Elephant Diaries: The Economics of Local News

Saul Hansell explains the underlying economic reality that comes with the Internet’s unbundling of the previously bundled product that my various employers over the years have been tricking you into buying:

[T]he bad news for anyone who actually likes reading about where they live is that no one seems to be able to develop an online version of the local paper–including local papers.

The reason is pretty simple: The news gathering of local papers is heavily subsidized by other higher margin businesses.

The front news sections of papers attract readers and define the brand of a paper. But much of the money is made in other high-margin sections–low-cost content like TV listings and recipes as well as pure advertisements like classifieds and Wal-Mart circulars. Indeed, hometown papers to some degree compete with the Postal Service as much as other news outlets, because they can piggy back the delivery of advertising on their existing network of delivery trucks and kids on bikes.

The Internet has this nasty way of shattering bundles and undercutting distribution monopolies. A newspaper company or a local news startup can offer TV listings and classified ads online. But it won’t have the powerful natural monopoly of a traditional metropolitan paper. And thus it won’t have those extra monopoly profits to pay for the city hall reporters.

Hansell notes that national operations (like his employer, the New York Times), can make up for some of this problem with the national reach of their web operations, with the accompanying revenue. But at the local level, no model exists that can support the “city hall reporters” because the alternative web numbers are simply too small.


  1. You’re going to convince me to subscribe to my local paper. (I’ve never had a regular newspaper subscription – when I was a student or a new faculty member, I didn’t really have time to sit and read the newspaper. I would listen to NPR while driving or while eating breakfast, but time reading a newspaper was time that I should have been writing or grading or something. And I felt guilty about all those unread pages, especially when I lived in communities that didn’t do recycling. So I didn’t subscribe. But maybe I will now, because the Herald’s reporting staff does important work, and I do read it on the web regularly.)

  2. The strategies and tactics for news online should be extracted, in part, from proven successes enjoyed by other industries.

    The sooner an industry adapts to using effective (and verifiable) Web methodologies – even at the expense of some practices traditionally used in the industry – the sooner it can succeed online.

    News media can’t live in a vacuum from those methodologies, because the users sure don’t .

    The people using netflix.com and linkedin.com are the same users visiting news media sites.

    The Web is the end-user’s sandbox. Everyone else just gets an opportunity to try to play in it.

    If you don’t play by the rules of the sandbox, though, the end users won’t make room for you in it.

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