Fresh Ways to Keep News Operations on Solid Financial Ground

This high tide of oftengripping content has had a beneficial impact on most of the quotshipsquot in the news ecosystem ranging from online platforms to TV news channels to newspapers And some members of the industry have invested intellect and capital to develop business models to make news organizations more profitableThey must grapple with an increase in audience fragmentation And there are actual declines in some media sectors like legacy newspapers That chaotic and competitive landscape makes it even more imperative for journalistic operations to find business models that will enhance their financial viabilityEncouraging FactorsTo assess the most advantageous strategies moving forward news organizations should consider four main factorsPolitical polarization has driven news consumers to familiar and preferred quotliberalquot and quotconservativequot content amp8211 placing pressure on the center Since 2017 only about 50 of the population has viewed major news organizations as quotcrediblequot according to a poll commissioned by Morning Consult and The Hollywood Reporter While this number may be discouraging at least it is not declining And the credibility of three major legacy TV networks NBC ABC and CBS actually increased from approximately 58 to 61 according to the same surveyAlthough approximately 50 of consumers bemoan a perceived lack of news credibility in general a higher proportion about 72 is satisfied with the outlets they choose Internet news sites 74 edge out television cable and print media when it comes to satisfaction according to data published on theasciorgDespite subscription declines average consumer spending on newspapers increased from 19 in 2019 to 22 in 2020 the most recent year available according to the Bureau of Labor Statistics This was spurred by price increases Consumers39 willingness to pay more indicates the perceived value of newspapers And it compensates for overall subscription declinesAccording to the Pew Institute the share of adults who trust local news sources is 75 That is significantly greater than the percentage who trust national sources indicating that a focus on localism will enhance financial viabilityWe can draw some conclusions from these four groupings of quottea leavesquot They indicate that business models will be more successful if they include a serious and creative plan to develop an internet platform Organizations also need to treat editorial content as an investment opportunity rather than a costcutting target and develop a focus on localism And they should develop analytics and backoffice savings that make the most of this environmentSome organizations are already on the right path successfully incorporating these factors into their business models and developing new ways of handling costs that are enhancing financial strength The Baltimore Banner and Tampa Bay Times are two cases in point Let39s look at each one in turnBaltimore ChallengerOne of the most expansive and innovative examples of a new business model can be found at The Baltimore Banner which launched in June It competes with the legacy Baltimore Sun which was acquired in 2021 by the hedge fund Alden CapitalThe Banner is going up against an entrenched print competitor with a 100 digital approach Its management is investing heavily in content and eventually plans to have the largest newsroom in MarylandIts business model can be characterized as not just local but hyperlocal Members of the editorial staff which may soon include 100 people are dedicated to specific neighborhoods and societal groups throughout the city and will eventually include other areas of Maryland Although it launched only a few months ago The Banner39s content and research is already being cited by other news outlets in the marketExtensive data analytics infrastructure will support advertising and customer development Several backoffice and nonstrategic functions like payroll advertising operations and financial planning are being outsourced overseas at a considerable cost savingsThe combination of these efforts is intended to make The Banner economically selfsufficient by 2025Even The Banner39s financial model is fairly unique It39s owned by a nonprofit the Venetoulis Institute and was started with seed capital from entrepreneur Stewart BainumThe Banner has only tapped into a few of the financial resources available to journalistic operations For example others might partner with a local foundation or educational institution on a research project Several philanthropic organizations amp8211 including the Knight and Ford Foundations amp8211 provide support for certain initiativesThe available options aren39t limited to nonprofit entities For example the Society of Professional Journalists may subsidize the cost of a journalist who is dedicated to a particular topicOther opportunities may be on the horizon For example in California a state bill SR 19 has been introduced that would support local news outlets using a model similar to PBS or NPR However the legislation is generating controversy because it imposes editorial limitations such as a prohibition on endorsing political candidatesTampa Bay TacticsWhile The Baltimore Banner eliminated the print cycle completely the Tampa Bay Times has found success by curtailing the print schedule to two days per week Wednesday and SundayThe change which took place in 2020 had a sharply negative effect on revenues However the beneficial impact on operating expenses was about 70 greater than the revenue loss resulting in a combined operating profit improvement of almost 14 million over a twoyear periodTampa Bay Times also made significant investments in editorial content and beefed up its enewspaper It added exclusive comics entertainment and opinion content along with themed pages The electronic version offers a full facsimile of a print edition And there39s considerable flexibility a full page of content can be added the same day that a story breaksTackling ChurnBoth The Banner and the Tampa Bay Tribune use extensive data analytics to target new subscribers and reduce churn among existing subscribers Churn is generally defined as the number of subscribers who terminate a service as a percentage of the total in a given month It is the bane of any subscriberbased business be it news wireless telecom or cable televisionA 3 monthly churn rate implies that a business will need to replace over a third of its customers just to say even 3 times 12 months equals 36 Churn among cable television and newspaper companies has risen sharply in recent years as a result of competition consumer preferences and subscriber cancellationsHowever 30 of churn is related not to those factors but to failed payment transactions according to the software company Vindicia The implementation of better analytics to help businesses understand why failed transactions occur can help them reduce their churn rates by 3 or so per year Vindicia concludes that the exponential impact of churn reductions can increase revenues by 10 and the lifetime of a subscriber by six monthsThe American Press Institute also offers resources on best practices for attracting and maintaining subscribers It39s provided four recommendationsCollect information about consumers39 interests and behaviorsIdentify those at risk of churnTake measures to glue subscribers to the news service such as welcome packages and subscriberonly benefitsTrack which content is the most engagingThere39s no doubt that traditional media will continue to face great challenges in terms of competition economic uncertainty and technological change But news operations like The Baltimore Banner and Tampa Bay Times point the way toward emerging opportunities that others can mineIf a growing number of operations discover new sources of funding learn from consumer data apply creative efficiencies and focus on local issues we may see more headlines about a buoyant and successful news industryThis article was originally published in the SepOct issue of TFMJohn Sanders is a principal with the financial and valuation consulting firm Bond ampamp Pecaro Inc He can be reached at johnsandersbondpecarocomClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillagecomMyersBizNet

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Fresh Ways to Keep News Operations on Solid Financial Ground

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Fresh Ways to Keep News Operations on Solid Financial Ground

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