With most of the population sheltering at home, large-scale experiments have been unfolding before our eyes. Whether it’s the disappearance of the smog in Los Angeles bringing back sights of forgotten mountain peaks, coyotes wandering freely around San Francisco, or even the reduced occurrence of earthquakes, we’ve all witnessed concrete examples of nature’s resilience.

In media, limiting people’s movements has created the interesting effect of reviving the consumption of traditional media, which pundits wouldn’t shy away from calling doomed in not so (socially) distant times. Live TV, while still accounting for the majority of hours watched per week, was reunited with weekly audience increases believed to be moved towards digital, all while the lack of live sports has created a historical gap in the content options available to TV viewers.

Source: Nielsen Npower, National TV Panel, Adults 18-49. MAGNA analysis based on data from The Nielsen Company (US), LLC; used under license.

By staying at home and focusing on their essential needs, people have returned to more traditional media channels, which help with two important priorities: first, navigating the consequences of the pandemic, impacted primarily by the decisions of local government; and, of course, staying entertained.

The impact on local media is quite stark, as the example of San Diego based KPBS illustrates: they announced early April 2020 that their television audience in March went up 47 percent Year-over-Year, while their online audience increased by 329 percent.

After a decade of survival, this would sound like the perfect comeback opportunity for local media outlets, if it weren’t for the massive drop in advertising spend seen since stay-at-home orders began. Consider these US numbers from Kantar: Ad spend from travel and retail decreased by 99 percent and 47 percent respectively in the second week of April. Restaurants are down 36 percent. These categories are not just illustrations of the problem, they represent major spenders with local media outlets. For these entities, the opportunity to monetize suddenly bigger audiences is virtually nonexistent: the ability to ‘bank’ on the surge of supply is effectively limited by a lack of demand. Even these audience surges could imply increased costs for publishers, associated with content hosting/delivery, removal of paywalls on COVID-19 news content, and general increases in the cost of doing business during a pandemic.  The result is a business risk, not a historic opportunity.

How did this not happen sooner? To analyze these shifts in the economy of local media, a look back at the profound changes that have operated in recent decades sheds light on the deep threats these businesses have been exposed to, long before a virus came to shake the global economy.

Stronger together?

After the Federal Communications Commission (FCC) passed the newspaper and broadcast cross-ownership rule in 1975, the ability for media conglomerates to concentrate had become limited. It forbade combo ownership of TV and radio stations as well as ownership of a daily newspaper and any “full-power broadcast station that serviced the same community.” But in 2017 the FCC ultimately allowed newspapers, television and radio stations in the same town to be owned by a single company.

The impact of these waves of deregulation on media concentration is well illustrated by the history of the Gannett group, formed in 1923 by Frank Gannett. By 1979, Gannett’s portfolio had grown to include 79 newspapers. In 2004, research conducted by the University of North Carolina showed that Gannett owned 177 newspapers, and although the number of newspapers in Gannett’s portfolio grew in 2016 to 258, its average circulation by newspaper decreased by almost 50 percent vs. 2004 (38,000 in 2004, vs 20,000 in 2016).

This shows that in the context of a severe reduction in newspaper readership, acquisitions are no longer a reliable way to expand the volumes of audiences that can be monetized.

Digital scale as the only way up?

Structurally, advertising revenue for newspapers has been on the decline in the US, just like everywhere else. According to Bloomberg Intelligence, it plunged to $12 billion in 2016 from $50 billion in 2000, while in parallel average total print circulation dropped by half between 2005 and 2016 according to industry analyst Alan Mutter. If advertising revenue decreased by 75 percent while circulation was down 50 percent, then the average revenue generated per reader also declined by 50 percent.

Could some of this loss be recaptured by pure players? The few success stories seen in the past 5 years with Patch.com and Nextdoor, haven’t been where audiences have moved, but rather signs of optimization of cost structures via automation of both content production and advertising monetization.

Patch.com can cover 1,277 communities across the US, by using artificial intelligence to relieve reporters of repetitive, low-level work. AdAge reported in March 2019 that this allows Patch.com to generate around 3,000 new articles every week and turn around $20 million of revenue in 2018. Despite these efforts, Patch still remains a much smaller player with 23 to 25 million monthly unique visitors, compared to the Craigslist or Facebook, which offer extremely relevant hyperlocal services without having to spend on content creation.

Can local media players create a value exchange with their readers?

If print readership is decreasing to the benefit of online, then local media players can only look to increase the average advertising revenue extracted from their readership. An opportunity is the importance buyers give to finding their online audiences for targeting and measurement. Programmatic publishers receive an average clearing CPM of 20¢ on display when no audience data is available, vs an average $8 clearing CPM when it’s been qualified. A massive holding company such as Gannett can mobilize enough resources to efficiently conduct the implementation of such a strategy, but economy of scale isn’t the only enticing reason.

First, it’s about having enough content to transact via paywalls. Paywalls allow publishers to articulate an exchange of value, where content distribution is dynamically evaluated against the revenue generated individually: indirectly, when users provide an e-mail address or phone number, or directly via buying subscriptions. Paywalls can hurt audiences if set up too strictly, but advanced implementations marrying data collection and content reward can make a huge difference.

The second, and maybe main reason, why local media holding companies are best positioned for this strategy is the sheer footprint of brands and digital properties they own. Even today, identifying audiences still depends on cookies, and despite the announced fade of the third-party cookie, first-party cookies are expected to remain the norm for some time. These allow publishers to remember users who previously logged in and thus deliver more directly perceivable value (“Remember me”), while ensuring better privacy. A company like Gannett, steering several hundreds of newspapers’ online assets and their respective domains, is in a unique position to dramatically scale its understanding of audiences across its entire network.

In the end, not so much relief

Supporting local news outlet is touted as each citizen’s responsibility. However, many local newspapers belong to holding companies, which couldn’t qualify for the first wave of Coronavirus relief measures. While brands only marginally invest their media budgets with philanthropy in mind, supporting these companies today is feasible and not very risky given the audience qualification opportunities they can help with. Future-minded buyers should not miss out on this historic opportunity.