Local outlets struggle during COVID-19

As we settle in our quarantines, we have more time in our hands to read the news—and sometimes obsessively. Thus, it’s not surprising that since the COVID-19 pandemic reached the Western hemisphere, news readership has surged dramatically. But what has also drastically changed is newspaper revenue. With businesses closing, the number of ads has plunged, and thousands of events have been canceled. This unbalance is especially impacting local news outlets, which were already struggling to begin with. One thing is clear—the pandemic is accelerating revenue trends, with news outlets depending more on communities and subscriptions than ever before.

Local news outlets have been either closing or reducing their staff for a decade since the Internet went mainstream. With online content, local newspapers were no longer competing with the other outlet in the city; they fought with everyone who posted content online. The competition tilted in favor of already-national news outlets, as politics in the United States became increasingly nationalized (read The Internet has few winners; local newspapers are not them). Many local news organizations closed, while others retained a skeletal cost structure to continue producing news. With COVID-19, the crisis for local news outlets has accelerated, although the pandemic is impacting the industry as a whole.

Readership is up; there’s no discussion about it. According to comScore, visits to news sites rose 57% compared to the same period last year, with a 46% surge in the number of minutes spent on the stories. With quarantines in place, readers have the time to go through the daily news, click on a few stories, and read them thoroughly. Plus, many of us consume the COVID-19 updates almost feverishly, looking especially at what’s happening in our communities. For local dailies, the numbers are equally exciting—daily visits increased 122 % as of the third week of March, reports the Nieman Lab. 

This could be a marvelous opportunity for news outlets, as they can experiment on how to reach the user and compile data on their readers’ habits. However, it is also a very stressful moment, as revenues for the same outlets are decreasing. The rise in demand is not coupled with an increase in the outlets’ income.

News organizations base their business models in a variety of revenue sources, such as advertising, subscriptions, events, and even merchandising. Although advertising revenue has consistently supported the news industry for over a century, the rise of search engines such as Google and Facebook led digital advertising to take a turn. Search engines suddenly got a significant chunk of advertising dollars, while newspapers were left to fight over the scraps. However, search engines are not the only problem. Most of the ad revenue for print papers before the Internet boom came from classified ads, many for products that could not sustain high ad prices, they thrived publishing “long tail” ads. Newspapers also lost that ad revenue when they went online, as those low-priced ads moved to more specialized sites. 

Subscriptions were then depicted as the white knight that would save the industry. And for some, they did. The New York Times reported in February that digital subscription numbers had reached an all-time-high while advertising dollars had decreased (read Subscriptions work, especially for the NYT). With the withdrawal of advertisers and the cancellation of events, subscribers have become holier still in the eyes of publishers.

A Digiday survey notes that 88% of publishers expect to miss their 2020 forecast this year, given “declining ad sales and difficult-to-monetize COVID-19 coverage.” For local newspapers, the decline is even steeper. Many of the traditional advertisers that were left, such as restaurants and local shops, are closed. However, advertising is not the only problem. Those newspapers that diversified their revenue sources and had a more non-profit approach based on memberships are also suffering, as they relied on live events for their bottom line. One solution could be to get readers to subscribe and pay for the content, which is already happening both for national and local outlets. Still, the surge is not enough to offset the ad-losses. 

As a result, layoffs and furloughs are again part of the newsroom experience, painfully resembling the aftermath of the 2008 depression. According to the Nieman Lab, roughly 100 local newsrooms, including The Tampa Bay Times, had layoffs in March. The national newspaper company Gannett, which owns titles such as the Arizona Republic, announced massive furloughs and pay cuts that would be put in place until June. Despite the increased interest in the content news companies produce, they still cannot manage to make ends meet. The prospects, specifically for local outlets, are grim.

National newspapers, such as the NYT, face similar issues, but they are more protected. The Washington Post, the Times, and The Wall Street Journal have had a solid base of loyal subscribers for a while, which shields them from the ad crisis. Moreover, quarantines prevent readers from spending their money elsewhere, like restaurants, movies and shows. They are left with a more substantial portion of their income to spend on streaming, video gaming, and, thankfully, news. Some may support their local outlets while the pandemic runs, but many subscribe to the national newspaper to keep abreast of what’s happening. The result? COVID-19 is accelerating the revenue crisis that had been slowly killing the local news industry for the past decade.

One conclusion can be drawn from this revenue resettling. While necessary, newspapers must move away from their ad-dependency and increase their reliance on their readers. And despite the situation, diversification still matters as the risk of losing money will be lower. 

Still, newspapers are not at fault. Readers and the state should be the sources of support for local news as local newspapers are essential to democracy, as we have already discussed in other posts (read Local news outlets need help from the citizens or the state). Some countries are taking steps towards supporting the media industry. For example, the Canadian federal government is planning a $30 million ad campaign to be displayed in news outlets, while working towards implementing tax credits for newspapers.

If we are interested in the media industry and if we care about our communities and sustaining democracy, we should support it. If not, our outlets will grow weaker despite our desperate need for information.

Carmen Arroyo & Josep Valor

Published in Media Matters, a blog by IESE Business School.