Could a government bailout be a short term solution for the struggling newspaper industry?

Various ideas to overhaul the business model of newspapers have been debated in recent weeks, such as the possibility of a return to paid online content, or a non-profit endowment scheme. Both have potential, but both are long term solutions that would take some time to implement, and for the immediate crisis at hand, could government help be the answer? At the end of January French President Nicolas Sarkozy approved a 600 million euro package of measures to save the beleaguered French press. Ideas for some kind of bailout plan have been floated in the US for several months now, following those for banks and the car industry, and similar discussion has taken place in the UK. Is a similar bailout likely to happen anywhere else? Could it save the struggling industry, or is such government involvement in the media too dangerous?

The French way

The French measures announced came largely from recommendations in a three-month study into the industry’s health that was released in early January. The proposals were largely based on reducing productions costs, but the study also recommended that newspapers restructure their finances and that journalists be better trained for multiple forms of media, including online. Sarkozy’s speech instructed newspapers to improve the content of their articles, bring in younger readers and transform business models

Arguably the most controversial measure was the decision to give 18 year olds a year-long subscription to a newspaper of their choice. This is clearly a direct subsidy, and one which many people do not think will work. It does seem optimistic to imagine that thousands of teenagers are going to find the time in their day to sit down and read a broadsheet rather than scan news online, and then be inspired to continue such a subscription. The package also included a major increase in state expenditure to support newspaper and magazine deliveries: 70 million euro from 8 million last year. The government will double its spending on advertisements in print publications. The state will also defer some fees the publications face, and Sarkozy announced a freeze on the cost of postal distribution and a reduction in payroll taxes for newsagents. He also extended tax breaks for investors in online journalism.

France’s press is among the least profitable in Europe, with circulation figures of around half those of the UK and Germany, and national newspapers suffering particularly. According to the Guardian, it is “stifled by rigid communist press unions, a lack of kiosks selling papers and a declining readership far below that of the UK or Germany.” Sarkozy has promised to increase points of sale, and work to improve newspaper delivery to both kiosks and homes. Another major problem is high printing costs, as presses are controlled by communist union Le Livre. Sarkozy announced that the state is aiming to reduce printing costs by 30-40 per cent by negotiating with the union.

Sarkozy insisted that the aid package was not an attack on press freedom, the Guardian reported. “I don’t understand how anyone could doubt the legitimacy of the state in this process,” he claimed, comparing the press to any other industry in need of aid, such as the automobile sector. Incidentally, the French car industry just received a 6.5 billion euro loan from the government. And the French state already gives 1.5 billion euro in direct and indirect aid to the press each year. The Guardian asserted in January that “the public’s trust in the media is at an all-time low in a climate where politicians rewrite their own interviews for publication and the president’s powerful business friends, from construction to arms manufacturing, own several major papers or TV stations.” Which does not really sound like ideal circumstances for the government to get further involved in the media. It is too early to assess the effects of the bailout on newspapers, though it seems to have been received favourably by editors.

UK’s regional focus

Another country where public trust in the media is at an all time low is the UK. Research by the Media Standards Trust revealed on 9 February that only 7% of the public trust national newspapers to behave responsibly. “Without urgent reform we believe that self-regulation of the press will become increasingly ineffective at both protecting the public and promoting good journalism and, without prompt action, there is real danger that it will become increasingly irrelevant,” said Martin Moore, director of the Trust. The report calls for government intervention to ensure press accuracy and to limit intrusion on people’s private lives. But would such government intervention be accompanied by financial aid?

In response to Sarkozy’s announcement of the French plan, a spokesman for publisher Trinity Mirror said: “We don’t believe that direct subsidies are a safe or sensible way forward. There are two easy things for the government to do. The first is to indicate that they will intervene and allow consolidation of regional newspapers on public interest grounds. The second is to return to using local newspapers for public notices and public sector job advertising.” Many papers have called for changes to competition regulations in the local and regional sectors to more easily facilitate mergers, and the UK’s Office of Fair Trading has confirmed it is to launch a full consultation on the local media ownership regime next month. Guardian editor Alan Rusbridger went a step further and raised the question of public subsidies for newspapers in November 2008, arguing that as broadcasters compete for government funding, why shouldn’t local newspapers too? “There has never been less certainty about the future of local news in this country,” he said. Roy Greenslade, amongst others, criticised this view, saying that information should not all be funded “through the mechanism of the state.”

American opposition

Across the pond in the US, Connecticut legislators sparked debate at the end of 2008 by petitioning the state government to help local papers whose publisher Journal Register said it could not afford to keep them open any more. Journal Register has been forced to close ‘dozens’ of newspapers in recent months. Connecticut’s Department of Economic and Community Development is offering tax breaks, training funds, financing opportunities and other incentives for publishers, but not cash. According to economic development commissioner Joan McDonald, Connecticut does not see trying to find a buyer and offering tax breaks as exerting influence on the press. In January, the publisher of the Philadelphia Inquirer and Daily News were in discussions with Pennsylvania Governor Ed Rendell about getting the two largest state employee pension funds to help bail out the papers.

But there has been considerable opposition to any such notion, as could be expected in a country which prides itself on its free market attitude. The Wall Street Journal asserted that a newspaper bailout was “the worst bailout idea so far,” and stressed that “independent journalism is valuable, but only if it is truly independent.”  Editor & Publisher editors warned that although it could be tempting to seek government assistance, “Uncle Sam’s purse comes with lots of strings attached.” Paul Janensch, a journalism professor at Quinnipiac University in Connecticut, and a former reporter and editor, commented “you can’t expect a watchdog to bite the hand that feeds it.”

There is already some unobtrusive government assistance to American newspapers, for example the US Postal Service has offered discounted postage rates. Also, several cities have papers running under Joint Operating Agreements, created following the congressional Newspaper Preservation Act of 1970 to keep competing urban dailies viable despite circulation declines.

Can a bailout be justified?

It is possible that other European countries will follow the French example, but an American bailout seems to be extremely unlikely. The British people are used to the idea of public funding for news, given the prevalence of the BBC, so maybe they would be more open to the idea of more government subsidies. But it could also be argued that given the major presence of the BBC, there is enough government involvement in news already.

It is undeniable that as one of the main roles of the press in a democracy is to criticise the government, it must remain entirely free of any government influence, and there is always the risk that government support could lead to influence. The idea of the press relying on the government to any extent is extremely unappealing to many people. But another valid point is that given the importance to any democracy of an active press, it is the government’s duty to support the press in time of need.

Making sure that press friendly laws are in place, rather than offering a cash injection, is probably as far as the government should go, in ‘normal’ circumstances. But perhaps given the current problems plaguing the industry, some limited, short-term government assistance could be justified, to help papers make the necessary adjustments to working online, until an appropriate business model can be found, or until the economy starts to recover. In any kind of bailout, help should be given in such a way where there would be no risk that it could be considered as an attempt to influence. It would be essential to ensure that any help offered to newspapers was offered country-wide, and that it did not give any papers advantages over others. And government support should not be a substitute for innovation, and should not stifle entrepreneurship.


One Response to “Could a government bailout be a short term solution for the struggling newspaper industry?”

  1. Mike Harmon said, on March 10th, 2009 at 8:00 am

    Well said? Great information, keep up the great work!

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