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Nov. 6, 2017, 12:47 p.m.
Business Models
LINK: www.cjr.org  ➚   |   Posted by: Ricardo Bilton   |   November 6, 2017

Spirited Media, one of the recent bright spots in local media, suddenly looks a lot more dim. The company laid off staff at all three of its local publications last week, Corey Hutchins at Columbia Journalism Review reported late Friday. Denverite, which Spirited Media acquired earlier this year, lost two reporters and its engagement editor — nearly a third (!) of its 10-person staff — while Billy Penn and Pittsburgh’s The Incline each cut their headcount by one. “It was a shitty week,” said a matter-of-fact Jim Brady, Spirited Media’s CEO.

When Spirited Media acquired Denverite in March, its ambition was to create a new kind of digital-only local news chain built around events and community engagement. And that ambition was a grand one. At the time of the news, Gordon Crovitz, co-founder of Denverite’s parent company Avoriaz, cited BuzzFeed, Huffington Post, and Business Insider as sites whose multi-million dollar success Spirited Media was chasing. “The missing part of the media landscape in terms of successful digital businesses has been local — and we aim to change that,” he said.

It isn’t clear whether the layoffs are a product of a sudden change in the advertising market, or whether Spirited Media misjudged how fast it could grow before its money started to run out. (We’ve reached out to CEO Jim Brady for more insight, but haven’t yet heard back). To turn things around, Denverite is exploring new revenue streams, including a membership program and custom content, which it hopes will bring in more revenue.

While it’s a welcome relief that Spirited Media isn’t shutting down any of its sites entirely, news of the layoffs came as a gut punch to many in the local news world, who have seen Spirited Media’s success as an exception in an industry marked by layoffs and little evidence of sustainability. Dimming the local news picture further, news of the layoffs came the same week that DNAinfo and the Gothamist network, two other admired efforts at digital local news, shut down entirely. And while DNAinfo CEO Joe Rickett’s move may have been greatly influenced by his disdain for unions, it was clear that the move to close DNAinfo and Gothamist was also a product of sites’ ongoing revenue challenges. Mike Fourcher, and CEO of the subscription-based local news site The Daily Line (which we’ve covered) laid out the reality:

It doesn’t take a detective to figure out why DNA Info was not profitable. It was an ad supported business in two crowded markets, New York and Chicago, where it was far from the first ad buy. The sites were never crowded with ads, and their email newsletters were often filled with house ads. Their neighborhood print papers, distributed when they had an ad to run, became less and less frequent, evidence of fewer and fewer ads.

As sudden as the publications closures were, the failure of DNA Info to be a viable business saturated every aspect of the endeavor. Without profits, it existed through the subsidy of its owner, Joe Ricketts. And without profits, the company’s employees had no real leverage when they sought to unionize. Why negotiate with a group of people who are already losing money for the owner?

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