Centuries-Old Bailout of Newspapers is Going Away, Report Warns

By: E&P Staff

While newspapers in the Great Recession have stoutly resisted proposals for government bailouts of their business, the fact is that federal and state governments have subsidized newspapers and other mass media since virtually the founding of the Republic, a study released Thursday argues.

The problem for newspapers and broadcasters now isn?t that a bailout is coming –it?s that the long-time subsidies are going away, write Geoffrey Cowan and David Westphal in the report, ?Public Policy & Funding the News? from the University of Southern California?s Annenberg School for Communication and Journalism.

It?s been all downhill since the late 1960s, say Cowan, the school?s dean emeritus and Westphal, its executive in residence.

?At the time, the postal service was subsidizing about three-fourths of the mailing costs of newspapers and news magazines, at a cost of about $400 million a year (nearly $2 billion in today?s dollars),? the study says. ?This benefit, in combination with other government supports such as tax breaks and paid public notices, amounted to a substantial financial boon for American news publishers. The Postal Reorganization Act of 1970 marked a turning point. The landmark legislation immediately reduced publishers? mailing subsidy by about half, and ever since, government?s financial support for the commercial news business has been falling.?

Public notices and legal ads have been a boon for newspapers as well. And while most people think of community papers as the chief beneficiary of these ads, government-mandated to run in print. But big papers benefit, too, the authors point out.

?The Wall Street Journal, for example, has a contract with the government to print seized-property notices,? they note. ?In a four-week study, we discovered that the government was a top purchaser, by column inches, of ad space in the Journal.?

But the writing is on the wall for print public ads. Cowen and Westphal note that at least 40 states are mulling bills that would let government units advertise online.

And when the Journal went to court for the right to be eligible for state legal ads in its regional edition, the study says, the circuit court judge handling the case said it ??may be an opportune time for the General Assembly to revisit the issue of notice by publication in light of the variety of electronic means of mass communication available.?

Measured in 2009 dollars, the study concludes, government support for newspapers and magazines had fallen to less than $2 billion from more than $4 billion in 1970.

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