I Told You So

Terry at NAB
Trying to teach what broadcasters didn’t know

Dear Mass Media News Industry,

I told you so. I outlined exactly what was happening to you over 15 years ago, devised a way for you to overcome it, and was publicly mocked for being a naysayer and an outlier who dared to challenge your business model. You cannot imagine the profound sadness I feel on a day like today.

My New York Times Tuesday morning newsletter spelled it out. Here’s David Leonhardt’s lament over the loss of local media:

A cornerstone of democracy, collapsing
In the internet’s early days, it seemed to have the potential to crush traditional print media. But its impact has turned out to be more nuanced.

The internet has instead been a boon for some publications with a national audience. The New York Times has never had as many subscribers or readers — or employed as many journalists — as it does today. The Atlantic, The Washington Post and some others are also thriving.

It’s at the local level that the digital revolution has been as destructive as feared.

Hundreds of local news organizations have folded, as their advertising revenue disappears, and the pandemic is exacerbating the crisis. At least 60 local newsrooms have closed since March, according to Poynter. Some of them were more than a century old, like The Eureka Sentinel, in Nevada; The Mineral Wells Index, in Texas; and The Morehead News, in Kentucky.

This isn’t a story of creative destruction, in which nimble new entrants replace older companies. Often, nothing replaces a shuttered newsroom, leaving communities without any independent information about local government, schools and businesses. (A recent Times investigation found that some partisan groups have begun posing as local publishers, trying to pass off political propaganda as news.)

There are consequences for society. When a community’s newspaper closes, voter turnout and cross-party voting tend to decline, while political corruption and government waste rise, academic research has found. A democracy struggles to function when its citizens can’t stay informed.

What can be done? Eventually, savvy entrepreneurs may figure out how to make local news profitable. But several have tried in recent years, without success. For the foreseeable future, the only reliable answer seems to involve philanthropy. Americans have long accepted that the arts, higher education and organized religion all depend on charitable giving. Local journalism is now in the same category.

“We need philanthropists across the country to embrace robust local journalism,” Sarabeth Berman, the chief executive of the American Journalism Project, which funds local news sites, told me. “If you care about education, you need to worry if school boards and charter boards are covered. And if you care about the environment, you should make sure reporters like Ken Ward Jr. are covering coal country in West Virginia.”

There are many other shining examples of the new nonprofit journalism. But even more communities receive little to no high-quality coverage.

I decided to write about this topic this morning, because today is Giving Tuesday, when people take a break from online shopping to focus on charitable giving. If you are worried about the state of local news, you can donate through NewsMatch, which matches donations to local publications, or to your local public-radio affiliate.

So, it’s come down to begging for handouts from a stiff-necked industry that thinks so highly of itself that it dares to make the remarkable claim of being a “cornerstone of democracy.” Upon this foundation, the industry has the temerity to hallow its business to one that serves democracy. This, my friends, is absurd, and let me tell you why. It’s always, always about money, for local media isn’t locally-owned; it’s run by big corporations and their attorneys.

There is no such thing as the news “business” anymore. There used to be, because people will pay for knowledge of what’s going on around them and the world. However, this revenue model is called “subscriptions,” and it can cover expenses for individuals and start-ups, but traditional newsrooms require more, a whole lot more. Subscriptions alone won’t cover the costs.

Ever since Walter Lippmann’s “professional” journalism of the early 20th Century, the industry moved to an advertising model, for the only real reason to pursue objectivity was to create a sterile environment within which to sell advertising. In less than a hundred years, advertising became the main value proposition of news organizations and their largest budget line, by far.

It isn’t a stretch, therefore, to make the statement that the real business of news organizations is advertising, not news. While these media giants looked at technology as providing new means of distribution, the advertising industry was undergoing a major restructuring that went completely unnoticed by these corporate executives, at least until I came along and told them about it.

In his remarkable book about disruptive innovations (The Innovator’s Dilemma), Clay Christensen wrote of how the railroad industry blew it when the airline industry came along, because they saw themselves in the railroad business, not the transportation business. Had they rightly seen the disruption, they could have and should have owned and operated the airlines.

In the same way, media companies could have and should have owned and operated a form of local Google, because advertising online is VERY different, vastly more effective, and much cheaper than via mass marketing. The only way for a corporate media company to address the disruption was to join it. As Steve Jobs once famously said, “If anybody is going to cannibalize us, I want it to be us. I don’t want it to be a competitor.” Would that media companies could’ve been so visionary.

The essence of what I taught them was that the web not only serves the ad to eyeballs, but the browser being used by those eyeballs talks back to the server. In this way, the web was building a data advertising juggernaut that would blow apart all those money-making wonders of mass marketing. I said they needed to build a local version of Google (ad network, ad exchange, etc.), that it would take them less than a year and a $500,000 software purchase to build it. I told them the revenue gains they’d see would more than offset losses from their mass media business model.

Their response? Show me who’s doing that. Media companies could copy but not innovate. My heart bleeds for them today.

Nobody would go near it, even though they were amazed at what I was saying. Remember, these are investor-owned corporations whose purpose is to make money for shareholders, not spend it on something that “might” happen. I was even summoned to a hastily-called gathering of doom-destined newspaper executives from around the country to explain all of this. Despite the reality that they could’ve pooled their resources, not a single company pursued what they’d been given.

Finally, I was interviewing a sales guy from Alexa several years ago about partnership with clients. He told me, “We don’t need to partner with anybody, Terry, because we already have access to 100% of the browsers in any market anyway.” Think about that. This is where advertising went, taking with it all those dollars that media companies used to rely on to support their journalism. That is all gone now. It’s just gone, and to continue to play the mass marketing game is to pick at the bones of the dead carcass once known as local news.

Local media doesn’t mean local ownership, and this is the rabbit hole that continues to consume large swaths of democracy along with it.

And, for all the damage we potentially face for it, I say “good riddance!” We’ll handle this without you.

Oh, and, I told you so.

Comments

  1. Few things to unpack, Terry. You’re right, local media did suffer from the Innovator’s Dilemma. Local TV has fared better than newspapers because they enjoy three unique revenue streams print does not have: Political ads, special events (Olympics, Super Bowl) and retransmission fees from cable operators and others. And you’re also right, there is no “local” media. Those stations are all controlled by large, publicly-held companies.

    But local media did try some versions of local Google. I worked for one in 2006 called Planet Discovery, a Gannet property that had a handful of developers working on the platform. But their arrogance was the belief local folks would turn to their favorite local media company for search over this thing called Google. But by 2006 Google already had AdSense and was employing hundreds of engineers to focus on nothing buy great search results.

    What could have easily been done in 2001 was for any media company to buy GoTo.com. This was the company that became Overture and was purchased by Yahoo for about $1.6 billion. The purchase of GoTo.com would have been a huge, visionary bet back in 2001, but then a media company could have directed GoTo.com to focus on LOCAL search results and that would have been a game-changer and a legit challenger to Google that was focusing on ALL search.

    • Terry Heaton says

      I built two local search sites (see WRAL’s Triangle411.com) and the numbers were encouraging. But it’s more than that. It’s the technology to use browser data to define and group actual people for ads, not viewing devices or new distribution. Absent such a database, local media companies are helpless and screwed. They will forever be a spoke on somebody else’s wheel, and that’s hardly a place from which to bawl and squall about support for local media. “Show me who’s doing that” is the ultimate copout for any CEO and evidence of corporate malfeasance in the killing of the goose that laid the golden egg.

    • Terry Heaton says

      One other thing. Don’t trust those three revenue streams for television. Cable is history. Aggregation is getting tougher to sell. Streaming is bursting at the seams, and those rights fees for broadcast are being devalued every day. We’re not there yet, but the path is pretty clear.

  2. David W Clark says

    Brilliant and disturbing. Today in the Wall Street Journal on the first page of section B is a diagram of media revenue streams. The collapse of newspaper revenue is clear and startling as is the enormous growth of digital. But why not require digital to produce local news as a requirement for access to clusters of zip codes. A relatively small news operation could grind it out content in both print and video. Any local ad sales would be extra to the digital revenue produced by these zip codes. A couple of pilot programs are need. With regulation inevitably coming for Digital this might be the price they have to pay for access.

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