This Just In: Government Spent More Than $1B To Support The News Industry Last Year

Journalists and government normally are seen as antagonists, but in reality the news business very much has relied financially on public support. Government at all levels — federal, state and local — spent more than $1 billion last to support commercial news publishers, according to a recent report the University of Southern California’s Center on Communication Leadership & Policy.

Public support for journalism is fading fast, however, and that drop-off has strong implications for a business already weakened by technology changes and the economic downturn, the report says.

The report, Public Policy and Funding the News, analyzes some of the financial tools that government has used to support the press over the years — from postal rate discounts and tax breaks to public notices and government advertising. The report documents cutbacks across a range of sectors and presents a framework for the consideration of policy options to place the industry on more secure financial footing.

“It is a common myth that the commercial press in the United States is independent of governmental funding support,” says Geoffrey Cowan who co-authored the report and is USC Annenberg School dean emeritus and director of the Center on Communication Leadership & Policy (CCLP). “There has never been a time in U.S. history when government dollars were not helping to undergird the news business to ensure that healthy journalism is sustained across the country.”

The late 1960s marked a high-water mark of government support for the news business, the report’s authors find. The postal service was subsidizing about 75 percent of the mailing costs for newspapers and magazines, roughly $2 billion in today’s dollars. Today, however, publishers’ mailing discounts for their printed news products are down to 11 percent, or $288 million.

Paid public notices, government-required announcements that give citizens information about important activities, have also been lucrative for newspaper publishers, providing hundreds of millions in revenue to publications ranging from local dailies and weeklies to national newspapers such as The Wall Street Journal.

For example, in a four-week study, researchers found that the government was responsible for the most purchases, by column inches, of ad space in the Journal. And the newspaper wants more: in 2009 they battled Virginia-area papers in a move to get their regional edition certified to print local legal notices.

This public notice income is especially important to weekly and other community newspapers, accounting, in 2000, for 5 to 10 percent of all revenue. But now, proposals are pending in 40 states to allow agencies to shift publication to the Web.

Tax breaks given to news publishers are likely to decline because many are tied to expenditures on paper and ink and cash-strapped states are seeking to find new sources of revenue. Federal and state tax laws forgive more than $900 million annually for newspapers and news magazines, with most of the money coming at the state level, the report authors say.

“Certainly, the U.S. has never supported news-gathering the way some European and Asian countries have,” says David Westphal, report co-author, former Washington editor for McClatchy, current CCLP senior fellow and USC Annenberg executive-in-residence. “The point here is that it’s time all of us, outside and inside the industry, realize that tax dollars support the American news business, and those dollars, which throughout our history have been critical in keeping the news media alive, are now shrinking quickly.”

In the last year, many once-mighty and venerable news organizations nationwide — the Seattle Post-Intelligencer, the Rocky Mountain News, the Baltimore Examiner and the San Francisco Chronicle, among others — have either ceased daily publication or have drastically cut their news-gathering operations.

The cumulative effect of reducing government subsidies is not the primary problem afflicting the news business today. At most, government assistance has dropped by a few billion while newspapers alone have lost more than $20 billion in revenue in the last three years, the report says.

Yet, government support represents a critical element of economic survival, and policymakers can’t afford to be mere spectators while these changes flash by, the authors of the report argue.

American government does not work very well if citizens do not have a reliable supply of news and information. What is playing out in the news business is a vital national interest, the authors say.

Some lawmakers have been looking closely at the economic viability of the news business, and have proposed specific solutions. Sen. Ben Cardin (D-Md.), for instance, introduced The Newspaper Revitalization Act of 2009.

Cardin’s bill would allow newspapers to operate as non-profits, if they choose, under 501(c)(3) status for educational purposes, similar to public broadcasting, according a summary of the legislation. Under this arrangement, newspapers would not be allowed to make political endorsements, but would be allowed to freely report on all issues, including political campaigns. Advertising and subscription revenue would be tax exempt and contributions to support coverage or operations could be tax deductible.

Cardin’s office emphasizes that his bill is not a bailout does not involve any government funding for the newspaper industry. Also, the measure is targeted to preserve local newspapers serving communities and not large newspaper conglomerates.

“While we have lots of news sources, we rely on newspapers for in-depth reporting that follows important issues, records events and exposes misdeeds,” Cardin says. “In fact, most if not all sources of journalistic information –- from radio to television to the Internet – gathers their news from newspaper reporters who cover the news on a daily basis and know their communities. It is in the interest of our nation and good governance that we ensure they survive.”

The USC report also offers several potential actions government could take to bolster the news business, including the non-profit approach Cardin favors. Other options are: Tax credits for taxpayers who subscribe to newspapers; expanded federal investment in digital technology and infrastructure, including broadband access; an antitrust law timeout to allow publishers to form a common strategy; and significant new government funding for public radio and public television.

“We live in an era of profound technological change that threatens many forms of news media. We do not favor government policies that keep dying media alive. But we do believe government can help to provide support during this period of transition,” says Westphal.

The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.

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One Response to This Just In: Government Spent More Than $1B To Support The News Industry Last Year

  1. DoctorPaul says:

    Given the importance of a free press to democracy, government support of news media is entirely appropriate, as long as the media’s independence is not compromised. A greater threat is posed by news monopolies or near-monopolies, as when a metropolitan area has only one major newspaper, owned by a corporation that also owns all that area’s major broadcast media.