Do we need to save journalism or save those who won’t save themselves? The FTC weighs in

So the Federal Trade Commission issued a “staff discussion” report generated by nearly a year’s worth of research entitled “Potential Policy Recommendations To Support the Reinvention of Journalism.”  You can, and should,  read the full 47 page report from the FTC here (Well, it’s actually a 35 page report.  The last 12 pages are bibliography.)  Ostensibly, the report is full of “suggestions” about how to fix journalism for the purposes of debate, particularly an FTC roundtable discussion on June 15 at the National Press Club.

The report opens innocently enough, going out the way several times to specify that this is just some ideas, they are just for discussion, and this is nothing concrete.  Okay, but then they make a crucial mistake.  In the very first paragraph of the actual report on page 2, they equate journalism with the term “newspapers.”  While it’s true that newspapers have and will continue (for a while, at least) to bring journalism to people, it is not actually journalism.  Journalism is an activity, newspapers are a medium no different than magazines, televisions shows, blogs, twitter feeds, what have you.  This choice, while serving to oversimplify a discussion that really shouldn’t be simplified at all, immediately called into question for me whether this was an effort to reinvent journalism, or to reinvent newspapers.  To their credit, however, they did state in plain language that policy decisions shouldn’t favor newspapers over other platforms.  Then they proceeded with 30 pages of recommendations that favor newspapers over other platforms.  Well, not simply newspapers, but the large corporate entities that had cornered this industry for so long.

Newspapers themselves served us very well for a long time.  But it would be disingenuous to ignore the reality that increased internet saturation, notably the newer pervasive mobile technology, has exposed the weaknesses of the platform.  To put it simply, newspapers have very few positives to hang their hats on anymore as a medium, and this is evidenced by the consistent declines in circulation over the past few decades.  Even prior to the internet information revolution, newspapers were losing readers.   If we are truly to “reinvent” journalism, we need to free the term from the shackles of any particular medium.  But I digress.

The report also makes a rather optimistic (and thus far, untrue) statement that advertising revenue is likely to improve in 2010.  The Newspaper Association of America just posted an 11.4% decline in sales for the first quarter this year, this off of the nearly 30% drop in the first quarter last year, and it is the third largest first quarter decline on record.  Sure 11 is smaller than 30, but that’s still not what I would call an improvement, and it still shows an industry in overall continued decline.  Read about it here, and don’t miss the comparison chart between the first quarter of 2005, just before the declines started and this year that shows a 55% drop in newspaper advertising revenue in just 5 years.  Ouch.  So it begs the question, should we be trying to save newspapers by linking journalism to them or should we be trying to find a sustainable outlet for journalism post-newspapers?  Should we have legislated support for the eight track tape in the ’70s or allowed the music contained to find newer, more useful mediums as it inevitably did?

Anyway, perhaps the best line in the entire report is located immediately before the Potential Revenue Sources from Changes in Law on page 5.  It says, “Is a wait-and-see approach preferable at this time, when experimentation to find new revenue sources is ongoing and the likely effects of some proposals may be difficult to gauge?”  In short, yes.  And it’s definitely preferable to some of the “revenue generating” suggestions they came up with.

One is Federal Hot News Protection.  Basically, this would allow news organizations to have copyright protection on some of the actual facts gathered in a news story for a brief period of time.  Some states, such as New York, already have laws in this regard, but there is still something unsettling in allowing corporations to copyright facts about the news, even for a short time. Another proposal is Statutory Limits on Fair Use.  Basically, this is the anti-Google, anti-aggregator argument.  Essentially, this kind of policy would redraw the landscape of how information spreads over the internet for the specific benefit of a few at the expense of everyone else.  One thing I’ve never quite understood is why, if the product is of such importance to your print business which makes the lion’s share of your revenue, and you’re uncomfortable with your lack of control online, then don’t put it on there.  No one is forcing news agencies to post their expensive content on the web, and there are already means to block search engine crawlers from indexing their material.  No, this is simply a matter of a handful of monopolies wanting to extend that online by altering the ground rules everyone plays under for their specific benefit.

A third one is news licenses in terms of either micropayments for use of content, or by a general tax on ISPs paid in some scheme or another to certain content providers.  Undoubtedly, this would result in the larger corporate entities basically getting a check from the feds paid by all of us on our internet service bill.  There is simply no way that this kind of proposal could be administered or paid out fairly, and I have considerable questions as to whether we should.  After all, many of the newer internet only businesses aren’t even trying to generate revenue directly off of their content.  Why should we set up a tax scheme that unfairly benefits one side in a competitive philosophy bout?  We shouldn’t.  And I certainly don’t want to be paying as extra five bucks on my ISP bill that siphons money to entities that don’t deserve it  and ones who I wouldn’t pay for their products by choice, anyway.  Put simply, we shouldn’t be forced to support business models that can’t find a way to support themselves.

Another suggestion is anti-trust exemptions for publishers.  This would allow publishers to collude to erect wide-scale paywalls, and set up a mandatory licensing scheme to extort money from search engines and aggregators.  No, and no.  Publishing has long been a somewhat monopolistic enterprise, and to allow individual monopolies to collude to shut out competing possibilities, especially with a licensing scheme, is exactly the kind of stuff the Federal Trade Commission was created to prevent.  When taken in conjunction with other suggestions  like limits on fair use, hot news protections that allow copyright control of news facts, and mandatory ISP taxes, we could conceivably each be paying to support an industry colluding unfairly to limit the spread and discussion of news except on their terms, setting up price structures uniformly that blocks the news behind paywalls and away from general public consumption or discussion.   If we are indeed defining journalism as a “public good” as the FTC does in this document, it’s hard to see how allowing any of this holds true to that moniker.  In addition, this could likely transition from a debate on Copyright and Fair Use into a 1st Amendment Freedom of Speech and Freedom of the Press issue.

The report goes on to detail some of the past government subsidies for publishers, such as postal subsidies that  produced significantly cheaper rates for delivery for publications than for average citizens, and many government regulations requiring the publication of legal notices in the paper of record in a particular area.  There are also numerous tax breaks publishers have long benefited from listed as well, including tax breaks for maintaining or increasing circulation (There shouldn’t be more than six newspapers in the country that have benefited from this credit in the past ten years, but I bet a lot of them do), sales and use tax exemptions for ink, newsprint and the printing equipment, etc.  Basically, newspaper publishing is an industry that has traditionally posted margins in the 30 to 50 percent neighborhood for a long time, yet still benefits from massive tax breaks. Why do you think newspapers were such an attractive buy for consolidators over the years?  Low taxes, high margins and virtual monopolies everywhere.  If anything, the recent upheaval is simply leveling a playing field that large publishers have had tilted in their direction for a long time, reaping billions in profits under the guise of a “public good.”  If the industry already benefits from these kinds of massive tax breaks and still can’t find a way to stay relevant, why should we continue to throw money their way in terms of new breaks?

The report suggests several new ways to support journalism, from commonplace like increasing postal subsidies for publishers, to establishing a National Fund for Local News (although how that would work and who would be on the receiving end of that is unclear), to the actually intriguing like providing a tax credit for news organizations for every journalist they employ.  That I could get behind, so long as it is actual writers they are getting the credit for and not pushing the definition just to get the credit.  I would actually like to make another suggestion in this vein; a tax penalty for hiring management.  Publishers, particularly the large corporate variety, and typically top-heavy with managers, and its been the writers and low level employees that have taken the brunt of the cutbacks while upper management staff have been largely untouched.  Let’s penalize this kind of inefficiency with a tax penalty for managers but a credit for actual, on the ground writers.  Makes sense to me.  Actually, it doesn’t.  Government should stay out of private hiring decisions, even well-meaning ones.

How to pay for this?  Well, we again have the tax on ISPs mentioned, and a 5% tax on consumer electronics (cell phones, iPads, computers, etc) and a sales tax on advertising as well as limiting the write-off of advertising expense for businesses.  That last one makes no sense.  Newspapers are struggling to sell ads as it is, so let’s make businesses that buy ads pay more in taxes, and make them more expensive through sales taxes.  Sure, that’ll help.  Help push businesses away from traditional advertising, as if they need much pushing these days, anyway.

There’s also a detailed look at non-profit status for news organizations, including all sorts of different possibilities such as new corporate classes, and changes in non-profit status, all designed to limit tax liability.  To me, this just seems problematic.  Businesses can already function under current non-profit laws.  If we change them to benefit news organizations, would we ultimately be creating an atmosphere where, after some paperwork filings, a newspaper could function as business as usual only without tax liability?  It just seems like this could be an area ripe for abuse.

The report wraps up with some actually interesting suggestions about making government information more open and available, as well as the technology to examine, index and search documents.  This stuff makes good sense to me.  One thing about this, though, as it relates to the previously mentioned government requirements for legal notices.  I think, particularly given the current budget problems, we need to drop that requirement and just have governments post the information available online, with access from the courthouse if you don’t have a computer or as cell phone.  We shouldn’t be requiring municipalities to continue to spend dwindling tax receipts to pay high newspaper ad rates for these.  Sure, that’s not going to save newspapers by literally taking away their last vestige of actual classified revenue, but that’s my whole point.  This process has to be about what’s in the best interest of everyone, not one segment of one industry that has failed to adapt to changes in conditions.

I go back to my point earlier about a wait and see approach.  After reading through this entire report, I don’t see anything in here that really needs to be done, and many things that definitely shouldn’t be.  I, for one, believe in the free market, and those market forces are at work here.  Maybe it’s not what the traditional legacy media needs to happen for their survival, but we shouldn’t structure law on emerging technologies to suit the ends of outdated and soon-to-be-if-not-already obsolete delivery systems.  The FTC roundtable on June 15 should be interesting, if nothing else.  We shouldn’t underestimate the entrepreneurial strengths of individuals, as this report does to an extent, to find a need, fill it and figure out how to make a buck doing it.  But much like the music industry, the disruption has severely handicapped large, corporate monopolies much to the benefit of the ever-greater number of individual musicians who now have the capacity to earn a living on their music without putting themselves under corporate control.  The same thing is happening to publishing.  Do we really want to save journalism or do we want to save the corporate monopolies that have hijacked it?

Pay attention.  This could be important.

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