Patch is the news industry's problem, not its solution

Jack Shafer's right: hyperlocal efforts are "a complete waste of time and resources" as he suggested this week in Slate.

Shafer missed one crucial qualifier in his hypothesis, though. Hyperlocal's a waste of time and money for national corporations. What's happening in the news industry today is not the Internet destroying the news industry by spreading free content. It's the Internet destroying the national news chain by eliminating of the traditional economies of scale for the news industry.

Shafer bases his arguments on continued criticisms of AOL's Patch.com network. Hey, I teed off on Patch nearly a year ago, so I share the skepticism. But Shafer errs in not even mentioning locally-owned and operated hyperlocal news sites, much less contrasting them with the top-down, corporate-driven AOL/Patch model for hyperlocal coverage.

In Shafer's piece, the alternative to Patch are sites such as Facebook, social networks where residents in a community can get what Shafer calls "social news" about their "interests," as opposed to "hyperlocal news": "the starving-artists exhibition at the farmer's market, increasing parking-meter rates, the city budget, local real estate prices."

But there's an alternative to corporate news chains and corporate social networks: homegrown news communities run by local journalists. That's a model we're encouraging by training dozens of journalist/entrepreneurs in our annual KDMC News Entrepreneur Boot Camps. Freed from the burden of paying for a national management team and Wall Street expectations, local journalists can make hyperlocal pay in ways that big companies such as AOL simply can't.

National news chains arose because the barriers of entry to printing, promoting and distributing a newspaper were so high. You needed printing presses, trucks, a telemarketing team, and an advertising and promotions budget. Oh yeah, you needed content, too, which meant hiring reporters and paying syndication fees for state, national and international news and features.

Corporations brought a load of capital to the table, and could leverage economies of scale in the purchase of newsprint, equipment and syndication deals. The could employ national sales staffs to sell ads across communities to regional and national chain retailers. And they could centralize telemarketing, IT support and even newspaper (and later website) design.

Over time, more and more locally owned papers sold out to the chains, as the chains amassed vast fortunes to buy out family-owned papers where the next generation decided to cash in rather than fight on alone in a consolidating industry.

But in the late 1990s, the Internet blew all those advantages away. One journalist could publish to an entire community, or the entire world, without having to pay for presses, trucks or newsprint. One journalist could link to all the state, national and international news and features his or her readers wanted, without having to pay for expensive syndication rights. One journalist could leverage social networks (even before Facebook and Twitter) to publicize his or her work, without having to pay for advertising or a promotion team. Open source and online instant publishing solutions allowed that individual journalist to create and manage interactive news without having to pay for huge IT and design teams. And national ad networks such as Google's AdSense gave independent publishers who were savvy enough to make that system work access to lucrative national ad buys.

So corporate news chains have lost all the economies of scale that allowed them to pay for ever-more-expensive multiple layers of management, multi-million-dollar executive bonuses and Wall Street dividends and profit growth.

Is it any wonder then, why corporate news is struggling? Patch.com isn't the solution to the industry's problems. It's the manifestation of the industry's problem - a top-down approach to an industry that now economically favors the bottom-up.

If the FCC wants to save local journalism, it ought to be pushing the Department of Justice and the Commerce Department to encourage news chains to break up and sell their publications to local owners.

And online journalists who want to stay in the business for the long haul ought to say no to Patch's temporary lifeline of a few months' paychecks and instead develop the entrepreneurial and publishing skills necessary to launch, grow and sustain an online news community.

We'll talk more about those skills over the next weeks.