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Confusion reigns as regulations are drafted for that NY local news tax credit

State Capitol building in Albany, N.Y. Photo (cc) 2015 by Marcela.

A three-year, $90 million appropriation to boost local news in New York State is sparking a contentious battle over who is eligible and who isn’t, according to an article by Jon Campbell of Gothamist.

As originally touted by its supporters, the program was supposed to provide subsidies to offset the cost of hiring and retaining journalists at all manner of news organizations — print, digital and broadcast, for-profit and nonprofit. Now much of that is up in the air — so much so that Campbell says the only sure thing is that it would cover all or most for-profit print newspapers. Campbell writes:

As crafted, the law largely excludes many local news outlets it purports to support — aside from for-profit print newspapers — due to a crush of last-minute negotiations in the days before the budget passed. Those led to a final version that excluded most TV broadcasters and many commercial radio stations….

Also excluded were nonprofit news outlets, which were never included in the first place — to the surprise of some leading supporters who were convinced otherwise.

If nonprofits aren’t eligible, that represents a significant reversal of a principle everyone thought they understood. Indeed, Steven Waldman, president of Rebuild Local News and a prominent supporter of nonprofit journalism, praised the appropriation shortly after it was approved in late April. Now he tells Gothamist that leaving out nonprofits would be a major mistake.

“We missed something all along here, and it was never quite set up the way any of us thought it was,” Waldman is quoted as saying. He added: “Nonprofits — including both websites, news services and local public radio — are crucially important parts of the local news ecosystem. We will definitely work to get them included in future revisions.”

What about for-profit digital-only news projects? Unclear. What about newspapers owned by publicly traded corporations, such as Gannett? They are excluded under one provision but seemingly included in another — a contradiction first reported by Richard J. Tofel, writing in his newsletter, Second Rough Draft. As for broadcast, Gothamist reports that they may have been left out by mistake. Or not.

The rules governing how the money will be distributed are still being drafted by the state, so it’s possible that the final product will look something like what Waldman and others were celebrating just a few weeks ago. At a minimum, the system should not favor print over digital or for-profit over nonprofit. Excluding corporate chains that have deliberately hollowed out their papers, such as Gannett, makes sense, too.

Whether we’ll get there or not remains to be seen. And, frankly, what’s happening in New York ought to be regarded as a warning for what can happen when the government gets involved in helping to solve the local news crisis.

Earlier:

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How a private equity firm that destroyed newspapers helped Trump in Chicago

Trump’s Chicago tower under construction. Photo (cc) 2006 by JeremyA.

A private equity firm that helped destroy local newspapers was also involved in building Donald Trump’s Chicago tower, a fiasco that was the subject of an in-depth investigative report over the weekend produced by The New York Times and ProPublica. The story, published in the Times, found that Trump may owe $100 million because he used “a dubious accounting maneuver to claim improper tax breaks from his troubled Chicago tower.” That conclusion is based on an Internal Revenue Service investigation whose details the two news organizations uncovered.

The tower, built on the former site of the Chicago Sun-Times, was plagued by cost overruns and overly optimistic estimates of the revenues that would be brought in. But this post isn’t about Trump’s problems. It’s about this:

As his cost estimates increased, Mr. Trump arranged to borrow as much as $770 million for the project — $640 million from Deutsche Bank and $130 million from Fortress Investment Group, a hedge fund and private equity company. He personally guaranteed $40 million of the Deutsche loan. Both Deutsche and Fortress then sold off pieces of the loans to other institutions, spreading the risk and potential gain.

Fortress Investment Group is the firm that launched the era of private equity firms’ owning newspapers, described by Margot Susca in her book “Hedged: How Private Investment Funds Helped Destroy American Newspapers and Undermine Democracy,” which was published earlier this year. I reviewed it for The Arts Fuse. As Susca wrote, Fortress paid $530 million in 2005 to purchase Liberty Group Publishing, which it renamed GateHouse Media.

GateHouse built a nationwide network of community newspapers, taking them in and out of bankruptcy twice and slashing newsrooms in order to goose revenues and fuel the acquisition of still more papers. That culminated in 2019 when GateHouse merged with Gannett, the country’s largest newspaper chain, a $1.1 billion deal that saddled the new Gannett with an enormous pile of debt. Fortress kept right on profiting, Susca wrote, as the firm continued to extract millions of dollars in managment fees. And Gannett kept right on cutting. Susca put it this way in describing what Fortress and other masters of the universe have done to newspapers, and what that has meant for democracy:

Researchers have shown that investments in sustainability, diversity, and community suffer when profit is the only goal; companies involved in those efforts to improve the world around them may actually inspire hedge funds to target them; hedge funds see line items in those businesses that, if eliminated, could lead to more profits….

At a time when government accountability and truth itself are at a crucial nexus, news organizations in the private investment era have failed citizens as these organizations have boosted private investment funds’ bottom lines.

To organizations like Fortress, it makes no difference whether they’re helping to bail out Trump or destroy newspapers. The bottom line is the bottom line, and nothing else matters.

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Gannett’s latest outrage; plus, AI comes to Boston, and student journos cleared

Gannett and USA Today headquarters in McLean, Va. Photo (cc) 2008 by Patrickneil.

Even by the rock-bottom standards of Gannett, what happened to Sarah Leach was shameful. Poynter media analyst Rick Edmonds reported last week that the country’s largest newspaper chain had hit the brakes on plans to restaff some of its smaller daily newspapers. And on Thursday he wrote that his source, Leach, was fired for “sharing proprietary information with [a reporter for] a competing media company.” Edmonds called the firing “outrageous!”

The Poynter Institute, a journalism training organization, competes with Gannett? Who knew?

So how was Leach, who’s based in Michigan and managed 26 Gannett newspapers in four states, identified as Edmonds’ confidential source? Edmonds writes: “As best Leach and I can figure, they must have tapped into her office email. ‘That’s the only way I can think of that they could have known,’ she said.” That is sleazy behavior by a news company, although we all know that employers have a right to read their employees’ email. That’s why many of the newsroom sources I’ve communicated with over the years use their personal email accounts. (As always, tips welcome, and anonymity guaranteed.)

In a remarkably magnanimous post for her newsletter, Leach writes:

I’m not bitter toward my former employer. It’s not Gannett’s fault. In many ways, it’s just the natural byproduct of media conglomerates owning publications in major metropolitan areas with hundreds of thousands of people … [ellipsis hers] and papers in much smaller towns who need local journalism just as much…. [ellipsis mine]

Let’s use this moment as a catalyst for a critical conversation about local media outlets and the audiences they serve. There has been an unprecedented loss of journalists and community newspapers across the country, and news deserts are growing larger and more numerous.

Gannett owns about 200 weekly daily newspapers across the U.S., anchored by USA Today. The company also owns a diminishing number of weekly papers, and has closed or merged many of them in Eastern Massachusetts, sparking the rise of a number of local news startups. Gannett likes to claim that it’s simply shifting from print to digital, but — to  name just one example — try finding any Medford or Somerville news on its Wicked Local website for those cities. Gannett dailies in this region include the Telegram & Gazette of Worcester, The Patriot Ledger of Quincy, The Providence Journal and the MetroWest Daily News of Framingham.

Back in February, Gannett’s chief content officer, Kristin Roberts, and chief sales officer Jason Taylor appeared on “E&P Reports,” a vodcast hosted by Editor & Publisher’s Mike Blinder, to tout the chain’s recommitment to local news. And maybe that’s continuing at the larger dailies, but who knows? I’m not blaming Roberts and Taylor, who are quality executives with solid backgrounds. But Gannett’s behavior continues to be reprehensible — not only for firing Leach but for trimming back its latest commitment to local news and for running the vast majority of its papers into the ground, leaving communities without the news and information they need.

A couple of other local news tidbits:

AI local news comes to Boston. My writing and podcast partner Ellen Clegg spotted this one: Hoodline, which uses artificial intelligence to cover two dozen cities, including Boston, is cranking out tidbits from locales such as Boston, Everett and Bridgewater. The stories have bylines, but when you click through, you find a little “AI” next to the name. For instance: “AI By Mike Chen,” which raises the possibility that Chen is a bot — a practice we’ve seen elsewhere. (If he’s an actual journalist who’s been hired to vet this stuff, my apologies.) Here’s what Hoodline has to say about its use of AI and its “In-House Writing Collective,” which sheds some light on who Mike Chen may or may not be:

We view journalism as a creative science and an art that necessitates a human touch. In our pursuit of delivering informative and captivating content, we integrate artificial intelligence (AI) to support and enhance our editorial processes. This includes organizing information and aiding in the initial formatting of stories for the editorial phase. Our stories are cultivated with a human-centric approach, involving research and editorial oversight. While AI may assist in the background, the essence of our journalism — from conception to publication — is driven by real human insight and discretion.

It turns out that Hoodline has been around since 2018, with Disney among its original backers. Although automation was part of its DNA from the beginning, presumably its use of AI has become a lot more aggressive since the rise of modern tools such as ChatGPT in late 2022.

• Charges dropped in Dartmouth. New Hampshire state authorities have dropped charges against two student journalists for The Dartmouth. Charlotte Hampton and Alesandra “Dre” Gonzales had been arrested on May 1 while covering pro-Palestinian protests even though they were wearing clearly visible press credentials, according to the independent student newspaper.

Student journalists have been producing some of the most important coverage of both the protests and the counter-protests that have broken out in response to the war between Israel and Hamas.

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Look out, Oregon: Ken Doctor is planning a new media outlet to challenge Gannett

Eugene, Oregon. Photo (cc) 2012 by Visitor7.

The pixels were barely dry on my post about the Pulitzer Prize awarded to Lookout Santa Cruz when I learned about plans by founder Ken Doctor to launch a second Lookout Local site in Oregon’s Eugene area. The Oregonian reported last month that Lookout Eugene-Springfield will launch in late 2024 or early 2025 with a newsroom of 20, of whom 15 will be journalists. That’s more firepower than Gannett’s Eugene Register-Guard can muster. Indeed, The Oregonian published a pretty depressing report on that paper a year ago that began:

The Eugene Register-Guard, once one of the best newspapers in the region, today has no local editor, no publisher, no physical newsroom and little love from a dismayed citizenry. The news staff that once exceeded 80 now stands at six.

As was the case in Santa Cruz, California, Doctor’s reputation in the news business is standing him in good stead. He said he has already raised $2.5 million for his Oregon project and plans to scrounge up another $1.5 million. Doctor is a graduate of the University of Oregon’s journalism school, so this is something of a homecoming for him.

Doctor also has a long post up at Nieman Lab about efforts in California to bolster local news. Like longtime media analyst Jeff Jarvis, Doctor opposes efforts to extract money from Google and Facebook, noting that Meta, Facebook’s parent company, has made it clear that it doesn’t need news, and that going after Google would harm the uneasy balance between the good and bad that the company has done for (and to) journalism.

Instead, Doctor is looking to New York State, which recently created tax credits for news publishers who create and retain jobs. The key, he writes, is to ensure that those credits go to California-based publishers rather than to out-of-state conglomerates. And though he doesn’t name names, he’s presumably referring to the hedge fund Alden Global Capital, with whom he competes in Santa Cruz, and Gannett.

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Media notes: Noem lies about Kim staredown, Gannett backs off and the three WBZs

Kristi Noem. Photo (cc) 2020 by Gage Skidmore.

A few media notes for your Saturday morning:

Kim lie dogs Noem. South Dakota’s dog-killing governor, Kristi Noem, also lied in her forthcoming book about staring down North Korean leader Kim Jong Un. Some media outlets are describing her claim as “false” rather than as a “lie,” which I guess is OK. Several, though, have parroted her claim that it was an “error.” For instance, here’s a headline from The Associated Press: “South Dakota Gov. Noem admits error of describing meeting North Korea’s Kim Jong Un in new book.” And here’s how the “PBS NewsHour” rewrote that AP headline: “South Dakota Gov. Kristi Noem erroneously describes meeting with Kim Jong Un in new book.” Whatever else you want to call it, it was not an error — you don’t confuse the dictator of North Korea with the governor of North Dakota.

Gannett nixes expansion. Earlier this year, top executives at Gannett said they were in expansion mode. Our largest newspaper chain, notorious for hollowing out newsrooms, was going to try something else, building up both the news and advertising sides. Well, that didn’t last long. Rick Edmonds reports for Poynter Online that Gannett’s plans to add staff at its smallest dailies have been put on hold, although hiring continues at larger papers. On Thursday, Gannett reported a loss of $84.8 million in its first quarter.

Media chain roulette. You may have heard that Kim Tunnicliffe, a respected reporter for WBZ-AM, was laid off by the soulless corporate ghouls who own what was once a great all-news radio station. What I didn’t know was that the three entities called WBZ all have different owners. WBZ-TV is owned by CBS and WBZ-AM by iHeartMedia. The third entity, WBZ-FM, is much better known as the Sports Hub, and its owner is Beasley Media Group. I had assumed the Sports Hub was part of iHeart. Anyway, best wishes to Tunnicliffe, who deserves an opportunity to work for an outfit that’s worthy of her talents.

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Richard Tofel asks some questions about the New York local news subsidies

Rube Goldberg drawing via Wikipedia

Richard J. Tofel has been looking into the details of legislation that created a $90 million fund to ease the local news crisis in New York State, and he has some questions. The two most important: Are newspapers owned by publicly traded companies truly excluded, as initial reports would suggestion? And what, exactly, is a newspaper?

As I wrote the other day, the program would seem to exclude Gannett, a publicly traded corporation that owns 12 daily newspapers in New York, including the Democrat and Chronicle of Rochester and the Times Herald-Record of Middletown. But Tofel isn’t sure of that, observing that “a separate provision makes all of the newspapers eligible, despite being owned by public companies, because their print circulation has declined by more than 20% in the last five years — as has that of almost every print publication in the country.”

The other major issue is whether digital-only outlets would be eligible. Tofel writes that “whether digital news organizations will be included within what the law refers to as ‘newspapers’” is still up in the air, adding that if “the regulatory definition of ‘newspapers’ excludes digital entrants and isn’t targeted at local news jobs, the bill will have amounted to a belated incumbency protection act for a failing field.”

Among the 200 members of the Empire State Local News Coalition who pushed for this legislation is The Batavian, a digital-only for-profit in western New York. I’ve already heard from Howard Owens, the publisher, who’s worried that his outlet may not be eligible for any subsidies unless the language is clarified.

The fund would set aside $30 million a year for three years to provide assistance to local news organizations that hire and retain journalists — although that, too, is unclear; it’s possible the money would be used for business-side employees, Tofel says. It could serve as a model for other states, but first the details have got to be nailed down.

In an appearance on Editor & Publisher’s vodcast earlier this week, Zachary Richner, the founder of the Empire State coalition, said that the final language had yet to be fully worked out. That will be done not through legislation but administratively, via a governmental agency called Empire State Development.

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New York local news tax credit would benefit nonprofits and exclude Gannett

New York will become the first state to offer a tax credit aimed at helping local news organizations. According to Rebuild Local News, which has been pushing for several different tax credits at the federal and state levels, the New York legislature and Gov. Kathy Hochul have agreed to a budget provision that will set aside $30 million a year for three years in order to offset the cost of hiring and retaining journalists.

Although the plan is multi-faceted, there are two aspects that I think are especially worthy of note.

The first is that calling it a “tax credit” is something of a misnomer — rather, it’s a payroll credit available to all news publishers, including nonprofits, which don’t pay taxes, and for-profits operating at a loss, which are also exempt from taxes under most circumstances. Zachary Richner, the founder of the 200-member Empire State Local News Coalition, explained that in a recent appearance on “E&P Reports,” a vodcast hosted by Mike Blinder, publisher of the trade publication Editor & Publisher. Given the importance of nonprofit startups in helping to solve the local news crisis, it makes sense to include them.

The second is that newspapers owned by publicly traded corporations are ineligible for assistance. That would exclude Gannett, the country’s largest newspaper chain, which is notorious for its slash-and-burn approach to managing its newsrooms. According to the chain’s website, Gannett currently owns 12 daily newspapers in New York, including well-known titles such as the Democrat and Chronicle of Rochester and the Times Herald-Record of Middletown.

Gannett shouldn’t be rewarded for destroying newspapers, but the provision does lead to some anomalies. For instance, Alden Global Capital, which, like Gannett, is notorious for driving up profits by hollowing out its newspapers, would presumably be eligible for assistance because it is a privately held hedge fund rather than a public company. On Twitter/X, I asked Steven Waldman, the president of Rebuild Local News, whether Alden would be able to put its hands on some state money. His answer: “Yes. I think so.”

Alden’s MediaNews Group chain owns four dailies in New York, including The Record of Troy, and The Saratogian. Alden also owns New York City’s legendary Daily News, which is listed as being part of MediaNews but which I understand is managed separately.

If I might speculate, it could be that there are several privately held chain owners in New York that are doing good work and that proponents of the credit didn’t want to exclude them. The largest privately held national chain doing business in New York is Hearst, whose Times Union of Albany is a well-regarded paper (but is not part of the Empire State coalition). In any case, even if Alden’s papers get some of the money, it provides an incentive for them to do the right thing.

Some other details of interest, quoting Rebuild Local News:

  • No newsroom can get more than $320,000.
  • The subsidy to newsrooms will be based on the number of  employees. The benefit will be up to $25,000 per employee (50% of the salary  up to a $50,000 wage.)
  • $13 million for firms with fewer than 100 employees, $13 million for bigger ones, $4 million for new hires.

As I said up top, there have been a number of tax credits proposed to help local news outlets over the past few years. The best known, the Local Journalism Sustainability Act, would have created credits not just for publishers but also for subscribers and advertisers. President Biden included a credit for publishers in his Build Back Better bill, which died at the end of 2021.

The question, as always, is whether government assistance to local news is a good idea. U.S. Rep. Claudia Tenney, R-N.Y., recently filed legislation to defund NPR in response to former senior editor Uri Berliner’s error-filled lament that the network has fallen in with the progressive left. Tenney, as it happens, is a lead sponsor of the Community News and Small Business Support Act, a bipartisan bill that would create tax credits for local publishers and advertisers.

Mike Blinder raised the issue of government interference with Richner and Waldman, who was also a guest on Blinder’s recent podcast. They responded, essentially, that the New York tax credit was worded in a neutral manner so that news organizations could not be punished for their specific content.

I agree that tax credits are about as neutral and arm’s-length as you can get in insulating journalism from government pressure. But it’s always going to be a challenge. Given that the New York credit expires after three years, you can be sure there will be a debate over whether to renew it as the expiration date approaches. That, in turn, will give politicians an opportunity to redefine eligibility requirements — and there’s always a possibility that some assessment of content might be part of that.

Still, the New York system seems like an experiment worth trying, and I’d like to see it spread to other states.

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Mike Reed, Gannett’s $3.9 million man, claims union ‘lies’ to his employees

It’s that time of the year when Gannett has to report how much it’s paying Mike Reed, the CEO of Gannett, the largest newspaper chain in the U.S. and the publisher of USA Today. Don Seiffert of the Boston Business Journal looked up the company’s annual proxy filing for 2023 and found that the answer to that question is $3.9 million, an increase of 14% (but still down from the $7.7 million he received in 2021).

A couple of other notable tidbits in Seiffert’s story:

  • “Median employee compensation fell last year by $179, a fraction of a percent, as inflation rose 3.4% over the same period.”
  • Although Gannett has been touting an upsurge of hiring, including some 500 newsroom positions, the company reported employing 3,200 journalists at the beginning of January 2024, down 100 from a year earlier.

Meanwhile, Gannett’s $3.9 million man has been blasting the NewsGuild, the union that represents many of his underpaid, overworked employees. “I think the Guild, unfortunately, plays dirty and lies to our employees,” Reed told Axios last week. And check this out: “Reed also accused the Guild of lying about the company cutting jobs ‘to increase profitability.’ He said that’s not true — ‘they’re designed to keep a newsroom in the market itself,’ he said.” Huh?

In response, Axios quoted from a statement by NewsGuild-CWA president Jon Schleuss, who said in part: “It’s a shame that Mike Reed is attacking journalists again instead of listening to them. If he did, he’d understand that the only sustainable future is to invest in the talented reporters, photographers and others who drive the company’s success — not enriching corporate executives and shareholders.”

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Kyle Munson on how nonprofit dollars are keeping for-profit Iowa newspapers alive

Kyle Munson leading a workshop at the Okoboji Writers’ Retreat in 2023. Photo by Doug Burns.

On our latest podcast, Ellen Clegg and I talk with Kyle Munson, president of the Western Iowa Journalism Foundation. The foundation was launched in August 2020, during the heart of the pandemic. It was a challenging time for newspapers. As we write in their book, “What Works in Community News,” the Storm Lake Times Pilot saw a real collapse in local advertising. Art Cullen, the editor, was worried about survival.

The foundation is set up as a nonprofit, so it can receive tax-free donations and philanthropic grants. In turn, it has doled out grants to small papers in western Iowa, including the Carroll Times HeraldLa Prensa and the Times Pilot. These grants were critical because the crisis in local news has hit rural areas hard.

I’ve got a Quick Take on The Associated Press, which is the principal source of international and national news for local newspapers around the country — and in many cases for state coverage as well. Two major newspaper chains, Gannett and McClatchy, have announced that they are going to use the AP a lot less than they used to, which will result in less money for the AP — and either higher fees, less coverage or both for their remaining clients.

Ellen looks at Outlier Media, a woman-led team of local journalists in Detroit. They formed a network called the Collaborative Detroit Newsrooms network to produce and share news for underserved populations. They’ve won a major international award from the Association of Media Information and Communication. Executive editor Candice Fortman traveled to Barcelona to pick up the juried prize.

You can listen to our conversation here and subscribe through your favorite podcast app.

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Gannett will use Reuters for international news and the AP for election returns

There’s a bit more nuance to the news that Gannett is dropping The Associated Press — nuance that wasn’t included in Ben Mullin’s initial tweets or in a follow-up story at The Wrap. New York Times media reporters Mullin and Katie Robertson now report that Gannett will use Reuters for international news and that it will continue to use the AP for election data. The McClatchy newspaper chain is cutting back on its use of AP journalism as well.

Credit where it’s due: Sophie Culpepper of Nieman Lab appears to have been the first to report that Gannett will use Reuters.

Three observations:

  • The news is not as bad as it first appeared. Reuters is a world-class news organization, and the AP is the gold standard for election returns.
  • You have to wonder what this will mean for the AP. Gannett publishes about 200 daily papers, anchored by USA Today. McClatchy, which is owned by a hedge fund, publishes in 30 markets and owns major papers such as The News & Observer of Raleigh, North Carolina; the Fort Worth Star Telegram, The Kansas City Star and The Sacramento Bee.
  • I find it odd that the initial statement from Gannett, reported by Mullin on Twitter/X, made no mention of Reuters or of Gannett’s continued use of the AP for election data. A bit of damage control perhaps?

Earlier:

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