How State House News charges $4,000 for access to its journalism

What used to be a standard newswire service now sells direction digital subscriptions to a B2B clientele.

For much of its 130-year existence, State House News operated as a standard newswire service. Its journalists covered the Massachusetts state government, and it then syndicated their content to regional and national newspapers. 

But in the late 90s, owner Craig Sandler realized that internet distribution would allow him to sell direct digital subscriptions and vastly expand his customer base. Today, the service charges $4,000 a year to any company or organization whose business is directly influenced by the state’s government.

In a recent interview, Craig discussed how he built the direct subscription business, why he decided to sell a majority stake in the company, and whether State House News is shielded from the whims of large tech platforms and AI chatbots.

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Transcript

Hey, Craig, thanks for joining us. 

Oh, it is my pleasure. 

So you run something that is called State House News. It's in Massachusetts. What's the kind of elevator pitch for what it is and what kind of news it provides and who its customers are?

Sure thing. You know, at first a disclaimer and then the elevator pitch. The disclaimer is that I don't run it. I just have great employees. You know, I just have a fabulous team. They run it. But it is true that I bought it, many years ago, 27 years ago, and have found the wonderful people who make it happen. Okay. The elevator pitch is that we are is the Associated Press on steroids – for Massachusetts state government. The government affairs professionals who absolutely live and die on high quality, unbiased, in-depth information about the state government, live and die by the Statehouse News Service.

Yeah. So it's been around for a long time, like all the way since the 1800s. You purchased it.

Very much so. Now, I didn't purchase it in the 1800s. Let us be clear. But it was founded in 1894 by a reporter from Massachusetts who would take notes on proceedings and sell them to the other reporters who weren’t there, and so they would fill in the stuff they missed by following his notes, and that's still the core function. We run around and cover everything we can in terms of the life of the state house and proceedings in its rooms, and we shoot it out there for the world to consume, because the world can't be everywhere. And we have six or seven people who collectively get to almost everything that's important that happens.

And you called it an AP on steroids. I would phrase it differently. I would say it's a hybrid between an AP and a Politico Pro in the sense that you are focused on a hyper, very specific niche and kind of owning that niche. And it's going to a clientele that is beyond the kind of casual news consumer, or someone – as part of their job  – has a very special interest in understanding the very nuanced minutia of what's going on in the state government of Massachusetts.

Very much so. That's why I use the phrase government affairs professionals, that the average citizen is not a government affairs professional, nor does the average citizen necessarily care that much about the Pension Reserve Management Board. And we are for the people who care about the Pension Reserve Management Board.

And we cost thousands of dollars a year, as does a wire service. We're a true wire service. I would take exception to Politico Pro only in that we have, in the not too distant past, acquired is... perhaps not quite the right word, but I'm now a minority owner and our majority owners are, called State Affairs, which is a rapidly burgeoning network of these state government news sources. And State Affairs is overlaying all of the new sources, the new services, including ours, with the most amazing technology in terms of bill tracking, keyword alerts for these state government obsessives.

So we're really part of a network now that is in competition with Politico Pro and excitingly so. So anyway, I just want to make that part of it clear that State Affairs is out there.

So State Affairs is a separate company that licenses news from state houses all across the country and you have a minority stake in that separate company?

Sort of, but the other way around. They buy new services and they bought ours, but I continue to be a minority owner. 

The important part of it is the technology. I am constantly saying that State Affairs is a federal republic of news services because they let the locals do the local coverage because it's foolhardy in the extreme for someone from on high to dictate what should be covered at the state level. But State Affairs is rapidly building out quite the amazing suite of technology to, again, help people who really need to understand and know what's going on, do that to the very best of their ability.

And when did State Affairs buy a majority stake in your company?

In late June. I might be off by a few weeks, but this summer.

Oh, okay. So since the last time that we talked. 

Fundamentally what they own this majority stake in is affiliated news services in Boston. We run the Statehouse News Service. And so not very much about the nature of the business or the enterprise has changed, except that we're aligned with these programs. technical wizards who can build tools that take the copy we're producing and slice it and dice it in ways that are just fantastic.

Are they in all 50 states?

No not at all, 12. 

So you bought the company in 1996 or something like that?

That's right. Well, I had worked at a chain of weeklies, suburban weeklies in the Boston area. And I asked the owners of this chain if they'd be willing to put up most of the capital to buy the news service from my mentor. Helen Woodman. She started covering news for the State House in 1962 and one of her mentors asked her if she wanted to buy it in 1979. This is not an accurate figure. We've only had 11 owners, could be nine over since from 1894 to 1996. Anyway, I bought it from Helen in 1996 with the capital infused by the publishers of this chain of weeklies. When I started, we put the copy out on Mimeograph, which is a long, obsolete technology none of my reporters have ever seen, but Primitive offset press used to be used a lot in school. It was great. We would print up mimeograph masters on computer printers, print out 85 copies, and place them by hand in boxes at the front of the news service. But it so happened that it was 1997. I'd been obsessed with computers since 1982, and I had some coding skills, and they're easily portable into the skills of the new burgeoning Internet Web servers, email automated automation of all these things. Microsoft Office automation coding. I could do all that. And so I won't say slowly, reasonably rapidly. I wrote all the code to process the copy, get it out to the subscribers by email.

So back in the print days, it was mainly a wire service. So I would guess most of the revenue came from newspapers that were syndicating the content, but obviously with digital distribution, you were early to what the AP is actually now finally doing is creating a direct to consumer type of product where, if I want access to this information, I can pay a subscription and just subscribe to it directly. So before we start talking about the direct to consumer one, just talking about the wire service part, what's the kind of value proposition? Who are your wire service clients? Like, are they just newspapers in Massachusetts? Are they also national newspapers? And like, what kind of value do they get out of the service?

Right. Well, I would say that they're almost exclusively, if not exclusively, Massachusetts clients. So there are regional newspapers that are shrinking and consolidating. That's a whole other conversation, and it's an interesting one because the same things that break my heart about the contraction of the news business are good for my own business and my own personal well-being, and I'm always going to be conflicted about that. Anyhow. So regional newspapers, radios, TVs. And so in a lot of ways, it's useful to the reporters, not necessarily to run the copy in their outlets. And we have restrictions in our terms of use about the duplication and excessive reproduction. We have to keep the copy relatively proprietary. In any case, it's not so much a matter of the news outlets running our copy verbatim as it is allowing the editors and reporters of those news outlets to know what they do want to cover and follow and in what cases do they want to take our stuff an basically lightly rewrite it.

Why can't they just run the article as is?

If too much of that occurred, it would badly dilute the business model, which is subscriber-only. Though we're running more ads now on the email product, we are fundamentally a paywalled subscriber-only business.

So they can only use your service as an information source in their own reporting. I didn't realize that. So that's slightly different from your standard or typical wire service.

Very much so. It's just a new animal that arose when I adopted the technology of paywalling and actually wrote that code requiring the passwords to expire after 24 hours automatically so that they couldn't be shared. When I arrived in 1988, I'd say we were thrilled when the Boston Globe would run a whole story from the Statehouse News Service. They had a much bigger bureau then, so it wouldn't happen as much. And our story had to be really good. But we had no objection to people taking the print and going through the process of using it then. Now that it's instantaneous and you could easily build a site to use all our copy and just replicate the new service on another website, we had to take steps to keep someone from saying, here's my 4,000 bucks. I want the copy. I'm going to put it all out there instantaneously.

And then like the value proposition now, especially now, and you hinted at this with the bureaus shrinking, is that a lot of regional newspapers, they have shrinking resources. They can no longer afford to have a robust team in the statehouse. They're using those resources mainly to report on their local towns and cities. So they need access to an information source for that, because obviously stuff that happens at the state house is relevant in local towns and cities, so they still need that information even though they can't afford to have reporters there. 

You really nailed it. I want now to recruit you for our sales team.

Yeah. And so you mentioned four thousand bucks. That's the cost of a subscription. Is that kind of like unlimited a la carte access where anybody from that organization can access it? Or do you have different prices based on the size of the organization?

That buys you six users, basically six licenses, and you can pay to add blocks of three. Again, horribly mangling a rate card, I'm sure. But that's the idea. You buy a block of users, you can pay more and add users.

Yeah. So you're not really a wire service. You're just a direct-to-consumer subscription service, and some of those customers just happen to be news organizations. So they're all getting kind of the same service.

I'll say that rather than direct-to-consumer per se, it's probably more accurate to say B2B, niche information source. I would say that the way I used to explain it is we were running a wire service for media outlets, but anybody who can pay for the subscription is welcome to. And that means that government agencies, political groups, lobbyists, corporations, advocacy organizations, they can get exactly the same copy that the newspapers are getting. So in that sense, you would say that it's a wire service that will sell subscriptions to anyone.

So that's why I kind of get back to the Politico Pro thing. It's like people who have a lot of money to spend because it's just expensed and it's vital for them to know because whatever is happening in the state house could directly affect their business or their issue or something like that.

Exactly. 100%. And obviously the play for State Affairs is just do that, just do it better.

So how do you staff the site currently?

I recruit reporters. So there are six people covering the news, one person in the room, now remotely, in the room handling ops. And then there's a team of five reporters. And then there’s a customer service, ops person keeping the technology running, 

And so for the five reporters, do they have specific beats like within the state house or the government? Like, is there someone who's, job it is to cover the mayor's office versus different regulatory agencies? 

They tend to have specialties. So when I was a reporter, I was really interested in the budget, so when a budget story came along, which was frequently, I would probably be the first one assigned to it. I liked covering education and now reveal the terrible secret that I didn't care that much about the environment. I mean, I wasn't an active polluter. I just didn't grab me. So somebody else would tend to do environmental coverage. It is that way to this day. We have someone who really knows the regulated industries, you know, i.e. gambling. And we have someone who does really care about education. So they will tend to develop the sources. But it's definitely not siloed into beats. The education, quote unquote, specialist has no idea when she's going to be tasked with writing up a supplemental budget. And she has to get it right because the governor of the state is reading the copy. She's certainly reading summaries.

And you're not doing like long features or anything like that. This is focused on just kind of the minutia, this is the hard news that is coming out today and stuff like that.

Exactly. And when we get the chance, which is not very often, we will do blowouts or takeouts or retrospectives or look backs, but mostly we just don't have the time and it never ends. I started the year not knowing the state was going to wind up spending two billion dollars trying to deal with an influx of migrant families,  nor did I know that suddenly the terribly mismanaged chain of hospitals would close two of them and just inflict another horrible nightmare on both the government and the consumers. And that's all to say the daily news tends to be so rich, so unpredictable, and so important to our customers that the daily is enough.

And your website, I was clicking around, like everything is extremely hard paywalled. Like basically you get the headline and nothing else, right?

Yes, I would say that that is true. Again, the business model depends on security and integrity that you have to pay in order to consume this thing. Skiing is good and food is good and they both cost money. News is also good and guess what? It costs money too and that's what we do. We charge for it.

So obviously with hard paywalls, the marketing aspect is a little bit harder just because it's harder for content to spread and kind of circulate. What's your marketing strategy? Like how do you make people aware of all the great information that you have and find customers?

Is it just that you were like literally constantly breaking news so often that you're just always part of the conversation? 

I would say that's true, except that we're in a wonderful situation when it comes to organic spread and reach in that because it's a wire service, as you're calling it, in other words, a source of information for media outlets to disseminate, we do allow the republication of one story a day or more than that if it's old, which is often good enough for a media outlet. Well, it turns out that it runs in other places. It gets a lot of spread that way. It gets organic SEO because, again, as you know, much better than I, the algorithms reward interaction and action and spread and sharing and quality as they measure it. And we seem to... satisfy all of that without trying. State Affairs is really good at it. And I think our SEO is probably going to go way up as they do things that we could never do.

But the fact is that because we are pumping it out there, other outlets are pumping out our material at the same time that we are organically in the mix of information among the people who would tend to contact other likely subscribers, people come to us, not with very little effort, but with comparatively little effort.

And what they do is they arrive at our site, at our paywalled site, and they can see our headlines and they're teased and they're asked if they'd like a a trial subscription of a couple of weeks. And then it's very high touch. They sign up for a trial and it's not very long before a human being calls them and sets up a relationship.

And to be clear, if I wanted to, I could not enter my credit card and become a subscriber without interacting with a human being.

I would say that's true. But if you wanted to subscribe on the spot... Yes, that's true. If you wanted to subscribe on the spot... It would be a little bit longer than signing up for your newsletter. It wouldn't be that much longer. If you really wanted to become a subscriber there and then, it could be done.

But could I become a subscriber without interacting with a human at all? 

No. 

Okay. So it is very high touch. So you have like a salesperson or something, a client relations type of manager. And so why are you denying people if they just want to just give you money? Why are you making them? What's the kind of strategy behind that?

I would say, and it's not... It's not static. Does it still make sense? It works. And in fact, perhaps it's archaic. But again, the reality is the nature of the business, the lobbying business, the government affairs professional business. The reality of the business is that it is also a very high touch business. You don't do government remotely.

So the people involved resonate well with having someone talk them through the features and having a relationship. In any event, the strategy is expensive. It is hard, it's a tough call for a lot of the would-be subscribers. And a lot of them will miss the features as they're in the trial process. And they will not read, you know, the marketing funnel emails. Did you try this? Did you try that? Maybe they will. Maybe they won't. 

Yeah. So it sounds like it's a kind of a churn reduction strategy. If someone just signs up for a free trial and then enters their credit card information, they're not going to know about the features. They're not going to have that high touch thing. And then they're more likely to unsubscribe or something like that just because they didn't have that kind of human being to really explain to them everything they're getting and kind of walk them through that kind of process is what it sounds like.

That's right. Well, we bought the business, I said. There are many, many people who could benefit from this and they have no idea it exists. Different world of technology then. And we will now compile massive lists of them and we'll call them. It slowly evolved to, we'll put a trial opportunity on the page, but we already had the infrastructure to do this very high touch method. It worked wonderfully. And I think it actually still does as the market gets narrower and narrower and we rely more on churn to stay healthy and also to grow. It's simply still working.

Is that person's job 100% to work on inbound inquiries or is that person's job also to do outbound kind of sales calls and stuff like that?

Yeah, it's mostly inbound, but then also compile the list. beat the bushes, go to the events. And my understanding is that there is not a specialty state government wire service that doesn't do it that way on the sales side.

And so for your new parent company, if I pay the $4,000, am I getting access to all of their state houses or is that a separate subscription?

Yes, it's sliced and diced in a way that I'm leery of trying to pretend that I understand the specifics, but it is definitely the case that you can subscribe to when you subscribe to the new service. you get access to the network nationwide.

So my next question is kind of macro. Obviously you've been watching what's happening within the media industry at large, especially as it has to deal with the platforms, both in sending less traffic, but now because of AI summarizing content and therefore kind of devaluing news content. Given that you work in such exclusive non-commoditized content and it's behind such a hard paywall, And you're probably less reliant on things like Facebook and Twitter and stuff like that as a traffic driver. Right. How do you feel about in terms of whether you're protected from those whims of the platforms and AI because your content is just so locked down and exclusive?

Yeah, I mean, I'm not foolish enough to say I even know. I think we're in good shape for a lot of different reasons. But again, the actual orientation of the wise news executive towards AI is do what you're doing, stay nimble, and stay alert to the moments when people are saying, this thing is so fabulous, because that's the trigger point to respond in kind or figure it out. So that all said, our relationship with our news consumers is built on trust. We could have the whole conversation about whether people trust news. They damn well trust us. And they are going to be able to tell instantly when something is created by a machine and they're going to pick up the flaws that AI is absolutely building into practically everything that comes out immediately. And so for now, it's actually the quality and I would say the narrow focus of the content of the copy. That's our best defense. .

I mean, would you say it would be impossible for AI to replicate what you're doing considering its large language models is blocked off from your content and you're literally the only organization that's publishing some of this content. So it doesn't have access to the information. So there's no way it could replicate what you're doing. Would that be accurate to say?

Yes. I mean, again, I would be smart enough to let... leave the final word on that to the technical people. But I would say that that is accurate. Quite difficult for AI to get at everything we have, and especially the most specialized material that the inner workings of the gaming commission that the average reader doesn't care about. Because one way to steal the news service is to set up news alerts for Massachusetts state government, Google News. If you do that, when other outlets are publishing our stuff, you'll see the plethora of stories that casual consumers see that originates from the news service. That's been AI. accessing our material since 2011 or earlier. So it's not undoable or unheard of. It is a threat. And part of it, I'm sure this is a naive thing to say, part of it, as always, will depend on a good legal team.

So do you monetize in any other ways other than subscriptions? Do you do any advertising or anything like that?

We have a morning aggregation newsletter that's entirely aggregation based and it's entirely free is what I'm trying to say. And it's advertising supported. It has 26,000 readers. And so that's a revenue source. We have begun selling ad space on the email platform, the stories as they come out, simply because the market, you know, 10 years ago, I wouldn't have countenanced it. Probably six or seven years ago, I didn't countenance it when it was proposed. And now I'm understanding that, observing my own behavior, that it's not found to be objectionable. So we are starting to sell ads in the new space.

Obviously you don't have a huge subscriber base, but because it's such an influential subscriber base, it's those kinds of businesses that want to reach those kinds of decision makers and high-level corporate executives and stuff like that. 

Absolutely.

And so for the email blast, you say it's an aggregation. Is it like someone's job to scour news sources? I'm guessing it aggregates content even from outside of your news organization, or is it just purely from your news organization?

Oh, no. We discourage... using news service copy, not because of the paywall issue, but because they don't want it to be Statehouse Light. We want to see if the L.A. Times mentioned our governor. It's a broad spectrum. And again, it's very much a human being. I describe the aggregation job as painful but fun because the news comes out between 6.30 to 8.30 at night, but then you also have to scan it and prep it and send it out before 7 a.m. in the morning. Oh, it's a dreadful job, but it's a terrific job too. It's really, really interesting.

Is that slightly more of a B2C product than your traditional kind of readership for the state news? 

Absolutely. 

So you're kind of diversified in that you're not only having two separate business models, but going after two separate audiences.

And let's not forget events. Events are important. It's a growing part of our business. You convene policy setters and industry leaders on important topics like the electrification of our lives or the diversity in higher education. And you organize a panel and you put out the bagels.

People can network for an hour, which is half the reason they come. And they go to the program, and sometimes we'll get good news stories.

Yeah. And not to continue comparing you to Politico, but in DC they do these panel discussions on issues like cybersecurity and they'll have some Congressman who sits on the cybersecurity committee. And then they'll have maybe two executives from that industry and it'll be sponsored by Microsoft or some other big cybersecurity firm or something like that. It's invite only, but it's also completely free to attend. Is that kind of the same model?

It depends on who's sponsoring. Sometimes it's free to attend and sometimes there's a charge, but it's not really about the ticket sales. It's about the sponsorships.

So you were acquired by this company. You still have a minority stake. Do you have any major ambitions over the next five years for the news organization? Are you still doing things on a day-to-day basis for them? What do you want to be doing five years from now? 

The world of Craig R. Sandler is mainly building out a directory product, which is called the Massachusetts Almanac. And it's a directory of the legislature, but also the executive leaders of the executive branch, the department, the secretaries, department heads, and their staffs, so that insiders can look up the locations and contact information and hopefully biographical information about these executive leaders and of course the legislators and the judicial branch as well. It's fairly bare bones now, and I believe it should become the sort of the trade journal of executive management in the public sector, real in-depth. Q&As with the people who run the government and what they do, why they do it.

So it's like a non-news information product that's sold within the larger subscription.

That's right. And it's not sold separately. It comes with your subscription. And I think that it is available in other State Affairs states. They're very interested in pouring our data into the platform they have. to do directories. But I think also I'm interested in moving it out and forward what State Affairs affairs has for scaling to include the executive branch. And then we'll see what the conversation is like around the content. I'm a journalist. I'm mostly interested in the content and the government is about people. So the extent that we can tell the story of these people in a way that's not available anywhere else, that's our value.

And that's kind of almost analogous to like a Bloomberg terminal in the sense it's like a data and information product as opposed to a news product.

Yes, I would say that's a rough analogy, but it is analogous.

And that's kind of what you're focused on. So are you actually like building, like are you overseeing a staff that's doing that or are you mainly doing that by hand yourself?

I have one staffer who sweeps the agency on a rotating basis. And then we put in some data tables. We try again to do more almanac-y sort of products. I believe the height of the state's highest mountain is in the Mass Almanac. I damn well know that the last person to be killed by a rattlesnake in Massachusetts is in the Almanac. I believe it was 1783. So we do try to flesh it out in that sort of fashion. So it's about the state. And it's also about the people, even the people who lead the state.