Several industries have benefited from government bailouts since the start of the latest economic slump. Some people have suggested that the newspaper industry should get similar help. Rick Henderson, managing editor of Carolina Journal, discussed the subject recently with Donna Martinez for Carolina Journal Radio. (Click here to find a station near you or to learn about the weekly CJ Radio podcast.)
Martinez: You have a vast array of experience in the newspaper industry. In fact, at one point you were working for the Rocky Mountain News, which has gone under. Tell us your assessment of the traditional newspaper industry. Where are they today?
Henderson: They’re in trouble right now because the three linchpins of advertising revenue for newspapers are in trouble. You have classified advertising, which has largely migrated to the Internet. You have retail advertising from large retailers, like department stores, furniture stores, that sort of thing. They’re in trouble. And then you have auto dealers. So you have situations in which the primary revenue sources for newspapers are not producing the sort of income that the papers need to survive. What they’re doing is, they are reducing circulation, they’re laying off staff members, they’re shrinking their newsrooms. And as a result, coverage is suffering, the papers are shrinking, and so it’s harder to motivate people to send that $15 a month if what they’re getting was smaller than the Sunday supplement that they received about a year or so ago. So they’re in a situation where the cycle is going downward and it’s really hard to see how it comes back.
Martinez: We are now starting to hear some conversation, not only in the industry itself, but among lawmakers — well you know, the newspaper industry, it’s vital to the society that we live in, and they are too important to fail. And we’ve heard a similar phrase previously — too big to fail — that was applied to banks and insurance companies. So what’s happening here? Is there a growing movement, growing support, for sending federal dollars into what up to now has been private industry?
Henderson: There’s discussion about that, and it’s very disturbing because, if you think about it, the government and the media are supposed to be at odds with each other.
Martinez: Exactly.
Henderson: The media is supposed to be, if you will, the fourth branch of government, fourth estate, if you will — the fourth check and balance that’s in our system. And all the sudden, because newspapers are in trouble, you hear newspaper owners — not surprisingly, as Adam Smith would have told us — newspaper owners lobbying for federal, or for some sort of government support, to help them against competition. The competition in this case quite often being new media sources, such as Web-based news sites, talk radio, cable television. Those other sorts of sources that had been competitors in the past now pose a larger threat because of the newspapers’ revenue model, and their annual double-digit profit margins have evaporated.
Martinez: In fact, we are now at the point where there is actual legislation, federal legislation, that has been introduced. You have Sen. Ben Cardin, a Maryland Democrat, and also Congresswoman Carolyn Maloney of New York. They are supporting something called the Newspaper Revitalization Act of 2009. Essentially, their argument seems to be [that] we can’t let these papers go under. So this is moving forward.
Henderson: It is. It’s moving forward. And I think the problem is that there is a disconnect among people who are advocating this — not just the newspaper owners. Oddly enough, some people who are media analysts and media participants —Dan Rather is one person who has been in favor of this sort of action. It’s very puzzling to me, not only because of the historical nature of the fact that the press and the government are not supposed to be partners but, secondly, the fact is that there’s this notion that somehow there’s an entitlement for there to be a New York Times or a Washington Post. That somehow or another CBS News and The New York Times are mentioned in the First Amendment. Well, they’re not.
Martinez: Right.
Henderson: They’re not. And so the idea is that the government has to keep these existing institutions alive, even if they’re no longer viable, even if their business model doesn’t work anymore. And I find that very disturbing. For one thing, because in a free market economy, if something, if some provider isn’t offering consumers what they want at a price they can afford to pay, then that provider goes out of business and is replaced by something else which actually serves consumers better. But this notion now is that, no, newspapers are so important — not just newspapers; the newspapers that now exist — are so important that they can’t be allowed to fail. And I just find that very alarming, and it’s not good for public discourse in this country.
Martinez: President Obama has said that, in general, he’s happy to look at this type of legislation. He has not committed to supporting anything specific, but the mere fact that the President of the United States is open to it should raise some red flags as well. When I was in journalism school, Rick — and, granted, this was a few years ago now, unfortunately…
Henderson: Same for me.
Martinez: But I learned that, as a journalist, you were supposed to automatically be skeptical of what any government entity was telling you, and that watchdog relationship —there was a natural tense relationship in that there should be a tense relationship between government and any sort of journalistic enterprise. But that seems to be going away.
Henderson: The danger is, if, for instance, something like this bill were to become law — and what this bill would essentially do would be to give newspaper companies special tax treatments if they reformed as nonprofit s— if they got the same sort of 501(c)(3) protection that the John Locke Foundation gets, for instance, they would essentially have an additional lifeline. The problem with that is, as anyone who works for a nonprofit knows, that’s involved in public discourse, if you say or do something that is perceived to be at odds with some government policy, is perceived to be in any way partisan, then the government can step in and say stop that. I mean, you have situations with churches, for instance, that have been involved in alleged political activities that the government has said, we can take away your nonprofit status, we can remove that ability for you to continue to raise money as you do through tax-exempt donations. So what’s going on is that you’ve essentially got the situation where the government can dictate content, and that is entirely at odds with the First Amendment.
Martinez: Let’s talk a little bit about how Carolina Journal operates and the funding mechanism. You are the managing editor, and the John Locke Foundation, which publishes Carolina Journal, is a nonprofit organization. So where does the money come from to publish Carolina Journal?
Henderson: The money comes from donors. It comes from some family foundations and corporate foundations. And so we receive money from individual contributions from people who want to support the cause. This is not unusual. This is the sort of thing that happens in other states, not just North Carolina. It happens nationally. Organizations like the Reason Foundation, which publishes Reason magazine, the nonprofit that publishes National Review and The Nation and The New Republic, those institutions, they receive — they’ve got this nonprofit status. The reason they do that, rather than being for-profit entities, is that magazines typically don’t make money. … With the Locke Foundation and Carolina Journal, our donors believe that our mission and our message of free markets, limited government, personal responsibility, is worth supporting, and we’ve decided to produce a media outlet to bring this information to the public.
Martinez: So then, those current entities who are having trouble, couldn’t they go out and just try to raise private funds to support the work they’re doing?
Henderson: Many of them are publicly owned companies, I’m sure. They try to raise capital, try to get shareholders to support them, and try to get some other way, besides the traditional advertising model.