20200
P
1
20100
R  E
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2070
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2050
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2020
I  S  M  2  0  2  0
7

Local news initiatives run into a capital shortage

“There may not be enough philanthropic capital, even on the sidelines, to support the scope and depth of local news-gathering that our democracy requires.”

Until now, daily newspapers have served as a primary source of public service journalism both in local communities and at the state level. And until now, public broadcasters and digital startups have often played an additive role in their information ecosystems, doing follow-on, human interest, and hyperlocal coverage.

This year, we’ll start to see these complementary news sources head towards center stage. But are the pieces in place for these newsrooms to play a starring role?

One major problem facing the entire local news sector is the lack of growth capital available to help organizations expand. Building a newsroom, growing an audience, and strengthening a news brand requires not just operational discipline but ongoing infusions of capital — to hire talent, create new infrastructure, and expand revenue-generating capacity. Thus far, it’s been foundations and major donors fueling much of the startup phase of nonprofit digital newsrooms — or in the case of LION members, individual entrepreneurs bootstrapping their operations with their own savings and sweat equity. Local public broadcasters in wealthy markets have been able to turn to major donors to raise capital, but not all stations are so lucky. To borrow terminology from the venture capital world, Series A and B funding sources are few and far between for many newsrooms.

So where will the growth capital come from to finance the expansion of local news-gathering capacity — to give once-secondary newsrooms a fighting chance of filling the holes left by local newspapers? And what might be the unintended consequences of growth in non-commercial news?

Here are five possible (not mutually exclusive) scenarios, ranked more or less by likelihood.

Consolidation and a brushfire effect: We see public broadcasters increasingly take the lead in local newsgathering, and helping their digital cousins along. We’ve already seen a wave of acquisitions of digital newsrooms by public broadcasters, and in healthy markets, this is likely to continue. In fact, in the short term, we predict that at least one public broadcaster will be in a position to purchase the assets of a failing local paper. On the other hand, if there isn’t adequate philanthropic capital to support the growth of noncommercial newsrooms and fund their acquisitions, we might see more small digital news startups fail. Indeed, while failure rates in local digital news media have generally been low, 2020 might be the year that changes. The market will be crowded, especially if more newspapers transition to 501(c)(3) status.

A big, coordinated play by philanthropic leaders to boost production of noncommercial news: In this scenario, outfits like the American Journalism Project become critical vectors for deploying philanthropic capital to newsrooms in ways that are designed for accountability and impact. If strong impact models can be found, we predict more philanthropic investors will come off the sidelines to make more growth happen. (Look to organizations like the Knight Foundation to catalyze new philanthropic investment in that direction.) Yet even with a game-changing funding renaissance in local news (which would require the significant participation of community foundations), it probably won’t be fast enough or big enough to refill the bucket as local newspaper talent and jobs continue to drain away. There may not be enough philanthropic capital, even on the sidelines, to support the scope and depth of local news-gathering that our democracy requires.

With generational churn comes a new relationship to the news: Remember how editors would bemoan “kids these days” who never had to pay for news? We see an important cross-current — younger news audiences who view journalism as something critical to civic life and who show signs of being willing to support it financially for that reason. As long as powerful voices in Washington and beyond threaten a free press, we’ll see more recognition by younger Americans that news isn’t just a consumer product, but a civic good.

Weighing donor influence and local trust in news: Growth in the non-commercial news ecosystem will also bring some ethical and trust issues to the fore. So far, local news outlets have been spared some of the public’s increasing distrust of the national news media. If the volume of philanthropic giving to non-commercial news outstrips the implementation of firewall policies protecting newsrooms from the influence of donors, we may see a deterioration of trust in local news. This is just as much a risk for public media newsrooms as small digital ones. The original newsroom firewalls were constructed to protect editorial decision-making from the influence of commercial advertisers. But editorial policy can be just as influenced by major donors or by the slow drip of catering to a core membership. And if a savvy news entrepreneur or two learns to apply the lessons of political or advocacy fundraising to local journalism (as some are starting to do), the risk is that local journalism becomes an influence racket — albeit a vaguely respectable one.

A New(s) Deal for the 21st century: If all forms of philanthropic support for local news are truly not enough, we predict that by the end of 2030, we’ll be seeing large-scale policy changes to publicly support more sources of local news. It may not seem like we’re that close on this one, but trust us, it could happen. Once the U.S. is under Swedish occupation. Or run by the Climate Strike generation of kids now in middle school and high school.

Elizabeth Hansen is program lead for news sustainability at Harvard’s Shorenstein Center on Media, Politics, and Public Policy. Jesse Holcomb is an assistant professor of journalism and communication at Calvin University.

Until now, daily newspapers have served as a primary source of public service journalism both in local communities and at the state level. And until now, public broadcasters and digital startups have often played an additive role in their information ecosystems, doing follow-on, human interest, and hyperlocal coverage.

This year, we’ll start to see these complementary news sources head towards center stage. But are the pieces in place for these newsrooms to play a starring role?

One major problem facing the entire local news sector is the lack of growth capital available to help organizations expand. Building a newsroom, growing an audience, and strengthening a news brand requires not just operational discipline but ongoing infusions of capital — to hire talent, create new infrastructure, and expand revenue-generating capacity. Thus far, it’s been foundations and major donors fueling much of the startup phase of nonprofit digital newsrooms — or in the case of LION members, individual entrepreneurs bootstrapping their operations with their own savings and sweat equity. Local public broadcasters in wealthy markets have been able to turn to major donors to raise capital, but not all stations are so lucky. To borrow terminology from the venture capital world, Series A and B funding sources are few and far between for many newsrooms.

So where will the growth capital come from to finance the expansion of local news-gathering capacity — to give once-secondary newsrooms a fighting chance of filling the holes left by local newspapers? And what might be the unintended consequences of growth in non-commercial news?

Here are five possible (not mutually exclusive) scenarios, ranked more or less by likelihood.

Consolidation and a brushfire effect: We see public broadcasters increasingly take the lead in local newsgathering, and helping their digital cousins along. We’ve already seen a wave of acquisitions of digital newsrooms by public broadcasters, and in healthy markets, this is likely to continue. In fact, in the short term, we predict that at least one public broadcaster will be in a position to purchase the assets of a failing local paper. On the other hand, if there isn’t adequate philanthropic capital to support the growth of noncommercial newsrooms and fund their acquisitions, we might see more small digital news startups fail. Indeed, while failure rates in local digital news media have generally been low, 2020 might be the year that changes. The market will be crowded, especially if more newspapers transition to 501(c)(3) status.

A big, coordinated play by philanthropic leaders to boost production of noncommercial news: In this scenario, outfits like the American Journalism Project become critical vectors for deploying philanthropic capital to newsrooms in ways that are designed for accountability and impact. If strong impact models can be found, we predict more philanthropic investors will come off the sidelines to make more growth happen. (Look to organizations like the Knight Foundation to catalyze new philanthropic investment in that direction.) Yet even with a game-changing funding renaissance in local news (which would require the significant participation of community foundations), it probably won’t be fast enough or big enough to refill the bucket as local newspaper talent and jobs continue to drain away. There may not be enough philanthropic capital, even on the sidelines, to support the scope and depth of local news-gathering that our democracy requires.

With generational churn comes a new relationship to the news: Remember how editors would bemoan “kids these days” who never had to pay for news? We see an important cross-current — younger news audiences who view journalism as something critical to civic life and who show signs of being willing to support it financially for that reason. As long as powerful voices in Washington and beyond threaten a free press, we’ll see more recognition by younger Americans that news isn’t just a consumer product, but a civic good.

Weighing donor influence and local trust in news: Growth in the non-commercial news ecosystem will also bring some ethical and trust issues to the fore. So far, local news outlets have been spared some of the public’s increasing distrust of the national news media. If the volume of philanthropic giving to non-commercial news outstrips the implementation of firewall policies protecting newsrooms from the influence of donors, we may see a deterioration of trust in local news. This is just as much a risk for public media newsrooms as small digital ones. The original newsroom firewalls were constructed to protect editorial decision-making from the influence of commercial advertisers. But editorial policy can be just as influenced by major donors or by the slow drip of catering to a core membership. And if a savvy news entrepreneur or two learns to apply the lessons of political or advocacy fundraising to local journalism (as some are starting to do), the risk is that local journalism becomes an influence racket — albeit a vaguely respectable one.

A New(s) Deal for the 21st century: If all forms of philanthropic support for local news are truly not enough, we predict that by the end of 2030, we’ll be seeing large-scale policy changes to publicly support more sources of local news. It may not seem like we’re that close on this one, but trust us, it could happen. Once the U.S. is under Swedish occupation. Or run by the Climate Strike generation of kids now in middle school and high school.

Elizabeth Hansen is program lead for news sustainability at Harvard’s Shorenstein Center on Media, Politics, and Public Policy. Jesse Holcomb is an assistant professor of journalism and communication at Calvin University.

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