What we’re looking at here is not the future of news, but the future of newsletters: an elite audience willing to pay a lot of money for granular coverage. That’s the model, and it’s been around for a long time.

This is what Chrystia Freeland called “The Rise of Private News” in CJR a couple of years ago.

In a note to me, Jim VandeHei, president and CEO of both Politico and Capital New York, rejects the newsletter analogy, pointing out that while 80 percent of Pro material is behind a paywall, 20 percent isn’t, and that’s often the most important stuff.

Our business model is somewhat unique: we provide a lot of journalism to organizations, politicians and groups who need and can afford high-end subscriptions. But this in turn allows us to serve the general public interest by assembling the largest policy teams in the country to provide unrivaled expertise and coverage when the stories are of broad, public interest. This has been on full display with Politico’s coverage of health care.

We are obsessed with building a business foundation that can support great journalism, not just for the moment, but forever. We think a foundation that rests on high traffic and general advertising alone is a flimsy one - if your aim is sophisticated, nonpartisan journalism that isn’t simply cheap bait for high clicks.

Fair enough. But what’s developing, at a minimum, is a two-tiered news system in which insiders get that which outsiders don’t.

The wider context here is of course the crash of general-interest, mass circulation newspapers, which could once be expected to cover city halls and state houses. This is what our pals at the American Journalism Review, in finding a 30 percent drop in state-house based reporters between 2003 and 2009, called the “State House Exodus.” The Times a few years ago found an 18 percent drop from 2000 to 2008, from 51 reporters at 29 news organizations, to 41 reporters from 27 news organizations (and a 30 percent plunge from the 1980s heyday). Kyle Hughes, who keeps track of such things for the Legislative Correspondents Association, says in a note to me that the figure is back up to 50 reporters working at two dozen news organizations. Capital New York supplies six of those.

Here’s more from Hughes:

I can’t speak to CNY’s prospects, but I can say there is a huge flood of non-paywall info and news about govt and politics that comes out of Albany every day. It has to be one of the most closely covered if not the most closely covered government among all the states. Which is all good and in keeping with the long history of the LCA and robust coverage that is the norm here.

Still, this sounds a bit like what might have been said in DC before Politico Pro. It’s not at all hard to imagine that big institutions would shell out for a newsletter to complement the free stuff, just to be sure they’re not missing something.

This niche market has been around a long time, but it is precisely the staggering decline of general interest newspapers that creates such a wide opening for nimble operators such as Politico.

And another thing to keep in mind: two-tiered news production is a business that general-interest newspapers could never really do even if they wanted to, since their brands are built on serving the public interest. They couldn’t get away with this system.

VandeHei isn’t wrong that Politico adds new reporting—for everyone—on important policy issues that wouldn’t otherwise exist.

Mixed blessing or not, the model is probably going to work.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.