The core problem was that DNA Info was never a very good business. The Gothamist Network is another story, but DNA Info was the big dog that called the shots, and from what I can see, there was never a time when DNA Info was profitable.
It doesn’t take a detective to figure out why DNA Info was not profitable. It was an ad supported business in two crowded markets, New York and Chicago, where it was far from the first ad buy. The sites were never crowded with ads, and their email newsletters were often filled with house ads. Their neighborhood print papers, distributed when they had an ad to run, became less and less frequent, evidence of fewer and fewer ads.
As sudden as the publications closures were, the failure of DNA Info to be a viable business saturated every aspect of the endeavor. Without profits, it existed through the subsidy of its owner, Joe Ricketts. And without profits, the company’s employees had no real leverage when they sought to unionize. Why negotiate with a group of people who are already losing money for the owner?
Of course, this is a bloodless thinking. Ricketts could have offered to sell the publication, or turn it over to a non-profit, and allowed others to pay the subsidies. But months ago Ricketts telegraphed his thinking: Unionize and I’ll shut down.
Even if Ricketts had passed the company assets on to some other group, I still doubt it would have survived.
I once operated a group of Chicago hyperlocal publications, Center Square Journal, Roscoe View Journal and Edgeville Buzz. I’ve not only run the numbers on neighborhood advertising, but I’ve lived them. Sold ads door to door and struggled to figure out how to make a neighborhood publication work in Chicago. You can read my 2013 business analysis here.
There just isn’t enough advertising demand in Chicago to support neighborhood news. I’m betting New York City is the same. As the Chicago Sun-Times proprietors (past and present) know, being the second market newspaper doesn’t draw a lot of ads. And digital ad plays matter less and less as businesses learn they can better target customers through Facebook and Google as well as through their own in-house newsletters.
This is not to say ad supported neighborhood news can’t succeed, it just can’t in Chicago. Last weekend I stopped by the annual meetup of hyperlocal publishers, the Local Online Independent News Publishers (LION), which I helped start. There I found a vibrant collection of growing, successful businesses, over 200 conference attendees from around the country. But the most successful ones were in smaller, rural, or highly fractured markets where readers couldn’t otherwise find news about their hometown.
That’s certainly not the case in Chicago. We have one of the biggest newspapers in the country (Chicago Tribune), one of the most profitable news radio stations (WBBM), one of the biggest talk radio stations (WGN) and some of the finest local TV news in the country. Oh! And then there’s still a suite of independent news organizations like mine, The Daily Line, as well as City Bureau and South Side Weekly.
Ours is not a barren plain. Readers in Chicago have plenty of choices.
And there is the basic challenge: Readers have plenty of news choices that remain mostly free. Sure there are paywalls, but they are still very porous. Publications that do not require their readers to make the hard decision, “Is this information worth paying for up front?” will continue to struggle because they place too much emphasis on audience-building and not enough on producing a product that people will surely pay for.
Towards the end of my neighborhood hyperlocals’ lives, we had well over 100,000 readers a month. It was exciting and gratifying that we could publish something, and tens of thousands of people that lived in our community would read it.
But then, in 2012 the average value of a web ad declined rapidly and Facebook really began to take market share. I turned to our audience and asked, who would like to buy a membership to keep us afloat? Only a few dozen responded. Hundreds were needed to keep going. That’s when I decided to close.
It was around this time that DNA Info launched in Chicago to much fanfare. They offered extensive neighborhood reporting, paid reporters decent wages and would do it all by selling ads.
Today, as the publisher of The Daily Line, I frequently hear comments about our subscription fees: $39 a month, or $395 a year for the Chicago edition. “Why are you so expensive, when The Sun-Times and Chicago Tribune are so much less? I can get all kinds of news for free on the web!” The rants come less often than when we first launched in 2015, but I still hear it at least once a month.
And yet. The Daily Line continues to operate. Our subscribers appreciate what we do and why we’re better than other outlets. We have an agreement with them: We do great work, and they pay for it. Just like going to a restaurant, buying clothes or any other goods and services transaction.
Until news organizations and their readers transition to a fee for services model, I’m afraid we’re going to see a lot more publications close.