Change You Can Barely See: Obama’s Impact on Industry Issues

By: Debra Gersh Hernandez

When presidential administrations change, newspapers prepare for changes in their regulatory, business and legal environments. As Tonda Rush, director of public policy for community newspaper group the National Newspaper Association (NNA), observes, “It’s been said that when the Democrats are in power we have to protect our pocketbooks. When the Republicans are in power, we have to protect our civil liberties.”

Certainly change seemed afoot when President Obama took office amid sky-high hopes in some quarters and dread in others. Would he swing the balance of power back to unions with his regulatory appointments? Would the independent-contractor status newspapers guard so jealously for their carriers be endangered? Would he open up the White House and Washington bureaucracy after eight years of tightened access and secrecy in the George W. Bush administration?

Yet rounding into the halfway point of this term in office, Obama has not been the game-changer many expected. Perhaps surprisingly, the newspaper industry’s business agenda in D.C. is less about the White House than the Democrats in Congress.

“The [congressional] committee chairs are real clear about the fact that they were elected with union support,” says Rush, adding that Democrats traditionally also tend to come down on the side of protecting privacy, such as in Freedom of Information Act and the HIPPA medical privacy law issues.

What happened? In a phrase: health care reform. The president’s full-court press on that issue — when, of course, he wasn’t dealing with two wars and a faltering economy — froze action in nearly every other area.

So the newspaper industry’s Washington agenda remains full, and familiar: Postal rates, a reporter’s shield law, advertising deductibility, FOIA reform, and access to top officials and information. Topics that have for years kept industry watchers up at night, and employed by day.

But the course of evolution has given these issues new focus — and some company. For one thing has changed inside the Beltway: newspaper industry groups are working together more frequently and smoothly than ever.

“What I am seeing right now is an understanding that we need to be working together,” observes Kevin M. Goldberg, counsel to the American Society of Newspaper Editors. “From years of practice, we’re getting good at this. In sports parlance, we have great locker-room chemistry going on with these groups.”

What follows is an overview of some current legislative, regulatory and general-interest concerns on or coming to the table. They reflect the different priorities of newspapers’ diverse interests. Editors, for example, are focused on passing a federal shield law.  Publishers worry about pension funding rules. Community papers dread the possibility of Saturday mail delivery coming to an end. And open-government advocates, in and outside of the industry caution against the seduction of technological transparency in the place of substantive access.

We’re from the Government and We Want to Help

The newspaper industry isn’t alone in being galvanized by its recent crisis. The Federal Trade Commission and Federal Communications Commission are also actively studying the survival of journalism in the Internet age.

In fact, that’s the title of a workshop the FTC held in April. The FCC has also conducted “Future of Journalism” workshops. Publishers, media activists, trade unions and others had their say, and the commissions are expected to make recommendations by the end of the year.

Is that a good thing? “Clearly, we’ve all been watching what’s going on at the future of media projects at the FCC and FTC,” says ASNE attorney Kevin Goldberg.

The FTC is reportedly preparing a package of proposals on a variety of issues, including antitrust and allowing newspapers to develop as nonprofit organizations. “We’ve had different problems with all these proposals, so we’re waiting to see what they come up with,” he adds. “A lot of it is abstract. Potentially, if the FTC comes out with legislative recommendation, it could be big.”

Since the FCC does not have the authority to regulate newspapers, Goldberg indicated its report would have less impact on the industry, although many people are watching what happens with Net neutrality because it could affect online operations.

Bureaucrats are getting conflicting advice on what to do about journalism, says NNA Public Policy Director Tonda Rush: “Some people say do nothing, some say do no harm, and others say the government should fund journalism.”

Rush worries there could be a snare in these proposals for community papers, which are different from their big-city cousins: “Community papers tend to be family-owned, they buy things with cash flow, and they’re risk-averse to debt. What has affected us, aside from real estate [advertising] is that the auto dealer closings have disproportionately affected our papers, particularly in exurban and rural areas.”

“The danger for us,” she adds, “is that people who look at major metro papers assign the same traits to community papers. If there are going to be decisions made by Congress, by the Commission, we want to make sure they understand that the difference is a huge one.”

Transparency That Lasts

Since President Obama signed his open-government directives on his first day in office, there has been a lot of activity designed to increase official transparency, including efforts to get more agency information online. But concerns have cropped up over whether the technology is bringing real transparency or simply access to more documents.

“Making government accessible to the public is difficult to do, but technology will get you only so far,” says Rick Blum, coordinator of the Sunshine in Government Initiative, a coalition of media organizations. “One of the biggest challenges to this administration is to take its real commitment to transparency and put it in place before they leave office, so that it’s lasting. It’s not just writing into laws their transparency initiatives and policies, and changing the so-called culture of government. It’s going from having the data to putting it out online and making it accessible so that it’s understandable and usable.”

Lucy Dalglish, executive director of the Reporters Committee for Freedom of the Press, says the Obama administration has used its transparency technology to distract journalists: “You mistake technology with useful information at your peril. The new administration has made a big show of releasing high-profile datasets, pre-selected by the agencies so you can conclude there’s nothing in them. I’ve never had a reporter call me and say, ‘I can’t get a high-value dataset.’ Sometimes they want a big set of data, but mostly they want a specific question answered or piece of data.

“Is it better? Yes, but not dramatically,” she adds. “These guys are at least talking about it, and that does mean something.”

But an audit of agencies’ new open government plans conducted earlier this year by OpenTheGovernment.org found that many “have a long way to go to create this transformational potential.”

One Obama initiative getting high marks from openness advocates is the recently launched Office of Government Information Services, informally referred to as the FOIA ombudsman. OGIS is designed to help both the public and federal agencies better ensure the timely release of information.

“OGIS is up and running, mediating cases and helping people with their FOIA problems and that’s a good thing,” says SGI’s Blum. “They are putting in place pieces to ramp up their capacity, and we will see a log more from them.”

Another hopeful sign was the creation this spring of a bipartisan congressional Transparency Caucus by Rep. Mike Quigley (D-Ill.) and Rep. Darrell Issa (R-Calif.). The caucus has pledge to “promote legislation that requires federal information to be freely accessible, as well as advocate for new initiatives that support transparency.”

“It’s great,” Blum says of the new caucus, which counts about two-dozen members. “For a long time we wanted to have ongoing, focused attention on transparency in Congress.”

Shield Law: As Close As It’s Ever Been

If one newspaper goal has a shot of coming to fruition this year, it’s the federal shield law.

The Free Flow of Information Act would protect journalists from being compelled to reveal their confidential sources, except in very narrowly defined circumstances, such those involving pending acts of terrorism or harm to national security, or the immediate physical safety of an individual.

“Priorities one, two and three on the legislative agenda are shield law, shield law and shield law. That’s it. That’s the list,” says Kevin Goldberg, special counsel at Fletcher, Heald & Hildreth PLC. “We’ve been saying for years that we’re very close, but we’re certainly closer than ever have been, especially since it passed the Senate Judiciary Committee.”

One hurdle to getting FFIA passed may not be the votes, but rather getting time for consideration on the Senate floor. A version of the bill already has passed in the House. “One reason was health care [reform],” Goldberg explains. “Nothing was going to happen until that was done.”

“Essentially, if a vote was held today in the Senate it would have overwhelming bipartisan support,” says Paul J. Boyle, senior vice president of public policy at the Newspaper Association of America. “We’re still working on some issues, like the definition of a journalist, but we feel we are pretty close. Once we have that, we hope [Senate leadership] would agree to floor time to move the bill. There’s still plenty of time in this session to get it done … [but] it’s going to be hard, fighting for time on the Senate floor. We need everyone in the First Amendment and media communities to push hard.”

The legislation is particularly timely, as New York Times reporter James Risen received a subpoena authorized by Attorney General Eric Holder at the end of April seeking information about confidential sources in Risen’s 2006 book about the CIA. Risen’s attorney has says his client will not comply with the subpoena and will seek to have it quashed.

“I think we’re as close as we may ever get to getting a federal shield law, but it’s been very clear in the past couple of weeks that the Justice Department and the intelligence chiefs are going to great lengths to make it absolutely clear that just because they signed off on a federal shield law, they’re not going to let up on finding out who the leakers are,” says Lucy A. Dalglish, executive director of the Reporters Committee for Freedom of the Press.

In fact, the Risen subpoena comes on the heels of a mid-April federal indictment against National Security Agency employee Thomas A. Drake, who is accused of leaking classified information used for a series of articles in The Baltimore Sun about overspending and mismanagement at the NSA. Neither the newspaper nor the reporter was named in the indictment.

“There’s no law that says a federal employee can turn over classified information. That’s always been illegal,” explains Dalglish, who says she’s been told anecdotally that several other federal employees have been targeted for talking to the news media — moves she says that are designed specifically to have a chilling effect on leakers.

“Every editor in America needs to understand that to protect a confidential source you may not use the phone lines, Internet lines, any means of electronic communication, or they’re going to get you,” she says.

“You need to go back to the old-fashioned method of meeting a source in a parking garage in Rosslyn. It worked then and it works now,” says Dalglish, referencing the D.C. suburb where Washington Post reporters Bob Woodward and Carl Bernstein met with their famous Watergate source, “Deep Throat.”

Going Postal: Seeing Red … Ink

Postal rates and service have long been vexing to newspapers, especially for community papers — many of which rely of the U.S. Postal Service for delivery of their periodicals and shoppers. This year, nothing’s more vexing than the proposal by the USPS to end Saturday delivery.

“The proposal to end Saturday delivery struck all six-day mail-delivered papers as scary,” says Tonda Rush, director of public policy for the National Newspaper Association. Other publishers with Friday editions that sometimes are not delivered until Saturday could see their publications delayed until Monday, she added.

There’s also a potential impact on cash flow and receiving mailed checks. “For smaller, family papers, that is a big issue,” Rush noted, pointing out, too, that the option of switching delivery days is not easy: “You can’t just call up [the printer] and say we used to print on Friday and now we want to switch to Thursday.

“Our publishers are watching to see if they really have to start setting up a private delivery service, if that’s even an option for them. It’s very expensive,” she explains, particularly for one-day-a-week delivery and in rural areas.

The good news, Rush says, is that there’s not much enthusiasm on Capitol Hill for the proposal. Nevertheless, the USPS will need to find ways to counteract declining revenue due not only to a shrinking first-class mail customer base, but also as the result of skyrocketing labor costs, particularly pension funding and health care.

“The Postal Service decided years and years ago to deal with its expanding delivery costs by growing its direct-mail market. As it did, it continued to cover 70% of delivery costs with first-class mail,” Rush explains. “First-class mail is going away, but labor prices keep going up. In a recession, there’s no way to create 7% revenue growth to cover increased labor costs.”

Larger papers also are concerned about the USPS’ financial health, particularly when it continues to maintain the rate differential between high-density rates for newspaper total-market-coverage products and saturation advertising mail, which has gone from about 0.9 cent in 2006 to about 2.6 cents last year, with additional discounts for incremental volume, says NAA’s Boyle.

“Over the last three years, they have favored saturation mailers to the point where newspapers are exploring alternative delivery, moving TMC products out of the mail,” he says. “In the past, alternative delivery firms were not as sophisticated. With technology we can assure stuff gets delivered,” which appeases a growing number of advertisers. “Some newspapers have started their own alternative delivery operations,” he adds, using their existing distribution forces.

For bigger dailies, ending Saturday delivery might not be a bad thing, says Boyle: “Some people think that if the Postal Service leaves the field on Saturday, it opens the door for newspaper advertising because it’s the only vehicle available.”

Retiring Those Pension Catch-Up Mandates

One of the biggest priorities for publishers right now is trying to get some relief from the pension-funding requirements of the Pension Protection Act of 2006, says Paul J. Boyle, senior vice president of public policy at the Newspaper Association of America. The act was designed to shore up pensions by setting targets that would have plans eventually funded 100% by 2011.

Almost all newspaper chains have frozen their pension plans and replaced them with 401(k) plans. But pension obligations must be paid out, and low interest rates and — until recently — the cratering stock market left them with plans that are under-funded by huge amounts. Plans at The New York Times Co., for instance, are under-funded by more than a half-billion dollars.

Newspaper lobbyists are looking for relief to “extend the runway for a safe landing in 2010,” as Boyle puts it. Without an easing of the funding obligation, newspaper companies may be forced to divert cash from operations to pensions.

“What we’re saying is that this pension relief would pretty much give us some breathing room without getting into any direct financial assistance from the government,” Boyle says, noting that the plan would benefit not just newspapers but any business trying to navigate the still-choppy economic choppy waters.

The plan, included in a Senate jobs and tax bill, would allow a 15-year amortization or a nine-year plan that calls for interest-only payments for two years. The House and Senate are working on the terms and conditions of a final package, Boyle adds.

Taking Public Notice

Public notices “are always a priority for community papers,” the National Newspaper Association’s Tonda Rush says. “There’s a lot of pressure on [cutting] public expenditures, but when you look at the ability of a government Website to fill the need that a newspaper in print plus its Website provides, it can’t measure up.”

Newspapers have a strong case for keeping public notices in print, Rush argues. The longtime advantage of proof of publication and readership in newspaper publishing is now joined by new possibilities for archiving, particularly in conjunction with state press associations. Most municipal or county Websites, she says, can’t make the same claims.

Rounding Out Industry Interests

Two additional proposals that come up time and again when legislators look for revenue sources — independent contractors and advertising deductibility — flared up again, but are unlikely to move in this Congress.

The administration budget, Boyle says, proposed the elimination of safe harbor, which prohibits the Internal Revenue Service from reclassifying workers. If, for example, the IRS changes a category of workers, those already in place would not be reclassified, but new workers would be. “It’s not likely to happen with this Congress, but that could change, depending on what Congress looks like next year.”

Advertising deductibility came up in the context of health-care reform, as a means to raise revenue. “There was a proposal to eliminate the deductibility for prescription-drug advertising, but that proposal didn’t go anywhere,” Boyle says. “We could see where the proposal could be on the table in the next Congress as it looks for revenue to pay down the debt, not just prescription drugs, but all advertising.”

 

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