Act of 1970 and in subsequent cutbacks. But the Post Office still discounts the
postage cost of periodicals by about $270 million a year.
Postal subsidies, though, are just the start of the story. Federal and
state governments forego about $890 million a year on income and sales tax breaks
to the newspaper industry, most of it at the state level. The actual figure is
probably much higher because many states don't report tax expenditure details.
Another major form of government support comes through public-notice
requirements, which also have their roots in colonial America. These laws require
cities, counties and school districts, along with state and federal agencies, to
buy advertising space in newspapers to disclose a range of government actions\ufffd
such as plans for a new school. Take a look at the Wall Street Journal, for
example, and you ll usually find a page or more of federally paid and mandated ads
\ufffd
in impossibly small print -- announcing property seizures. Those are public
\ufffdnotices, and nationwide they bring in hundreds of millions of dollars in revenue.
But all three of these categories are shrinking. For example,
legislation has been introduced in 40 states to move public notices to the Web,
and the Department of Justice has already announced it will shift property-
forfeiture notices from newspapers to its own Web site. The impact would be
another blow to newspapers, especially small ones: In 2000, the National Newspaper
Association estimated that public-notice billings accounted for 5-10 percent of
newspaper revenue.
Surprisingly, the authors don't mention three other virtual subsidies,
each of them applied in California as in most other states.
The federal Newspaper Preservation Act of 1970, reportedly signed by
\ufffd
President Nixon as a reluctant favor for the editorial support of the Hearst
newspaper chain in his 1972 re-election campaign, which allowed daily newspapers
in the same city San Francisco and many others to combine their business
\ufffd
\ufffd
operations (advertising, production, circulation) into a single joint enterprise,
sharing the revenue under a "joint operating agreement" (JOA) while preserving
their independent reporting and editorial work under their own mastheads. The law
thus exempted the JOA partners from the antitrust laws, which otherwise would have
prohibited pooling of enterprise between such competitors. The typical effect was
to give the weaker of the pair in any given city a few years' extra survival
before folding a decline documented ten years ago and meanwhile to undercut ad
\ufffd
\ufffd
revenue for other competing media in the local market. There may have been studies
of just how big a gift this was to participating dailies especially those that
\ufffd
eventually went under but it had to have been sizeable.
\ufffd
Another major subsidy enjoyed for most of the 20th Century by
\ufffd
newspapers in California and other states the sales tax exemption was repealed
\ufffd
\ufffd
nearly two decades ago as a legislative effort to close an earlier budget gap,
with the promise that it the exemption would be reinstated when the state's
revenues improved otherwise. But it never was.
A third unmentioned effective subsidy comes in the area of
\ufffd
circulation costs. Since the Nineteenth Century "paper boys" or "newsies" have
been classified by publishers as independent contractors "little merchants" rather
\ufffd
\ufffd
than employees. Employees are subject to the wage and hour laws, including the
minimum wage and overtime, to workers compensation liability, to payroll taxes and
other economic benefits and protections that are not extended to independent
contractors. The latter are considered to be in business for themselves and to
have parity of bargaining power with the publisher. This legal fiction applied to
newspaper carriers is not the result of legislation but rather of the lack of
Leave a Comment