Media beware: Government is coming to your rescue

By Len Lazarick

Many people are concerned about the future of journalism, and how to help it survive. Now the Federal Trade Commission has gotten into the act.

What the heck is the Federal Trade Commission doing meddling in journalism? That’s what I asked when I first heard about it.

On Tuesday, the FTC gathered a high-powered group of experts who spent the day discussing how to rescue the failing media at the National Press Club in Washington. The whole thing was webcast.

Two dozen panelists – mostly older white men – tackled the topic from all sides – business, legal, technological, political. The jumping off point was a 36-page FTC “staff discussion draft” that has stirred quite a furor.

FTC commissioners at Tuesday’s conference tried to tamp down the negative publicity of the last few weeks by pointing out that this was not a “report,” and that they had no intention of trying to implement most of the proposals being discussed.

In a short, readable format, the staff had collected ideas for how to help the media cope with the financial disaster they’re confronting. Government subsidy is one of them – public funding on the model of the Corporation for Public Broadcasting, which helps fund National Public Radio and the Public Broadcasting System. Among other options: an Internet tax to pay for it.

I actually appeared on a webcast radio show on the topic out of Los Angeles. The host ranted about this Internet tax as if it were a concrete FTC proposal and not one of many suggested alternatives. I told him that the government should fix the oil spill, and stay the heck out of the news business.

The American public seems to agree, according to a Rasmussen Reports poll taken last week.

“Americans continue to oppose government-driven solutions for the newspaper industry’s problems in large part because of their concern that they threaten the press’s independence,” Rasmussen’s analysis said. The national telephone survey of 1,000 adults found that “85% of Adults believe that maintaining freedom of the press is more important than supporting the newspaper industry.”

Moreover, about three-quarters of the people surveyed oppose taxing the Internet to fund the FTC’s ideas.

Despite the criticism, the FTC study and Tuesday’s conference actually had a lot of good points worth discussing. One of the most important is that few people outside the newspaper business understand that government has a long tradition of subsidizing local newspapers.

From the founding of the United States Post Office until this very day, newspapers and magazines have paid lower rates than the rest of mailers to distribute their products. If you get The Gazette of Politics and Business or The Daily Record, or dozens of other Maryland publications by mail, your timely delivery is subsidized by other mailers. To keep their low-priced second class permits, the publications must adhere to a requirement that they maintain 50% editorial content. And, yes, the postal service does keep track of this.

Another major subsidy is the legal notices that are required to be placed in newspapers. This is not just about notices of government meetings and actions. Did you ever notice all the foreclosure ads in newspapers?

There are a passel of state laws mandating the placement of these ads, and the Maryland-Delaware-D.C. Press Association has resisted efforts to cut the number of these ads (which, of course, raises the cost of the foreclosure process.)

The National Newspaper Association battles constantly to maintain its postal subsidies and service. It fought against elimination of Saturday delivery, for instance, and it fights all efforts to take legal notices out of the newspaper and put them online. Many newspapers simply would not exist without these ads.

Another major finding of the FTC draft and the subject of discussion Tuesday is the lack of clear direction for nonprofit models in helping to sustain journalism., for example, is a 501(c)(3) nonprofit corporation, but in exchange for this hard-won status from the Internal Revenue Service, we are not allowed to endorse political candidates nor may we engage in legislative lobbying or “advocacy” for specific causes. Giving up endorsements is no big deal, but the rules defining advocacy are vague. There is also a real question of what kind of advertising we may take without harming our 501(c)(3) status.

Maryland Sen. Ben Cardin last year proposed that for-profit newspapers be allowed to turn themselves into nonprofits. But this status brings with it monitoring by Internal Revenue Service, one of the most unforgiving and nit-picky of government agencies. Because of potential government intrusion, many free-market think tanks, such as my friends at the Free State Foundation, oppose this route even while they themselves operate as 501(c)(3)s.

There were lots of bad ideas espoused at Tuesday’s conference, and lots of bad proposals in the FTC draft document. Many people in the news business oppose further government involvement, though a few prominent ones have embraced them. The Rasmussen poll indicates that Americans recognize these bad ideas as well.

But the discussion of ideas, good, bad and ridiculous, is not evil in itself, despite the first overreaction of many of us to the FTC study.

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