V. Government support for sustainable quality local journalism

V. Government at all levels should support policies that create an environment for sustainable, quality local journalism

It is highly unlikely that in the near term government will directly fund journalism, especially in a time of strained budgets at all levels. Even indirect subsidies or added tax breaks may be problematic.

One area where government at all levels can directly facilitate the functions of journalism is to operate openly. Knight Commission Recommendation 4 states: “Require government at all levels to operate transparently, facilitate easy and low-cost access to public records and make civic and social data available in standardized formats that support the productive public use of such data.” This topic is the subject of another Aspen Institute white paper, “Six Strategies for More Open and Participatory Government,” by Jon Gant and Nicol Turner-Lee.

The Knight Commission said that media policy should be directed toward innovation, competition and support for business models that provide marketplace incentives for quality journalism. It added, “Government’s first role should be to let experimentation thrive. Governments should avoid regulations that distort incentives. Rules should not make investments in traditional media artificially more attractive than new ventures, or vice versa.”

A. Convene a national conversation about the importance of local journalism to community health

The Knight Commission asserted, “Information is as vital to the healthy functioning of communities as clean air, safe streets, good schools and public health. People have not typically thought of information in this way, but they should.”

Often when government, foundations or community organizations develop agendas to focus civic attention, local news and information are not called out for specific attention. There seems to be an assumption that healthy news and information flows are a given, but they are not.

According to the National Conference on Citizenship (NCoC), connection among citizens is the most powerful force in American democracy, and news is high on the list of activities that create connectedness. At least a few times a week:

• 89 percent of people eat dinner with members of their households

• 86 percent receive news from television sources

• 68 percent receive news from newspaper sources

• 55 percent receive news from radio sources

• 54 percent talk to family and friends online

• 46 percent talk with neighbors109

In its 2010 Civic Health Assessment, the NCoC called for the “development and collection of new measures of civic engagement that broaden our understanding of the term and more accurately capture the full range of participation.” It said these include metrics associated with social innovation, online engagement, corporate citizenship, social capital, public service, trust among individuals and confidence in institutions. “These are crucial indicators to understanding what an informed, engaged, giving and trusting citizenry will look like in the 21st century.”110

News was not on that highlighted list, despite its importance in creating connectedness. This speaks to the need for a national conversation about the importance of local news to community health.

In December 2010, President Obama created the White House Council for Community Solutions. The council is to provide advice to the president on the “best ways to mobilize citizens, non-profits, businesses and government to work more effectively together to solve specific community needs.” Its charge includes “making recommendations to the president on how to engage individuals, state and local governments, institutions of higher education, non-profit and philanthropic organizations, community groups, and businesses to support innovative community-developed solutions that have a significant impact in solving our nation’s most serious problems.”111

This council should take up the issue of local news and information as part of its deliberations. It should initiate a national dialogue about how communities can measure and improve their information health and where journalism fits. It should be a model for how communities throughout the nation can convene their own conversations about the importance of local news to community health.

B. Facilitate new ownership and collaboration models

New models are emerging for non-profit or hybrid organizations that integrate the social purposes of journalism with business activities. Uncertainty about tax status is getting in the way of experimentation and collaboration. Fixing this is one of the few things government can do to help journalism that should be relatively non-controversial, although complicated.

In May 2009, the Federal Trade Commission (FTC) announced a project to explore “How will journalism survive in the Internet age?”112 Following the first two of three scheduled public hearings, the FTC staff issued a discussion draft of potential policy recommendations to support the re-invention of journalism. It asserted, “In sum, newspapers have not yet found a new, sustainable business model, and there is reason for concern that such a business model may not emerge. Therefore, it is not too soon to start considering policies that might encourage innovations to help support journalism in the future.”113

Additionally, the FTC draft statement noted “hybrid organizations that blend social purposes with business methods are emerging at the intersection of the three traditional sectors (for-profit business, non-profit, and government.) Some for-profit corporations are looking to pursue socially beneficial goals in addition to profits. Similarly, some socially oriented non-profits and government entities are incorporating traditional business practices and principles.”

In a background paper prepared for the Knight Commission, Stephanie R. Hoffer, assistant professor at the Ohio State University Moritz College of Law, wrote that federal and state law should value such for-profit/non-profit ventures. But, she noted, “These agreements are cumbersome, costly to draft, and severely restricted by the Internal Revenue Service.”114

Similar observations have been made in other examinations of non-profit or hybrid media. Four distinct types of media hybrids emerged in the discussions at a Duke University conference on non-profit media in May 2010:

• Media organizations run as non-profits

• Media companies organized as low-profit limited liability corporations, denoted by the acronym L3Cs

• For-profit media outlets with “affiliated” non-profit investigative funds

• For-profit media firms that accepted funds from foundations and non-profits to support particular areas of coverage.

A report on the conference said a non-profit organizational structure could offer ways to increase support for watchdog journalism and should qualify as a charitable purpose. “When asked what policy change they would favor affecting non-profit media, the most frequent response from conference participants was a desire for the IRS or Congress to make clear that newspapers could be run as non-profits…. To date the IRS decisions about the non-profit status of publications, especially those with advertising, have generally been negative.”115

Some states have acted to provide flexibility in forming hybrid organizations. Examples include a Maryland law passed in April 2010 to create a new corporate form known as a “benefit corporation.” It will let social entrepreneurs codify social benefits as part of the corporate charters.116 Other states considering similar legislation include California, Colorado, New York, North Carolina, Oregon, Pennsylvania and Washington.

Several states have established or are considering “low-profit limited liability companies.” These L3Cs are for-profit businesses established to advance charitable, educational or other socially beneficial purposes.117 They are designed to encourage a “program-related investment” (PRI) from private foundations. But Hoffer pointed out that, as yet, it is unclear how the IRS will react to the L3C. “Although it is a beneficial first step, simple adoption of the L3C statute by states will not entirely remedy the federal tax barriers for for-profit/not-for-profit joint ventures. Additional work is needed,” she said.118

The need for greater flexibility and regulatory clarity in new ownership and collaboration models is obvious. Answering key questions could encourage more entry into the news business by non-profit startups.

Among the actions that would be fairly straightforward:

• The IRS or Congress should explicitly authorize “any independent news organization substantially devoted to reporting on public affairs” to be created as or converted into a non-profit entity or L3C serving the public interest.119

• The IRS should change its regulations to clarify when newsgathering and publishing may be a tax-exempt purpose under Section 501(c) (3). Alternatively, Congress should amend the statute to add a separate subsection to Section 501(c) specifically exempting qualifying news organizations.120

• The IRS should issue guidance to clarify which business operations, such as an increase in profits or advertising space, will cause a news organization to lose its tax-exempt status.121

C. Facilitate private to non-profit ownership

Given the economic plight of newspapers, there is the clear likelihood that some current private owners could want or be forced to sell their companies. In her paper prepared for the Knight Commission, Professor Hoffer outlines several ways in which tax policies would work against not-for-profit entities in acquiring these newspapers. She outlines three ways in which Congress could make it easier for private news companies to transition to non-profit ownership:

• Removing the deduction limitation for the contribution of ownership interests in newspapers to not-for-profit organizations

• Deferring taxable gain on the sale of news organizations to not-for-profit organizations

• Ensuring that tax-exempt bond financing is available to not-for-profit purchasers

“The availability of local journalism is undoubtedly a public good that provides positive externalities even to those members of the public who do not consume it,”

Hoffer writes. “Accordingly, it would be fitting to move local journalism, which is

threatened in the current regulatory and business climate, into the public sector.”122

D. Encourage competition

In May 2010, the Federal Communications Commission (FCC) released a Notice of Inquiry (NOI) as part of the 2010 quadrennial review of its media ownership rules. The NOI initiates a fresh look at the current rules to determine whether they promote the commission’s goals of competition, localism and diversity.123

The NOI specifically asked for input on the following:

• Whether the current rules continue to foster competition, localism and diversity

• How to define, measure and promote competition, localism and diversity and how ownership structure affects these goals

• How to weigh these public interest goals if they conflict with each other

As of this writing the issue remains open, and debate about the consolidation of media ownership persists, although the FCC has released a report of its inquiry into the future of media and information needs of communities. The Knight Commission did not take a specific stand on the issue, and a full analysis of the matter is well beyond the scope of this white paper. It is worth noting, however, that the trend in recent years has been toward more outlets for journalism and commentary, but less original reporting.

The Pew Project for Excellence in Journalism 2010 media report made the following observation:

The notion that the news media are shrinking is mistaken. Reportorial journalism is getting smaller, but the commentary and discussion aspect of media, which adds analysis, passion and agenda shaping, is grow-ing—in cable, radio, social media, blogs and elsewhere. For all the robust activity there, however, the numbers still suggest that these new media are largely filled with debate dependent on the shrinking base of reporting that began in the old media. Our ongoing analysis of more than a million blogs and social media sites, for instance, finds that 80 percent of the links are to U.S. legacy media.”124

Reporting from established media remains critical, even as it diminishes substantially. One of the major factors in that erosion is the debt burden associated with media consolidation. The key question going forward is what policies will promote original reporting in local communities. Further consolidation of media ownership is unlikely to do that.

E. Expand the definition of who is a journalist

In a world where essentially anyone can perform journalistic functions, what distinguishes someone as a journalist in the eyes of the law? One answer is, “We’re all journalists now.”125 Scott Gant, who wrote a book by that name, argues that the web is having a dramatic transformative effect for three reasons:

1. It is inexpensive to access and use.
2. Its access and use are unregulated and largely unconstrained by either government rules or physical scarcity.
3. Unlike communications innovations that preceded it, the web allows the interaction of many-to-many rather than one-to-one.126

Journalism increasingly is being practiced outside traditional industries and businesses. One analysis suggests journalism jobs in the U.S. actually grew by 19 percent from 2007 to 2010, despite the fact that employment was down in newspapers, periodicals, radio and television.127 Government policies need to recognize, understand and encourage this new reality.

Inevitably, it seems, laws will address themselves to the functions of journalism, rather than to defining who is a journalist. But one area that is already an issue is “shield laws” that allow journalists to keep confidential the names of their sources. Most existing protections to journalism do not clearly extend to people working outside traditional news outlets.

In May 2010, Wisconsin became the 39th state to pass such a shield law, and its law is more inclusive than most. It protects a “news person,” someone who gathers and disseminates news to the public through any medium, including print publications, books, news agencies or wire services, broadcast, cable, satellite or electronic services. A Kansas shield law that passed a month earlier specifically gave online journalists protected status.128

All states and the federal government should have shield laws, and those laws should protect all who perform the traditional functions of journalism.

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