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 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.

Do you see the man in the gorilla suit?

One of the most interesting people I’ve met in the past few years is Wes Edens, CEO of Fortress Investments, a billionaire and world traveler originally from a small town in Montana.

Say what you will about Wes today, but you can’t argue with the fact he started with nothing and built himself a very prosperous company.  That makes him, to a large degree, a man worth listening to.

When we met, he talked a lot about business — the importance of hiring the right people, not being afraid of change, not being afraid, period, and making your own observations.

Edens talked about the classic experiment of watching two teams of people pass a basketball and telling the audience to count how many times one team passes the ball.  Invariably, many people miss the guy in the gorilla suit who walks through the players, stops, beats his chest, and then keeps walking.

The lesson Edens said he took away from this was, "make your own observations."

The smart business leader doesn’t do something because others are doing it or because some might criticize it.

His advice: observe the business environment and figure out what you think you should do and then do it.  Trust your observations.

That little conversation played a big role in how I went about planning The Batavian and continues to drive what I do.

It isn’t my goal to live up to the expectations of the so-called — self-appointed or not — experts. 

My goal is to make my own observations and then do what I think is right.  If that means I fail, then at least I’m going to fail doing what I believe in rather than what somebody else thinks I should do.

And if I piss some people off along the way because I’m sticking to my own observations, well, I guess I just have to learn to live with it.

I have a plan. I’m going to keep after that plan, unless something happens to make it impossible, whether others understand it, agree with it, or not.

Five things you need to know about starting a local news business

1. Be prepared for long hours.  If you’re not prepared to work 14 to 16 hours per day, seven days a week, you’re not ready to start your own small business.  You might not be able to put in that level of time commitment because you’re recently married, or working another job, or have kids, or just have too many  other interests you want to pursue.  I’ve known a lot of small business owners in my life, and most of them put in long hours even years after setting up shop, but all of them put in these kinds of hours when their businesses started.  It’s not something that is unique to doing a local news start up.

2. Plan to keep your expenses to a minimum.  Clayton Christensen, the world’s foremost authority on disruptive business strategies, says, "Be impatient for profits and patient for growth." The more expenses you take on, the harder it will be to obtain profitability.  It should be your goal to achieve profitability within three to six months.  The more people on your payroll — meaning the more partners you have, usually — the more revenue you need to generate.  If you’re local start up consists of more than you and a partner, you’re probably over staffed.  A spouse makes the best partner because then you really need to pay out only one salary.

3. Be prepared to be a jack of all trades. The skills needed to run a local news start up include, but not limited to, reporting, writing and editing news (plus photos and video), ad sales, ad graphics, marketing, community engagement (online and off), bookkeeping, some level of tech knowledge related to servers and content management systems,* the legal issues surrounding content publishing and business strategy and tactics. If you don’t personally have the skills, you need a partner who does.  The skill sets of partners should complement each other so all bases are covered.  It might be possible — if you have all these skills — to start a local news business as a solo operation, but as you begin to have success, you won’t be able to keep pace with the work demands.  Finally, be a learner.  You might have most of these skills, but you won’t have mastered them all.  When I took over The Batavian, I realized that while I had some PhotoShop skills, there was a lot I didn’t know, so I bought books.  I also studied advertising and revisited some of my sales training.  I never assume I know all I need to know about what it takes to run my business.

4. Be able to think and plan strategically.  Starting a local news business isn’t something you do just because you need a way to make a living, or just want to find a way to stay/be in journalism. If your goals are purely commercial, the crassness will show through and you will fail at finding opportunities to differentiate your business from your competitors. And no matter what your market, you will have competitors. You need to understand both the concept of competitive advantage and disruptive innovation. You need to know what advantages your business has over your competitors and how you are disrupting their tried-and-true business models.  You need to understand why readers and advertisers will or do gravitate toward what you do.

5. Be prepared to have fun.  To be successful, you must love what you’re doing.  Running a start up business is hard, frustrating even some times depressing work.  The news business is unique is that you will have hundreds of critics (which is also another reason why you need a clear vision about what you’re doing and why, so you can be confident of your course in the face of criticism).  Your mistakes will be public. Your failures will be public. There will be times when readers publicly denounce you; and, for any of 100 different reasons that have nothing to do with your business, advertisers will quit you.  There will also be days when you wish you didn’t have to work all day.  You’ll miss your loved ones. You won’t be able to keep up with the latest movies, TV shows or music.  You may not be able to go out of town for a friend’s wedding or a brother’s birthday. Starting a business is and must be the whole of your life.  But you know what, running your own business is much better than working for The Man. And if you do it right, you will be treated in your community far better, with greater appreciation and adulation, than you ever received as a newspaper reporter, or any other salaried job.  If you do it right, you will feel deep in your heart that you’re doing something meaningful and important, and that will carry you through any dark hours.

(Credit where credit’s due: Brad Flora’s post got me thinking along these lines).