Uncle Sam Unlikely to Back Handouts for Newspapers

U.S. newspaper companies will probably get little help from the government after the Federal Trade Commission completes its review of the industry, says a person with knowledge of the agency's plans.

The FTC is reviewing more than a dozen ways that the government could assist newspapers. The agency has held public workshops and is due to publish a report this fall. Its recommendations are likely to exclude subsidies or new taxes to support newspaper companies such as New York Times Co. (NYT) and Washington Post Co. (WPO), said the person, who asked not to be named because the proposals aren't yet finalized.

FTC officials won't back financial aid because Congress is unlikely to approve it, the person told Bloomberg Businessweek.com. The government has faced criticism for bailing out carmakers and banks and is now dealing with a potentially expensive oil spill in the Gulf of Mexico.

"Most everything they suggested is politically untenable," says Jeff Jarvis, director of the interactive program of journalism at City University of New York, referring to proposals presented to the FTC.

The FTC called for ideas addressing the future of newspapers in response to a decline in their financial health, which has resulted in thousands of journalists losing jobs and has forced some publications to shut down. Newspapers face falling readership and slumping ad sales amid ever-intensifying competition from websites.

Small Business Administration loans?

"We should be willing to take action if necessary to preserve the news that is vital to democracy," FTC Chairman Jon Leibowitz said in December, during the first of three public workshops on the issue. The final meeting, scheduled for June 15, is set to feature testimony from academics as well as executives from Gannett (GCI), the Associated Press, and the Newspaper Association of America.

Instead of proposing financial aid for newspapers, the FTC may recommend that the Small Business Administration expand its program to provide loans to news startups, the person said. The commission may also propose tax benefits for so-called hybrid news organizations, which are modestly for-profit while avowedly pursuing the public good. Peter Kaplan, an FTC spokesman, declined to comment on the agency's plans. "We hope to issue a report in the fall, but it may or may not have any policy recommendations," he says.

The FTC has little authority over the newspaper industry and its recommendations would need to be approved by Congress to go into effect. Lawmakers may or may not choose to side with the commission's suggestions.

Last month the agency released a list of "potential policy recommendations," including the imposition of new taxes on consumer-electronics devices, TV advertising, and broadcasters' overall sales.

The idea met with opposition from the technology industry. A tax would hurt sales of computers, phones, and other Web-connected electronics, says Gary Shapiro, president of the Consumer Electronics Assn., which represents about 2,000 companies, including Hewlett-Packard (HP) and Motorola (MOT). "Innovation has winners and losers," he says. "We didn't tax car companies to protect horses. The whole thing is absurd. If this gets serious, we'll come out with all guns blazing."

Murdoch opposes federal intervention

Newspaper ad sales fell 27 percent, to $27.6 billion, last year as Craigslist and Google (GOOG) ate into their classified revenue and blogs and news sites cut into their circulation, according to the Newspaper Association of America. Almost one in five journalists working for newspapers in 2001 is no longer there, according to Pew Research Center's 2009 report. "Newspapers do not expect a whole lot of help from the government," says John Sturm, CEO of Newspaper Association of America. "We've never sought or asked for anything like a bailout."

News Corp. (NWS) Chairman and Chief Executive Officer Rupert Murdoch in December warned against the "heavy hand" of federal intervention, saying newspapers could be harmed by overregulation or efforts to subsidize the industry. Robert Christie, a spokesman for New York Times Co., declined to comment, as did Rima Calderon, a spokeswoman for Washington Post Co.

The FTC will not advocate major changes to copyright laws, another controversial component of recent discussions, the person said. Ideas that have been considered include requiring Internet service providers to collect a $5-to-$7 fee per subscriber to be distributed to copyright owners. A further proposal called for news aggregator sites such as Google News to pay content owners for running bits of their stories, including headlines.

"It would be a terrible idea because it will cut down on the amount of dialogue that occurs online," said C.W. Anderson, a fellow at advocacy New America Foundation, chaired by Google CEO Eric Schmidt.

The Federal Communications Commission plans to release its own report on the state of the media industry by yearend. The FCC is examining if it should let TV broadcasters merge with newspapers that operate in the same market. "We are looking for ways to improve the provision of local information to people," says Steve Waldman, a former journalist who heads the FCC's effort. "We are taking a holistic look of what needs to be updated."

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