We see lots of hand-wringing about the sorry state of local news organizations because of digital disruption of their financial models. I just happened on a 2016 study by Clare Cook, Kathryn Louise Geels, and Piet Bakker that finds reasons for optimism while realistically assessing the problem.
Their study, Hyperlocal revenues in the UK and Europe, dives deeply into the financing details of 35 local media organizations from five countries –the UK, Netherlands, France, Belgium, and Sweden.
The authors divide the media into three groups: viable (they fulfill a demand or perceived need for their content), sustainable (they generate enough content and revenue to cover costs and pay a wage), and resilient (they can make a profit and grow or scale). Only eight fall into the last category. The “viable” group are possibly the most precarious.
They tracked 16 revenue sources and showed nearly all these media still depended on display advertising (30). Meanwhile, almost half had started using native advertising while few had membership programs (9) and almost none offered subscriptions to their digital content (2). (All is detailed on p. 53 of their report and in the graphic below).
It turns out that print products and subscriptions were important for a third of the publications. In some cases, the digital product came first and the print offered supplemental revenue. The key to print in helping achieve viability was finding cheaper ways to produce and distribute the product.
A strength of this report is that it includes good ideas, such as regional advertising networks, that failed and why. National media that tried to develop local media outlets have often failed to attract advertisers. The changing dynamics of technology can drive consumer tastes and habits, and vice versa. It’s complicated.
In their analysis, the authors describe the hyperlocal sector as a “messy ecosystem made up of imbalanced interdependencies.” This is accurate, of course. Each media organization’s revenue model has to respond to a series of local conditions, including the laws, tax codes, culture, language, business customs, labor force, available technology, and the role of dominant institutions.
Among those dominant institutions are often legacy media brands that successfully lobby the government to prop them up with subsidies to offset losses to the technology platforms. All in the name of the free press and public service to a democratic society. The hyperlocal media and digital startups often get left out of these subsidy programs.
Provincial and municipal governments can also make it tough on hyperlocals media. Some offer their own public service information services that compete with independent media for advertising, sponsorships, and other revenue.
Six predictors of success
The study offers six factors that predict success for a hyperlocal organization:
- effective use of volunteers
- a sharing economy (like the trading of services)
- partnerships with other media and institutions
- full-time sales and marketing staff
- advertiser programs that reward loyalty with discounts
- email newsletters that build an intimate relationship with users.
This study provides a series of detailed road maps that policy makers, publishers, and would-be entrepreneurs can use to refine their business models. As Cook, Geels, and Bakker point out, the chosen path for each media organization will be different. They just point out the opportunities and the pitfalls that you might find along the way. Useful reading.
What 35 hyperlocal news sites in Europe can teach us