A Dangerous Trend? p. 10

By: Mark Fitzgerald Media economist says use of gvernment pensions to
fund media companies heightens potential for conflicts sp.

PARK COMMUNICATION'S announced sale to two investors financed by a loan from the Alabama state pension fund is only the latest example of a dangerous trend towards government funding of newspaper and broadcasting companies, a media economist warns.
"One of the little secrets of the industry is that the top shareholders of many media companies are government agencies and organizations," said Robert G. Picard, editor of the Journal of Media Economics and professor in the Department of Communications of California State University, Fullerton. "A great deal of financing for purchases by individuals increasingly comes from government or government-controlled funds."
In the Park Communications sale, announced Oct. 26, much of the announced $711.4 million purchase price will be paid from a $573.4 million loan by the Retirement Systems of Alabama, the agency that manages pensions of state employees, to Donald Tomlin.
Tomlin, a real estate developer based in South Carolina, and Gary Knapp, the owner of a Lexington, Ky., stock brokerage, are acquiring Park Communications.
Picard argues these ties between state agencies and news organizations "heighten the potential for conflicts of interest and biases in reporting."
"Government ownership and financing of private media deals violates the basic principles of U.S. journalism that media should be free from government and not have ties to major institutions that could influence or control their reporting," he said.
"The increasing government financing of the nation's media raises real concerns about the ability of media to remain independent when they are directly lined to government organizations," Picard said.
State pension funds and other government institutional investors now represent about one-fourth of the most active investors in newspaper companies, Picard said.
"Government funds own large blocks of shares in companies including Gannett Co., Knight-Ridder Inc., Dow Jones & Co., New York Times Co., Pulitzer Publishing Co. and Times Mirror Co.," he said.
Indeed, government entities are among the largest investors in two major companies, Picard said.
"In 1993, the State of Wisconsin Investment Board was the second-largest investor in and one of only seven to have more than a 5% beneficial ownership in the New York Times Co.," he said.
Also in 1993, the Bureau of Investment of the Michigan Department of Treasury owned more than 8% of A.H. Belo Corp., Picard said.
"Even if such relations do not involve coercive attempts to control content," Picard said, "history and research has shown that media tend to handle news regarding major investors more carefully and that there are subtle effects on coverage when the interests of major investors are involved."
The head of the Retirement Systems of Alabama, however, says he thinks Picard's logic is faulty ? especially in the case of the connection with Park Communications.
"This is just the debt side of the transaction," David Bronner said in a telephone interview from Montgomery, Ala.
"Someone the other day brought up a question like this and I used this analogy: Do you have a house? Well, if you have 80% or 90% mortgaged, we might own that house, by your logic.
"But do I tell you what color to paint your house? Do I tell you where you can put your windows?" he said.
Arguments about what investments are appropriate for pensions seem to go in cycles, Bronner said.
"I don't think [Picard's argument] is a whole lot different from the people who told us pension funds shouldn't invest in [distiller] Brown & Foreman or [brewer] Budweiser. And now people say you shouldn't invest in [cigarette makers] Phillip Morris or RJR [Nabisco].
"For a while there you got a lot of heat from people who didn't want you investing in South Africa. Now you get heat from people if you are not investing in South Africa," Bronner said.
"It makes as much sense for us to put [investments] in media as it does to put it in . . . utilities or anything else," he said.