For a long time, many news publishers have believed scale was the key to a successful media business model. That was true in the past as free print papers or those with low single-copy prices helped publishers deliver large readerships to advertisers willing to pay for reach. When the internet came along and news publishers launched websites, that same business model largely moved online: produce a lot of content to attract a large audience and the advertisers will follow.
More recently, in the online era, some news publishers have turned to programmatic advertising as a basis for their business models.
Today, however, both models are flailing and many once-formidable media houses have been slashing budgets, reducing their print frequencies, and cutting staff – sometimes drastically so. One need look no further than the recent collapse of BuzzFeed to see that scale alone is not enough to ensure success.
Joshi Herrmann, on stage at Digital Media Europe in Vienna in April. Photo by Roland Rudolph, APA, for WAN-IFRA.
Small scale, local news delivered by newsletter
A few years ago, Joshi Herrmann, who has worked for the London Evening Standard and written for the Guardian, The Daily Telegraph among others, decided to try something different.
Having worked for both legacy publishers as well as an internet start-up in New York, he saw first-hand that the standard business models for supporting quality local news were no longer working.
“In 2020, a couple of months into the pandemic, I had the idea to do very small scale, local news, paid-for newsletters. I basically designed an experiment on my own, with no company behind me and no funding behind me,” Herrmann told participants at Digital Media Europe in Vienna in late April.
Focusing on the city of Manchester, the philosophy was: “instead of trying to cover everything, we’re going to try to cover a very small range of topics, and we’re going to try to cover them in-depth. Would people sign up?”
He wrote two stories and put them on a Substack newsletter. Then he took out some Facebook ads, around 500 pounds (about 575 euros) worth.
‘There was a huge appetite’
Herrmann expected the experiment to take at least a few months to take hold. However, within a few days he had his answer.
“I could see there was a huge appetite,” he said.
“I realised that even with just two local stories on the website, basically what you would call the minimum viable product, people were willing to go and sign up for the email list,” he said.
Within a few months, he had 4,000 people on the email list, at which point he decided to experiment with asking people to pay. Very quickly 400 people agreed to do so.
“Just as a tiny experiment, with only me writing two articles a week – and with no structure, and no tech and no newsroom behind me – I got an early indication that this kind of model, which focuses on a small number of stories rather than trying to cover everything, could be a winner in local news. That’s when I turned it into a business,” he said.
The model has now spread to two more cities in England – Liverpool and Sheffield. In total, the three newsletters have more than 40,000 registered users and have managed to convert 4,350 to paid subscriptions. Subscribers pay 70 pounds a year (about 80 euros).
“The character of the different cities where we publish is different. Some like sustainability topics, others different types of content. But the principle is the same for all: to produce very differentiated content,” he said.
How the funnel works
Herrmann said the basic business model of The Mill and its sister publications starts with getting people to first sign up to their free email list.
“If people really love the first three or four stories they get, then they tend to become a paying subscriber,” he said.
Within three months, 5 percent of the people who are on the free email list will convert to paid, he added.
Within the next 18 months, he said that will increase to 7 percent.
“So that three months is critical. If people really love the journalism they’re getting in the first three months, we’ll get like one in 20 of them on paid. And that’s huge for us. Those numbers have been pretty consistent for us from cohort to cohort if I look at quarterly cohorts over the past three years,” Herrmann said.
The Sheffield newsletter converts at 8 percent, and with Manchester, it’s closer to 6.5 percent, he said, with an average across the three of 7 percent.
Paying subscribers get four newsletters per week. The free ones get two.
At 70 pounds a year, he noted The Mill is getting “a good revenue per user on the basis of an output that’s not killing us in terms of how much we’re producing.”
While Herrmann acknowledged The Mill and its sister publications are still young and small, they are offering proof of an important principle.
“People are willing to pay for very small quantities of local journalism if the journalism is very, very good. And the journalism is something they can’t get anywhere else,” he said. “The moment you start publishing things that people can get elsewhere, they can get for free on the BBC, or the Guardian, they won’t pay for it, obviously.”
“Our big focus, our big watchword is differentiation,” he continued. “What I realised when I started this is that a lot of people who are trying to solve the local news problem are recreating old style newspapers online with but with stories that feel very similar to what is already out there.”
Going against the grain with long-form journalism
Herrmann’s solution was to do the type of journalism people are not used to seeing on other local news sites.
“They are used to seeing stories that are 600 words long about local politics and the courts and police,” he said. “And they are used to seeing a local journalism that is full of press releases.”
The Mill and its sister publications however, are doing long-form journalism. Each of the newsletters they send out is a 3,000 or 4,000 word story going in-depth into a local topic.
“Sometimes it’s a human topic, sometimes it’s an investigation, sometimes it’s about business. But it’s always something you are unlikely to find on any other local news website,” Herrmann said.
He said some of his favourite stories are their profiles of local people, trying to capture their humanity and writing about their lives.
“I think that’s the kind of thing that creates social bonds in a city and also makes the journalism sustainable because people feel connected to the media company that’s delivering that,” he said.
They are also keeping the story volume low, but that is partly due to necessity.
“With the tiny team that I have, I can’t produce 25, 30, 50 stories a day,” he said.
‘Critical mass has led our industry in the wrong direction’
Charging for a very small number of stories is something Herrmann noted is “against one of the main orthodoxies of subscriptions.”
“When I lived in New York and spoke to media executives, the thing everyone said was ‘You need to have critical mass. You can only charge for a subscription if you have 40 stories a day or 20 stories a day or 10 or whatever it is,’ ” he said.
However, Herrmann said he believes “the idea of critical mass has lead our industry in the wrong direction, which is that we have to give people volume and then we can charge for subscriptions.”
‘If you differentiate yourself enough, you can charge even with low volumes of content’
Interestingly enough, he came to this conclusion largely through a Substack newsletter that he was paying for.
“I was paying five bucks a month, and the guy was only sending me three extra stories for my payment. I was getting four normal free ones, and for my five bucks, I was only getting three more over the month. That is a tiny amount of content for my five bucks compared to my five bucks for The New York Times,” he said.
From this, he realised that if you differentiate yourself to the extent that your content is nothing like the other things people are getting, you can charge even with low volumes of content.
This forms the underlying rationale that allows The Mill and its sister publications to produce the in-depth content they do and get subscribers on a very low cost base, Herrmann said.
In addition, he noted that The Mill is proving sustainable solely on paid subscriptions. They do not have any grants, or government support, etc.
“That would have been an easier way to go obviously, but I don’t think it would have been as hopeful for the future in terms of model,” he said.
Future success in media will be built on relationships with readers
Looking ahead, Herrmann said what he sees happening in the next five to 10 years is that the media companies that currently control local news in the UK and the US will likely continue to lay people off because their underlying business models rely on print advertising and online programmatic scale advertising.
They have not grasped the opportunity of getting revenue from readers, he said, and he doubts they will.
“Getting revenue from readers is fundamentally about something they don’t do, which is a relationship with readers. I think if you build a strong relationship with readers, they trust you, but also they feel like you’ve got their back. And if the tone you use is personal enough that they feel they know your team, then I think you can drive really significant reader revenue. And I mean significant revenue in millions of pounds in Manchester that could fund a proper newsroom,” he said.
WAN-IFRA Director of Insights Dean Roper contributed to this report.
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