Two hyperlocal online news sites DNAinfo and Gothamist recently folded. Their shutdowns highlight a much bigger problem: local news profitability and sustainability. Here's why that matters, from big urban metros to small rural communities:
DNAinfo, and its sister sites like the Gothamist, had metropolitan hubs in New York City, Chicago, LA and Shanghai. Even though more than 9 million people viewed their stories each month, the company was losing financially.
CEO Joe Ricketts says, "DNAinfo is, at the end of the day, a business, and businesses need to be economically successful if they are to endure."
The 8-year-old company was financially troubled and closed a week after the staff unionized.
"Although the unionization of part of the workforce may be a participating factor, it may not be the largest one," Northwestern media professor Owen Youngman said. "The largest one is the difficulty of finding a sustainable business model at scale for this kind of important reporting."
Other local news companies in New York City have either shut down or cut back on staff. A decrease in local outlets could mean a decline in community and neighborhood reporting that the public trusts. A 2017 Pew study found more Americans trust local news than national news.
"This problem is actually much more severe in medium-size and small communities where the economics are very challenging and where we are seeing something that professor Penelope Abernathy at North Carolina calls news deserts, large geographic areas where there is dramatically less local news coverage than there was a generation ago," Youngman said.
In smaller towns, especially in Middle America, where newspapers are the only source of local news, fewer or no outlets can hurt community coverage for things like city council, local elections and schools.
So, why not put these smaller newspapers online and make money there? Well, Google and Facebook gobble most of the ad revenue, getting 85 cents for every dollar an advertiser spends on an ad. Even more bleak, the duopoly accounted for 99 percent of advertising growth in 2016, leaving 1 percent for everyone else.
Financially strapped newspapers have also been consolidating in unprecedented numbers and are now owned by fewer companies, which control what the reader sees. Abernathy calls it the rise of the "media barons" and their growing influence — two companies have the biggest national footprint.
Despite all this, at least one local online news outlet, Patch, made a comeback and profited by scaling back on employees and getting rid of what it called ineffective advertisers. Still, Youngman says the survival of local news may be up to consumers.
"Ultimately, the people who say they value this coverage will have to pay for it. There is no magic solution, but direct payment for information," Youngman said.