Private equity firms and hedge funds are mainly in the news media. This means that the local news is not necessarily local or national but does not have an international scope.
Private equity firms and hedge funds dominate local news.
Thousands of citizens carry the fate of their local news on their shoulders. Affluent communities are the ones that are likely to have resources to support their news organizations, while economically struggling communities are more likely to lose theirs.
The loss of local news has caused a wide range of interrelated issues. These include an erosion of contextual beat reporting, the absence of major investigative pieces, and a reduction in bylined local news stories.
The most prominent newspapers are now owned by large private equity firms and hedge funds. These “mega-chains” have acquired hundreds of mid-market newspapers across dozens of states and are taking advantage of low-interest rates.
They are also aggressively selling their papers. The largest chains are the most aggressive in buying and selling newspapers.
The rise of private equity firms has raised concerns about “shadow banking,” the financial engineering that private equity firms perform without being regulated.
These firms are gaining so much momentum that the Securities and Exchange Commission is considering new rules to control them. The rules would require more disclosure of their holdings and returns. Some critics worry that the new regulations could rattle the economy.
Private equity firms also have far-reaching effects on local economies. They often dump obligations to retirees and have poor investment returns.
Some pension funds see poor returns on their investments when private equity-owned retailers go bankrupt. The impact of these secret equity deals extends beyond the local economy and can affect states’ tax bases.
In addition to private equity firms, philanthropic organizations have also increased their support of local news. Some have invested in start-up news sites, while others are underwriting digital sites.
These charitable organizations are primarily based in media-rich urban areas. However, many digital sites are unavailable in communities that lack a commercial base.
There needs to be more than the for-profit and nonprofit models of funding local news to sustain a robust news ecosystem. These organizations must diversify their funding sources. Several states are considering tax credits for businesses that advertise with local news organizations.
Ultimately, the challenge for these organizations is getting public funding to the right places, especially in less affluent communities.
Newspapers strengthen communities
Thousands of communities across the country depend on newspapers to deliver local news and information. The newspapers are:
- An essential part of the news ecosystem.
- Aggregating the data.
- Highlighting community pride.
- Encouraging residents to be more engaged in their communities.
In the past decade, nearly one in five newspapers have closed. The most recent data shows that the United States will lose another third by 2025. This significant loss further divides the nation into wealthy and struggling communities.
In addition to local news, newspapers are also crucial for social cohesion. Newspapers are often a source of community events, such as parades, park cleanups, and regional theater productions.
They are also vital to political engagement. Many newspapers report on community development initiatives and youth programs.
The newspaper is also a valuable source of information on local government activities. 30% of adults get information on local zoning and real estate issues, while four out of five get information on local government.
Newspapers also have a significant role to play in educating children and young adults. They have reported that students who used newspapers in the classroom performed better on standardized reading tests than students who did not.
Newspapers also help people form a community around shared values. The newspaper’s editorial pages are a chance for editors to make their voices heard. They often use this space to advocate for causes.
The newspaper industry has seen a series of devastating storms. The recession was the most significant storm to hit the industry in the past decade. Many commercial newspapers have cut their resources and staff, making it harder to provide civic value to communities.
Some newspapers have leaped into the digital age. Others have closed down and become shells of their former selves. Some newspapers are still mom-and-pop operations, while others have been sold to investment banks and hedge funds. Some for-profit news organizations are doing well in affluent communities.
However, the future of the newspaper industry remains in balance. Many newspaper editors were skeptical about government funding.
Nonprofit media will be the local media ecosystem of the future.
Thousands of people are working to save local news. From policymakers to concerned citizens to scholars and digital entrepreneurs, these individuals carry the burden of local information. They are also reshaping the local news landscape as we look toward the future.
For example, the National Trust for Local News established a nonprofit conservancy that leaves the business functions of newspapers in place while ensuring local news coverage remains consistent.
It has also partnered with local papers to create networks of community news outlets. Several states are considering tax credits for businesses that advertise with local news organizations.
The philanthropic industry has also increased its support of local news. Several nonprofit foundations have invested in start-up news sites. The Knight Foundation supports the American Press Institute and has funded the “table stakes” movement, which has grown to include more than 100 local news enterprises in the U.S.
The digital news ecosystem includes more than 170 local business sites, 95 state or regionally-focused news sites, and 273 independent local sites. These sites have local particular interest sites, community newsletters, and “networked” local outlets. This ecosystem also excludes large national sites, such as the Washington Post.
In the past 15 years, hundreds of upstart news outlets have emerged. In Cleveland, four news sites have been established in the past two years. In Milwaukee, double-digit growth rates in digital subscriptions have been reported.
Successful local and state sites need to be strategic about raising funds. They must also diversify their funding sources, including membership fees, donations, and sponsorships.
Local ownership is the key to reviving local news in the 21st century. Traditionally, underserved communities struggle to support print news organizations. Entrepreneurial owners have transformed their legacy outlets by diversifying their income streams.
They also operate more efficiently by consolidating similar activities. They can also offer national advertisers access to multiple markets.
The next few years will be crucial for the fate of hundreds of news organizations. They will need timely interventions backed by for-profit, nonprofit and public funding.
Paying for local news
Increasingly, local and regional news organizations are turning to paid content. These models have led to various new processes, products, and newsroom roles. In many cases, the organization has reoriented staff away from national issues and towards more local matters.
A recent study by Northwestern University’s Medill Local News Initiative found that more than one in three adults in the United States does not pay for local news. However, most of these adults use multiple sources to get their information.
Some of these sources are delivered online, and other sources are accessible. Moreover, many of these readers need to be aware of local news organizations’ revenue challenges.
Despite these challenges, news organizations continue to produce local news. Nevertheless, these organizations have faced various challenges, including sharp declines in print deliveries, advertising, and event revenues.
In addition, some news organizations have faced layoffs or furloughs. The economic fallout of the COVID-19 pandemic has exacerbated the challenges facing local news organizations.
In response, news organizations have been innovating ways to serve readers, including new digital products, content-management strategies, social media tactics, and alternative revenue strategies.
But many editors and managers are concerned about the ability of these strategies to attract readers. In addition, they are worried about the ability to retain newsroom talent.
Some of these models include reader-donation models, freemium models, and micropayments. Other methods include direct-debit options, which ensure ad-free access to paid content.
However, this type of revenue model is still in its experimental phase. It is also possible for these models to be implemented in local apps, including those for Girl Scouts and other specialized news organizations.
Local news organizations must continue to reinforce the value of local news. They also need to explain their editorial decisions to readers and increase transparency about their newsroom operations. In addition, they need to reinforce the role local news plays in a democracy.
The News Media Alliance will host programs on developing revenue directly from readers. News organizations must also build trust among readers and establish a sustainable membership model.