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.

No revenue model for news? Labor steps up

At the recent Harvard session on new business models for news, I offered an off-the-beaten-path idea to the question of who will pay for the news. One answer, I said, was non-news organizations: NGOs, trade associations, businesses, governments and labor unions.

Yes, labor unions. There are indications of a back-to-the-future trend in labor funding for the news. Just in the last several months, two labor unions in southern California have provided six-figure funding for very different kinds of operations – Voice of Orange County, an independent news site working toward a January launch, and Accountable California, a direct arm of Local 721, Service Employees International Union.

The idea that legitimate journalism might flow from “special-interest” labor money would have seemed a non-starter to many of us not long ago. How could journalists provide fair and unfettered accounts when their paychecks were the product of an organization with a clear political agenda? In fact, though, Voice of Orange County and Accountable California are simply a revival of a kind of journalism that permeated American life in the late 19th and early 20th centuries – labor-backed newspapers.

A few months ago I stumbled on a website kept by the Kansas State Historical Society that listed labor newspapers published in Kansas during that period. There were 95 of them, going by names like Anti-Monopolist, Labor Champion, People’s Vindicator and Vox Populi. Theirs was an era when local markets often had many newspapers, not just one, and each reflected a constituency like labor or business, or one political party or the other, that provided audience and sustenance.

There were plenty of arguments then about what constituted journalism, what was accurate, what was fair. We’re certainly headed for more of them now now, with a likely proliferation of news hybrids that may make the previous era look monolithic by comparison. But don’t discount the potential of newsgathering backed by labor (or myriad other interests) to be the essence of journalism. There’s already powerful evidence that the two can happily coincide, and it’s hard to see why the trend won’t continue.

When I posted notes from my Harvard remarks last week, NYU’s Jay Rosen pointed me to David Beers, editor of The Tyee of Vancouver, British Columbia. I hadn’t realized how long Beers has been toiling in the world of investigative reporting backed in part by labor. He started The Tyee in 2003, with $190,000 in initial funding provided by labor. Quite quickly, he diversified his revenue stream, which now also includes philanthropy, advertising, audience contributions and small grants from the government.

The result is an award-winning nonprofit that’s investigative and progressive at heart, and focuses on the civic life of Western Canada. Beers’ budget this year is about $550,000, and his site last month reached more than 160,000 unique visitors.

“It’s a fantastically hopeful story,” said Beers. “And no, we haven’t solved the business-model problem. But we do terrific journalism that has impact and that journalists can take heart from.”

Beers, in fact, thinks labor won’t be the only special interest that will be funding news gathering in the future. “There are thousands of debates going on that people, institutions can’t afford to lose. They need venues for these debates. They have money. And they need journalism and journalists.”

(Note: I’ll write more about The Tyee in a subsequent post.)

The business model for the nonprofit Voice of Orange County is fundamentally the same as The Tyee’s: Start with seed money from a labor union, add other revenue streams, and produce independent reporting. In the case of the Voice, though, supporters want to ramp up immediately. Norberto Santana, the Voice’s editor, said the $140,000 contributed by the Orange County Employees Association will be supplemented by private donations that could put the first-year budget north of $600,000. (Eventually, Santana said, the site hopes to diversify through advertising, foundation grants, NPR-style memberships and perhaps premium content).

Santana said the Voice of Orange County will differ from The Tyee in one other respect: Unlike The Tyee’s progressive orientation, Voice will be neutral ideologically. However, he acknowledged that the mission of doing strong accountability reporting in an overwhelmingly Republican area like Orange County may make it look like Voice leans solidly left.

In any case, Santana isn’t concerned that the labor money baked into the Voice’s business plan will skew its coverage. “My only orientation is aggressive watchdog coverage of the local scene,” he said. “What does labor get out of it? Only the guarantee that city hall’s feet will be held to the fire, the same way we’ll hold their fee to the fire. But they know they’re not getting a labor shill out of me.”

The Voice will begin with a staff of 6-8, Santana said, and plans to partner extensively – with public broadcasting, with local and topic-based bloggers and with NGOs like the League of Women Voters. Current plans are to translate significant pieces of the site into Spanish and Vietnamese.

What do you call investigative work that is written by a union staffer and is part of the union’s strategic agenda? Can that be journalism? Is the writer a journalist?

I put those questions to Ted Rohrlich, former award-winning investigative reporter for the Los Angeles Times who now is research coordinator for the SEIU local’s research arm. Six months ago it launched a website called Accountable California, whose aim is to produce investigative reporting about the government and its contractors.

Here’s Rohrlich’s answer: “I still think of myself as a journalist,” he said. “But I also think of myself as a staff member of a labor union with strategic goals. So I think skepticism of my work is not inappropriate. But this exercise is pointless if it doesn’t have credibility.”

Here’s one way in which his role is different. Rohrlich’s initial investigation was about the nonprofit Tarzana Treatment Center, which gets 85 percent of its money from the government. According to his reporting, the treatment center spent $22 million in government funds over the last 11 years on inappropriate benefits for company insiders. Interestingly, the Los Angeles Times ended up beating Rohrlich on some of the story. But here’s the difference. Rohrlich’s story wasn’t just for public discussion; it was a dossier that the union took to the attorney general’s office, where it’s demanding action.

“The Los Angeles Times would have the chips fall where they may,” said Steve Askin, who hired Rohrlich and heads the union’s overall research effort. “What we did was a detailed report that says to the government: This money should be paid back.”

Askin said part of the rationale for Accountable California is to respond to the vacuum that’s developed in coverage of labor issues. Labor beats used to be standard fare at metropolitan newspapers; today they’re almost non-existent. But he said the SEIU local has two other more specific goals: putting a face on public employees more favorable than the one people normally see, and acting as a counter-weight against the government.

Mixing journalism and an agenda like that would be in the realm of high treason at the Los Angeles Times, but Rohrlich said he’s perfectly at home with his role, and comfortable in asking the public to buy it.

That’s not journalism as I practiced it, but that doesn’t mean it won’t have its own validity. We’re almost certain to see more of it.

Update: Josh Kalven has flagged me about the Progress Illinois site he edits. The site launched in 2008 under sponsorship of the SEIU Illinois State Council.

Old Media vs. New Media: Let's call this one off

It’s been a lot of fun, this long-running sniper’s war between Old Media and New Media. We’ve all enjoyed some hilarious slap-downs, all marveled at the sheer idiocy of the morons on the other side. (Oh, and let’s not forget their over-the-top mean-spiritedness.) But all fun things must end. It’s time to put the Old vs. New Media war to rest.

This framework, old vs. new, hasn’t been wholly wrong. For a long time it has mostly reflected facts on the ground. Old media was in the money-making driver’s seat and spent long hours scoffing and chortling at the new-media prophets. New media would not be outdone on the scoffing front, convinced that the digital revolution would change everything, if only old media would get out of the way. The battle lines were drawn and fixed. And there they would stay.

I was thinking about this last week on the drive up to San Francisco and the Online News Association. I wanted to write about the anniversary of my leaving the old (McClatchy’s Washington Bureau) and entering the new (USC Annenberg, writing and teaching about new media). What struck me is how this old framework was in the process of busting up, but also how much more dismantling was required. As many people have noted — Jay Rosen and Robert Niles among them — these shifting fault lines were much in evidence during ONA’s fabulous program. The old battles were somehow… fading away.

What happened? The war ended. The prophets turned out to be correct. The Internet has changed, is changing, everything — or close enough to everything that they get full credit. What else is happening? The crowd previously known as the money makers get it, too. The consensus now is overwhelming. Armistice is at hand.

Of course, not everyone gets it. Old ways die hard. And, in fact, there are still some real disputes. New-media veterans still see flare-ups of denialism that must be countered. The old-media crowd sometimes sees a presumption that everything old has now been discredited.

But these things now lie at the margins. The ground has shifted. There’s no longer a need to maintain a standing army. And, in fact, it gets in the way of progress.

To my friends in old media, I’d say: If you haven’t already, admit that the new-media thinkers were right — because they were. The Internet would change everything, it would revolutionize and devastate the business you came to love, and there are people who saw this much earlier than you did. (Let me say: Earlier than I did as well.) To my friends in the new media, I’d say: Kudos. You deserve acknowledgment for your vision and smart thinking. But now: Lower the barriers to entry in what used to be your world and yours alone. Newcomers are blessings to embrace, not Johnny-Come-Latelys to be mocked.

We journalists are back together again, or sure as heck should be,and the enemy now isn’t the other side but the challenge of finding new ways and new models that will sustain the information needs of democracy. This work needs everyone’s good thinking, and will be accomplished much more easily if it’s not weighed down by old grudges and tribal loyalties. What a richer world this will be when new-media thinkers critique new media with the same vigor they bring to old media, when old-media veterans feel free to say that old ways don’t work and may not have been the greatest anyway.

Tina Brown, also observing a one-year anniversary this week (the Daily Beast), declared the battle between print and Internet a “phony war.” I wouldn’t say the war was phony, exactly. I’d just say: it’s over.