‘The Floor Is Collapsing’ on Local News, but Congress May Be Poised to Help

As the local news crisis deepens, growing awareness and shifting political dynamics in Washington are raising hopes that targeted legislation can pass to help make local journalism more financially sustainable.

“This Congress is going to be the most likely to tackle local news that we’ve had in a very long time,” said Steven Waldman, President of Report for America and coordinator for the Rebuild Local News coalition. “People understand that the collapse of local news is severe and real, and there is attentiveness to the topic like there hasn’t been ever.”

While advocates differ on the most promising rescue efforts, a host of ideas are being discussed:

  • Tax credits that encourage people to buy subscriptions.
  • Tax credits that encourage news outlets to hire journalists
  • An antitrust exemption allowing news organizations to negotiate as a group with Big Tech companies like Google and Facebook for digital advertising revenue.
  • A tax on Big Tech’s digital ad revenue, with the proceeds funding journalism.
  • A “replanting strategy” in which a change in tax laws would encourage chains, hedge funds and private equity firms to sell news outlets to local owners.
  • A federal commission to study causes and solutions regarding the local news crisis.

The need for action is obvious to Rep. Cheri Bustos, D-Ill., who was a journalist for 17 years.

“The smaller and smaller these newsrooms are, the less attention they are paying to critically important issues,” Bustos told the Medill Local News Initiative. “I think we need a deeper dialogue. There is a real sense of urgency around legislation that is going to help local journalism.”

Bustos who represents northwestern Illinois, said her former newspaper, the Quad City Times, is just one example of the problem.

“I left that newspaper in 2001 and it has been heartbreaking to see what has happened to the newsroom since I left there,” she said. “Little by little, it’s just been whittled down to very few people. … At one point, we had three investigative reporters, and this is a mid-sized daily. I was one of those investigative reporters. … We had reporters who had these very specific beats where you could drill down deep and you could uncover stories that nobody would uncover unless you were a journalist doing that job.”

Bustos, who was on the House floor during the Capitol attack, proposed a resolution thanking journalists for risking their safety to report on the events of Jan. 6.  Though Bustos is grateful for the Capitol Police’s alerts, she said her first word of the attack came from a commercial news outlet’s video.

“This is how I found out what was going on,” Bustos said. “Eric Swalwell, a member of Congress from California, was sitting to my left and he hands me his phone and it shows these people storming up the Capitol steps, and I said, ‘My God, when did this happen?’ and he said, ‘This is live.’ And that’s literally how we knew that there were problems coming our way.”

This was vital local news on Capitol Hill that day. But it’s not yet clear whether enough lawmakers understand the depth of the local news crisis to take action to keep the American people – and Congress – informed.

Susan Stephens/WNIJ 2017 (CC BY-NC 2.0)
Rep. Cheri Bustos, D-Ill., supports tax credits to boost local news.

How Tax Credits Could Help

Perhaps the most promising legislation in news industry circles is the Local Journalism Sustainability Act, which was introduced last session by Rep. Ann Kirkpatrick, D-Ariz., and Rep. Dan Newhouse, R-Wash., and attracted 70-plus co-sponsors, including Bustos. The list of backers was remarkably bipartisan. It’s not often that Rep. Louie Gohmert, R-Texas, agrees with Rep. Ro Khanna, D-Calif., but they did on this.

The legislation, which has not yet been re-introduced this session, would encourage people to buy local news subscriptions by giving them a tax credit equal to 80% of what they spent for subscriptions. After the first year, that percentage would fall to 50%.

In addition, the bill would encourage the hiring and retention of journalists by waiving 50% of the payroll tax for employers (on up to $12,500 of earnings per quarter) for the first year, with the percentage reduced to 30% afterward. Another provision would give small businesses an incentive to advertise in local media by providing a tax credit equal to 80% of what they spent the first year and 50% in subsequent years, with ceilings of $5,000 the first year and $2,500 afterward.

Ben Owens, lead legislative assistant to Kirkpatrick on the issue, said “we do have plans to re-introduce it in this Congress … in the next couple months.”

First, though, they must iron out some technical issues, such as precisely stating “what the definition of a local newspaper is,” Owens said.

There’s a lot of different, sometimes competing interests in the industry, and everyone pretty much has rallied together and believes that this [tax credits] bill is a great vehicle.

Dean Ridings, CEO, America’s Newspapers

Dean Ridings, CEO of the America’s Newspapers industry group, is pushing hard for the Kirkpatrick-Newhouse bill.

“There’s a lot of different, sometimes competing interests in the industry, and everyone pretty much has rallied together and believes that this is a great vehicle,” he said. “It provides three different levels of solutions that would provide meaningful impact to newspapers and other news organizations, but certainly to newspapers.”

Waldman of Rebuild Local News agreed. “It’s not perfect, but that’s our favorite,” he said.

“The thing I like about the tax credits for hiring journalists,” Waldman said, “is it potentially changes the incentive structure for a company from  ‘Let’s cut the head count, that’s a good way to save money’ to one where ‘Oh, our labor costs are cheaper, we actually get an incentive, we have more money if we hire.’”

He noted that the provision providing a tax credit for subscriptions would also offer the credit for memberships or other contributions to nonprofit news outlets.

‘Safe Harbor’ Antitrust Exemption

Another bill with bipartisan support that appears to have a chance this session is the Journalism Competition and Preservation Act (PDF), which would provide “a temporary safe harbor” – a four-year antitrust exemption – so that publishers of online content could collectively negotiate with platforms such as Facebook and Google.

As it is now, when Big Tech features publishers’ content on its platforms, it collects the vast majority of digital advertising revenue even though it doesn’t have to go through the difficult and costly process of producing the content that attracts the ad dollars.

The platforms have tremendous leverage now because if publishers tried to band together to negotiate for a bigger share, they would run into problems with antitrust laws.

The antitrust exemption bill was introduced last week in the House by David Cicilline, D-R.I., and Ken Buck, R-Colo, and in the Senate by John Kennedy, R-La., and Amy Klobuchar, D-Minn.

“We’re pretty optimistic about that bill in this Congress,” said the News Media Alliance’s CEO, David Chavern.

“Antitrust laws can’t just apply to news publishers,” Chavern said. “How about Google and Facebook? We need something to balance out the system, and we need it in the short term. Otherwise we’re just going to get pushed off the table.”

Antitrust laws can’t just apply to news publishers. How about Google and Facebook?

David Chavern, CEO, News Media Alliance

So is the aim to claw back those ad dollars?

“I don’t frame it that way,” Chavern said. “Oftentimes this gets discussed as ‘the platforms took ad dollars, people want them back.” Advertising went toward targeted ad products. Targeted ad products benefit the people with the most data. The platforms have the most data, right? You’re not going to unwind that clock. I look at it as ‘We provide a lot of value and engagement in that we provide quality information into the system.’ Also, information that is of particular value to the platforms since it solves one of their biggest problems. If you have a fake-news problem, guess what, we’re in the real news business. … They’re not returning value commensurate with the value they’re getting, and that’s going to change.”

Ridings of America’s Newspapers endorses the bill, but Rebuild Local News’ Waldman is skeptical.

“I’m certainly sympathetic to the motivation there of getting the platforms to pay for content, but as far as I can tell, this set-up would not particularly help local news or small or medium players,” he said. “… If we’re really going to go down that road, we’ve really got to fix that and make it so that it doesn’t just become a way of propping up legacy players.”

Chavern insisted that the antitrust exemption would help small publishers, too, but acknowledged that concern. There is discussion about adding language to the bill that would outline its benefits for small publishers, he said.

Victor Pickard, a University of Pennsylvania media professor who advocates for far more aggressive government action to support local journalism, said the antitrust exemption is “just the wrong approach.”

“Even if all the digital advertising were going back to these publishers, it’s still not enough to sustain the level of journalism that democracy needs,” Pickard said.

Tax on Big Tech and ‘Replanting Strategy’

A variety of other ideas have been discussed that seem farther away from fruition than the tax credits or the “safe harbor” bill.

Some industry advocates want to go after the platforms in a more direct way, with a tax on Big Tech’s digital ad revenue that would be used to support local journalism. But that would raise major issues about who would get those funds.

“Coming up with the revenue, in a weird way, isn’t the hard part,” Waldman said. “… Let’s say you did have a pile of money. How would you distribute it in the right way that got to the right folks that didn’t end up endangering editorial independence or leading to political manipulation?”

Also, he said, “You want to help with the new models as well as the old.”

Jay Rosen, a journalism professor at New York University, echoed that last point with a recent tweet: “I’m for a tax on digital advertising that feeds a fund to support public service journalism, not ‘newspaper incumbents.’”

Let’s say you did have a pile of money. How would you distribute it in the right way that got to the right folks that didn’t end up endangering editorial independence or leading to political manipulation?

Steven Waldman, coordinator, Rebuild Local News coalition

The increasing influence of private equity firms and hedge funds in local news has alarmed many advocates of public service journalism because of their history of aggressive staff cuts.

Waldman’s Rebuild Local News wants to address this trend with a “replanting strategy” in which changes in tax law would encourage chains, hedge funds and private equity firms to sell off or donate individual news outlets to local ownership.

Under the Rebuild Local News plan, a fund would be created to make these transformations work. The goal would be to create and nurture financially stable news outlets that served their communities.

“We are not suggesting that if only newspapers could be rid of heartless management, they could thrive as wildly profitable businesses,” Rebuild’s website states. “Rather, we believe that if liberated and converted to an entirely new ownership structure, hundreds of them could be sustainable organizations that could provide tremendous civic value to their communities, either as nonprofits or locally owned for-profits.”

But the News Media Alliance’s Chavern cautioned against seeing changes in ownership as solutions by themselves.

“I don’t really think ownership is our biggest problem right now,” he said. “There are good owners and not-good owners, but that’s always been the case. I think we can all point to local owners in any number of markets who aren’t very good. I don’t think ‘local’ is an unalloyed good.”

Understanding the Problem

A proposal in the last session of Congress would have created a year-long federal commission to study the local news crisis and recommend solutions.

The Future of Local News Commission Act, introduced by Senators Brian Schatz, D-Hawaii, Michael Bennet, D-Colo., and Klobuchar, was endorsed by PEN America; the Pulitzer Center, Local Independent Online News (LION) Publishers and more than a dozen other organizations.

But some industry advocates are wary.

“We would oppose a federal study bill,” said News Media Alliance’s Chavern. “If anybody doesn’t see the immediacy of the threat of misinformation from Jan. 6 … the problem is now. We’ve got to start solving it now.”

While a commission might build support for more sweeping efforts to support local news, Waldman also was concerned about the time it would take.

“I like the motivation of trying to create a bipartisan foundation for it because it’s otherwise a highly politicized topic,” Waldman said. “But I would worry if that’s what we were doing. There’s no time for that. The floor is collapsing right now. I would rather see a combination of doing some stuff now and then trying to build a bipartisan consensus for longer-term things.”

Anything that brings attention to the issue and studies the issue is good. Obviously, I have more interest in legislation that actually provides support or relief.

Dean Ridings, CEO, America’s Newspapers

But Ridings of America’s Newspapers thought a commission might help.

“Anything that brings attention to the issue and studies the issue is good,” Ridings said. “Obviously, I have more interest in legislation that actually provides support or relief more than I am studying it. But certainly, understanding the issue is always good.”

Some federal study has already been done. Sen. Maria Cantwell, D-Wash., released a 67-page Senate Commerce Committee report last October that cited two main contributing factors in the local news crisis:

“The first is that the rise of the Internet and digital information has fundamentally altered how Americans receive and digest the news, disrupting journalism’s historic business model. … The second major challenge is that local news has been hijacked by a few large news aggregation platforms, most notably Google and Facebook, which have become the dominant players in online advertising.”

The report noted that Congress has historically acted to support journalism, including setting low postal rates for magazines and newspapers. Now, the report said, Congress should consider legislation – including an antitrust exemption – to help local news organizations get “fair market value for their content” from the platforms.

‘Public Media Centers’

Pickard, the Penn professor, wants the government to do far more to protect local journalism.

“Congress needs to intervene in this particular journalism crisis immediately, and we should recognize that this crisis is existential, that it’s deeply structural, and that Congress will need to do more than simply short-term bailouts and propping up failing commercial models, that it needs to think long-term and look at replacements for any commercial model,” he said.

There’s virtually no chance that this session of Congress will do what Pickard wants, which is to spend $30 billion a year in taxpayer money – about $100 per American – to create “public media centers” that would serve all corners of the country.

“These public media centers would be owned and controlled by local communities themselves,” he said, “and those communities would be very much engaged with not just supporting but also producing the news.”

Journalism isn’t a commodity. It’s not something that’s nice to have if you can afford it and get it. It’s just something that we all should have. It’s just a must-have.

Victor Pickard, University of Pennsylvania associate professor

In his 2019 book “Democracy Without Journalism?: Confronting the Misinformation Society,” Pickard argues that when journalism is in danger, so is our system of government.

“Journalism isn’t a commodity,” Pickard told Medill. “It’s not something that’s nice to have if you can afford it and get it. It’s just something that we all should have. It’s just a must-have.”

Pickard recognizes the danger that government-funded journalism could be hijacked by politicians. “We need to build in institutional safeguards so that simply can’t happen,” he said.

“The strongest democracies on the planet also happen to have the strongest public broadcast systems,” Pickard said. “So somehow other countries have figured out ways to have independent public media, and I think we can do that in the U.S. as well.”

Pickard dismisses the idea that the news industry could turn things around and thrive commercially in a way that also serves democracy.

“The market is not going to support the journalism we need,” he said. “There is no commercial future, especially for local journalism. There is no business model. … I think we’ve already wasted over a decade chasing after some mythical business model that’s going to bring back local journalism.”

Will Anything Get Passed?

The new situation in Washington, with President Joe Biden’s election and the Democrats’ control of both houses of Congress, makes some people optimistic about passage of a rescue effort targeted to support local news.

Advocates for local news have gained power. For example, Cantwell now chairs the Senate Commerce Committee instead of being the ranking minority member. Klobuchar now chairs the Rules Committee and also chairs the Judiciary Committee’s Subcommittee on Competition Policy, Antitrust and Consumer Rights.

The new administration has already thrown one lifeline to local news. The $1.9 trillion Covid relief law provides $86 billion to help struggling pension funds remain solvent. This includes pension funds in construction, transportation – and journalism. The law also gives these funds a longer runway to improve their financial standing. Craig Forman, a former CEO for the McClatchy news chain, said McClatchy probably could have avoided Chapter 11 bankruptcy protection in February 2020 if the law had been in place then.

While the White House and Congress have been on a fast track lately, history is full of ambitious ideas that became stuck in the Washington mud. Although Waldman said this Congress was the most likely in a long time to tackle the issue of local news, he added, “It’s always a long shot for anything to happen congressionally, so I don’t want to make it sound like it’s for sure something’s going to happen.”

It’s always a long shot for anything to happen congressionally, so I don’t want to make it sound like it’s for sure something’s going to happen.

Steven Waldman, coordinator, Rebuild Local News coalition

In any case, there does seem to be growing understanding that local journalism is at an inflection point.

The News Media Alliance’s Chavern put it this way:

“I often analogize the moment we’re in to what music was in in the early part of the 20th century or TV in the 1990s. Music was a print business, sheet music, and then they were disrupted by recording devices. And then over about a 25-year period, they developed a music licensing system which then has carried that industry through multiple other disruptions such that Google and Facebook now pay to license music. … Similarly, local television gets retransmission fees from cable providers. So how did that happen? Well, cable came in and disrupted the distribution of local broadcast and there’s a federal law that mandated retransmission fees.

“We’re in a similar historic moment where we’re going to need a system to get value back to news publishing, or else they’re just not going to have it anymore.”

Article image by Harold Mendoza used under Unsplash license (Unsplash)

About the author

Mark Jacob

Editor

A former Metro Editor at the Chicago Tribune and Sunday Editor at the Chicago Sun-Times, Jacob is chronicling the Local News Initiative’s progress for the project’s website. He is the co-author of eight books on history and photography.

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