Web-only frugality

Anyone hoping that online newsrooms will be the industry's salvation might want to get a reality check from Mark Josephson, CEO of local news platform Outside.in. He tells Peter Kafka at ATD's MediaMemo that the online-only newspaper of tomorrow in a decent-sized city will have a staff of 20 - perhaps six of them being "news gatherers."

Josephson's opinion is worth noting because his company is supposed to play a role in creating said future newspaper/news site. The pitch: Outside.in wants to help local news sites by supplying them with a river of extra content created by local bloggers, Twitterers and lots of people who don't even think of themselves as content creators, like people who post real estate listings. The local site is supposed to aggregate and filter the stuff, and sell ads on it. The people supplying the content get more exposure via links from the bigger site.

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He imagines that the tiny editorial staff of the model newspaper produces an extraordinary number of page views -- 40 million per month, in this example -- and then augments it with twice as many page views from a third party network (which could be, but doesn't have to be, supplied by Outside.in). A sales force of a dozen people sells ads for both buckets of inventory, and uses ad networks to fill in remnant space they don't sell. Net result: A very healthy 43% operating margin -- much better than the 27% margins the newspaper industry enjoyed from 2000 through 2007, before the business imploded.

Keep in mind there are other online models with far larger news staffs. A few months back LAT editor Russ Stanton conjured up a Web only operation that could generate a profit margin of 10 percent and support a staff of 275 at their current salaries--about 150 of those in the newsroom. That's still a huge drop from the current newsroom staff of 600 - and that, of course, is a huge drop from the peak staffing level of around 1,200 some years back. On the other hand, the cost of entry into the online-only game will be relatively cheap, which means many more players are likely to emerge. L.A. might end up with a dozen or more of these online news sites, most of them geared to specific interests, such as sports or politics.