Local journalism: Innovative business approaches and targeted policies may help local news outlets adapt to digital transformation

What GAO found

The digital transformation of the past few decades has changed the economics of local news media—most notably, reducing circulation and revenue for many local papers. According to research and participants at GAO’s February 2022 Local Journalism Viability Workshop, this market disruption can be attributed to a variety of factors. Consumers increasingly prefer to access news in digital rather than print form, and the Internet allows consumers to access a wider variety of sources of news and information, often for free. In addition, web-based marketplaces have replaced classified advertising, which has traditionally been the main source of newspaper revenue. Many businesses now use digital advertising, which is less expensive and more targeted than print advertising. Because of these factors, local newspapers are no longer necessarily the primary source of news and information for the local community, nor are they the primary avenue for advertising by local businesses.

Local news outlets adapt to digital transformation using different strategies and organizational arrangements. For example, local news organizations are looking to diversify their revenue streams, such as offering memberships or accepting donations. In addition, some news organizations are transitioning from private companies to cooperatives or community organizations, or to nonprofits, to take advantage of existing tax incentives. According to stakeholders, a nonprofit model co-funded by federal funds and philanthropy could be a viable strategy for targeting low-income communities that feel limited paid access to news. Additionally, media organizations are forming strategic partnerships to foster growth or share resources.

Several workshop participants argued that public policy should focus on addressing potential market failures in the delivery of public interest news and the inequities in its delivery. Digital transformation may have increased the risk of market failure, as this type of journalism is now rarely bundled with high-revenue-generating content in print newspapers—an approach that allows for cross-subsidization. According to the literature and participants, direct government funding and tax incentives to support nonprofit news organizations can effectively address market failures and provide adequate safeguards to ensure independence. On the other hand, indirect government funding such as tax credits and government advertising can provide support, but it is broader and not specific to public interest journalism.

Policymakers in the U.S. and elsewhere have also sought to mitigate the market disruptions the internet has wrought through policies that would require some of the largest internet platforms to pay news publishers for the use of their content. However, the literature, stakeholders and experts have expressed concern that these policies may be based on insufficiently supported claims and, if poorly designed, may have unintended consequences for smaller publishers and consumers. Experts suggest that the primary goal of public policy should be to protect the function of journalism, not specific local news outlets. The main goal of journalism is to create an informed society, experts say, and policies aimed at supporting this need to be innovation-friendly, forward-looking and inclusive.

Why GAO is doing this study

With the digital transformation of recent decades, many local newspapers — a vital part of local journalism — have struggled to remain economically viable. Since the early 2000s, more than 2,000 local newspapers have closed. Many more have slashed operations. While broadcast and digital media have partially filled that void, the overall decline in local and public interest journalism is particularly worrying for many policymakers and others. Public interest journalism covers critical issues of public importance, such as education and public safety, and can help keep citizens engaged and hold government officials accountable.

GAO is asked to examine issues related to local news. This report discusses (1) factors that affect the viability of local news media, (2) strategies that local news media are adopting to adapt to the new environment, and (3) public policies to improve the viability of local news media.

GAO conducted a literature review and interviewed agency officials, academics, representatives of media and technology companies, industry groups and think tanks, and other stakeholders. GAO also held a 2-day workshop in February 2022 with 40 participants from diverse backgrounds and expertise. This includes academics, legal scholars, independent and affiliated journalists, publishers, and representatives of NGOs and technology companies.

For more information, please contact Lawrence L. Evans, Jr. at (202) 512-2700 or EvansL@gao.gov.

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