October 27, 2020

It’s an ill-kept secret that, with few exceptions, politicians of both parties really, really like their local newspapers and other local media. News is a conduit for getting their views to constituents and a feedback loop for finding out what issues are on the community’s mind.

As the pandemic advertising recession and longstanding negative trends have made the financial precariousness of these enterprises obvious, Congress has pretty much decided it should come to the aid of local news. The question of how remains, together with making the help timely.

My take comes from conversations with a variety of advocacy groups pushing one form or another of legislative assistance. A surprising favorite approach has emerged, too — direct subsidies for news subscribers, local journalists and small business advertisers.

That’s the structure of HR 7640, the Local Journalism Sustainability Act, sponsored by Rep. Ann Kirkpatrick (D-Ariz.), Rep. Dan Newhouse (R-Wash.) and more than 70 co-sponsors from both parties.

The bill would:

  • Provide a tax credit of 80% the first year and 50% after on the price of a subscription to a local news source, up to $250 a year.
  • Relieve employers of 50% of the payroll taxes (on up to $12,500 per quarter) for one year for journalists they employ and 30% in quarters after.
  • Subsidize small business advertising — up to $5,000 one year and up to $2,500 in subsequent years — with local TV stations as well as newspapers or nonprofit outlets.

Local is defined as having more than 50% of subscribers in one state or one area with a 200-mile radius. So chain-owned local papers would qualify but not big national publications like The New York Times or The Wall Street Journal.

Not every news outlet, subscriber or small business advertiser would necessarily choose to take advantage of the tax breaks.

The approach is designed to defuse the First Amendment perils of mixing government money with independent journalism (though not everyone will agree that it does). A decision on which outlets get subsidized is pushed all the way down to the level of the individual consumer/voter — ruling out politicians playing favorites in picking recipients.

Though not directly inspired by European models, this kind of subsidy of news has been provided in Sweden and other countries for years.

“We wanted to figure out a way to quickly improve these publications’ revenue streams, while simultaneously attempting to broaden readership and maintain journalistic integrity,” Rep. Kirkpatrick told me in an email. “We believe the three tax credits described in the bill — subscription, journalist compensation, and advertising — do just that. In developing the language for the bill, we received exceptional input from community newspaper owners and the Republican original co-sponsor of the legislation.”

Other advocates are pushing very different bills. The News Media Alliance has spent several years relentlessly pursuing a “safe harbor” antitrust exemption so newspapers can come together to bargain with platform companies like Google and Facebook to get paid for the use of their news content.

Safe harbor bills with bipartisan support have been introduced in both the House and the Senate. The recent wave of hearings on the monopoly power of Google and Facebook treats in detail the damage they have done to the news business mode. Generalized pressure on the companies could get them to the table.

David Chavern, CEO of the News Media Alliance, commented in an email, “The fact that there are so many ideas about helping the news industry means that news matters and politicians care. But we don’t think anything will work if we don’t fix the digital ecosystem around news content, and that is why we view the antitrust safe harbor bill as so critical.”

A third idea, backed by the writers’ group PEN America and other groups, is to form a federal study commission with a year to document the problem and recommend a solution. Sen. Brian Schatz (D-Hawaii), with co-sponsors Sen. Amy Klobuchar (D-Minn.) and Sen. Michael Bennet (D-Colo.), introduced a bill advancing the study commission concept in late September. The legislation does not yet have a sponsor or companion bill in the House.

Other proposals — like directing more federal government advertising to local news outlets or facilitating the sale of chain-owned newspapers to local groups — are kicking around as well.

Despite the flurry of interest, nothing will happen until after the election, possibly in November or December or more likely as a new Congress comes back in January. Then there will be the added challenge that local news may not rise to the top of a crowded agenda.

To my question in the headline of this piece of how many Congressional plans are too many, a number of people echoed Chavern — many are better than none at all — as had been the case as recently as two years ago. However, a best way forward needs to be sorted out.

Each of the main bills on the table have strengths and weaknesses. Sponsoring congressional proponents have typically cast their lot with one or the other. At least a few who are very sympathetic to the plight of newspapers, I’m told, “haven’t decided yet which horse to back.”

Steve Waldman, a longtime and energetic advocate for government intervention, told me that he shares First Amendment concerns about the government simply giving out journalism grants (as foundation-funded Report for America, which he co-founded, does for selected reporters and projects).

A buffer of expert third-parties determining how best to disperse appropriated money (as with National Science Foundation research grants) is possible in theory, Waldman told me. But journalism is so political by nature that the approach could unravel if well-placed politicians get their noses out of joint when they are targets of investigative reporting.

For that reason, he thinks the Kirkpatrick-Newhouse bill “is breaking out from the rest.” It has cosponsors as diverse as former Black Panther Rep. Bobby Rush (D-Ill.) and conservative Rep. Louie Gohmert (R-Texas). “It is a pretty big development because it is very bottom-up, all about giving money to consumers and local businesses.”

Another well-considered touch in the bill is that the subsidies sunset after five years. So they won’t be baked into future budgets unless a future Congress renews a version of the plan.

Along with NMA’s Chavern, Waldman thinks that the time frame for the PEN America idea of a study commission is too slow. Months to get a bill approved and the commission organized, then a year for the study and recommendations, then a new round of legislative consideration of what to do.

With or without more pandemic damage, the fragile news business needs help sooner, they say.

I spoke with PEN America’s Washington lobbyist Thomas Melia, who acknowledged he has heard that criticism, but disputes it. Getting both parties and both chambers to agree, sorting through options, will take time, Melia said. The PEN America bill lets minority and majority leaders in each chamber name one commission member to promote a bipartisan result and pulls in other interest groups to designate members.

PEN did its own detailed study of the local news problem a year ago. So “this is not a research project,” Melia said, “… It is a consensus-building process that gets assembled by touching all corners … getting over the partisan divide.”

The NMA’s “safe harbor” legislation has a well-placed sponsor in Rep. David Cicilline (D-R.I.), chairman of the House antitrust subcommittee.

His subcommittee’s 500-page report on Google and Facebook, released Oct. 4, makes the case in surprising detail that they exert a near-monopoly in digital advertising, gravely wounding legacy news outlets and digital startups.

“Google and Facebook have an outsized influence over the distribution and monetization of trustworthy sources of news online,” the introduction to the report says, “undermining the quality and availability of high-quality sources of journalism. This concern is underscored by the COVID-19 pandemic, which has laid bare the importance of preserving a vibrant free press in both local and national markets.”

Sen. Maria Cantwell (D-Wash.), a ranking minority member of the Senate Committee on Commerce, Science and Transportation, released a detailed report this morning on the plight of local news and the case for safe harbor negotiations with the platform companies.

The Justice Department’s antitrust suit against Google, filed Oct. 20, underscores a rare agreement between the Trump administration and Democrats that the platform giants need to be reined in.

What is not yet clear is whether the news concerns can be carved out of the much broader antitrust brief about practices that the giants use to capture and expand various business segments. My NMA sources say they are hopeful that Cicilline’s bill can pass the House in the lame-duck session, but consideration by the Senate (possibly swinging to a Democratic majority) will need to wait until next year.

Another reservation — Google has told news organizations for more than a decade that if they don’t like contributing story summaries free to the platform to capture new audiences and build subscriptions, they can opt out. Facebook CEO Mark Zuckerberg blows hot and cold about whether a news feed is even important for Facebook users.

However, efforts abroad this year in France and Australia take the uncompensated use of expensive-to-produce news head on. Google now appears to be taking a negotiating posture rather than a defiant one.

The Kirkpatrick-Newhouse direct subsidy bill has the backing of a second newspaper trade group, America’s Newspapers (formed by the merger of the Inland Press Association and the Southern Newspaper Publishers Association). It has a large constituency of family-owned and smaller community newspapers, while the NMA tilts toward the biggest companies.

Dean Ridings, CEO of America’s Newspapers, told me that the bill goes right to the heart of the issue by getting money to endangered outlets. Plus it can pair with longer-term efforts like the safe harbor exemption or the study commission.

Ridings explains that its popularity in the House reflects the close relationship of many hometown publishers with congressional representatives. Their districts take in populations of less than 1 million and may be out of range of big cities.

That link is the backstory on the subsidy bill. Francis Wick, president and CEO of Wick Communications, an 11-state chain based in Sierra Vista, Arizona, approached Kirkpatrick. Her current district includes the Eastern part of Tucson and the sparsely populated southeastern corner of Arizona. She previously represented an adjoining sprawling and all rural district and, though not Apache, she grew up on an Apache reservation where her parents worked.

Kirkpatrick told me, “Having grown up in rural Arizona, and represented large swaths of the state, I understand just how valuable local newspapers are to our communities. … These newspapers are in danger of financial ruin if we don’t take action. So, when I was contacted by a publisher in Arizona who feared for the future of his industry, I looked at it as an opportunity to put forward a bold proposal.”

A potential problem for the bill is cost. Just the subscription portion, assuming 20 million current and new subscribers at an average subsidy of $150, would amount to $3 billion. Even tucked into the vast federal budget, that’s a chunk of change.

The bill would pass through the House Ways and Means Committee and would need to be “scored” (given a cost estimate) by the Congressional Budget Office.

The climate, though, has turned friendly toward news. In 2019, the industry won a reduction in newsprint tariffs and selective relief for pension obligations. This year, the Paycheck Protection Program stimulus funding included news organizations, as does the package currently being debated.

If the forecast is for sustainability help early next year with more to come later, that in itself doesn’t solve the business model revenue challenge for local news. It would, however, extend the window for established players and new ones to work toward a solution.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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