Government subsidies for the media, which are not widely known but are a long-running source of revenue for publishers, are quietly vanishing just as the industry is struggling to remain commercially viable, according to a new report released Thursday.
The report from the USC Annenberg School for Communications & Journalism points out that postal subsidies for the publishing industry have dwindled to nearly nothing, and many government agencies are preparing to shift public notice advertisements to the Web, cutting out an important revenue stream for newspapers.
The report was written by David Westphal, a senior fellow at the Annenberg School and former Washington editor for McClatchy Newspapers, and Geoffrey Cowan, Annenberg's dean emeritus and a former director of Voice of America, the federally funded broadcaster.
They did not put a dollar figure on what the government contributes to media companies' revenue. But they say the falloff is a matter of life or death for some publications.
Postal subsidies, for instance, put in place by the Postal Act of 1792 to foster the spread of information, used to cover 75 percent of the cost of mailing periodicals, according to the report. But the Postal Reorganization Act of 1970 and subsequent tweaks to the law have reduced that figure to 11 percent.
"Magazines that would still be profitable under the arrangement established by our founders are now closing at a precipitous rate," the report says.
Even recent changes to postal law have threatened some magazines. A subsidy cut in 2007 hit small-circulation titles including The Nation, which saw its postage costs rise by about $500,000 a year and had to ask readers for donations to cover the cost. The left-leaning magazine has about $12 million a year in revenue and a circulation of 168,000, according to the Audit Bureau of Circulations.
"The government used to subsidize journalism much, much more that it does now," said Teresa Stack, the magazine's president, "And now you've got journalism really in crisis."
More than a dozen newspapers or newspaper companies have filed for Chapter 11 protection since the start of the recession. High-profile magazines including Gourmet have succumbed to staggering advertising declines and closed shop. Recession aside, publishers have suffered because they haven't found a way to make as much money online as they did in print.
Whether the government should step in to finance news coverage is a question many people in the media business have asked. But some publishers have argued that government support is not a desirable solution — for media companies or the public.
In an op-ed published by The Wall Street Journal last month, News Corp. Chairman Rupert Murdoch argued that government aid may actually be a threat. "The prospect of the U.S. government becoming directly involved in commercial journalism ought to be chilling for anyone who cares about freedom of speech," he wrote.
The Annenberg report seeks to rebut this kind of criticism, and points to the Journal in particular as a major recipient of government support.
The authors conducted a four-week study and found the government was the top ad buyer by column inches for the Journal through its seized-property notices. That doesn't necessarily mean the government spent more money than other advertisers, because color display ads generally cost more to place in newspapers. Still, the Journal did feel the potential payoff was enough to go to court in Virginia last year to try winning a piece of the local government notice business there. A spokeswoman for the newspaper declined to comment on the report.
The study pointed to a National Newspaper Association report from 2000 that estimated public notices accounted for between 5 percent and 10 percent of community newspaper revenue.
And it warned that the Web could crimp legal notice revenue as well. The Justice Department, for instance, said last year that it would put asset forfeiture notices online and save $6.7 million over the next five years.
The report's authors don't necessarily view that kind of government savings as a bad thing. Rather than simply restoring the old subsidies, they recommend the federal government find new ways to step in, including a "dramatic" increase in funding for public broadcasting.
"I don't know that we can argue that a local school board that says, `We can put our notices online and save $100,000 and thereby save two jobs for teachers' is wrong," Cowan said in an interview. "Our position is, let's be honest about what's happening and take account of it."
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