Medill’s Local News Initiative finds that subscribers, not advertisements, generate revenue for local news organizations

Medill’s Local News Initiative at Northwestern, working with Medill’s Spiegel Research Center and Northwestern’s Knight Lab, recently conducted research analyzing reader behavior in the context of local news sources. The results showed an interesting conclusion – that establishing a consistent foundation of readers improves the state of local news organizations much more than advertisements do.

“What makes people subscribers is a lot more about their relationship to the media organization,” said Joe Germuska, Executive Director of Medill’s Knight Lab. “It’s not just about their simple behavior in terms of clicks.”

Tim Franklin, a senior associate dean at Medill, former president of The Poynter Institute and leader of Medill’s Local News Initiative, said one reason why change needs to be made in the way of revenue generation for local news organizations is that today, the majority of digital advertising revenue is taken from sites like Facebook and Google.

“The business model is completely broken. It’s been mountably disrupted by digital sources,” Franklin said. “We’ve been living in this world where news organizations are largely supported by advertising and advertising revenue, and now we’re shifting to an environment where news organizations and media are being supported by subscriber revenue.”

These results mean that local news organizations need to take a different approach to how they spread their information in order to have the most success. Edward Malthouse, Director of the Spiegel Research Center, said that local news organizations should not be trying to maximize the number of clicks they receive. Rather, they should be searching for something else: frequency.

“What was surprising to us was that it’s really about frequency,” Malthouse said. “How often you read is the most important driver of whether you’re going to remain a subscriber.”

A shift toward this new approach to generating revenue in the media landscape has already occured in at least one way, through newsletters and emails sent to readers by these news sources. Malthouse said the Washington Post, for example, sends out about two emails per day with important headlines. These emails, while short, are effective at making readers feel that they are benefiting from their subscription.

However, there is still much to be done within the world of local news organizations, and Medill’s Knight Lab is currently working on finding solutions. Master’s students from both the Medill School of Journalism and the McCormick School of Engineering’s Segal Design Institute are currently enrolled in a course with the purpose of finding new ways to solve the local news dilemma. Ideally, Germuska said, this course, along with the projects developed by the students, will continue into the future and hopefully result in concrete solutions.

The students working on these solutions, Germuska said, offer a fresh perspective and can help formulate creative solutions to improve the future of local news organizations. This support for local news will inevitably have an effect on these young people, along with the U.S. in general, including an increase in community civic engagement.

“From a civic perspective, a lot of times, it’s more possible for people to get involved in big change in their community than it is to get involved in big change at a bigger scale,” Germuska said.

Currently, however, the state of local news organizations in the U.S. is concerning, to say the least. According to a study by the University of North Carolina, 171 counties in the U.S. have no local newspaper. These “news deserts,” or areas where no local news is present, are a growing problem in the U.S. that many believe is not being addressed to the extent that it should.

Franklin discussed this at a talk in San Francisco when he compared this pressing lack of local news consumption to global warming, highlighting that the way the public perceives the local news crisis mirrors the way it sees global warming.

“Climate change, in some ways, is a distant problem,” Franklin said. “You read about it, you see some video of what’s happening with melting ice and rising sea levels. You know this could be a really big problem –  but it’s a slow motion crisis. I think you see the same sort of thing with local news in America. It’s not one cataclysmic event. It’s a gradual loss of local news and information. If this continues, I think the consequences are serious for the country.”

The research conducted by Medill’s Local News Initiative is a step in the right direction in terms of improving the state of local news organizations. It is comprehensive, including both qualitative and quantitative data that Tom Rosenstiel, executive director of the American Press Institute, described as a “paradigm shift” – one that has to potential to make individuals more aware, informed and engaged in their communities.

“The basis of democracy is on the assumption that people make informed, rational decisions,” Germuska said. “As long as we hold that idea, it’s important that people have good information to make these decisions on.”