FTC’s ‘Journalism Reinvention’ Ideas: The Good, the Bad and the Ugly

By: Mark Fitzgerald & Shawn Moynihan

The Federal Trade Commission (FTC) is at pains to emphasize that the ideas contained in its “staff discussion draft of potential policy recommendations to support the reinvention of journalism” are just talking points — not steps the government is about to implement.
That’s a good thing, because the proposals packed in its 47 pages range from the brilliant to the boneheaded. With discussions continuing on the FTC draft, here’s E&P’s take on some of the ideas, from a newspaper industry perspective.
Worthwhile: Extending so-called L3C corporations to newspapers and other general news organizations. The draft makes the best case for changing IRS standards for tax exemption to recognize that journalism is a public benefit and allow media companies to incorporate as low-profit limited liability companies that can operate as for-profit businesses while also accepting funding or investments from non-profits. Similarly, other proposals would let newspapers operate as “Flexible Purpose” or “Benefit” corporations.
Worth thinking about: In the welter of ill-conceived ideas that would give newspapers antitrust exemptions for various purposes are two more sensible proposals: allowing news organizations to “agree jointly to erect pay walls” and allowing them to “agree jointly on a mechanism to require news aggregators and others to pay for the use of online content.”
What were they thinking?: Apparently some publishers are urging the FTC to recommend extending and strengthening the Newspaper Preservation Act. The joint operating agreements (JOAs) permitted under the law have a miserable record of “preserving” newspapers. Two cases in point from 2009: The Rocky Mountain News and the Seattle Post-Intelligencer.
Worthwhile: There’s no more fraught issue in cyberspace than trying to reconcile the public interest in a free and open Web with a newspaper’s natural economic interest in preventing its expensively produced reports from simply being swiped in nanoseconds by any number of Websites or aggregators news in a cut-and-paste world. Yet this complex problem may have a simple answer: Amend federal copyright law to again permit news organizations to sue “free riders” who grab their content under the old “hot news” doctrine still recognized by some states. Though this draft isn’t supposed to take sides, it makes a strong case for this idea advanced most prominently by the brothers David and Daniel Marburger.
Worth thinking about:
In this part of the draft there’s little that comes close to the copyright solution. There are proposals for federal legislation defining hot news or allowing states to set their own hot news standards that might reach a fair balance, but, like the amended Copyright Act itself, technology could soon bring out unintended consequences.
What were they thinking?: Where to start? There’s a proposal to rewrite copyright law to “limit” fair-use — as if that wouldn’t immediately bite all journalists back. There’s an offer of federal “help and support” for a system that would somehow “license” facts. And most infamously, there’s what Jeff Jarvis calls the “constitutionally abhorrent doctrine of ‘proprietary facts.’” That’s another third rail for newspapers.
Worthwhile: Here’s one for circulation execs: a proposal to increase postal subsidies for newspapers. As the draft notes, Postal subsidies have gone from covering approximately 75% of the cost of mailing (in 1970) to about 25% in 2010. That’s a decrease from about $4 billion to $500-$600 million, and it’s high time this disparity was set right — and opening a dialogue on this is a very good thing. On glaring omission: the FTC’s document does not address the USPS’ bias toward direct mailers, in continually cutting deals for cheaper postal rates.
Worth thinking about: Providing news organizations a tax credit for every journalist they employ is one way to help newsroom staffs expand again and get a tax break in the process. Provided there weren’t an array of strings attached, this could be a win-win. Likewise, providing grants to universities to conduct investigative journalism and establishing a “journalism” division of AmeriCorps are also solid ideas worth pondering — as long as government influence can be kept to a minimum. But it’s worth noting that if college student journalists are to be doing investigative journalism, they’d need the same legal protection professional journalists have (in most states) when it comes to protecting confidential sources — not an easy thing to achieve.
What were they thinking?: Establishing a fund for local news, which would be paid for with money the FCC currently collects or could collect from or could impose upon telecom users, television and radio broadcast licensees, or Internet service providers — and administered in open competition through state Local News Fund Councils — would be ponderous and very costly. Not to mention, there’s no guaranteeing fairness in that “open competition.”

A proposal to establish “Citizenship News Vouchers” that would allow taxpayers (via their tax returns) to allocate some amount of government funds to the non-profit media organization of their choice is another non-starter. Americans have already spoken their minds on this one: A recent Rasmussen Reports poll showed that 84% of those asked opposed a 3% tax on monthly cell phone bills to help newspapers and traditional journalism. The same poll showed lopsided opposition to a tax on computers, e-readers and other equipment.
To submit comments or additional proposals to the FTC’s document, go here.

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