Local television news isn't seeing the same collapse as other forms of local news. Why?

The decline of local news is now common knowledge. But local television news seems to be able to sustain itself, even as newspapers and weeklies and web news fail. While local newspapers have shrunk, or been acquired by large companies and their news operations centralized and homogenized, most areas of the US still have functional, even robust, local journalism via TV reporting.

What's the secret? Why does local TV news seem to be the exception to the rule of the decline of journalism in this century?

Looking at why local TV news works usefully explains some of the challenges of funding local journalism. There are two kinds of subsidies that do a lot to boost local TV news in the US. Campaign advertising, where news outlets negotiate directly with advertisers, and a form of hidden subscription fee paid through cable subscriptions.

Let's take those two kinds of subsidies one at a time.

First, the direct advertising subsidy I'm pointing to comes from campaign ads. Local TV revenue goes up and down predictably every two years. Odd years, revenue is down, even years it's up. That runs with the two-year political campaign cycle, with most elections in even years. In 2022, a midterm year with less spending than a presidential year, local TV ad revenue was up 27% from the year before, an increase of approximately $5.5 billion. In 2024, the total amount expended on campaign ads on all federal races is expected to be at least $15.9 billion. If the slow rise of digital share stays on track so that a bit less than half of that goes to local TV, that's around $8 billion in ad revenue to local TV stations[[1]]. In contrast, estimates of how much public funding the US has previously spent to subsidize journalism, or would be required to make local print and internet journalism robust today, are in the range of $10-40 billion.

[[1]]: h/t to Michael Socolow for links and info on local TV news economics.

For context, the Scranton PA newspaper, the Times-Tribune, before being acquired by a private equity firm had estimated revenue somewhere around $100 million. ThinkProgress, the national progressive news site run through CAP, cost around $3-5 million to run per year. There's a lot of localities in the US to split that $8 billion or so of local TV ad money across. Still, that is a lot of money for journalism.

Those campaign ads are run through the stations directly — that is, there is no digital middleman, no Google or Facebook, taking profits away. Direct ad negotiation is important because it circumvents a way that news businesses have been stripped of their ad dollars in the last two decades: disintermediation. That's where news outlets are no longer able to collect and curate an audience and market that audience to advertisers themselves. Disintermediation is clear in the digital space, where advertisers usually now choose to buy ad space from Google and Facebook instead of the news outlet directly. The digital ad firms get paid for this because advertisers get more precise audience targeting. But the fact advertisers would rather go to third-parties means that news outlets have less negotiating power with advertisers than they did before. Campaign ads on local TV are not affected by disintermediation and so local TV news is at an advantage compared to newspapers and websites that now primarily sell digital ads. And of course, on top of disintermediation, cutting out Google and Facebook removes monopoly effects, where the digital ad duopoly gets to extract profits due to their unfair market power.

The direct negotiation between local TV stations and political campaigns didn't just come about by market forces. Some of the reason why local TV campaign ads are sold directly to TV stations, even as other advertising has gone to ad middleman markets, is due to government regulations that give campaign advertising special rights with TV stations. That is, it's not just due to consumer markets that local TV stations get to make big profits from campaign ads. It's due to government structuring of the market.

The second sort of subsidy for local TV news comes from cable. Cable companies pay broadcast TV stations for "retransmission rights" — fees to carry the local ABC, NBC, CBS, and Fox station on the cable network. Those retransmission fees end up being rolled by the cable provider into cable subscription fees. So in effect, many Americans do pay a subscription fee to their local TV news outlet. They just pay that subscription fee in a hidden way, to the cable company. A local newspaper would love to have this form of subscriber base — to have stable revenue from some third party collecting subscription fees.

You might say, well, local TV gets this subscription fee revenue because it is just providing a product that the subscribers want. But that's not the only driver; the retransmission/subscription fees are not totally independent of market distortions. The big TV networks negotiate some of those retransmission fees with the cable networks across many local affiliates. The local TV stations benefit from the size and scale of their networks in the negotiations with the cable companies. Beyond scale, the TV networks also use sports rights as a way to boost retransmission fees. No cable company wants to drop ABC's local affiliates, and have its customers complain about losing some of Sunday Night Football.

And all these non-market forces mean that the hidden subscription fee cable customers pay isn't just a consumer choice to pay for news — the price cable customers would pay for local journalism would be lower if they were able to select to pay for the journalism by itself. The customer desire for sports content is used to cross-subsidize the local TV reporting.

Local TV news is the thing that's keeping some local coverage going in many places in the US. We have news deserts where few newspapers remain. The number of reporters going to school board meetings, and holding mayors and county commissioners accountable for fraud and waste, is declining. The good news is that local TV news still remains to do some of that. But we should be clear: local TV news is supported by subsidies. It's not just surviving in a pure laissez-faire consumer market. It's boosted by regulatory choices: by campaign ad rules, retransmission fee regulation, or our choices to allow local TV to consolidate — which means that cable companies have to negotiate fees not just with small independent local news outlets, but with big diversified media firms. That's a market distortion that we allow to exist, and it subsidizes local TV news compared to other forms of journalism.