Tuesday, November 18, 2008

Why feds won’t bail out newspapers

If a federal bailout for General Motors might be good for America, how about one for newspapers, too? Ain’t gonna happen. Here’s why:

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.

17 Comments:

Blogger 10ksnooker said...

How about the simple version, because no one will buy their newspaper? Who needs their biased claptrap when you can find the news for free online.

Getting close to this with autos as it is, no customers, no company.

10:24 PM  
Anonymous Anonymous said...

Excellent point, 10ksnooker. We don't need the Wall Street Journal, Washington Times, and that Richard Scaife paper in Pittsburgh, what with their biased claptrap.

7:52 AM  
Anonymous Anonymous said...

Yes, go get free news from the Internet. Oops - too bad newspapers provide a lot of that news. Guess you can always go to unbiased sources, like Limbaugh's site.

8:05 AM  
Anonymous Dave D. said...

...Even when unbiased, the claptrap is tiresome. Who would pay good money for claptrap when you can get it free online ?

8:26 AM  
Anonymous Anonymous said...

The big metros are clearly in trouble, but is the "press" in the United States going to disappear? I think not. There are plenty of scrappy small papers out there that are well-positioned to make a lucrative living once the big dailies collapse (which I think they clearly will). The business model that made fortunes clear-cutting advertisers is gone, and the revenues for newspapers will never be the same again. It is truly embarrassing to hear executives argue their papers are providing vital information to readers that protects their right to know when the daily paper contains the latest on Britney's divorce, Heather's latest DWI, and the curious case of the perhaps missing Caylee. The smaller papers have carved out a niche providing community news that justifies their existence, and they will survive. Taxpayer dollars for big papers to run more pretty pussy cat pictures, or my new baby pictures? I think not. Public funding so Howie Kurtz can write more vapid, navel-gazing and self-flagellating insights on how the news is made? This generation of newspaper editors have led us into this swamp. Owners loaded down their properties with debt so they could skim off revenues to buy vast Colorado ranches. Now they are caught in the quicksands of their own making. Glug...glug...glug.

8:43 AM  
Anonymous Anonymous said...

10ksnooker: How long will it take guys like you to figure out that you don't get your news "for free online." You get it from an aggregator who is ripping it off from the newspapers you despise. Matt Drudge is just a collection of links, with some blowhard commentators riffing off those same news reports mixed in. Alan, I agree that a bailout is not a good thing for newspapers. What might be a middle ground is some sort of one time tax break so that the Sam Zells, Avistas and others could sell to a non-profit (this would have to be the mandate). The millstone of debt is just killing any chance for many companies to have even a shot at surviving. We need to remove the speculators and hedge funds from the mix. Otherwise democracy will be impacted.

8:50 AM  
Blogger rknil said...

"What they need is to get real about their problems and then get busy solving them."

The next time will be the first time.

Newsrooms work hard to avoid solving problems than they do to solve them. That will never change until the underperformers and design desks are sent packing.

10:01 AM  
Anonymous Anonymous said...

Seems to me, considering the ads in certain local papers, if the auto industry goes, so goes the newspaper.

As for free content online, 10ksnooker. It's not free. It is surrounded by ads and other revenue makers.

If you want to blame anyone for killing the newspapers, especially online, look to Craigslist and Social Networking Services where people can post their classifieds and market to the masses for free or next to it.

And, P.S. no one really cares about reading the news... not really... not hardly... not at all.

10:19 AM  
Anonymous bevo said...

The US nameplate automakers and the newspapers do not need a bailout because their problems existed long before this current economic downturn.

That said, a good newspaper serves our public policy by advancing thoughtful discourse. Unfortunately for the newspaper business, about 99% produce a product that is not worth a plug nickel.

1:58 PM  
Anonymous Evil Pundit said...

Bankruptcy for biased, semi-competent outlets like AP and the NYT can't come fast enough for me. These institutions contribute nothing worthwhile to society, since they act as the propaganda wing of the Democratic Party.

Unfortunately, that is the very reason there probably will be a newspaper bailout. With the Democrats controlling Washington, they would only be showing appropriate gratitude to the news organisations which handed them that victory.

And the Dems will still need their pet propagandists in 2010 ...

2:44 PM  
Blogger DigiDave said...

I still strongly believe that the citizens in mass could actually bail out journalism.

It won't amount to 150 million, but through small donations we can fill the gap that is left as newspapers fall apart.

Trying it here in the Bay Area right now.

Only need another $250 to fund this $1,000 investigation: http://spot.us/pitches/11

If we don't fund it - we only have ourselves to blame. Still.. I have hope.

5:17 PM  
Blogger donica said...

Right wing, left wing, local, metro, citizen or community -- newspapers are the source of most of our newsgathering and news producing capability in the country. Lose those and we lose a significant portion of our ability to know what's going on in the middle of a mess of wickedly complex problems.

Newspapers are imperfect and have been getting worse for a long time. But until a viable commercial model emerges online, losing this news force will leave us much worse off than we are now, and at a time when vetted, researched, public information most matters.

Why not consider some type of limited public funding? Or other funding sources besides advertising, which many claim has caused a lot of the problems in quality. You've just outlined how minuscule the relative cost of newspapers are. The specter of government censorship over watchdog stories is the standard answer to why this would never work -- but other countries have negotiated this problem in reasonable ways, including the UK and the BBC.

It's easy to blast the myopic, idiotic and biased drivel that passes for a lot of news today. But like democracy, it's the best we happen to have right now. Because the financial model is a mess and the people who run newspapers have made a long series of mistakes, the current news product does not represent the best of what journalism can bring us. Is that an argument for throwing it out? Or making it better? Citizen journalism has a vital role to play but it can't fill the entire gap left by dying papers.

Do you really want a bloated bureaucracy, incumbent politicians and corporate schemers operating in cahoots with impunity because they know they have so little chance of being caught on the front page of a paper, an online news site or the network news?

We are still sort of willing to pay for roads, firehouses, schools and hospitals. Shouldn't we at least debate whether a viable news force is in the same category?

1:28 AM  
Anonymous Anonymous said...

"Newspapers don’t need a bailout. What they need is to get real about their problems and then get busy solving them."

Many newspapers aren't serious about solving their problems. Ours recently spent weeks debating what kind of fluff content to put onto the Classified section front as the newspaper goes through another round of newsprint downsizing. A Classified section that contains roughly a page and a half of actual paid Classified ads now. Meanwhile, suggestions for interactive web-based products, alternative revenue streams and the like have been summarily dismissed because "they won't make money immediately." Many newspapers deserve to die. Not because of their editors, or perceptions of bias, but because their publishers and CEOs have consistently looked backward for solutions to their problems, or worse yet, not looked anywhere at all. Failure to take action is an action itself.

11:42 AM  
Anonymous Anonymous said...

What I want in my local print newspaper at this point of the game? In-depth, investigative, quality LOCAL NEWS! Do I get it? Note enough! My free weekly does a better job than the daily.

My city's paper is shrinking in size and relevancy, with tons of AP filler. By the time I open the paper, most stuff I read is old to me. National/Intl news? I can easily consume that elsewhere.

Give me objective and informative local news stories, connect me to my city and my neighbors, etc. Yeah, like the old days.

My main reason for purchasing the paper these days (now I only buy the Sunday)? Coupons...'cause I'm too lazy to go online and get them.

1:28 PM  
Anonymous Dave D. said...

...Donica, if you think public funding for newspapers is a good idea...give 'em your own money. Buy their stock. Buy a newspaper corporation and run it yourself. But don't send the tax collector around here to take my money for your causes. The only way our tax system works is with the ( grudging ) cooperation of the taxed. If even a small portion of the taxpayers fight it, it will collapse. And I'll be damned if I'll subsidize a newspaper that subscribers have already abandoned.

9:00 PM  
Blogger Steve Collins said...

The government could, however, provide funds to turn newspapers into nonprofits aimed solely at providing a public service to their communities. It would cost almost nothing, in federal terms, while ensuring the long-term survival of an intrepid press.

12:10 PM  
Anonymous Anonymous said...

Completely by accident last week I was flipping through a book in my library at home, On Liberty, by John Stuart Mill, and came across this sentence: "The time, it is to be hoped, is gone by, when any defence would be necessary of the "liberty of the press" as one of the securities against corrupt or tyrannical government." Well, the time is NOT gone by. Did he foresee the ongoing, vicious attacks on the press by politicians (and partisans 10snooker) who would prefer that no light shine on their mischief?

10:05 AM  

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