American government: It's always subsidized commercial media

By Geoffrey Cowan and David Westphal

Geoffrey Cowan is university professor at the University of Southern California and dean emeritus of the Annenberg School for Communication and Journalism. David Westphal is a senior fellow at USC’s Center on Communication Leadership and Policy and former Washington bureau chief for McClatchy Newspapers.

A mythology about the relationship between American government and the news business is again making the rounds, and it needs a corrective jolt. The myth is that the commercial press in this country stands wholly independent of governmental sustenance. Here’s the jolt: There’s never been a time in U.S. history when government dollars weren’t propping up the news business. This year, federal, state and local governments will spend well over $1 billion to support commercial news publishers through tax breaks, postal subsidies and the printing of public notices. And the amount used to be much higher.

This topic is back in the news because of the rapid economic decline of newspapers, news magazines and many broadcast outlets. Amid deepening concern about the impact on our democracy, some are calling on the government to get involved. Leonard Downie and Michael Schudson were among the latest, urging limited government aid to support the cause of news and information. The Federal Trade Commission is among the federal agencies wading in, scheduling discussions Dec. 1-2 to gauge whether government intervention is needed.

The truth is that American government and the news business have always been joined at the hip, and not just through the government’s copyright protections, restrictions on anti-competitive practices and regulation of the public airwaves. It’s also through the infusion of tax dollars.

The Postal Service’s subsidy of mailing costs for newspapers and magazines, which dates back to colonial America and the Postal Act of 1792, is often raised as Exhibit A. Less well known is just how large this subsidy was – and how much it has shrunk. As recently as the late 1960s, the government was forgiving roughly three-fourths of print publications’ periodical mailing expenses, at a cost of about $400 million annually (or, adjusted for inflation, about $2 billion today). Much of that disappeared with the Postal Reorganization Act of 1970 and in subsequent cutbacks. But the Post Office still discounts the postage cost of periodicals by about $270 million a year.

Postal subsidies, though, are just the start of the story. Federal and state governments forego about $890 million a year on income and sales tax breaks to the newspaper industry, most of it at the state level. The actual figure is probably much higher because many states don’t report tax expenditure details.

Another major form of government support comes through public-notice requirements, which also have their roots in colonial America. These laws require cities, counties and school districts, along with state and federal agencies, to buy advertising space in newspapers to disclose a range of government actions – such as plans for a new school. Take a look at the Wall Street Journal, for example, and you’ll usually find a page or more of federally paid and mandated ads – in impossibly small print — announcing property seizures. Those are public notices, and nationwide they bring in hundreds of millions of dollars in revenue.

But all three of these categories are shrinking. For example, legislation has been introduced in 40 states to move public notices to the Web, and the Department of Justice has already announced it will shift property-forfeiture notices from newspapers to its own Web site. The impact would be another blow to newspapers, especially small ones: In 2000, the National Newspaper Association estimated that public-notice billings accounted for 5-10 percent of newspaper revenue.

Postal subsidies, tax breaks and public-notice requirements only begin to describe the ways governments at every level have supported the American news industry. Municipalities provide newspapers with enormous sales and marketing benefits by allowing vendor boxes on public sidewalks at little or no cost to the newspaper companies. Drug advertising regulations by the Food and Drug Administration have been a boon to magazine publishers because they require TV ads to be accompanied by more specific disclosure, and magazines are one of the approved outlets. Commercial broadcasting has also benefited mightily, via the free use of government-licensed airwaves.

After backing the news industry for more than 200 years, the government should assess how it can be most helpful now, when the future of news and information is so uncertain. As it debates possible forms of support, the government should consider these principles:

First and foremost, do no harm. A cycle of powerful innovation is under way. To the extent possible, government should avoid retarding the emergence of new models of newsgathering.

Second, the government should help promote innovation, as it did when the Department of Defense funded the research that created the Internet or when NASA funded the creation of satellites that made cable television and direct TV possible.

Third, for commercial media, government-supported mechanisms that are content neutral — such as copyright protections, postal subsidies and taxes — are preferable to those that call upon the government to fund specific news outlets, publications or programs.

However policymakers proceed, they should do so based on facts rather than myth. The government has always supported the commercial news business. It does so today; and unless the government takes affirmative action, the level of support is almost certain to decline at this important time in the history of journalism.

About David Westphal

After almost four decades in newspapering, I've made the jump to academia at USC's Annenberg Journalism School in Los Angeles. I hope to use my recent experience as head of McClatchy's Washington Bureau to write about the revolution that's taking place in journalism -- and in particular to study new-media business models. I'm a senior fellow at Annenberg's Center on Communication Leadership and Policy, and also affiliated with the Knight Digital Media Center.


  1. says:

    A link or two to the people you say are spreading this mythology?

  2. says:

    i’d love to see some hard numbers on public notice/legal advertising. in penna, it’s about $30 million/yr just for municipalities. my educated guesstimate pegs this franchise at +$2 Billion nationally on all levels of govt — granted almost exclusively to publications bearing a fixed price per copy. before the giant leap online, the definition of fixed in print should expand to include verified free circulation.

  3. yes,government should help promote innovation, the facts proved the views,as it did when the Department of Defense funded the research that created the Internet or when NASA funded the creation of satellites that made cable television and direct TV possible

  4. says:

    Lumping public notice in as a government subsidy of media is a simplistic and alarming claim, as the very concept of public notice publication is to serve the public good by presenting governement information in an independent (non-government), accessible and verifiable way. Enabling governmental bodies to post, maintain and archive its own notice is problematic to any real open government policy, which was the basis behind historic state and local legislation mandating third-party notice. Following this subsidy logic would need to include practically any service or product purchased by government to serve a need of government — subsidies for industries that produce cars, trucks, carpets, planes, roads, lunch meat, etc.

  5. says:

    It’s absurd on the face of it to say that postal discounts and public notices are government subsidies. Both actions were taken with the intent to foster democracy, not to subsidize any industry. It was felt that it was important to provide universal access to “news” so the new republic could indeed be self governing. That all went away in the mid 90s … the industry now gets “discounts” for work saving intiatives. Periodicals get discounts for doing USPS work … walk-sequence sorting, etc. Public Notices were never meant as a subsidy. They were a way to notify the public of what government was up to, how it intended to spend taxpayer dollars, etc. The fees were BELOW standard rates, often set and capped by the state governments, so that in many, if not most, instances the government rate is much lower than that charged the general public or commercial accounts. When these went into effect the idea of government paying for the ads was NOT to subsidize the news industry, but to compensate at minimum cost for the service. When surveys show that almost 70% of Americans have never visited a government web site, what does that tell us about the concept of putting public notices on government web sites, usually several clicks beneath the home page? So much for transparency.

  6. says:

    I haven’t heard this myth? Who’s putting it forth? If you can’t offer a link or two, I suspect this is a bit of a straw man argument.

  7. says:

    The government has NOT propped up the media, save for NPR and PBS. And those organizations should be spun off, as should the postal service (which is an off-budget expenditure to begin with). Tax breaks aren’t “support,” nor are any of the other things the writers enumerate.

    Bailouts, on the other hand, will lead to censorship and destruction of the First Amendment. Remember the Golden Rule — “he who has the money makes the rules.” Anyone who thinks the American press would be nonexistent without the government is grossly uninformed and should never be allowed to vote, a useful idiot for the forces who would care to tear down the free market.

  8. David Westphal says:

    A few responses to the comments above:

    1. You can see what the authors consider to be mythology in the comments themselves. Some people don’t consider government-required public notices, postal discounts or tax breaks to be subsidies. Jeff Jarvis made the same point this week. So have the many others who urge the government to refrain from subsidizing the press. We argue it already has, and already is.

    2. The postal system’s discount system is a good topic for elaboration, which we’re doing in a longer paper on this topic.

    3. We don’t quarrel with the origins of public-notice publication requirements. Government wanted to make sure the public was properly informed. That doesn’t mean that public-notice requirements don’t amount to subsidies today. All government subsidies arguably have public purposes, but they nevertheless work to the benefit of one industry or another. Indeed, the movement of public notices to online space would be a financial nightmare for many newspapers, especially small ones. Yet that movement is under way.

    4. We also are interested in a national tabulation of public-notice expenses incurred by local, state and federal agencies. $2 billion sounds high, but there’s little doubt it’s a big number, and that whatever it is going to decline, perhaps quickly.

    5. Whether you call them subsidies or prefer another term, the money the government has directed toward commercial media has been reduced significantly in recent decades (through higher postal rates), and is certain to decline more (public-notice revenue and tax breaks based on newsprint and ink, for example). Our view is it’s a good opportunity for policymakers to ponder what role this money has played in the past, and whether government should play any kind of comparable role in the future.