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As Newspapers Cut Back, Online Reporters Step In

April 13, 2009 at 6:40 PM EST
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Hard hit by declining readers and revenues, newspapers across the country are making cuts or shutting down altogether. Experts examine how new online sources of local news and reporting are gaining popularity as newspapers cut back.
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GWEN IFILL: Finally tonight, looking for new ways to read all about it. Jeffrey Brown has our Media Unit report.

JEFFREY BROWN: “Newspapers in Trouble.” It’s a headline for our times as papers across the nation are hit by declining readers and revenues and cut back on staff, pages and coverage, or shut down all together.

But there are at least the beginnings of another side to this story, as journalists and, in some cases, investors set up independent online news sites. We look at several local news efforts now with Joel Kramer, former editor and publisher of the Minneapolis Star Tribune. He’s now CEO and editor of MinnPost.com, a nonprofit online news and analysis Web site covering Minnesota.

Esther Thorson, associate dean at the University of Missouri’s School of Journalism.

And Jon Brod, CEO and founder of Patch.com, a for-profit company that aims to present online news and information to towns of up to 50,000.

Well, Joel Kramer, I’ll start with you. Explain the idea behind MinnPost and to what extent it fills a void or need that you see?

JOEL KRAMER, MinnPost.com: The idea behind MinnPost is to provide high-quality journalism at the metro and state level and to do so on the Internet, news, analysis, to be sophisticated to aim for the serious news audience.

And the need for it is that there is a great decline of that kind of journalism because of the shrinkage of staff resulting from the deterioration of the for-profit model.

Historically, for-profit operations provided a great deal of resource for journalism. And as you can see in the headlines every day, that’s going away. We’re trying to see if a nonprofit model will succeed in replacing at least some of the resources that are being lost at the local and state level.

JEFFREY BROWN: And you started this, I gather, with foundation money. But the aim is to be — is to get by or sustain yourself through local revenues? What’s the model? What’s the business model?

JOEL KRAMER: Yes. Right now, we do have some foundation support and we also got a lot of start-up major donors, six-figure donors.

But our long-term model is to sustain ourselves with what I would call more operating revenues. That includes advertising, sponsorship, membership, fundraising events, perhaps syndication, the kinds of things that we should be able to keep bringing in every year without relying on foundations.

A viable new business model

JEFFREY BROWN: Now, Jon Brod, you came to this from the investment world, I guess. What need are you trying to fill? And how do you see making a profit from it?

JON BROD, Patch.com: Yes, well, Patch.com is a community-specific news and information company that combines professional, original content with community contribution to deliver the most important information to consumers. And that is community-specific news events, announcements, volunteer opportunities, school information, business listings, et cetera.

And I think the need here is really that, as the major metropolitan dailies decline, they are unfortunately cutting back at the community-specific level, which really, in our minds, creates a void in the amount, the quality, and the access to news and information at that all-important community-specific level.

JEFFREY BROWN: But if you need to rely on advertising to get some kind of return for investors, what's different from what we're seeing with newspapers who are having increasing trouble through advertising?

JON BROD: Sure. I think there are two things going on. First is that this is an incredibly low-cost model. When you take out the ink, the distribution, the circulation, the print costs, and the significant overhead, and you compare, you know, Patch.com to a like-sized daily newspaper, you're looking at roughly 4.5 percent to 4.7 percent of the cost.

And the second thing is that as eyeballs and advertising dollars migrate from offline to online, we are very confident that we can secure significant revenues to create a very profitable business over time.

JEFFREY BROWN: Now, Esther Thorson, you've been studying a number of efforts like this around the country. What do you see, in terms of pluses and minuses? Start with the business model. Are these viable alternatives to newspapers? How should we think about them?

ESTHER THORSON, University of Missouri: Well, the online situation for newspapers, I think, or for newspaper-like products is not very encouraging, because there's no real scarcity of opportunities for advertisers, local or national, to advertise online. There's just all kinds of places where they can go.

So what's going to lead them to migrate toward online news products? That's a question we don't really know the answer to. And it's highly problematic. Eighty percent of all advertising dollars online are spent in search, not with banners, sponsorships, and so on and so forth. So that's a little bit of a negative.

JEFFREY BROWN: Search meaning -- I'm sorry. Explain search, meaning search sites, search engines, like Google and others?

ESTHER THORSON: Right, exactly. Advertisers pay to be located in a particular page location, Google, Yahoo, et cetera. And then when somebody clicks and they're looking for shoes in Columbia, Missouri, bang, you hope your little store pops up at the top of the list and you're able to make some sales from that.

JEFFREY BROWN: What about in terms of -- I'm sorry. Go ahead.

ESTHER THORSON: So -- I was going to say is that -- so advertising online is really a problem. I mean, most of the advertising dollars in the newspaper business still go to the print product.

So without a print product, it's really hard to see how you can have a long-term viable product, in terms of these -- I mean, MinnPost is great. I looked at Patch.com today, really interesting concept, great programming and so on and so forth. The worry is just that the advertisers are not going to come and bring the dollars.

Advertising still difficult online

JEFFREY BROWN: Well, let me come back to, well, Joel Kramer first. Go ahead. Respond to that.

JOEL KRAMER: Well, I generally agree with Esther. I think that, at a strategic level, advertising online is very challenging, because there is an enormous supply of publishers. There's no barrier to becoming a publisher. And, therefore, the pricing power of the content-providing publisher has been lost.

At MinnPost, we only are relying on advertising for less than half of our revenue. We became a nonprofit partly because of Esther's -- the analysis that Esther and others have made and I agree with, that it is very difficult to get there on the advertising.

Now, we do have advertising. We capture a very good rate for our advertising. But we're small. We're more like a boutique shop. And when you get to be really big on the Internet, it's very difficult to charge a decent rate for your ads, because it becomes a commodity business.

JEFFREY BROWN: You're not, in fact, trying to cover the waterfront, so to speak, or be a comprehensive newspaper, is the way we're generally used to it?

JOEL KRAMER: Yes, that's correct, for a variety of reasons. One is that all Internet sites, if they have any chance of doing OK -- and nonprofits have to break even, also -- have to hold their costs down.

But in addition, we felt that being comprehensive was something that even in its weakened state the newspapers still try to do, so we try to pick our spots, be more analytical, cover what others don't cover or where we have a different way of covering it, so we're actually more like an online daily news magazine than a full service newspaper.

Local news is getting lost

JEFFREY BROWN: And, Jon Brod, in your case, what's your response to the problems with the model that Esther Thorson brought up?

JON BROD: We have a two-pronged advertising approach at Patch.com. The first is a do-it-yourself solution, where these community-specific businesses and organizations, with three clicks of a mouse, a swipe of a credit card, and 30 seconds, can create high-quality Internet advertising across Patch.

The second is, we've got an ad sales rep who reps a cluster of Patch sites who both evangelizes the do-it-yourself model, as well as takes orders for more traditional Internet advertising.

And we are very confident that, with this two-pronged approach and with the migration, as I mentioned, of dollars from offline to online, and the fact that we are an incredibly targeted medium with very measurable results will ultimately, as I mentioned, result in a profitable business for us.

JEFFREY BROWN: Well, Esther Thorson, what about editorial comment? What's lost and gained in what you see in all these experiments to try to find a new business model and a new way to make it and attract viewers or readers?

ESTHER THORSON: Well, I think both of these experiments are absolutely terrific ones, but I think what I want to say here that's so important for people to understand is really exemplified by some research that we've just completed for Knight Foundation and Pew Charitable Trusts.

We looked at a representative sample of cities and towns across America, 47 of them. And we looked every place for start-up companies like these, what kind of news were they providing, and so on and so forth.

What we found was, number one, on average, there's hardly any of them on a per-city basis. And, number two, the amount of news that they contain compared with their own city newspapers is very, very low.

So my question is, you know, not just what kind of business model are we going to come up with, but how are we going to come up with a business model that allows us as citizens in a democracy to get the kind of local, rich, extensive, diverse information that we need? And right now I don't see a model out there that's -- that's...

Readers must pay for news

JEFFREY BROWN: Joel Kramer, are you presenting or putting forth your MinnPost as a response to that very thing? Would you go that far?

JOEL KRAMER: Well, it's a response, but it's not a solution. You know, I used to be the publisher of the Star Tribune. And I still love what newspapers do, including the newspapers in the Twin Cities. And they're doing a very good job under extremely difficult circumstances as their resources shrink.

But I do not believe that there will be a single substitute for what is being lost. I do think, however, that unless we figure out how to get the readers to pay for news, a great deal will be lost. I'm not optimistic that we can keep anywhere near the level of local and regional serious journalism that we had in the days when publishers had pricing power.

Some of it can be covered by philanthropy. Things will happen because of sites like ours and many other experiments that are, you know, shooting up around the country. But unless the reader pays for news, there will be a lot less journalism 10 years from now than there was 10 years ago.

JEFFREY BROWN: All right. We will leave it there. Joel Kramer, Jon Brod, and Esther Thorson, thank you all very much.

JON BROD: Thank you.

ESTHER THORSON: Thank you.

JOEL KRAMER: Thank you.