Guy Tasaka is the Managing Director of the LMA Technology Resource Center.

Guy Tasaka | For Editors and Publishers

The phrase “sustainable local news model” is one of the hottest topics these days. This is on everyone’s mind in the industry and is a major topic of many fundraising conversations.

To understand sustainability, let’s explore the basic concepts of the local news publishing model. A simple formula is that your total content and distribution costs must be less than or equal to your net revenue plus ‘other stuff’. This is a bucket for activities not related to publishing.

content + distribution <= revenue + other stuff

The “Other” category has always been there. At the peak of local media revenue, we initially used our core assets to grow our revenue base. Commercial printing, custom publishing, and alternative distribution leveraged the print infrastructure and subsidized some of the print publisher’s existing operations. Commercial video production used the surplus capacity and provided an additional benefit to the station’s bottom line.

The list of “other things” grew as the local news revenue model was exacerbated by the loss of print advertising and circulation revenue. Digital marketing agencies, event management, and branded content were the most widely adopted new revenue streams. Software companies, real estate companies, national media, data management and cable companies also fell into this ‘other’ category. Media companies are now using cash flow from these other businesses to subsidize news publishers.

“Other” (activities not related to publishing)

• commercial printing
• custom issuance
• national media
• branded content
• software company
• digital agency
• Data disclosure
• event management
• real-estate company
• cable company
• e-commerce

I have always been a purist who believes media operations should be profitable. At a former employer, while attending a quarterly board meeting, one of her board members said that when “other staff” had to subsidize news his operations. I said I would come. It was prophetic and ten years ago.

The diversity of revenue streams within our major publishing activity categories has expanded significantly. It is a gift and a curse. Today’s focus is on the area of ​​reader revenue, including subscriptions, donations, and charitable funding. The local advertising space was hit hardest as local advertisers moved to lower out-of-pocket costs for digital advertising.

core publishing revenue

• advertisement
• Direct sales
• Communication network
• programmatic
• sponsorship
• branded content
• Number of copies (single/subscriber)
• digital subscription
• e-commerce/transaction revenue
• Lead Generation/Affiliate
• Donation (individual or corporate)
• charitable foundation

This new revenue diversity has pushed local publishers away from local business relationships.I was going to call it a local business reliancebut the symbiotic relationship is what has made the community thrive over the past century.

look in another direction

While local media companies are setting up digital marketing agencies and adopting public media funding models, more and more digital marketing agencies and public media companies are transforming into local news organizations.

If you visit your local public media website, you may see promotions for PBS and NPR shows and upcoming membership drives. For example, Connecticut Public and Oregon Public Broadcast are more like local news sites. While other news outlets have scaled back their local coverage, both companies are focusing on creating more unique state and local news content. Public media as a whole seeks to become more relevant to younger audiences as their core audience ages.

In Texas, ThriveFuel’s Jason Holmes launched a successful digital marketing agency and built a video competency to serve advertisers in the Victoria and Corpus Christi regions. ThriveFuel is working to establish a local media company as an extension of their agency. It is staffed by local broadcasters and will soon be launching a connected TV presence.

Should Digital Marketing Agencies Be Local New Organizations?

As the Chief Digital Officer of a local media company in 2014, when the movement towards building a digital marketing agency started gaining momentum, I was clearly against it. We, the local press, were not properly staffed and had the right relationships in the marketplace. Media companies focused on big deals with big local advertisers rather than the long tail of local businesses. I also opposed what I expected would be a low-margin, high-churn business.

Local media companies have had varying degrees of success based on what part of the market they focus on. The most successful companies aim to be in the middle of the market, not small businesses.

Fast forward to 2022 and beyond, and the path to a sustainable and, boldly, a thriving local news model involves powerful local digital marketing agencies starting, acquiring, or merging independent news companies. I believe the two businesses are complementary in many ways.

The model is an independent local newsroom with omnichannel publishing capabilities. A single newsroom publishes to web, TV/CTV, radio/audio, mobile, social, newsletters and more. Newsroom creates TV newscasts (news magazine shows syndicated to non-news radio stations). So does radio. Additionally, the newsroom can own his branded CTV and streaming audio channels.

As a differentiator, digital marketing agencies will have inventory from all media companies across all media platforms as a dedicated source for their advertising clients. Additionally, digital marketing agencies have design, technology, and user acquisition capabilities that most local media companies don’t have and probably never will.

In 2018, we asked Gordon Borrell, CEO of Borrell Associates, “What is a sustainable business model?” He outlined much of what I just described. Everything took shape when he met with Holmes and started building his CTV channel.

This article is reprinted with permission from the local media association. Thinking about media sustainability or want to learn more about the services of the LMA Technology Resource Center? Email Guy Tasaka (guy.tasaka@localmedia.org).