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Supporting Journalism as a Public Good

· June 19, 2019

On June 11, the House Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law held a hearing on “The Free and Diverse Press.” One of the main topics of discussion was how to preserve the value of journalism when new technology disrupts it. In a previous post, I explained why I do not believe that antitrust immunities are the right fix for the news industry. But what is? Fortunately, the FTC examined this issue a decade ago and presented suggestions in a 2010 discussion draft. These proposals are helpful, because they offer ways to support journalism through multiple models rather than fixing the common advertising-supported journalism model currently in place. The Internet is changing the industry in ways that radio and TV did not, and looking for model-agnostic solutions seems the most appropriate. But before we can discuss solutions, we need to define the problem.

The Problem

Matt Schruers, testifying on behalf of CCIA, explained the history of the problem as follows:

Before the advent of modern advertising networks, the Internet introduced significant competition for media organizations. Many had enjoyed decades of profits stemming from the previously limited channels available to local advertisers (​e.g​., one local paper and a few local broadcasters). New websites like Craigslist disrupted publishers’ classic revenue models (such as lucrative classified listings), at the same time readers could obtain any news content online from around the world. This naturally led to a decline in local publishers’ revenues as advertising prices fell to more competitive rates.

The FTC staff similarly stated the history of the problem in its 2010 discussion draft:

Advertising paid for the vast majority of the news produced in the twentieth century in the United States.  For most newspapers, about 80% of revenues came from advertising and 20% came from subscribers. Advertisers paid newspapers (as well as radio and television broadcasters and cable) to bring together audiences to view advertisements.  As an ancillary benefit, consumers received news about a wide variety of topics, including important public affairs.

But, the FTC explains, the Internet created many new ways for advertisers to reach customers, and “the vast supply of online sites for advertising reduces the amount that an online news site can charge for advertising at its site.”

In light of this, is the problem that media owners don’t have enough revenue to employ enough journalists, or is it that there is not enough investment in journalism to ensure a sufficiently informed citizenry? These are different problems, the latter is agnostic as to how the journalism is generated. Some solutions are targeted at the former problem by looking for ways to enable media owners to get a bigger share of online advertising revenue. This is attractive as a short-term fix, because it supports the traditional advertising-based journalism model already used. However, I see two problems with this. First, the 2010 FTC discussion draft states that “[i]t appears unlikely that online advertising revenues will ever be sufficient to replace the print advertising revenues that newspapers previously received.” News will continue to compete with the ever-increasing ways for advertisers to reach customers, and that will drive the prices they can demand down. We are no longer living at a time where there is a limited number of options in how a consumer can spend their time consuming media.

Second, there are no guarantees that media owners will be the best shepherds of the public good created by news. Media owners might take their additional revenue and decide that their publication is operating fine with a lean newsroom or that the money could be better invested in journalism that is profitable but does not produce as much public good, like sports news. Other models might do a better job of producing quality journalism. We already see some success in alternative journalism models. NPR is widely regarded for its veracity. There are several industry-specific publications that can demand high subscription fees due to their must-have value to those operating in the industry. Many small publishers have found ways to use platforms to increase their reach and improve revenue. These models should not be disadvantaged, which could happen if certain advertising-based journalism competitors are given an exclusive advantage.

The problem policymakers should be targeting is how to increase news production generally. This means our policies should attempt to be as agnostic as possible as to how that journalism is created.

The Solution

Fortunately, the FTC staff’s 2010 discussion draft offers many innovative suggestions that are potentially model-agnostic. These suggestions are targeted at increasing revenue and reducing the costs of journalism. Some of these suggestions have substantial costs, and not all may be worth it. Additionally, some may not have aged well — the report is 10 years old. With that in mind, here are the suggestions that caught my eye:

 

  • Licensing: The staff report proposed considering some kind of industry-wide licensing arrangement, either supported by or required by the government. An example of this would be a small surcharge collected by ISPs that would be distributed to media organizations based on use. This would essentially function as a user tax to promote the public good of journalism. Something similar to this was done in the Audio Home Recording Act, which attempted to provide compensation for potential losses due to piracy by creating a levy on certain goods that could be used for piracy. Any such tax or surcharge would need to be carefully tailored. Spain’s attempt at this actually hurt publishers, especially small publishers.
  • Government Subsidies: The report acknowledges that any subsidy should be undertaken with care due to the potential for, or appearance of, undue influence over reporting. However, as the report notes, there is a long history of the government supporting journalism through subsidies. These have included postal subsidies, tax breaks, and investment in the Corporation for Public Broadcasting (CPB). Suggestions for increasing this support includes establishing a journalism division of AmeriCorps, which places young people with nonprofits to get training and do public service work. It also includes increased funding for the CPB. Other ideas are to establish a fund for local news, provide tax credits per journalist employed, establish citizenship news vouchers, and provide grants to universities for investigative journalism.
  • Change the Tax Code: The staff report gives a number of suggestions on how to change and clarify the tax code to make it easier for news organizations to receive tax-exempt status. Other suggestions are aimed at providing tax code support for, and incentives to invest in, “hybrid organizations” that blend social purposes with business methods. The report notes that several states are experimenting with this model.
  • Improving Government Communication: The government provides much of the information important to news organizations and the public. However, many of the ways the government communicates information are outdated and difficult to access. This increases the costs to journalists of collecting facts for news stories. The report has several suggestions on how the government could help reduce the costs of journalism through better communication of information.

Some of these suggestions have been adopted elsewhere. CCIA’s testimony last week explains:

Last year, the Canadian federal government introduced a CAN$595 million tax package to bolster the country’s journalism market over 5 years, including a temporary tax credit allowing news subscribers to deduct a portion of eligible digital news media subscriptions, a new tax category for qualified non-profit journalism organizations, and a refundable tax credit for qualifying news organizations that “produce a wide variety of news and information of interest to Canadians.”

Several EU Member States also have state aid programs that directly subsidize news or media producers, particularly to promote diversity of independent news producers in small geographic and language markets.

Considering the importance of journalism, it might be necessary to update this study and look for where we can find successful examples of other countries addressing this problem. Policymakers should be looking for successful policies to adopt that support quality journalism as a public good. Additionally, while it may not always be possible, any solutions should strive to remain agnostic as to the business model of the news organization.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.