FTC draft study proposes massive bailout of newspapers

By Joseph Smith

The FTC has issued a discussion report on rescuing the failing newspaper industry, labeled as "The Reinvention of Journalism," Fox News reports.

An NYU journalism source speaks for critics of the FTC draft:

The problem with this is that the FTC is trying to set an agenda here, that some sort of government intervention is necessary. It's a power grab by the FTC and it's also an example of one old power structure circling its wagons around another.

The FTC draft covers the well-trod ground of declining newspapers, the rise of the internet and the concern that a sustainable business model for newspapers is not on the horizon.

Just before leaping into the waters of government-knows-best intervention, the FTC authors ask a series of rhetorical questions:

How susceptible is the proposal to creating bias - in terms of news platforms or government interference? How likely is the proposal to create unintended consequences?

Uh, well, let me count the ways...

The FTC rescue proposal includes changes in copyright and anti-trust laws:

·        Tighten copyright law on news aggregators and fair use restrictions

·        Strengthen laws on the "hot news doctrine" whereby facts gathered at considerable expense are protected from "free-riding"

·        Expand antitrust exemptions to allow news organizations to jointly agree to build copyright or licensing walls

New funding sources suggested include:

·        Expand the copyright office to enforce a license fee on content downloads, similar to that in the recording industry

·        Increase funding for public broadcasting

·        "Establish a ‘journalism' division of Americorps," complete with cub reporters on the government payroll

·        Add a tax return check box, a fund for local news, increased postal subsidies and university grants for investigative journalism

Naturally there are a slew of new tax proposals, including taxes of five per cent on consumer electronics, seven per cent on broadcast spectrum, two per cent on advertising sales and three per cent on cell phone ISPs. The draft estimates those taxes combined would raise $20 billion or more annually.

A further assortment of federal tinkering would include:

·        Redefine tax-exempt status to aid news providers

·        Increase interactivity and access to government databases

·        Allow journalists to use "excess capacity" in government computer centers

The draft report discusses at length "benefit corporations" and "socially-oriented" LLCs, a so-called "fourth sector" of organizations.

The concept of benefit corporations, already law in Maryland, provides for tradeoffs between profit and public benefit. Investments in newspapers, for example, could be measured as an educational resource for the public benefit. From the FTC draft:

This model could allow news organizations to choose higher standards of journalism over greater profitability. For example, local community lenders for whom a modest profit would suffice might be willing to invest in a "Flexible Purpose" news organization that would provide high-quality journalism for the community.

Dan Gainor of The Media Research Center, quoted in the Fox column, observes that

The mere fact that they're holding these hearings is the beginning of the problem...They should have no hand in the future of journalism...No one is going to support a tax to support old newspapers.

The Obama FTC is attempting to commit the liberal press to permanent, government-run life support, with the federal monolith and the state-funded press each supporting the other in perpetuity.

Let's see, raise taxes, reduce competition, expand government, drain the profit, control the news...

Music to Obama's ears.