Coronavirus sends local news into crisis

Sara Fischer, Margaret Harding McGill

Dozens of local newsrooms began laying people off this week out of fear that the economic hit of the coronavirus could severely impact their ad revenue.
 

Why it matters: Local news was already facing dire strains in the United States. The coronavirus and a pending recession could push the industry into near collapse at a time when people need access to local news and information more than ever before.

Driving the news: Despite the fact that local outlets are experiencing higher levels of traffic and viewership in years, many have wasted no time trying to get ahead of what will be a long, financial struggle.

• So far there have been roughly 100 known local newsroom layoffs at outlets like the Monterey Country Weekly, the Sacramento News & Review, the Tampa Bay Times, Detroit Metro Times, Riverfront Times, Cleveland Scene, Orlando Weekly, San Antonio Current, and others, per Nieman Lab.
• Many of the layoffs are occurring at small weekly or non-daily papers and community magazines, Nieman Lab notes.
• Some have suspended publishing, like Riverfront Times and the Sacramento News & Review, Portland Mercury, The Stranger in Seattle and The Pulse in Chattanooga, Tenn. Others have instituted pay cuts for its employees.

Small broadcasters are already feeling the pain of the pandemic as advertising sales drop off. Neuhoff Communications, which has 20 radio stations, said advertising has been decimated as local businesses close their doors.

• "Economically, this is devastating,” CEO Beth Neuhoff said in an email. “We are modeling daily on how to keep people when we have no money coming in the door.”
• The company cut its 401K match on Monday, a move Neuhoff said felt “draconian” at the time. The next move is massive layoffs, she said, and she fears some advertisers may not be able to pay on time for the ads they’ve already sold and run.

By the numbers: "Right now – 2020 could end up 20-25% down in local advertising," says Corey Elliott VP of Research at Borrell Associates, a local advertising analysis company.

• The irony is that "this is probably the greatest demand for local news that we've seen since before the transformation to digital ecosystem," says Harris Diamond, chairman and chief executive officer of McCann Worldwide, one of the largest global ad agencies.
• "The local news organizations we are speaking to are reporting very significant new website traffic, as much as five times the daily average,” says Jim Friedlich, executive director of The Lenfest Institute for Journalism, a nonprofit that supports local news and is the owner of The Philadelphia Inquirer.

How it works: "Alt-weekly newspaper businesses are primarily dependent on local venues, bars, restaurants entrainment venues, for ad revenue and this evaporates that," says GroupM's Brian Wieser, one of the top advertising industry analysts.

• "Local news generally, like local TV and general newspapers, is going to be more dependent on the automotive retail sector and retail more generally.  Not a positive environment for them, but not the same as the alt-weeklies, which are less likely to have any revenue from the national brands who will keep advertising to some degree."

Yes, but: Diamond argues that big advertisers will want to stay in touch with people throughout this crisis, because it's unclear how long it will last.

• "If local publications can still show that they have audiences, mass marketers and national retailers will be interested," says Diamond.

Be smart: News outlets, in an effort to get more people vital information, are beginning to drop their paywalls. But that provides a major business risk, says David Chavern, CEO of the News Media Alliance, a newspaper trade association.

• There has been no bump in digital subscriptions, says Chavern — "and while we have seen a bump in digital traffic, the additional digital ad revenue is minimal because that system is dominated by Google and Facebook." 

The big picture: Newsrooms are struggling with how to balance covering the virus while also ensuring the safety of their employees. For local newsrooms that are already strapped for resources, moving to a work-from-home framework can be a real challenge.

• "Newsrooms need equipment and services needed to help work remotely; this category includes telecom costs, Slack subscriptions, Zoom or other video services, even laptops or other equipment," says Friedlich.

Our thought bubble: While there are some relief measures underway, it's likely they will not be enough to solve for the crisis. Still, this could be the push that the local news industry needs to really transition to digital.

• “We will look back on these events as a moment at which the newspaper industry’s transition from print to digital accelerated meaningfully," says Friedlich.

The bottom line: "With the rapid drop in general ad revenue, overall revenue is dropping fast while costs and need are rising. This is on top of decades of financial stress. There is no fat in the system," says Chavern.