Paywalls create opportunities for local news entrepreneurs

It seems like paywalls are popping up all over the place these days.  In recent months Lee, GateHouse and Gannett, for example, have all announced or are implementing paid subscriptions for digital content.

Nobody is rooting for these newspapers to fail as they try to prop up flagging business models, but as a matter of business reality, when an incumbent business moves deeper into sustaining innovation it opens up opportunities for disruptors.

In every market where a newspaper puts up a paywall, an opportunity is created for an entrepreneur to start a local online news business.

Here’s an outline of three possible approaches (and depending on  conditions in each local market, there may be other models or variations — the key is for an entrepreneur take a close look at his or her market, and his or own strengths and weaknesses, and figure out the best bet for success).

The important thing to remember is that history has shown — including quite recently — that consumers will flee to a free alternative content sources when available.

A key rule of disruption is to target the customers undervalued by incumbents. Clearly, any news site that puts up a paywall is telling the community, “there’s a lot of people in this town we don’t value.”  That creates pure opportunity for the disruptive entrepreneur.

In small markets: Start a local news site.  Concentrate on breaking news, some enterprise and feature content, lots of what’s deemed “hyperlocal” news. Successful examples, of course, would include The Batavian (my own business, for those who don’t know).  This can easily be done as a two-person operation.

In suburbs: Perhaps the entrepreneur lives in a suburb and doesn’t want to tackle the larger metro area. The effort here is more hyperlocal (typically, a suburb is undercovered by definition, even if it has a good print weekly). Overlapping emergency jurisdictions and jurisdictions that take in much larger areas can make breaking news harder to cover, but not impossible, but just being embedded in the community and showing great passion for it is a huge competitive edge. Successful examples would include West Seattle Blog (which also shows how to do breaking news in a suburb) and Baristanet. (Authentically Local is another great resource for finding examples of successful, independently owned local news sites. You’ll also find other successful sites that do variations on the quick outline of approaches posted here.)

In Metro Markets:  A metro presents a decision fork for the entrepreneur, with the question being, “do you have money in the bank or not?”  It becomes much harder to bootstrap an original reporting site the bigger the market.  There is simply so much more to cover in a metro, and if you can’t give readers a sense of having a good handle on the community, they won’t find your effort appealing.  With that in mind, below are alternatives for an effort that is funded and one that isn’t.

Boostrap in a metro: Pure, or nearly pure, aggregation.  Not to pick on my friends at the Democrat and Chronicle, but if I lived in Rochester, I would be taking a serious look at how to take advantage of Gannett’s plan to wall off the D&C, so I’ll use Rochester as an example.  Rochester is blessed with some fine TV news stations. There is also local radio news and local bloggers who do various forms of reporting and aggregation. In other words, it’s a news rich environment.  A good aggregator could bring all of this coverage into a home page for the community sort of site and give people who don’t want to pay for the D&C an convenient place to go for as much if not more local news than they could get from the D&C’s web site. A good example of a local aggregator is Newzjunky.com in Watertown, N.Y. While this is a smaller market, it shows the potential. In fact, NJ’s successful eventually forced the Watertown Daily Times to take down its paywall in 2008, which should serve as a cautionary tale for publishers putting up paywalls now.

Bootstrap in a metro II: Aggregation could be supplemented by original reporting.  If you’re a one or two person team, you won’t have time to cover the whole metro, but why not cover a portion of it?  If it were me, I’d get a scanner and concentrate on breaking news, even going out to the scene of bigger events.  A reporter with a strong background in city government might concentrate on City Hall as a specialty, or an education reporter might spend a lot of time on schools and the school board.  Or maybe the reporter would do only a couple of big enterprise stories pure month. Aggregation supplemented by original reporting would create a stronger draw for readers.

Funded in a metro:  No advice here on how to get money to hire staff, but if I were an entrepreneur with some backing, I would start a series of local news sites, each with their own area of coverage. There would be a blog for crime and courts, a site for breaking news, a site for city hall, a site for education, a site for environment and infrastructure, a site for business, etc.  Each editor would be a co-owner in their own site, giving them a greater stake in its success.  A series of separate sites, instead of one big one, would open more revenue opportunities and diversify the risk (some sites might work, while others wouldn’t, giving the group publisher greater flexibility in how to adjust during the start-up phase).  There would also be an umbrella site that would act as an aggregator of not just my own group of sites, but the other free news outlets in the market.

In all of the bootstrap models briefly outlined here, there are examples of independent publishers finding at least enough success to support themselves (and maybe a staff member or two).  Nobody yet has shown that these independent sites can grow into larger operations, but I believe that growth is only a matter of time and inevitable.  The point is, whether you’re an entrepreneur who would just be happy with a ma-and-pop operation, plenty of successful examples already exist.  If you have bigger ambitions, there’s no reason not to believe those ambitions can’t be realized. The money is there to be made if you want to make it.

Newspapers are turning to paywalls not because they’re great business models, but because lack of vision and lack of execution over the past decade and a half has left them in a desperate bind to just try and survive. Being in business for yourself is a great lifestyle if you can stomach the hard work and unavoidable frustrations.  As newspapers crumble, there should be entrepreneurs ready to pick up the pieces, if for no other reason than our communities deserve good local news coverage. And a little (more) competition is always good in any market.

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  • http://www.facebook.com/profile.php?id=568787272 Craig Huckerby

    another example of a small independent local news site http://www.local2.ca

    • http://howardowens.com Howard Owens

      It’s not owned by a TV station?

      • http://www.facebook.com/people/Bob-Whitby/100000600703712 Bob Whitby

        Inspiring post. Who sells your ads?

        • Craig Huckerby

          we had a sales guy . last year the site generated over $200,000 in sales

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  • Ken Aaron

    Interesting but you fail to mention the most important part about starting a hyperlocal news site, how to make it profitable. What you give are fairly typical structures for delivering news, nothing new. In a world where hyperlocals compete with Google, Facebook, Groupon to name a few; and Google is starting to penalize sites that have “too many” banner ads on their homepage, relying on banner ads is not a long term strategy. Pretty much all of the profitable hyperlocals that I’m familiar with all rely on lots of banners. So while the organization and delivery of news is relatively easy, what about the long term profitability? It’s a volatile digital world and things change quickly, including customer demands and expectations.

    • http://howardowens.com Howard Owens

      This should all be self evident, but

      “how to make it profitable?” Just look at the successful examples. Not hard to figure out.

      “In a world where hyperlocals compete with Google, Facebook, Groupon” big assumption there that that is the competition.

      “Google is starting to penalize sites that have “too many” banner ads on their homepage …” Specific type of sites. We have 120 ads on our home page, our search results are just fine. But more importantly, Google is not the end all and be all of traffic. Only a minor percentage of my site traffic comes from random Google searches. The vast majority of our traffic is direct, loyal, local readers who don’t depended on Google to find us. That is where the money is, not in Google search results.

      “what about the long term profitability? …” First, nothing says banners can’t be long-term profitable. It’s mere speculation to say either way. Second, we know what works — retail advertising. The smart entrepreneur is going to go after the easy revenue first. To knock banner ads is shortsighted and hidebound.

      ” It’s a volatile digital world and things change quickly, including customer demands and expectations.” I absolutely agree, but the only business world we operate in is the one that is here and now. The smart entrepreneur works with what’s available and builds a business and plans to change directions or grow in other areas as necessary.

      None of what you present here is an argument against starting a local online news site.

  • http://www.facebook.com/d.mccormick.williams Doug Williams

    But where does your revenue come from?

    • http://howardowens.com Howard Owens

      Doug, Pierre, Ken … hate to be rude, nothing personal as they say, but did you guys even read the post? I specifically cite examples of successful local online-only news sites.

      I don’t know about you, but when speaking of successful businesses, to me, that means profitable.

      I know of at least a dozen profitable local online news sites and I believe there are more.

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  • Photodude719

    I guess it must just be me, but I’d like to elaborate on how to keep a quality news website going without any revenue stream. Mr. Owens keeps talking about entrepreneurs with backing, aggregation, and supplementing a website with some original reporting. If an entrepreneur has money, and if it’s someone else’s, they may want a business plan. If a website uses aggregation, they have to steal content from someone paying for the reporting. And if you do some original reporting, we get back to that money thing again.

    I don’t believe people naturally we go to a free or open website when another news site uses a paywall. If the content stinks, then readers will flock away. Yes free helps get your foot in the door, but you have to keep readers too. The bottom line is if you are publishing unbiased, quality, enterprise news stories, the page views will follow. And the only way to do that is by paying for good people.

    I use an example of a fellow that built this huge calendar for our community events that automatically aggregated the listings from other calendars into one larger one with everything. The good news is it had everything. The bad news is it had everything. With little to no editing or reporting, there’s was a ton of redundancy, some groups monopolized the calendar with what amounted to advertising, and it became so large, no one would read it. Advertisers liked it at first, until a few months in when they saw what it had become. The banner ads didn’t even come close to supporting it.

    The point is there is no real business model for open access, local news websites. The revenue must come from somewhere and it’s not going to be just banner advertising, daily deals, or business directories. Pricing is low and there’s less overall volume. Years from now, the Internet will play a bigger role in broadcasting news…but it’s the websites that produce quality content that will still be around…even with paywalls.