Rebuild Local News – Media Nation

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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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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Illinois seeks to bolster community journalism. Plus, a local news round-up.

The Illinois Statehouse. Photo (cc) 2023 by Warren LeMay.

Illinois lawmakers this week unveiled a massive package aimed at bolstering local news. According to Mark Caro of the Local News Initiative, based at Northwestern University in Chicago, the package comprises two separate bills:

The Journalism Preservation Act would require Big Tech companies such as Google and Facebook to compensate news organizations for the content that they share, display or link to on their platforms. The Strengthening Community Media Act offers a broad array of incentives, tax breaks and scholarships intended to repopulate local newsrooms. Included in that bill is a provision that calls for 120 days’ written notice before a local news organization may be sold to an out-of-state company.

As I’ve said before, I’m less than enthusiastic about going after the tech platforms, which presupposes that they are somehow stealing journalistic content without paying for it. Facebook executives have made it clear that they can live quite nicely without news. With respect to Google, media outlets find themselves in the awkward situation of demanding compensation while at the same time depending on the search giant to drive traffic to their websites. Indeed, any one of them could insert a simple line of code in their sites that would make them invisible to Google. None of them does. I would like to see Google and Facebook do more for local news, and maybe it ought to be mandated. But this bill seems like too much of a blunt instrument, as does similar legislation being pushed by Sen. Amy Klobuchar at the federal level.

The second Illinois bill includes a number of different ideas. I particularly like the proposed requirement for a 120-day notification period. As Steven Waldman, the president of Rebuild Local News, said recently on the podcast “E&P Reports,” a mandatory delay can give communities time to rally and prevent their local newspaper from falling into the hands of chain ownership.

Other provisions of the Strengthening Community Media Act would mandate that state agencies advertise with local news outlets, provide tax credits to publishers for hiring and retaining journalists, enact additional tax credits for small businesses that advertise with local outlets, and create scholarships for students who agree to work at a local Illinois news organization for two years or more.

It’s good to see action taking place at the state level given that several federal proposals in recent years have gone nowhere despite bipartisan support. It’s also notable that the proposals were drafted by Illinois’ Local Journalism Task Force, which was created in August 2021. Here in Massachusetts, legislation was signed by then-Gov. Charlie Baker way back in January 2021 to create a commission that would study local news. I had a hand in drafting that legislation and would be one of its members, but the commission has yet to get off the ground.

There are several other developments in local news that are worth taking note of.

• Gannett is making a $2 million investment in its Indianapolis Star aimed at bolstering the newsroom and the advertising sales staff. Two top Gannett executives recently appeared on “E&P Reports” about Gannett’s plans to reinvest in its properties. Unfortunately, Holly V. Hayes of the Indy Star writes, “This is the only site in the USA TODAY Network, which includes more than 200 local publications across the country, where such an investment is being made.” My hope is that if the investment leads to a boost in circulation and revenues, then it will serve as a model for what Gannett might do elsewhere.

• A new hyperlocal news project has made its debut in Boston. The Seaport Journal, a digital news outlet, covers the city’s newest neighborhood. Meanwhile, the Marblehead Beacon, one of three independent projects covering that town, has announced that it’s ending regular coverage but will continue to “pursue periodic and unique pieces, and shift away from daily, weekly, or otherwise regular articles.” A reminder: We track independent local news organizations in Massachusetts, and you can find a link to our list in the upper right corner of this website. Just look for “Mass. Indy News.”

• Local access cable television plays an important role in community journalism by carrying public meetings, providing a platform for residents to make their own media, and, in some cases, by covering the news directly. Unfortunately, cord-cutting has placed access television at risk since stations’ income is based on a fee assessed to cable providers for each subscriber. In CommonWealth Beacon, Caleb Tobin, a production technician at Holbrook Community Access and media and a junior at Stonehill College, argues in favor of Massachusetts legislation that would impose a 5% fee on streaming services. “While often viewed as a relic of the past,” Tobin writes, “the services that cable access stations provide are more important now than they’ve ever been.”

• Many thanks to Tara Henley, host of the Canadian podcast “Lean Out,” who interviewed Ellen Clegg and me about our book, “What Works in Community News.” You can listen here.

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Gannett is ramping up on the advertising and editorial sides — but will it last?

For a long time I’ve heard an alternative explanation for why newspaper advertising collapsed over the past 15 years. The argument goes something like this: Yes, Craigslist, Google and Facebook offered a better deal and took most of the ads that used to belong to newspapers. But newspapers themselves were to blame, too. Ad salespeople had become so accustomed to sitting at their desks and taking the orders that came pouring in that they actually had no experience or incentive to get out and sell. The tech platforms were going to have a devastating effect on them in any case, but it was worse than it needed to be, so this argument goes, because they couldn’t shake themselves out of the lethargy that came with many years of enjoying a monopoly or, at worst, a duopoly.

Which is why there’s some reason to be at least a little bit hopeful about the latest moves by a large media company that is hiring on both the business and editorial sides. At a time when many news organizations are in the midst of laying people off (CNN, The Washington Post, the Los Angeles Times) or shutting down (The Messenger), one media mega-corporation that is a household name is taking the opposite approach.

Would you believe it if I told you that the company is Gannett? The chain, which controls about 200 daily papers, anchored by USA Today, is rightly known for hollowing out newsrooms and using the savings to pay down debt and enrich their owners and top executives. These days, though, they are talking about trying something different.

Recently Mike Blinder of Editor & Publisher had two top Gannett executives on his podcast, “E&P Reports” — the chief content officer, Kristin Roberts, and Jason Taylor, the chief sales officer. After years of cutting at Gannett and the chain that it merged with several years ago, GateHouse Media, Gannett is now in expansion mode. Taylor said that Gannett has hired about two dozen local general managers since last August, with plans to hire more. These are the folks who are in charge of selling advertising, and they say it’s paying off with new accounts and with the return of some old accounts that left years ago.

Meanwhile, Roberts said that Gannett has hired 500 journalists since June of last year, with more to come in the months ahead. These are reporters, editors and visual journalists who, she said, will “bring strength back to local newsrooms, so that they can do the job of strengthening their local communities.” And yes, she mentioned the reporters that Gannett hired to cover Taylor Swift and Beyoncé, so make of that what you will.

Now, of course we should be skeptical. Axios has reported that the combined company eliminated fully half of its 21,000 employees after the 2019 merger, and the destruction it has wreaked in the communities it supposedly serves has been deep. I would love to hear from Media Nation readers whether they’ve seen any improvement in their Gannett paper’s coverage of local news in recent months.

The situation is especially dire in Eastern Massachusetts, where Gannett has closed and merged dozens of weekly papers and replaced local news stories with regional content from around the chain. Weeklies were at the heart of GateHouse, but the new Gannett doesn’t seem to have any interest in weeklies. If improvement is going to come, I suspect, it’s going to be at the dailies.

It’s also fair to be skeptical about whether the current upsurge is sustainable. Roberts and Taylor were recruited at a moment when the executives at the very top of Gannett decided to see if a little expansion might bring in more money than round after round of cuts. If it works, great. If it doesn’t, well, we know that the cutting will resume. Gannett remains heavily burdened by the debt it took on when it merged with GateHouse, which led the new Gannett to cut half its workforce.

The hiring that’s taking place now doesn’t come close to making up for what has been lost. But if they succeed, perhaps the hiring will continue.

• Blinder has been on a roll with his podcast. His latest features Steven Waldman, the president of Rebuild Local News, and Jeff Jarvis, a journalist, author and the retiring director of the Tow-Knight Center for Entrepreneurial Journalism at City University of New York. The discussion was billed as debate over whether legacy media is worth saving or if instead it’s time to let them go. They agreed more than I thought they would, though they diverged when the discussion turned to government assistance and efforts to force Google and Facebook to compensate news organizations. It’s well worth a listen.

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Alden buys four papers in Pennsylvania. You’ll have no trouble believing what happened next.

The historic Scranton Times building. Photo (cc) 2022 by Jeffrey Hayes.

Last summer came horrifying news from Scranton, Pennsylvania: the notorious hedge fund Alden Global Capital was buying the Scranton Times-Tribune and three sister papers from the Lynett family, the local publishers going back to 1895. The sale was taking place even though those members of the family who actually ran the papers opposed it. They were outvoted by other members of the family who simply wanted to cash out and get on with their lives. Ellen Clegg and I talked about it at the time on the “What Works” podcast.

What happened next was predictable and depressing. Washington Post media columnist Erik Wemple traveled to the Scranton area recently and filed a long, sad report about what he found (free link). The lowlights:

The news staff, already down to 40, a steep decline from 90 in the late 1990s, was immediately cut by another 10, with employees offered voluntary buyouts if they would just go away.
Newsrooms in Wilkes-Barre, Hazleton and Pottsfield were put up for sale. The Scranton Times’ headquarters was abandoned in late November, with journalists being told that most of them would be expected to work at home.
Some customer service calls were outsourced to the Philippines.

Almost immediately, Wemple writes, editorials about local and state issues were replaced with generic national content, which is exactly the opposite approach that researchers Joshua Darr, Matthew Hitt and Johanna Dunaway found is helpful in reducing political polarization. As Darr told Ellen in 2021:

It’s important for people to be able to express their opinions on national politics, and there are myriad ways to do that. But I don’t think there’s necessarily a good reason for local newspapers to devote some of their precious op-ed page space to things that aren’t local. I think they should be maximizing their comparative advantage in the marketplace by giving people things that they can’t get anywhere else.

There’s no question that the Pennsylvania papers were facing real challenges. As Wemple reports, paid circulation and advertising were both in a tailspin, and the Lynett family understandably was tired of subsidizing losses. But it didn’t have to end like this. Perhaps the best solution would have been for a local nonprofit institution to purchase the papers, as is the case at another Pennsylvania paper — The Philadelphia Inquirer, a for-profit entity owned by the nonprofit Lenfest Institute.

Steven Waldman, the president of Rebuild Local News, has proposed tax incentives and other measures to prevent newspapers from falling into the hands of cost-slashing chains. Unfortunately, such steps would not have come in time to save the Lynett papers.

Sadly, based on Wemple’s story, it doesn’t sound like much of an effort was made to find a buyer that would have operated the papers for the benefit of the public rather than for Alden’s wealthy investors. I just hope that some of the journalists who have lost their jobs will fight back by starting their own venture, as is happening in community after community across the country.

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Journalism, public goods and the free rider problem

Watchdog journalism at its finest. Photo via Needpix.

One of the arguments that often comes up in discussions about how to pay for news is that journalism is a “public good.” I was thinking about this last night when I read Rebuild Local News president Steve Waldman’s latest piece in The Atlantic, in which he observes that journalism often saves more money than it costs. He cites some notable examples, including a ProPublica investigation that led to $435 million in fines and reporting by MLK50 in Memphis, Tennessee, that resulted in the cancellation of about $12 million in debt owed by hospital patients.

This is the very definition of a “public good.” When economists talk about a public good, they mean something similar, but not identical, to what we lay people mean. You and I might simply mean that a public good is good for the public, as tough, ethical journalism surely is. But what economists mean is that it’s also something that benefits the public whether they pay for it or not. Here’s how Investopedia puts it: “The two main criteria that distinguish a public good are that it must be non-rivalrous and non-excludable. Non-rivalrous means that the goods do not dwindle in supply as more people consume them; non-excludability means that the good is available to all citizens.” Thus, a public good carries with it a free rider problem.

This is what I wrote about public goods in my 2013 book “The Wired City”:

In economic terms, a public good is something that benefits everyone, whether each of us pays for it or not — which, perversely, creates incentives for us not to pay. That is why we must pay taxes rather than make voluntary contributions to fund national defense. “Public good” is a phrase that also comes up a lot in discussions of why it is so difficult to fix the news business. For example, the local newspaper reports that members of the school committee are taking bribes from a bus company with a record of safety violations. As a result of that reporting, those committee members are removed and prosecuted. Schoolchildren are safer. Yet people who don’t buy or even read the paper benefit just as much as those who do. Thus, there needs to be a way to pay or such journalism outside the for-profit, advertiser-based context that worked reasonably well until a few years ago. Seen in this light, community journalism is a public good that deserves funding beyond what the market is willing to pay.

The problem is that when tax money is used to fund journalism, it can create a conflict that interferes with the independence needed for a news organization to fulfill its role as a monitor of power. Watchdog reporting is difficult when the institutions you’re holding to account are also providing you with the money you need to operate. That makes journalism very different from the fire department, schools or public works, all of which may accept public money without any such conflicts.

In his Atlantic piece, Waldman advocates for tax credits for local publishers and advertisers, a variation of an idea that he’s been promoting for several years that was recently revived in the form of the Community News and Small Business Support Act, which I wrote about a few weeks ago. Now, tax credits are sufficiently arm’s-length that they don’t present much of a threat to journalistic independence. But the very fact that such indirect government assistance is being talked about helps illustrate why news isn’t just good for the public — it’s also a public good in every sense of the term.

At one time there was so much advertising money supporting journalism that we didn’t need to think about such things. These days, news has morphed from a highly profitable enterprise into a classic public good. It makes sense for us to find ways to fund that public good as long as we can do so without undermining the very qualities that make it a public good in the first place.