Can Subsidies Save Local News
There is no question that local news media operations are suffering today. For that reason it should be no surprise there is a payroll tax credit for local news organizations tucked in the many pages of the $2.2 trillion Build Back Better proposal now before the US Senate. It is estimated to cost nearly $1.7 billion, which is a very small piece of the overall act.
Still, using taxpayers’ dollars for a dubious rescue mission may be unwise.
The proposed subsidy would be available not only to newspapers, but also to websites, and radio and television stations that claim to provide local news. A payroll tax credit would be tied to news personnel, up to $25,000 for each journalist in the first year and $15,000 in each of the next four. Criteria for defining “local news” is a bit murky.
Most of the discussion relative to the local news subsidy has been focused on newspapers. Little has been said or written about how it might impact websites or radio and television stations, both of which seem unprepared to fill the void of truly local news. Based on my own experience in news media, I am skeptical of how well either could replace newspapers in this regard.
As a young high school student in the late 1950s, I wrote a regular sports column for the News and Press, a weekly newspaper in Darlington, SC, and was a sports stringer for four daily newspapers that covered high school sports in the area. A high percentage of local residents subscribed to the News and Press and to one of the dailies. Competition from broadcast sources was not serious and the Internet did not exist.
Later when I came home from Vietnam in spring of 1963, I went to work as a reporter for the Florence (SC) Morning News, a daily newspaper near my home. That fall, the major television networks expanded evening news broadcasts from 15 minutes to 30 minutes which required local station to adjust similarly local news programs. When as part of the expansion I was offered a newsman’s job by the station, at a much better salary, I accepted.
Although WBTW-TV, an affiliate of Jefferson Standard Broadcasting, gave a nod to local news, our coverage area included 13 counties, nine in South Carolina and four in North Carolina. The area also included a couple dozen municipalities. We were a staff of four. While we tried to touch base with everyone in the region occasionally, we never considered providing in-depth local news broadly. Even our coverage of local affairs in Florence and contiguous counties was limited.
Expecting television to replace newspapers when it comes to providing “local news” is unrealistic. The difference in delivery systems allows television stations to cover a much larger area than newspapers. All three major television outlets in the western Carolinas reach into three states. It would be a rare station that could staff up sufficiently to keep up with all relevant economic and political developments in such an expansive territory.
Television also has trouble devoting sufficient air time to adequately analyze the often complex issues facing local communities. If laid out in print form, the information provided in the normal 30 minute news program would cover only about half a page in a newspaper.
Matching staffing requirements with coverage ambitions also is a problem for websites. Some interesting and positive initiatives to strengthen local news have been launched in North Carolina, but whether or not they have staying power remains to be seen. The impact of websites is also restricted by the lack of universal access to the Internet.
The primary motivation for the proposed federal subsidy is the obvious decline of newspapers as an information source over the past two decades. Several sources confirm that more than 2,100 newspapers have gone out of business since 2004. According to the Pew Research Center, newsroom employment among newspapers declined from 71,000 in 2008 to a little below 31,000 in 2020.
A major factor in the collapse of newspapers has been the rise of social media platforms that have siphoned away advertising, readers and profits from daily and weekly newspapers. Most of the money and viewers are captured by the monolithic social media giants, Facebook and Google. Their business model purports to provide free access to their platforms, but actually it disguises the collection of viewers’ personal data and then monetizes that data. The model generates mind-boggling profits, but it also feeds America’s partisan polarization.
Retired UNC professor Penny Muse Abernathy has written much about the “vanishing newspapers.” Until last year the Knight Chair in Journalism and Digital Media Economics at the Hussman School of Journalism and Media, she received in 2019 the Christopher J. Welles Memorial Prize for her “impact on the journalism profession and…raising the alarm and prompting an industry-wide call-to-action about the local news crisis.”
Abernathy has made note of the conundrum that has arisen in the effort to address the decline in newspapers. Many financially distressed newspapers have turned to private equity firms and hedge funds for rescue. She estimates such financial entities own either wholly or in part some 1,200 newspapers, nearly 20 percent of those in the US today.
Unfortunately, enhancement of local news coverage is not the primary motivation for these investors. Consequently, their strategy has been to focus heavily on cutting news staff and consolidating operations and management.
Many newspapers owned by private equity firms and hedge funds would be eligible for the subsidies provided in the Build Back Better legislation. For example, Gannett, the largest newspaper chain in the country could receive as much as $37.5 million in the first year and tens of millions annually afterwards.
Two years ago Gannett borrowed more than $1 billion from a private equity firm, Apollo Global Management, as part of its merger deal with Gatehouse Media. Within a fifty-mile radius of my home in Tryon, NC, Gannett today owns half a dozen daily newspapers. Staffing and operations have been consolidated, but “local news” coverage is marginal. It has no daily newspaper competition within the area.
Also, eligible would be McClatchy, owned by the hedge fund Chatham Asset Management. McClatchy owns three major dailies in the Carolinas, the Charlotte Observer, the News and Observer (Raleigh, NC), and The State (Columbia, SC). Staffing at all three has suffered significantly since the hedge fund takeover..
Other major chains owned by hedge funds that could benefit from the tax credit include Tribune Publishing and MediaNews Group. Both are owned by the hedge fund Alden Global Capital.
Giving a federal subsidy to these institutions seems wishful thinking if not downright suicidal. It is reminiscent of the decision to allow for-profit postsecondary education institutions unfettered access to the student loan program. Institutions got the money, students got the shaft.
Locally based journalism helps to inform citizens about the important issues facing society and their communities. Government intervention may be necessary if local newspapers are to survive in the future. Attacking the monopolist practices of today’s social media giants might be a good place to start. Eliminating the unethical access to and use of the personal data by social media platforms could also restore some of newspapers’ lost revenue.
Whatever measures are implemented, however, they should be designed to encourage local ownership of news organizations and to keep in mind that responsible journalism is a “public good,” not just another money-making opportunity.