“The big opportunity — and where the most disruption is — is in local media.”—Vivian Schiller, president, NPR

“I have little doubt in my mind that, whether it’s us or somebody else, [local news] is going to be a very big space in the future.”—Tim Armstrong, chair and c.e.o., AOL

In the front of the room, NPR President Vivian Schiller and AOL Chief Executive Tim Armstrong are laying out their corporate strategies to almost a thousand online journalists. It’s the lunchtime general session of the Online News Association (ONA) Conference, and the topic is one of the principal challenges for American journalism: how to provide and sustain local news.

The distinction between national and local news often gets lost among the gloomy statistics that surface in so many discussions of the news business. Local newspapers have been folding, probably at a faster rate than many people realize. According to Paper Cuts, 171 local newspapers have closed in the three years 2008-2010, resulting in the loss of 2,800 jobs, not counting early retirements.

Locally is where disruptive technology has been the most profoundly disruptive. By contrast, national news providers have been gaining some advantages that may ultimately offset their losses, with CNN, theNew York Times, Fox News and USA Today using the Web to deliver more news to more people more often.

The same difference in local/national potential appears in public radio. Few knowledgeable observers worry that NPR will collapse under the pressure of disruptive technology and social media. The national audience for NPR content is growing, reaching historic highs in spring 2010.

All signs point to continued growth in the decade ahead. On Facebook, NPR is “liked” by 1,371,607 people (and that number is growing steadily). Monthly usage of NPR digital platforms grew from 43 million pageviews in June 2009 to 88 million in June 2010, with about three-quarters of that growth coming from mobile users.

In contrast, you have trouble finding people who are optimistic about the prospects for mid- and small-sized stations. The weakest public TV stations already are collapsing. In the decade ahead, the damage and consolidations will almost certainly extend to public radio.

So, what are stations viewing as a way of improving their competitive position? Most often their answers is: “go local.” Speakers at many media conferences reinforce this survival strategy: go local, especially in news.

What makes this approach so appealing? First, with the collapse of local newspapers, there appears to be a market opening, much like the opening that developed on radio as long-form news formats gave way to all-news-all-the-time.

Second, the majority of public stations are already news outlets. Their audience is an “NPR news audience,” so the go-news approach is building on strength. And finally, many of the largest foundations in the country are looking to help fill the local news gap created by the newspaper crisis. Perceived opportunity, perceived capability and potential funding. It’s a powerful combination.

Some of the best-funded public radio stations are heeding that call. In New York, Los Angeles, Chicago and Minneapolis, stations plan to expand their local newsgathering dramatically (Current, Nov. 1). Smaller stations are thinking along the same lines, though scaled-down in payroll. To encourage this direction, CPB has put money behind seven regional journalism centers.

Depending on how CPB fares in the coming round of federal budget deliberations, more newsroom expansion could follow.

How will this new bounty of local news be delivered? Given the limitations of any broadcast operation — a linear schedule holds only so much material during a listener’s waking hours — we should expect that much of the anticipated expansion will take place online.

How local is local news?

The first question to take up: What actually constitutes local news? For the most part in public radio, local generally is defined as anything that is not national.

Almost every radio station with a news department provides some “local news,” whether it’s short pieces that fill between segments of NPR or extended wrap-ups. But almost every station is faced with a perplexing problem when it comes to identifying what is locally relevant to an audience covered by a single broadcast channel with a range of 50 or even 100 miles. In my own area, the top local story in Saratoga, N.Y., often has little or no relevance to listeners in Willilamstown, Mass., 50 miles east, or Newburgh, 100 miles south. Yet all three cities are served from Albany by WAMC, which takes great pride in its local coverage. WAMC rotates its local focus, on Mondays covering Saratoga, Tuesday covering Williamstown, but the resulting mix is, even at its best, an awkward compromise.

In the terms in which the local news conversation was taking place at ONA, it’s fair to say that most locally produced public radio news is regional. The same is true for almost all service from a network TV station, reaching both cities and suburbs, and for the many state or regional networks in public broadcasting, whose signals often spread across thousands of square miles by a constellation of repeaters. In all these cases, the definition of local news remains blurry, and most are poorly equipped to explore hyperlocal news, a term that is best be applied to compact communities, such as a neighborhood in a large city or a village or township in a rural area.

Regardless of this awkward fit, local or regional news is a top priority for investment at many stations. And if the ONA conference in Washington last month was any indicator, public broadcasters should recognize that the race to provide local online news is accelerating at Internet speed in both public and commercial media.

As that competition develops, stations will be faced with a set of complex decisions and some hard realities of productivity, investment and return.

• How much news can you generate with a two-, three- or four-person news staff generally found in CPB-funded station?
• How much additional revenue can a mid-sized station expect to reap from an expansion of local news even if you move a lot of your delivery online?
• And if the majority delivery capacity does occur on the Web, what competitive advantages does public radio bring to the competition?
• Should we build or borrow technology?
• Do you partner or go it alone?
• And even assuming a massive foundation effort targeted to preserving local news, what makes the local public radio station the best candidate for those dollars, especially when a new web-savvy operation starts up in the same market?

Players — big, small and new

Who are the new players vying for the local news franchise?

By far the best-known company moving swiftly to stake local claims in the New News world, and represented at the ONA conference, is AOL, an online player that was so dominant in its day that, at one point, the Internet appeared to be just one of its new offerings. AOL is now building a complex of websites called Patch.

An edition of AOL’s Patch covers some Hudson River suburbs of New York.

AOL bought Patch for $7 million when the startup had just 17 employees, reportedly invested $50 million in it, and expanded its reach from five communities to 356 local or hyperlocal sites, with hundreds now in development in 14 states. The approach is economical but uses paid labor; it’s staffed “by professional editors, writers, photographers and videographers who live in or near the communities we serve,” according to the company website.

A second commercially based entry among the New News startups is Washington’s three-month-old TBD.com, which was deemed to be so significant that ONA conference organizers gave over their entire 90-minute opening session to an extended interview with Jim Brady, its founding g.m., and other key staff members.

TBD, like Patch, plans to build on professional journalists, including émigrés from downsizing news organizations. It is the second major online venture to emerge from Allbritton Communications Co., based in Arlington, Va, which launched the highly successful Politico web/print publication in 2007. Albritton, controlled by a family that once owned the city’s Evening Star newspaper, shares material with its cable news channel, now rebranded TBD-TV, and its WJLA-TV, the ABC affiliate in town.

MinnPost and its kin

Surrounding and in many ways opposing the spread of Patch are a group of independent New News organizations that drew as much or more attention than Patch at the ONA meeting.

The most talked-about examples from this group include:

• Voice of San Diego (“Investigation. Analysis. Conversation. Intelligence”),
• The Texas Tribune in Austin,
• The West Seattle Blog, and
• BayCitizen in San Francisco.

Austin’s Texas Tribune seeks members to keep the news site cranking.

The leader of this group is MinnPost in Minneapolis, which we can examine as a prototype for this new breed of news site that has emerged in the past three years.

MinnPost and its cohorts share three characteristics:

• They’ve been developed largely by former newspaper people.
• They’re starting with substantial capital — not just a domain name and a few credit cards. The money is supplied by an individual philanthropists or foundations.
• They’re clearly looking to extend the business and marketing models of public broadcasting to a new form of public media, drawing revenue from (a) subsidies, principally from foundations or philanthropists; (b) advertising/business sponsorships, and (c) a growing list of member/contributors willing to pay for something that Americans have long expected to get for free — good-quality local news.

MinnPost, as many of the other New News ventures, emerged directly from decline of a major daily newspaper, in this case the Minneapolis Star Tribune. In 2007 — the year MinnPost was founded — theStar Tribune excised $50 million from its annual budget by reducing news pages, laying off employees and freezing wages for its nonunion staff.

The person credited with founding MinnPost was the former editor and publisher of the Star Tribune, Joel Kramer, who, together with his wife, put up part of the initial $850,000 seed money used to launch the site.

That public radio voice

Given the organization’s focus on developing individual membership support, it should come as no surprise that MinnPost’s image patter mirrors public radio’s pitches about “our mission and service.”

Take a look for yourself. Just Google “MinnPost.” The top link on your search page will read:

MinnPost – High-quality journalism for people who care about … Nov 11, 2010 … MinnPost.com is a nonprofit
journalism enterprise that publishes
MinnPost.com. Founded by Joel Kramer, MinnPost’s mission is to provide …

As the site loads, you see the MinnPost positioning statement under the logo at top left: “A thoughtful approach to news.” That sounds a lot like what thankful donors often tell public radio stations. Slightly to the right, your eyes settle on a dark red button that invites you to DONATE. Donate to what? “Member-supported news.” That sounds totally like public radio.

Yes, there are ads on the page — as there are ads on most public stations’ websites. But MinnPost also has a Sponsor Board at top left where it recognizes the support from Minnesota Soybean and other companies and individuals who bring MinnPost to the readers. Again, very public radio.

Their choice of content is also characteristic of public radio news, with a heavy emphasis on local politics and public affairs. For example, on Friday, Nov. 12, MinnPost’s top story was about an impending recount in the Minnesota gubernatorial race. In contrast, the city’s highest-traffic TV station, WCCO, which is also kin of all-news WCCO-AM, leads with the headline “One Killed in Wisconsin School Bus Crash.” The next biggest story is about Minnesota sports.

Just as MinnPost shares the mission-driven values of public radio, it also shares the limitations, most obviously the size of their news staff. As Managing Editor Roger Buoen explained, “I used to have a newsroom with over 300 reporters (at the Star Tribune).” Now he commands a team of 15 to 20 writers, some full time, others on contract. At first, MinnPost relied heavily on freelance writers, hoping to take advantage of the area’s surplus of underemployed journalists, but that approach proved unwieldy. So they course-corrected, and now use fewer writers, who, work under contract and contribute more.

Online local news as a market

Even with the Star Tribune’s decline and recent return from bankruptcy, MinnPost, Minnesota Public Radio and the Twin Cities TV stations have relatively modest reach in the online news market. Reliable metrics for comparing the audiences of local news competitors are not available at affordable prices, but Compete.com provides a reasonable profile of Minneapolis/St. Paul.

Unique visitors per month of selected Twin Cities sites estimated by Compete.com, April-September 2010. Not shown: commercial station sites other than WCCO’s.

The local online news scenes in the Twin Cities and other markets look much alike. In almost every market, the top spot is held by a dominant newspaper site — in this case, the Star Tribune, which attracts an average of 1.67 million visitors per month (all ratings are six-month average, April through September 2010, from Compete.com). With a circulation of 504,000 Sundays/297,000 weekdays, the Star Tribune nearly doubles the reach of the St. Paul Pioneer Press, whose website reaches 536,000 unique visitors per month.

Each of the other Twin Cities news outlets attracts fewer than 500,000 visitors per month. CBS-TV affiliate WCCO (Channel 4) ranks head and shoulders above the other Twin Cities TV sites — probably helped by its association with WCCO-AM, NewsRadio 830, also a CBS affiliate. (I have not included all of the TV and radio sites.) Next in traffic volume at 318,000 monthly visitors comes the site of the alternative newsweekly, CityPages, “the definitive source of information for news, music, movies, restaurants, reviews …” with the area’s top event calendar.

Then we find the region’s powerhouse radio news source, Minnesota Public Radio, with about 260,000 visitors per month — very strong by public radio standards. And finally, MinnPost, with 118,000.

For all the talk of opportunity at ONA, developing MinnPost into a sustainable local news service is a tough slog, especially with these competitors — overshadowed on one side by a teetering goliath that still has a small army of reporters, a wealth of daily sports coverage, and a set of service functions, classifieds, and listings that would be almost impossible to duplicate. And on the other side, MinnPost competes with news broadcasters who may field similar-sized (or smaller) reporting teams but who also possess a 24-hours-a-day promotional megaphone reaching hundreds of thousands of cars, homes and offices.

Threshold of sustainability

With its goal of creating an enduring, sustainable addition to the status quo of TV, radio and declining newspaper coverage, MinnPost attracted the right group of civic and foundation leaders that can start a New News operation and carry it for a while. But their priorities eventually will change.

This is where MinnPost faces its greatest challenge. It needs to build a popular base of renewable support before draining its working capital, and it has to make this transition from startup to going concern without the promotional advantages of a broadcaster or the financial assets of a much larger corporate entity like AOL, Allbritton or even Minnesota Public Radio.

So far, the venture appears to be making reasonable progress along this path, although a review of the details shows how difficult the process will be for any New News organization.

For MinnPost, their financial development began with startup capital of $1.1 million, which included four large “family gifts” and a $250,000 grant from the Knight Foundation.

In their first full year of operation, 2008, they secured $160,000 in ad revenue, $356,000 in memberships and $467,000 in grants, major gifts and event proceeds, for total revenues of $991,000. That left an operating deficit of $450,000.

Their second full year, 2009, was slightly better: Ad revenues increased to $217,000, individual gifts rose to almost a third to $458,000. They lowered their costs but still ended with an operating deficit of about $500,000.

This year, Publisher Joel Kramer says they’re turning the corner. In an interview with Current, Kramer expressed optimism, suggesting that stable costs and rising revenues will allow MinnPost to produce a modest surplus by the end of 2010, largely thanks to foundation grants. If they reach that point, it will be nearing its first threshold of financial success: covering all operating expenses with ad and membership revenue, leaving foundations to support supplementary activity, such as investigative reports.

If the trend lines continue in 2011, and MinnPost can break even without foundation subsidies, Kramer and his colleagues will demonstrate that citizens in larger cities have another option for local journalism. In the face of declining newspaper capacity, citizens can create and maintain a local, independent, professionally managed “public media” news service.

The significance of this accomplishment goes well beyond Minneapolis. Almost every city has the basic elements that Kramer and his supporters combined to create MinnPost, including a few deep pockets (or foundations) that can provide working capital and a group of trained journalists who are willing to take more risk and to make less money in the effort to create something new. Of course, putting those pieces together requires leadership and vision, which may not always be available.

But can it really be profitable?

Those revenue numbers clearly frame the competitive challenges and disadvantages of a New News startup. How many reporters can you support with a $1 million budget? What kind of salaries and benefits can you provide, even with a scaled-down reporting staff? The limits on costs are very significant.

The other options that surfaced at the ONA meeting — like AOL’s Patch or multiplatform commercial operations like TBD — may have some competitive advantages over ventures like MinnPost, but those may not be critical factors in determining who survives to report the local news.

MinnPost’s most important message to observers outside Minnesota may be the realization that commercial TV and newspapers are no longer profitable enough to engage in serious journalism as many did for much of the last century. If that’s the case, then Joel Kramer and his colleagues are in the early stages of defining a partly subsidized business model — the kind that sustained public broadcasting for the past 40 years.

This kind of sea change in an industry is a function of the markets. Providing educational shows for young children is not that profitable, so capital goes elsewhere and Sesame Street ends up on public TV. Serving TV to teens can bring enormous wealth, so private industry creates Nick and High School Musical. Over the last two decades, broadcasting classical music and jazz ceased to be profitable, at least in the terms of contemporary radio finance; now those offerings find homes exclusively on public radio.

Joel Kramer, who once ran the Star Tribune, has more than enough experience to know what it takes to produce a profit with local news. He initially put together a package of secure investment in MinnPost, only to find that what he was proposing “doesn’t really feel like a for-profit — the risks are high, the rewards are low.”

Perhaps MinnPost is just telling us: This is the way you have to do it. Serious journalism in the decades ahead will be created with less money — including some form of subsidies — by new organizations formed for that purpose.

We may not have to wait too long for an answer on this. The next five to ten years we can watch the progress of AOL/Patch and TBD.com. I suspect they will both hear and respond to the message sent by the markets.