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Published in The Daily Post on June 14, 2010

A bad idea for newspapers

The Federal Trade Commission (FTC) wants to "re-invent" the news media. In a May 24 report, the agency proposed various options for rescuing journalism, most notably taxing websites like the Drudge Report or Huffington Post that link to the news of the day. The government would then give the money to newspapers as a subsidy.

We urge the FTC to drop this terrible idea. A press funded by the government will become tame. A don't-bite-the-hand-that-feeds-you attitude will take over the newsroom. Reporters will stop asking officials tough questions. Controversies won't be exposed. Readers will be kept in the dark.

Corporate welfare

Unfortunately, the government is already subsidizing some news organizations.

For instance, in January the Palo Alto City Council threw a lifeline to the Palo Alto Weekly. Council decided to pay the Weekly as much as $450,000 over the next three years for legal notices and other advertising (See council minutes, page 71 and see this April 5, 2010 city manager's report). We could understand if the city were to spend a few thousand dollars with the Weekly, but a six-digit figure reeks of a subsidy.

Another example of the government subsidizing the media concerns MediaNews Group, the owner of the San Jose Mercury News, Palo Alto Daily News and San Mateo County Times. Last year at this time, MediaNews was circling the drain. Chief executive Dean Singleton was laying off employees and cutting the pay of those who remained in a desperate scramble to avoid defaulting on nearly $1 billion in debt.

Singleton's bailout came in January when MediaNews filed for Chapter 11 bankruptcy. The bankruptcy was "pre-packaged," meaning that he got his creditors to agree in advance that they would reduce his debt from $930 million to $165 million.

Why were they so generous? His creditors were mostly banks that had received TARP (troubled asset relief program) money from the federal government's Wall Street bailout. The banks were required to use the TARP funds to clean up their balance sheets by writing off bad debt, such as money MediaNews owed.

Honest competition

As for the Daily Post, we don't want a handout or subsidy. We would rather operate in a free marketplace, where our competitors don't get subsidies and consumers pick the winners and losers.

The Founding Fathers knew the press and government must remain separate so that the press could serve as a check on government. As a result, we have the First Amendment. Subsidies short-circuit the First Amendment and turn news organizations into shills for the government.


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