Too Liberal To Fail?

On June 15, the Federal Trade Commission will be holding round-table discussions about “POTENTIAL POLICY RECOMMENDATIONS TO SUPPORT THE REINVENTION OF JOURNALISM.”

The FTC document has been a year in preparation, and although prominent members of the Main Stream Media contributed to its writing, the general public knows little if anything about it.

The policy recommendations that comprise the document can accurately be described as a many-tiered attack on the First Amendment. It appears that some members of the 4th Estate are willing to trade an independent press for federal help in preserving MSM dominance and, not incidentally, obtaining a place at the government trough. The rationalization being that news is a “public good” and, in an uncertain and rapidly changing market, journalism needs subsidy and supervision.

The FTC explains:

Journalism is moving through a significant transition in which business models are crumbling, innovative new forms of journalism are emerging, and consumer news habits are changing rapidly. … Although many of the issues confronting journalism cut across different news media platforms, such as broadcast television and radio, most of the discussion in this document will use the perspective of newspapers to exemplify the issues facing journalism as a whole.

According to the FTC document, newspapers cannot survive this transition without government help. The FTC does not mention publications that have adapted to the new environment and are thriving. The Wall Street Journal, for example, is facing the same challenges but, as of June, already has over 10,000 paid iPad subscribers.

The premise that newspapers must be saved is bogus.

Newspapers, similar to the horse and buggy, have been displaced by technology. Customers don’t want to wait for tomorrow’s paper to hit the driveway when television and the Internet track events in real time. Newspapers, like any industry, must either adapt to economic reality or join the purveyors of buggy whips, typewriters, and carbon paper on the proverbial ash heap of history. The argument that no newspaper can make a successful transition to online distribution is false. Some will fail, and in the process ensure greater value to those that remain.

News is not a public good.

It costs money to produce. It has value. If the information has sufficient value or perceived value, people will pay for it as they now pay for subscriber-only news outlets on the Internet. If newspapers fail, demand for other reliable sources of information will increase and other entities will emerge to supply it. What we have here is a manufactured crisis. But, in the brave new world of the Obama administration, government solutions  (to real or fabricated problems) are preferable to allowing the free market to work.

The authors of the FTC document worry that…

… Consumer demand for public affairs reporting in particular may be suboptimal, because citizens may decide their votes are unlikely to make a difference and therefore may choose to be “rationally ignorant” of public affairs.

This statement is absurd on its face. At no point in the history of the world has it been easier to obtain information or has the barrier to journalism entry been lower. While this means that there is more chaff to sift through when consuming information, the tools to do so are ever improving, and the demand for such tools is growing.

The FTC document begins with assurances. These are tentative conclusions concerning the current and likely future environments for news gathering and reporting, and only potential policy recommendations” … not final conclusions or recommendations;  but are solely for purposes of discussion…

It is far more likely that the FTC paper is a trial balloon, which, unless promptly deflated, will be legislated.

So, because few people want to read newspapers, and newspapers can’t figure out how to make money, the FTC document conveys a sense of urgency:

it is not too soon to start considering policies that might encourage innovations to help support journalism into the future.

However, there are difficulties to overcome. Because news is non-tangible, and non-excludable, it’s nearly impossible in the current world to prevent ‘free-riding’ and difficult to ensure that producers of public goods are appropriately compensated. (Apparently, the government will now determine what constitutes appropriate compensation.)

What are these policies that we should be considering?  Read all 47 pages of proposals. Among them are the usual culprits: pricing (taxation), licensing, and regulation, or some combination of all three.

Under one proposal, the Copyright Act would be amended to protect “Hot News.”  The details of how this would be accomplished are not available, but the idea is to grant copyright protection to the actual facts of the story – not just the format in which it appears. The FTC notes this would present access problems for commentators, columnists and editorial writers, among others.

Also recommended are anti-trust exemptions, which would allow news organizations to agree jointly to erect pay walls so that consumers must pay for access to online content.  Of course that would be effective only if it can be accomplished industry wide. It is admitted that easing antitrust laws could put ‘smaller, emerging media companies at a distinct competitive disadvantage.

Outright subsidy of newspapers is also considered. The paper cites The Corporation for Public Broadcasting as a noble example of government media support. The quote is from CPB’s own puffed up version of public benefits: The fundamental purpose of public service media is to provide programs and services that inform, enlighten and enrich the public….CPB … programs and services … are educational, innovative, locally relevant and reflect America’s common value sand cultural diversity. Truth to tell, CPB competes with other news organizations that are not subsidized. Deprived of those subsidies, on a “level playing field,” CPB might just go the way of Air America. However, that proposition will never be tested because ending subsidy is not an option. As expected, a substantial increase in federal support is recommended.

Then there is the proposal to establish a journalism division of AmerCorps… the federal program that places young people with nonprofits to get training and do public service work. Imagine, journalists trained to propagandize for whatever “public good” the government wants to declare.

Journalists also get their very own jobs program under a proposal to….
Provide a tax credit to news organizations for every journalist they employ. This could help pay the salary of every journalist.

A national Fund for Local News is also recommend, created with money the Federal Communications Commission now collects from or could impose on telecom users, television and radio broadcast licensees, or Internet service providers and which would be administered in open competition through state Local News Fund Councils.

Of course the Councils would determine who may compete.

The Washington Times said it best in a recent editorial:

The conflict of interest in having the government pay or contribute to a newsman’s salary could not be more obvious. Reporters and columnists would have little incentive to offer critical analyses of tax increases that might mean a boost in the pocketbook. Once Congress has the power to fund the news, it can at any time attach “strings” designed to promote certain viewpoints – in the name of fairness, of course.”

Another proposal would confer tax-exempt status on news organizations that meet IRS criteria. News gathering and reporting is not specifically listed as a tax-exempt purpose, but it may be considered to have educational or literary purposes.

Licensing the news is also proposed.

… amending the copyright laws to create a content license fee (perhaps $5.00 to $7.00) to be paid by every Internet Service Provider on each account it provides. This would require a new division of the Copyright Office, which would operate under streamlined procedures and would collect and distribute these fees.

Streamlined procedures? One can only imagine the thicket of regulations that would be erected to keep providers the bureaucracy considers unworthy from obtaining a license. Later in the paper it is stated that this amounts to a tax on every single person who accesses the Internet. The ramifications of compulsory licensing are explored.

A compulsory license places an effective tax on certain conduct.   In the context of the news, this raises numerous questions about what conduct, entities, or utilities to tax, at what rate, and on behalf of what entities. The particulars of such a scheme have not been specified for the news, and many have expressed concerns about the unintended consequences of mandatory licensing. Mandatory licensing fees for news content raise complex issues related to the hot news and fair use doctrines, and the extent to which access to information about the news should be constrained by proprietary rights or fees. Moreover, licensing raises complicated questions about how to calibrate fees to properly balance the interests of copyright holders and fair use by others.

However, as congress and the president demonstrated when Obama Care was imposed – where there is a will, they will find a way.

All of the recommendations will cost money, and that is the justification for using the tax code to impede access to other means of communication. These include a 5 percent tax on consumer electronics, an ISP-cell phone tax on monthly ISP-cell phone bills to fund content they access on their digital service.  The authors submit, This is the least desirable approach because demand for these services is “elastic” and even a slight rise in price could result in people dropping the service. Disclaimer aside, it’s a perfect storm.

The First Amendment protects the free flow of information because the Founders believed an informed electorate is essential for representative government. If the powers outlined in these proposals become law, First Amendment protections would cease to exist. It requires only a rudimentary knowledge of history to understand that information has ever been the enemy of despotism.

On more than one occasion the president has expressed dismay and even anger when his policies came under journalistic fire from Fox News, Talk Radio and Internet commentaries. He is nettled when such entities expose his rendition of facts as less than accurate.

Does anyone really believe that given the powers outlined in the policy recommendations to support the reinvention of journalism, government will not suppress free speech or limit the public’s access to information?

We didn’t think so.