News Deserts Threaten Democracy

Dec 23, 2016

Fake news has received significant attention in the wake of the 2016 election. But to many in the news industry, it’s the continuing demise of real news organizations that raises bigger warning flags.

"For newspapers, 2015 might as well have been a recession year," concluded the Pew Research Center in its most recent “State of the News Media” report. Weekday circulation fell 7 percent and Sunday circulation fell 4 percent, according to the report, both of which were the largest declines since 2010. Similarly, advertising revenue dropped 8 percent from 2014, the biggest year-over-year decline since 2009.

In an election year, news outlets typically see upticks, and even with recent reports from the New York Times that circulation has spiked since the election, few news industry observers expect to see these trends reversing over the long term.

Declining circulation has led to papers changing hands. Since 2004, more than one-third of the newspapers in the United States have changed ownership, according to research published by Penelope Abernathy, the Knight Chair in Journalism and Digital Media Economics at UNC-Chapel Hill. These new ownership groups, which Abernathy dubs “media barons,” are buying newspapers at bargain basement prices.

Total newspaper circulation in the United States has decreased from 117 million in 2004 to 93 million in 2014.
Credit Penelope Abernathy / UNC Database

Earlier this week, McClatchy announced it will buy the Durham Herald-Sun. McClatchy already owns seven newspapers in North Carolina and South Carolina, including the Raleigh News & Observer and the Charlotte Observer.

Not much longer than a decade ago, newspapers were selling for 13 times earnings, Abernathy calculates. That has now shrunk to three times earnings, in some cases.

This can make a big difference. If an investor has to pay 13 times what the annual earnings are, that investor theoretically would not make back money until after the 13th year. That would require an ownership group to become a long-term player in the community. If, however, the sale price is just three times earnings, the profits would begin to roll in starting with the fourth year. In these cases, those long-term commitments aren’t as necessary.

A lesser commitment can reduce operating budgets, leading to staff cuts. Across the nation, newspapers are making hard decisions to cut long-term, enterprise and investigative pieces just because they barely have enough staff to cover day-to-day stories.

"Often these investigations go on for months. And if you've had decreased margins, you have less latitude to say, 'Gee do I want to bet on going after this when it might not pan out.' So you don’t uncover some of those things that would have been uncovered," Abernathy said. "And if you've got more and more of the investigative pieces residing in just a smaller number of large organizations there is all the more opportunity for things like this to go unreported and unnoticed."

Investment groups have gotten into the newspaper business.
Credit Penelope Abernathy / UNC Database

In some ways, newspapers face a vicious cycle. Dwindling subscribers mean fewer advertisers, which leads to smaller budgets, less reporting and fewer subscribers.

"Advertisers weren’t really buying space around the news, they were buying access to the audience that the newspapers delivered," said Abernathy. Now those advertisers are following the eyeballs elsewhere.

Digital advertising is on the rise, even at traditional newspapers, but it has not made up for declining advertisement in other areas. "The Millennials and the Gen X-ers are just attached to their mobile phones. They're attached to their laptops in a way that if you don't deliver it that way, they are not going to be there," said Abernathy.

Some in the industry worry that as the quality news industry shrinks, small and midsized communities will be the first to suffer from little or no coverage. This will lead to "news deserts" in which there are no watchdogs on local governments or businesses. Pulitzer Prize-winning journalist Alex Jones has estimated that 85 percent of the news that feeds democracy comes from community newspapers.

In 2014, there were at least 138 fewer daily papers than in 2004, according to Abernathy's research. That compares with a loss of 91 papers in the previous decade. Another 100 papers switched from daily to weekly production.

"This is a really difficult problem and democracy is at stake especially the quality of democracy at some of the small and midsized communities," said Abernathy. "So it's not just the problem of newspapers, it's a problem we all have."

Since the recession, the cost to acquire a newspaper has plummeted.
Credit Dirks, Van Essen & Murray / UNC

Looking for a silver lining, Abernathy said there are a few positive signs. For one, news organizations have switched from generating the majority of revenue from ad sales, to again growing revenue through subscribers. Indeed, since the election of Trump, both commercial and nonprofit news outlets have seen increases in paid subscribers or donations.

In addition, Abernathy said local news outlets can do more to shed their competitive spirit against each other and learn to work together. "And I think that is a big 'Aha,' because most of us who were trained as journalists love nothing better than the scoop, and you love nothing better than to show whomever you considered to be your competitor that you had gotten that scoop."

Sharing resources, however, could help news outlets better cover their local areas, and continue to provide that watchful eye the public relies upon.