Local News Works When Cost Structure Isn't Screwed Up

The reason newspapers are dying is because they’re stuck with massive fixed costs when the businesses no longer require them. It is expensive running a printing operation. Additionally, the infrastructure that gets built up to support hundreds of employees is also very expensive.

But in all three cases, digital-first local media companies are looking to serve their communities without needing those fixed costs. It means that profitability can come much quicker than it ever will for newspapers.

Imagine a world where you didn’t have all of that fixed costs. As Benedict Evans says, these newspapers are “a specialised (sp) light manufacturing industry, that aggregated attention to sell advertising.”

People like to talk about how media needs new business models. The business models are perfectly fine. People will either pay for the content themselves or their attention will be monetized with advertising. Those are fundamentally good business models.

But despite all of that, the fundamental reason that local news has struggled is because the businesses are just bad. They have screwed up cost structures that make it incredibly difficult to be profitable.

As you can imagine, the local newspapers have struggled. There are a variety of reasons for this. Hedge funds have milked these companies for all their worth. Overpaid senior managers have fired their lowest paid employees (journalists), resulting in an inferior product. Facebook and Google have claimed a far larger chunk of the advertising pie.