While there's a compelling argument to be made that newspapers are doomed regardless of what they try, I think Ezra Klein is wrong when he argues that there's no market for local news. Atrios writes:
This is the reason I'm so often pretty unsympathetic about the way many journalists whine about their declining industry. I don't actually care if the Philadelphia Inquirer has somebody covering Washington (though they should have somebody covering local races for federal office, etc.). I have no idea why 3 million journalists showed up in Denver for the Democratic convention. I don't know why there are so many journalists stationed at the White House all day every day waiting to pester Gibbs.This stuff might be sexier and feel more important than covering local zoning board meetings, but it doesn't actual require the amount of resources that are devoted to it.
I actually disagree with Ezra (click the link) that what we're losing is news that people don't want. I think local newspapers have generally been pretty bad at doing the thing they don't have all that much competition for, which is providing good coverage of local news. Frankly, much maligned local television news often does a better job, not because they're so awesome but because they're focused on it.
I have to agree with Atrios. One reason that I don't read either The Boston Herald or The Boston Globe is because they don't give me good local news. Finding national news is actually pretty easy, but no one is covering local news. And I don't think it has to do with a lack of interest: Boston has a lot of free papers that are profitable and which focus primarily, if not exclusively, on local and state news. Intelligent Designer knows, a good writer could have a field day with all of the goings-on at City Hall. And consider that Carl Hiassen and Jimmy Breslin made entire careers covering local news: it can be done, and done well. Engaging stories are, well, engaging no matter what level of government they cover.
While the local papers often don't have very many stories and are weeklies (their budgets are limited), I find the local news is covered much better in them than in either of the large city newspapers (although some of the free newspapers are biased towards developers and realtors--the people who pay the bills).
The only way I see The Boston Globe making a comeback is if they dramatically improve the quality, scope, and depth of local and state coverage. Yes, Charlie Savage (the guy who broke the signing statements story) is a national treasure, but Massachusetts and Boston need that talent aimed locally. And there's money to be made too.
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There is a saying (or was, some time ago) among the tiny weeklies I sometimes read as part of my job at a newspaper: the way to get someone to buy/read the paper is to put their name in it. And that's what weeklies do. That is pretty much what you're saying, and I think it's still true.
In my last gig at a websearch software vendor, the majority of our customers were major newspapers. They spent money with us because better search drove more page views and more page views drove ad rates...
But it only did so much. Content is still king and I totally agree, the only way to differentiate as a local is with local content.
Smaller the paper/community, the better. The hyperlocal papers will survive. The mega-international will survive (but entirely online). The state/metro papers in-between are all going to die and be replaced by an ecosystem of local news-websites.