Can anything save the news biz?

0:01NPR.

0:11It seems impossible to imagine now, but not long ago, journalism was actually a good business. For decades, hundreds of millions of Americans relied on newspapers, TV, and radio to find out what was going on in the world and in their communities. The money for journalism came from two main sources, news consumers and advertisers. And news outlets had an endless supply of both. When the internet came along, things changed. Media industry analyst Ken Doctor had a front row seat to it. You can see that newspapers were in decline because of the inroads of Google, Yahoo. They were taking advertising revenue.

0:53They are also taking something that's even in a sense more precious, which is attention. Consumers' attention turned to social media and streaming. Advertisers followed. And the business model that supported news for centuries began to crumble. In the past couple decades, more than 3 ,000 local newspapers have closed. And thousands of journalists have been laid off. For millions of Americans, the vacuum left behind has often been filled by misinformation, paid influencers, and AI slop. One could look at all this and reasonably conclude that fact-based, independent, local journalism is cooked. But Ken is not giving up just yet.

1:32I do believe if you build it right, they will come. This is The Indicator from Planet Money. I'm Adrian Ma. And I'm Waylon Wong. Today on the show, we'll look at two startups bucking the trend. Their success so far might just reveal a path forward for a local news revival.

1:57It's Oscar season and we watched the nominated movies so you don't have to. We are making some bold predictions for Hollywood's biggest night and we may help you win your Oscars pool. Listen to Pop Culture Happy Hour in the NPR app or wherever you get your podcasts. Santa Cruz County in California has a population of around 260 ,000 residents. For a long time, the paper of record there was the Santa Cruz Sentinel. But when Ken Doctor moved there in 2019, he says the Sentinel was a shell of its former self. Its owner, a hedge fund called Alden Global Capital, was notorious for buying up newspapers and slashing their staffs.

2:36After a few decades working as a journalist and then as a media analyst, Ken felt like he had to do something. I decided that I needed to put my my principles out there and exchange the relatively easy work of being a consultant and analyst for being an entrepreneur. Ken decided to start his own local news outlet. Ken, there got to be easier ways to stand by your principles. Yeah, I mean, only madness lies that way. But despite the decline of legacy newspapers, Ken believed that with some tweaks, the classic business model for journalism was still sound. You get businesses to pay you who want to advertise.

3:19They want to reach customers. And you get readers to pay you because they like what you're writing. They want to know what's going on. So in 2020, with a newsroom of 10 people, Ken started a digital news site called Lookout Santa Cruz. In a few short years, Ken says its readership has grown to the point where they reach about half the adults in the county every month. A couple of years ago, Lookout won a Pulitzer Prize for its coverage of floods in the city. And that recognition helped pave the way for Lookout to open a second newsroom, one that covers the city of Eugene, Oregon. Very few local news outlets have enough people where they can cover both city, county, education, school boards, universities, public health, arts, food, sports.

4:02We do that in both places. And Ken says there are plans to open three more local newsrooms in the near future. Lookout, indeed. So what is the secret to Lookout's success? We like to say we're fiercely mission-oriented and fiercely business-driven. OK, so business-wise, Lookout is what's called a public benefit corporation, which means it balances profit-making with public service. And Ken has a couple lessons to share from running it. The first lesson is that capital is key. To get the operation off the ground, Ken pitched various philanthropic funders, telling them he wanted to raise$2.5 million.

4:39And they go like,$2.5 million for Santa Cruz? Are you crazy? You know, it's just this little groovy place. But how do you put a price tag on grooviness? I know, right? And some funders were like, why don't you just hire like two people and show us what you can do first? But Ken said, even for a groovy little place, that's not going to work. You have to give people a good enough and big enough product if you want to replace a daily newspaper. And I wanted to replace the daily newspaper as a source of truth in the community that people could rely on. And that meant hiring enough reporters so that they could tell the story of the community.

5:19Ken managed to raise the money, but he didn't want Lookout to be dependent on charitable funding. So Ken says the second lesson from Lookout is the importance of a business model with multiple streams of what's called earned revenue. For example, Lookout sells subscriptions and ads, but they also make money hosting events and offering something they call promoted content. These are articles commissioned by advertisers, which run alongside Lookout's news articles. This promoted content is clearly labeled on the site. This multi-pronged revenue strategy has been working. For the past couple of years, Ken says the majority of Lookout's revenue has been earned, and the plan is to keep that growing.

5:59It's tough work, but it is doable. It is no longer in any of our minds an experiment or waiting for somebody to come along. Certainly not a billionaire at this point, but there is enough money if you execute correctly to serve these communities, and we think it'll get better and better. Lookout is not the only local news startup actually growing during a time when the rest of the industry is contracting. Another example is Deep South Today, a nonprofit network of three newsrooms based in Mississippi and Louisiana. CEO Warwick Sabin says there are plans to add a fourth newsroom in Arkansas this year.

6:36There are just a lot of populations that are underserved that don't have access to basic information like what's happening at the city board or at the PTA meetings or who's running for all. office. Certainly when it comes to accountability reporting and investigative reporting, that's just not happening in so many parts of our region. And this is where the journalists of Deep South today have made a difference. For example, one of its publications called Mississippi Today won a Pulitzer Prize in 2023. They got it for revealing how the former governor used millions in state welfare funds to benefit his friends and family.

7:09And then just last year, reporting by its New Orleans site, Verite News got a man freed from prison. Their joint investigation with ProPublica examined the junk science behind the man's conviction. What's interesting is even though they do this really impactful work, it doesn't charge readers for it. We don't have a paywall. We make all of our content available for free to whoever wants to consume it or whoever wants to republish it. Okay, so how do they manage to give away their journalism and keep the lights on? Warwick says growth is part of their financial strategy. The more newsrooms the network adds, the more readers, advertisers, and donors they can attract, and then the more revenue they can bring in.

7:50And because all the business functions like HR, tech, and sales are already paid for, the entire network can benefit from economies of scale. As we grow, you know, the per unit cost of doing the journalism obviously decreases. So the scale itself is going to create more revenue opportunities for us and is going to continue to make this model more sustainable. This is similar to the strategy used by the big newspaper chains and hedge funds, that the priority is public service rather than profits. Another way Deep South today has been able to expand its journalism without breaking the bank is by partnering with other outlets.

8:26Some big, like the New York Times or Associated Press. Others are small, like local public radio stations. Warwick thinks their model can be replicated in other parts of the country that have lost local news. I'm very bullish on the future of journalism, mainly because I think there's always going to be a need for information. And perhaps another reason to be bullish is that Deep South today, Lookout, these are just two examples of startups that are bringing local news back. We learned about them from Northwestern University's Local News Initiative. And if you want to see more cool new startups, give their website a look.

9:04Go Cats! Oh, that's your alma mater. That's my alma mater, yeah. Yeah.

9:13This episode was produced by Corey Bridges with engineering by Jimmy Keely. It was fact-checked by Cooper Kaspikim and Vito Emanuel. Kate Kincannon is our editor, and The Indicator is a production of NPR.