Why feds won’t bail out newspapers
Like the Big Three domestic automakers, most newspapers are suffering from weak customer demand, falling sales, suffocating fixed operating costs and shrinking profitability that together are eating into their financial reserves. But the similarities end there.
Unlike the auto industry, the failure of any or all of the newspapers in our country would have a negligible impact on the greater (or lesser, as the case may be) economy. If economic stimulus is what bailouts are all about and scant impact would be gained by slipping publishers a few billion bucks, then there’s no point in doing it.
Beyond pure economic considerations, of course, there is the emotionally persuasive argument that the press needs to be saved so it can fulfill its unique role as the watchdog for the oldest democracy in the world. The problem is that it is difficult to imagine how the vigor and independence of the press would be maintained if the industry depended on the largesse of the very government officials it is supposed to be watching.
Let’s examine the economic issues first.
After numerous layoffs in recent years, newspapers today at best employ 325,000 individuals, or 0.2% of the nation’s labor force. It would be a tragedy for any of those folks to lose their positions, but, to put this in perspective, the total employment of the publishing industry is equal to just 1.3 times the number of jobs that were lost across the entire country in the month of October. The liquidation of the newspaper industry would be a minor blip in the unemployment statistics.
With newspaper ad and circulation revenues this year likely to be no greater than $50 billion, the industry represents about 0.36% of the gross national product of $13.8 trillion. The auto industry argues fairly convincingly that it produces 4% of the GDP, making its contribution to the economy some 1,110% bigger than that of newspapers. It is far from clear that even the auto industry deserves to be rescued after decades of indolence, extravagance and unwarranted self-satisfaction. If big, ol’ Motown isn’t worth saving, are newspapers?
The combined market capitalization of all the publicly held newspapers has tumbled to $26 billion, or 0.2% of the value of all the stocks traded in the U.S. markets. If you factor out News Corp., which single-handedly represents three-quarters of the consolidated market cap, the combined value of all of the remaining publicly traded publishers is $7 billion, or a mere .05% of the total U.S. equity float. Shareholders on average lost 83% of their newspaper investments in the last 12 months. What's a few more bucks, either way?
Because the shutdown of the entire newspaper industry would have a nearly imperceptible impact on the nation’s economy, there is no reasonable commercial case for bailing it out.
The next-best argument for rescuing newspapers would be that they serve an indispensable role as guardians of our democracy. Notwithstanding the great and small failings of newspapers over the years, the absence of an inquiring press would be at once unprecedented and frightening.
Unfortunately, the idea of government-subsidized newspapers is pretty frightening, too.
Unlike the relative ease with which the feds can make a loan, investment or guarantee to the likes of AIG, American Express, Fannie Mae or Wells Fargo, it seems difficult to see how the government could help a newspaper without running afoul of the First Amendment stricture that bars the government from “abridging” the freedom of the press.
Because a reasonably strict level of accountability presumably would be associated with any government payment, would newspapers suddenly find themselves having to defend to government bureaucrats their decision to spend money investigating bridges to nowhere? Would Congress ding newspapers if they stopped covering future out-of-the-running presidential hopefuls like Ron Paul or Dennis Kucinich? Would publishers be called to account by the White House for emphasizing the number of civilians accidentally killed in Afghanistan, instead of the number of terrorists ostensibly taken out of action?
Although the federal government covers approximately one-fifth of the budget supporting public broadcasting (the balance coming from foundation grants, sponsorships and viewers like you), the system historically has not been immune from political pressure – especially during the last eight years.
The Bush administration in 2005 installed a partisan operative as the chief executive of the Corporation for Public Broadcasting (CPB). He lost no time in policing the perceived politics of broadcasters and their guests, going so far as to brand Republican Chuck Hagel a “liberal” in spite of the Nebraska senator’s favorable ratings from such conservative organizations as the Christian Coalition and the Eagle Forum.
Although this chilling brush with Big Brother-ism ended in fairly short order, the administration’s assault on public broadcasting continued this year, when the White House proposed cutting by half the $820 million federal contribution to the CPB.
Even if someone could figure out a way to give newspapers a few billion without compromising their editorial independence, it’s not clear how much good it would do. Federal handouts are not enough to rescue a business losing customers because it has failed to objectively assess its shortcomings, understand the strengths of its competitors, capitalize on new technology and adapt to new market realities.
Newspapers don’t need a bailout. What they need is to get real about their problems and then get busy solving them.