A Committee of MPs has called for major changes to the way local news is funded, saying its quality and provision will continue to decline without fresh support from the government.

The Digital, Culture, Media & Sport Committee (DCMSC) has been probing the sustainability of local journalism in the UK and its members have been taking evidence from many leading figures in the industry.

Their findings, released in a report published today, pull few punches, claiming that local publishers have struggled to adapt to the shift away from print towards “an online world which favours larger players.”

As well as additional government funding, the report calls for a “fairer” distribution of existing support, saying that larger publishers are currently taking a “disproportionate” share.

The report states: “While market consolidation has ensured the survival of newspaper titles, the Committee is concerned that some of the approaches of the largest publishers may be reducing the quality of the local journalism produced by their titles.

“The largest publishers taking a disproportionate share of available support may be stifling much needed innovation. There should be an audit of public money that supports local news and an analysis of whether this could be distributed more fairly.”

The report also calls on the BBC to reconsider its controversial plans to shift resources from local radio stations to digital services, saying: “The strategy for digital first should not come at the expense of local radio.”

And it calls for the BBC-funded Local Democracy Reporter Service to be expanded across more platforms and to give access to a wider range of news providers.

During their investigation, MPs learned more than 300 local newspaper titles have closed between 2009 and 2019, with surviving news providers often operating with diminished resources and fewer journalists.

The report highlights the harmful impact on communities of the resulting decline in access to local news, including a decrease in participation in civic life, less scrutiny of local government decisions and increasing levels of polarisation and misinformation.

One way MPs want to help the regional press and local publishers is to set up a fund to support innovation, along the lines of the Institute for Public Interest News first proposed in the Cairncross Review of media.

The committee also wants to make it easier for local news publishers to achieve charitable status and encourage more philanthropic funding of local journalism.

The MPs say more must also be done to ensure that support reaches smaller publishers of local news, and long awaited digital markets legislation must enable news sites to negotiate a fair commercial relationship with online companies that host their stories, such as Google and Meta.

And it argues for the retention of the requirement on councils to place statutory notices in local newspapers, saying they are “an important revenue stream for many local news publishers.”

Damian Green MP, acting chair of the DCMS committee, said: “With the shift towards online readership swallowing up traditional print revenues, many local newspapers which have served their communities for years have struggled to keep their heads above water.

“While hundreds have already folded, those that remain are faced with a lack of resources to conduct quality journalism, forcing them into a downward spiral of decline, as readership and therefore revenues continue to fall further.

“The disappearance of local news providers, which have always acted as the eyes and ears of their readers and held local decision makers to account, has ripped a hole in the heart of many communities.

“Worryingly it is the most deprived areas of the country that are most likely to miss out on coverage, compounding the disadvantages they already face.

“While there are many success stories of innovation, the very nature of having smaller audiences and limited reach means local publishers find it hard to float in a market that rewards scale.

“The sector can have a sustainable future, but without more support and a rebalancing of the rules to help smaller publishers, the decline in local journalism and all the negative impacts associated with it will continue.”

The report’s main findings and recommendations are:

• Despite the collapse in revenues and challenges for surviving titles, there are encouraging examples of innovation by local news publishers. The sector can be revived and have a sustainable future with the right support.
• The BBC-funded Local Democracy Reporter Service (LDRS) has had a positive impact but more could be done to expand it across different platforms and to give access to a wider range of news providers. It should be protected during forthcoming BBC Charter negotiations.
• The Government should build on the Future News Pilot Fund – set up in response to the recommendations of the Cairncross Review – and create a long-term public interest news fund to support innovation, start-ups and new technology.
• Statutory notices are an important revenue stream for many local news publishers and the requirement that councils place them in local newspapers should be kept. The rules and practices for placing them should be reviewed, with an assessment of how this revenue stream can be made more accessible for new entrants to the local news market.
• While market consolidation has ensured the survival of newspaper titles, the Committee is concerned that some of the approaches of the largest publishers may be reducing the quality of the local journalism produced by their titles. The largest publishers taking a disproportionate share of available support may be stifling much needed innovation. There should be an audit of public money that supports local news and an analysis of whether this could be distributed more fairly.
• The Government should consider how it might make it easier for local news organisations to achieve charitable status and how to encourage more philanthropic donations to local news publishers. Local television and radio
• The BBC should reconsider its proposed changes to local radio provision. The strategy for digital first should not come at the expense of local radio.
• The Digital Markets, Competition and Consumer Bill will be vital in redressing the unbalanced relationship between the large digital platforms and local news publishers. There should be clear and explicit provisions for ensuring smaller publishers are fairly remunerated.

The National Union of Journalists, whose general secretary Michelle Stanistreet was among those who gave evidence to the inquiry, was supportive of the report.

Assistant general secretary Séamus Dooley said: “Journalism matters, and any measures designed to protect and promote local journalism are to be welcomed.

“The NUJ has been in the forefront of promoting public interest journalism and local democracy and shares many of the MPs’ concerns over the threats to the quality and coverage of local news. The report’s proposals are very welcome, and the emphasis on smaller publishers is especially appreciated.

“The NUJ strongly supports a Journalism Foundation to promote, protect and investigate new ways to fund public interest news.”

News Media Association chief executive Owen Meredith said: “We strongly welcome the Committee’s recommendation for government to lay out “clear and explicit provisions” for smaller local publishers to be renumerated fairly under the pro-competition regime in the Digital Markets, Competition and Consumer Bill.

“This legislation will be imperative to the sustainability of local journalism in this country, helping to support competition in our digital economy and levelling the playing field between news publishers and tech platforms.

“We were pleased to see support for retaining statutory notices in print local newspapers, which remains a vital source of revenue for local publishers and is a cornerstone of local democracy, enhancing open government and debate in our communities.

“We also share the Committee’s concerns over the BBC’s plans to expand their online local news services, which as the report notes, would only threaten commercial local news publishers who are already facing challenges to building a sustainable business model for digital news. We strongly echo the report’s recommendation that the BBC reconsiders their plans.”

The full report can be read here.   Below are some of the key passages from the report.

On the changing business model for local news and the impact on local communities:

“Technological developments of the past few decades have fundamentally altered the market for journalism. Print circulations have declined as people increasingly consume their news online, from smartphones and via social media feeds. With declining print revenues, news publishers have had to adopt business models based on online advertising, digital subscriptions, or both. But their smaller audiences and more limited reach compared to their national counterparts means many local publishers find sustaining themselves from either particularly difficult.

“Consequently, local journalism has declined in the past two decades. More than 320 local newspaper titles closed between 2009 and 2019, a trend likely to have been accelerated by the Covid-19 pandemic.  Those local news organisations that have survived often operate with diminished resources and fewer journalists. There are many negative consequences to these trends: a measurable decrease in participation in civic life within local communities without local news provision, a lack of coverage of public interest news stories, and less scrutiny of local government and public services. Worryingly, it is the most deprived communities in the UK where local news is most likely to be limited or absent, compounding the disadvantages such areas face.”

On the ‘imbalances of power’ in the local news market:

“The difficulties affecting local journalism are exacerbated by imbalances of power in the market for local news. As we have heard in this inquiry, government and industry support for local journalism tends to disproportionately benefit the larger, corporate publishers at the expense of new titles. And the sector suffers from the overwhelming  dominance of the big tech platforms, namely Google and Meta, in the online advertising market. News publishers are increasingly reliant on these platforms to reach audiences but are unable to effectively negotiate with them for fair remuneration for their content.

“The shift to online news consumption and the decline in print revenues has forced news publishers to rapidly transition to business models based on digital advertising, subscriptions, or some combination of both. We heard how recent inflation-driven increases in newsprint costs—as much as 100% for some publishers—have only added to this imperative. 

“Both online advertising and subscription-based business models reward scale. National news publishers have a potential audience of millions and need only to reach a fraction of this to generate sufficient revenue. Publishers that receive more visits to their websites can charge a higher premium for adverts to be hosted there. By definition, local news audiences are much smaller, particularly for “hyper-local” organisations that publish news for a small town or just a postcode. The potential revenue that can be made from these smaller audiences via either advertising or subscriptions is much less.”

On the impact of falling revenues on the quality of local news:

“With falling revenues, local news publishers are left with fewer resources to conduct effective journalism, and the quality of the stories they publish and their relevance to local communities can decline. The economics of digital advertising may contribute to this trend, as sensationalised news content designed to drive visits to a publisher’s website (“clickbait”) is incentivised to increase revenue. In response to the declining quality of their local paper, many people choose to stop buying it and often also no longer visit the publisher’s website. The publisher’s revenues fall further, and the downward spiral continues, often until the publisher is forced to close or merge with another. More than 320 local newspaper titles closed between 2009–2019. One submission surmised that this means the UK has fewer local newspapers than any time since the 18th century.”

On consolidation in the regional press industry:

“The local news sector is highly concentrated. The three largest publishers, Newsquest Media Group Limited, Reach Plc, and National World, between them own more than two-thirds of all UK local newspaper titles.

“Much of the evidence we received from independent news providers or bodies representing them was critical of these largest publishers, arguing that they have presided over a decline in the quality of local news produced by their titles. This was partly attributed to cuts to the number of staff working at titles to maximise earnings or replacing journalists with other roles. Another factor cited was a loss of local knowledge by journalists as titles are merged and base their operations outside of the areas they report on. Criticism was also directed at the business models of the largest publishers, which often focus on generating large amounts of content with a wide reach to increase online
advertising revenue. Journalists at the corporate publishers can be expected to produce multiple stories per day, with targets or other incentives for them to maximise audience engagement with each story.

“The largest multi-title publishers denied arguments that they are compromising journalistic quality for the sake of higher profits. Newsquest said that their titles are typically read by more than 75% of adults in their respective local communities each month and this demonstrates customer loyalty and satisfaction with the journalism produced. Reach told us they were employing more journalists than before the Pandemic and working from home arrangements had allowed their journalists to become more embedded in their communities. They said that in addition to 15 regional hubs, they have multiple smaller bases for their titles and there is no link between the hubs and how stories appear in their publications. Reach also argued that government and funders tend to wrongly assume that large multi-title publishers lack innovation, and funding schemes can be biased towards new, independent publishers.They cited the NESTA Future News Pilot Fund as an instance of this.

“Owen Meredith, CEO of the News Media Association, told us that consolidation provided economies of scale that meant titles could survive financially: ‘I think that many of those titles who are part of networked groups would simply not be viable without the ability to share back office costs of HR, finance, marketing, procurement power and so on. There is certainly an important role for consolidation within the market, and potentially further consolidation, because of the economies of scale that that brings, which then supports titles operating on the ground in individual communities.'”

On funding imbalances between large and small publishers:

“Many independent news publishers we heard from also argued that the corporate publishers overwhelmingly, and disproportionately, benefit from the various forms of industry and government support for local journalism, despite some of them being highly profitable companies. This included the funds and schemes run by the online platforms and the BBC’s LDRS. As noted above, in the latest allocation of local democracy reporters in 2021, 139 (84%) of the 165 journalists went to Newsquest, Reach plc, or JPI Media (now National World).

“Indirect forms of support also mostly tend to go to the larger publishers. According to the Independent Monitor for the Press (IMPRESS), a self-regulatory body for news publishers in the UK, the revenue from statutory notices is worth around £50 million per year, the vast majority of which goes to the largest publishers. The same applies to revenues from government advertising. For example, during the coronavirus pandemic the Government launched a £35m three-month advertising partnership with the news industry called “All in, All together”. This was praised for offering an important revenue stream for struggling publishers, but very few independent titles qualified. In oral evidence, the Minister acknowledged the frustrations of independent publishers on this point, but noted the Government’s duty to ensure value for money.”

On innovation in the hyperlocal sector:

“Despite the challenges affecting the local news market, during this inquiry we have received evidence from multiple local news publishers that have been established within the last few years, often explicitly seeking to reverse the decline in local news provision in their communities. These news publishers operate with a variety of innovative business models. For example, The Bristol Cable is a co-operative newspaper founded in 2014 which runs a paid membership scheme where members contribute a minimum of £1 per month. The paper publishes a free quarterly print magazine, and online content several times per week, which is also free to access. Nub News is an online-only hyperlocal news publisher launched in 2019 with websites reporting on more than 40 towns and suburbs across
England and Wales. Its commercial revenues come from sponsors and partnership-based advertising with local businesses. The Mill is a newspaper covering Greater Manchester, founded in 2020. It publishes free content via a Substack mailing list, with further content for subscribers, who pay £7 per month. It raises additional revenue from partnership-based advertising with local businesses. The paper has recently launched two similar newsletters in Sheffield (The Tribune) and Liverpool (The Post). And Social Spider CIC publishes five publications covering different areas of London. It generates revenue from a combination of print and online advertising, membership donations, and consultancy work for other independent local new publishers.“

On the local democracy reporting service:

“We also heard concerns about the functioning of the LDRS. Some evidence noted that it is unclear whether local democracy reporters are directly replacing journalists who are being made redundant at news providers.  Concerns were also raised that local democracy reporters are not always used for their intended purposes and pressured by editors to pursue stories outside of the LDRS’s remit. In an analysis for the British Journalism Review in 2020, two academics interviewed one LDRS reporter who supported the scheme but believed that publishers could “exploit the service for their own ends”, and discovered another who wanted to voice criticism but felt “too nervous to speak”.”