Steve Outing has a good column in Editor & Publisher on how news organizations can use citizen journalists to deepen their local coverage without it necessarily turning into just a source of free labor. Outing’s solution: stringer fees (remember those?), free admission to events that folks wanted to attend anyway and the like.
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Here’s a web site which solicits such stories, and pays for them via PayPal after clicks or pick-ups – http://www.associatedcontent.com/