Finding Solutions

Walter Lippmann, one of American’s pre-eminent journalists and commentators in the 20th century, referred to a newspaper as “the bible of democracy, the book out of which a people determines its conduct.”115 Scholars have argued that strong local newspapers have the ability to “set the agenda” by determining the important public issues that a community debates and decides.116 Modern-day economists refer to the journalism produced by newspapers as a public good. In theory, the better informed a community’s citizens, the better they will be in making everyday decisions that could enhance their own and their neighbors’ quality of life.

Over the past decade and a half, the newspaper industry has experienced unprecedented economic and technological disruption. Out of that caldron of instability, a new media baron has emerged — investment entities now own a growing number of newspapers across the country.

There is no guarantee newspapers will survive, especially if their owners do not possess both journalism’s civic mission and the business savvy to discard old business models and create new ones. This is a classic moment, leaving all of us in society with challenging questions about the role of both newspapers and newspaper owners in the 21st century.

In an age of disruption and consolidation, the future of newspapers and communities throughout the country is at stake. In addition to newspaper owners, individuals and institutions will need to make a committed and concerted effort to save community journalism. Earlier, this report documented the dramatic shift in newspaper ownership and the emerging threat of “news deserts” developing in regions across the country. The concluding chapter attempts to identify interested parties and some actions they can take now to ensure that community newspapers — whether on paper or digitally — continue to provide news that feeds democracy at the local level. Far from an exhaustive list, what follows is intended to start a conversation at national and local levels before it is too late.

The most urgent challenge for newspaper owners is developing new sources of digital revenue so they can survive and continue producing the news that feeds democracy.

The disruption in the newspaper industry over the past decade is a textbook example of “creative destruction” when old ways of doing business fade and new models are created. In other industries that have experienced such massive economic disruption, survivors transformed their business models by aggressively cutting costs associated with the legacy product while simultaneously adopting the new technology so they could attract new customers and new sources of revenue.

Most newspapers have significantly cut costs related to their print edition, and many have invested in technology to reach readers anytime, anywhere. But the vast majority still remain almost totally dependent on rapidly declining print advertising revenue to pay the bills.

Several recent industry studies have found that there is enough digital advertising and marketing revenue in many markets, whether large or small, to support a robust local news gathering function.117 However, community newspapers currently receive only a fraction of that revenue — many less than 5 percent. So even if local newspapers now owned by investment entities and other large legacy chains revert to local owners with a passion for civic journalism, these papers will most likely fail if the new owners do not develop new sources of revenue quickly.

To survive and thrive in the digital age, community newspapers need to transform their advertising departments and develop revenue strategies that more closely align with the marketing needs of their local businesses. This involves moving beyond mere sales of advertising space in one of the paper’s print or digital editions and, instead, offering a full range of digital services, including search engine optimization, social media management, website design and video production. There will be much trial and error, as this is totally new territory for newspapers. What works in one market may not work in another, so strategies will need to be tailored to individual communities.

Schools of journalism and communication have historically focused on training current and future journalists, as well as public relations and advertising professionals. Many major schools have recently begun teaching students concepts and skills around “innovation and entrepreneurship.” But while this focus may help them start their own businesses at some future date, it does not address the pressing business issues that community newspapers are currently experiencing. Newspaper owners—especially those in rural and low-income communities—need university faculty and students to produce applied research that assists them in developing and implementing new and sustainable business strategies, as well as tools for measuring progress against goals. UNC’s Center for Innovation and Sustainability in Local Media is one example of university outreach and collaboration with both newspapers and communities. A soon-to-be- published white paper, for example, examines the feasibility of small newspapers in low-income areas establishing profitable full-service digital marketing agencies that fulfill the marketing needs of small businesses in the community.118

Press associations have historically served as effective lobbyists, working at the state and national level to preserve newspaper revenue from government-required legal notices, for example, or postal discounts. They have also fought aggressively for open meetings and public records laws. But a new emphasis is required. Legal ads, printed inserts and national ads are going the way of classified advertising. Industry analysts expect these three forms of print advertising to disappear from most community newspapers within the next five years.119 Press associations need to work now with news organizations in planning for the future. Their primary focus needs to move from preservation of the status quo — lobbying state legislators to protect legal ad revenue for yet another year — to working with universities and newspaper owners to support research and development of business models and revenue strategies that allow newspapers to survive in the digital age.

Governmental media policies in the 20th century focused on keeping competitive newspapers “alive” through joint operating agreements, which ultimately didn’t work. Federal policy also sought to prevent the owners of a traditional news organization, whether TV, radio or newspaper, from holding a cross-media local “monopoly.” The measures the Federal Communications Commission and the Department of Justice use for determining media “concentration” in local markets are 20th-century contrivances and do not acknowledge the competition from new media that threatens all traditional media. The major digital competitors in most markets are now Facebook and Google.120 What’s more, a 2011 FCC report detailed how IRS rules constrain nonprofit organizations in developing new sources of revenue by limiting how much they can get from advertising.121 IRS rules need to be revised so that nonprofit news organizations can also develop scalable and sustainable business models, instead of relying primarily on donations from individuals and foundations.

Cutbacks in newsroom staffing have left many communities and regions in this country — especially those that are rural and less affluent — underserved by news media. Several hundred newspapers in the past decade have either ceased publishing or merged with other papers, leaving their communities without a media outlet

Too many newspapers still see other news organizations as competitors. In addition to developing new revenue strategies, newspapers also need to consider new models for reporting to ensure that underserved communities receive the news and information they need.

Newspapers in small and low-income communities — where the majority of investment-owned publications are located — are so understaffed that many struggle to cover routine events, such as town council meetings. And large metros, which have endured multiple rounds of layoffs, are not able to produce either the number or range of enterprise and investigative series that they did in the past.

Therefore, newspaper publishers and editors need to develop partnerships and networks with other news organizations that stress collaboration instead of competition. These networks can take many forms, uniting metro dailies with smaller weeklies, independent and chain-owned papers, or nonprofits and for-profit dailies.

Two recent journalistic endeavors by investment-owned newspapers illustrate that civic-minded editors — at both large and small papers — can rise to the challenge when they have the backing of corporate headquarters. Reporters at the Sarasota Herald-Tribune, owned by New Media/Gatehouse, worked collaboratively for a year with journalists at the independently owned Tampa Bay Times, detailing the increase in violence and abuse at state-run mental facilities after major cuts in funding.122 The two papers shared the 2016 Pulitzer Prize for Investigative Reporting. At the same time, Community News Holdings (CNHI), the oldest of the large newspaper investment groups, founded almost 20 years ago, has been upgrading its coverage of state and regional issues in seven states where it has the largest number of papers, most with circulation under 10,000. CNHI has designated one journalist in each of those states to produce both regional enterprise stories and cover statehouse news about policy issues that affect the communities where its papers are located.123

Unfortunately, these two notable collaborative journalistic efforts remain the exception in the industry as a whole, and especially among the investment-owned papers. While supporting the public service journalistic endeavors of some papers, both New Media/Gatehouse and CNHI have simultaneously closed unprofitable papers in small, low-income communities. That is the risk as the large chains grow even larger; they can selectively support some papers and not others — unless all papers are key links in a greater network.

Similarly, locally owned independent news outlets, including newspapers, nonprofit online outlets and broadcasters, need to establish their own collaborative journalistic ventures and networks that allow them to both cover dig deeper into the many important public policy issues in their regions. Partnerships may also ultimately determine the ability of independent and nonprofit organizations to survive, since they are stronger together. As an example, public broadcasting stations in three states have banded together to form the Ohio River Network.124

Large community and journalism-related foundations have mostly funded nonprofit news organizations in major cities that have stepped in to fill the news and information gaps left by the decline of metropolitan newspapers. Though some attempt to report on education, health, environmental and economic issues of concern to distressed communities, most report on news that originates in metro areas. Now is the time for foundations to focus on areas that are in danger of becoming news deserts. They can make it imperative that those organizations that they do fund reach beyond “hyper-local coverage” in a specific metro area. And they can start funding nonprofits that provide “regional” contextual/analytical reporting. Examples in North Carolina include North Carolina Health News and EducationNC.

They can also encourage partnerships — between for-profit news organizations and nonprofits or between universities and nonprofits. Some universities are already partnering with local nonprofit startups to provide information to underserved communities. However, most of these partnerships focus their news coverage on communities located near the university. There is an opportunity for universities to teach students and to provide public service by reaching beyond their current geography to forestall news deserts in their states. They could, for example, set up statewide news bureaus that give budding reporters a chance to actually cover regional concerns. A model exists in the now-defunct City News Bureau of Chicago. From the time it was established in the late 19th century until it closed in 2005, it served as a cooperative effort among the city’s newspapers to cover breaking news while training new reporters.

State governments
often provide scholarships to future teachers and doctors to assure an adequate supply in regions of need. In potential news deserts, journalism has reached a point at which scholarships could be devised to supply interns and young reporters to local news organizations. Similarly, the federal government has in the past offered tax incentives for companies that hire people who are unemployed. States could also offer tax incentives for newspapers that hire journalists who cover important public policy issues.

A dual need exists: to raise awareness in society about the vital role of community news organizations and to hold current newspaper owners accountable for delivering on their civic duty in the digital age.

Educators, as well as many foundations, support media literacy programs. Indeed, the future of democracy depends on students, as emerging voters, comprehending and appreciating the vital role of news media. Some states and communities have had strong newspaper-in-education programs. Unfortunately, they have suffered financially as their sponsoring newspaper companies have cut back. Most of the media literacy programs are now aimed at college students. The fashioning of an informed citizenry depends on both high schools and colleges connecting their students to substantive journalism and teaching their students how to maneuver through the multiple channels of the internet to find comprehensive and credible journalism. The McCormick Foundation, among others, has identified media literacy at the secondary and college level as a major priority in the digital age when “a growing sector of the U.S. population does not distinguish between professional journalists, information spinners and citizen voices. The 24/7 news cycles and digital advances in disseminating information serve to further exacerbate this challenging situation.”125

Lawmakers and regulators in Washington have spent considerable time since the Great Recession of 2008–2009 debating the merits of the big banks and developing stress tests of their financial soundness. At the same time, under the radar, a complex, interrelated and very loosely regulated network of financial institutions has experienced explosive growth. These investment partnerships come in a variety of forms: Some are classic hedge funds or private equity funds. Ironically, anyone who has a pension fund has fueled the rise of these investment groups. Half of the money that has flowed into private equity partnerships has come from the many corporate and public pension fund managers in this country, seeking a higher return than the stock market or other traditional options.126

Some of the largest private equity funds are also publicly traded — such as Fortress Investment Group, which is the largest owner of newspapers in the country. Yet their publicly available financial statements and shareholder material offer scant transparency, even as these organizations oversee vast empires that provide services that enhance — or diminish — the quality of life in a community, including hospitals, transportation, emergency call centers, as well as newspapers. With little transparency, there is little way to hold these large corporations accountable, except to their majority investors interested in their own return. Considering the potential impact the financial practices of these investment partnerships could have on communities throughout the country, federal authorities need to turn their attention toward addressing the opaqueness of these organizations — at least as eagerly as they focus on big banks.

In the end, though, activists and individuals at the community level may have the most important role to play. Large newspaper companies held by investment entities are even more removed from their communities than the sprawling chains of the late 20th century. Yet communities need strong newspapers. Even though a local newspaper is owned by an investment entity or corporation located somewhere else, it usually has publishers, editors and reporters in the city of publication. Activists and individuals in the community need to insist on coverage of important issues and to deliver criticism of coverage when warranted. In the digital age, person-to-person contact and building relationships continue to matter.

Interviewed in 2013, Charles Broadwell, the fourth-generation family member to serve as publisher of The Fayetteville (North Carolina) Observer, emphasized his paper’s longstanding commitment to covering the news not only of Fayetteville and Fort Bragg, but also of all of the 10 counties that encompass the Cape Fear Region in southeastern North Carolina.127 Eight of the 10 counties are among the poorest and most rural in the state. Even as other newspapers and television stations in Raleigh and Wilmington pulled out in the 1990s, The Observer continued to provide comprehensive and contextual reporting on the major regional and local issues confronting those communities. It was the paper’s civic responsibility, he said, to give voice to all the residents in the region, who were tied together socially, politically and, ultimately, economically.

In August 2016, New Media/Gatehouse purchased the 200-year-old Observer from its family owners, who had spent an agonizing year debating this “difficult decision.” Commenting on the sale, Gatehouse CEO Kirk Davis noted, “We value the Observer’s heritage of delivering rich local content to the Fayetteville metropolitan area, including Fort Bragg.128 What he did not address is whether the Observer would continue to provide coverage of major issues in the rural, economically struggling counties outside the metro area.

In the coming years, investment entities may yet rise to the challenge and deploy their resources to reinvent local journalism, as well as local advertising. But it will require them to significantly reorient their financial priorities. Instead of a short-term earnings focus, they will need to make a long-term commitment and investment in the civic mission traditionally assumed by newspaper publishers.

One thing is certain: Time is running out. No one interested party — whether individual, institution or newspaper owner — can alone save community journalism. It will take a collaborative effort by many interested parties to meet the challenges posed by changing media ownership during a time of great economic and technological disruption. The fate of local newspapers and communities hangs in the balance.


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