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Wrong Way to Reinvent Media Part 3 - Media Vouchers [Thierer & Szoka - PFF]

Wrong Way to Reinvent Media Part 3 - Media Vouchers [Thierer & Szoka - PFF]

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Published by Adam Thierer
Part 3 in a series of essays from the Progress & Freedom Foundation (www.PFF.org) about the dangers of proposals to have the government play a greater role in assisting media operators, supporting journalism, or expanding public media. Adam Thierer and Berin Szoka argue that using the tax code to nudge people to support media—while less problematic than direct subsidies for the press—will likely raise serious issues regarding eligibility and be prone to political meddling. Moreover, it’s unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.
Part 3 in a series of essays from the Progress & Freedom Foundation (www.PFF.org) about the dangers of proposals to have the government play a greater role in assisting media operators, supporting journalism, or expanding public media. Adam Thierer and Berin Szoka argue that using the tax code to nudge people to support media—while less problematic than direct subsidies for the press—will likely raise serious issues regarding eligibility and be prone to political meddling. Moreover, it’s unlikely the scheme will actually encourage people to direct more resources to hard news but instead just become a method of subsidizing other content they already consume.

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Published by: Adam Thierer on Apr 14, 2010
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05/12/2014

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Progress on Point 
Volume 17, Issue 4 April 2010
1444 EYE STREET, NW
SUITE 500
WASHINGTON, D.C. 20005202-289-8928
The
Wrong
Way to Reinvent Media, Part 3:Media Vouchers
by Adam Thierer & Berin Szoka*
Should the government play a greater role in the media sector in the name of sustainingstruggling media enterprises,
“saving journalism
,
or promoting public media? In this ongoingseries of essays, we
ve been analyzing proposals that would have public policymakers use taxes,subsidies, or regulations to accomplish those objectives.Part 1 of this series examined proposals to fund media content via a tax on consumerelectronics, broadband service, or cell phone bills.
1
 Part 2 critiqued proposals to impose fees
on broadcast spectrum licenses and channeling the proceeds to a “public square channel” or
some other type of public media
or “public interest”
content.
2
Other essays in this series willaddress proposals to tax private advertising revenues to support public media; expand postalsubsidies; directly subsidize out-of-work journalists; and to prop up or bail out failing mediaentities. A wrap-up essay will then focus on some potentially constructive policy reforms thatcould assist media enterprises without a massive infusion of state support or regulation of thepress.In this installment, we will consider whether it is possible to steer citizens toward so-called
hard news
” (“serious” journalism)—
and get them to financially support it
through the use of 
“news vouchers” or “public interest vouchers”
? We will argue that using the tax code to nudgepeople to support media
while less problematic than direct subsidies for the press
will likelyraise serious issues regarding eligibility and be prone to political meddling.
Moreover, it’s
unlikely the scheme will actually encourage people to direct more resources to hard news butinstead just become a method of subsidizing other content they already consume.
Adam Thierer is President of The Progress & Freedom Foundation. Berin Szoka is a Senior Fellow and Director
of PFF’s Center for Internet Freedom. The views expressed in this report are their own, and are not
necessarily the views of the PFF board, other fellows or staff.
1
Adam Thierer & Berin Szoka, The Progress & Freedom Foundation,
The Wrong Way to Reinvent Media, Part 1:Taxes on Consumer Electronics, Mobile Phones & Broadband 
, PFF P
ROGRESS ON
P
OINT
2
Adam Thierer, The Progress & Freedom Foundation,
The Wrong Way to Reinvent Media, Part 2: Broadcast Spectrum Taxes to Subsidize Public Media,
P
ROGRESS ON
P
OINT
 
Page 2 Progress on Point 17.4
Funding Hard News is Hard
Funding
hard news
has always been challenging. Financing a team of dedicated local beatreporters, investigative journalists, national desks, foreign bureaus, and all the associatedproduction facilities and support staff is an extremely expensive undertaking.
3
And, for all thattrouble and expense, hard news rarely turns a healthy profit. Often it has been considered a
“loss leader”
for media companies and has been cross-subsidized by other types of content orservices.
4
 
This is why “bundling”
has been such a popular model for many media operationssuch as newspapers, magazines, and cable television. By tying news production to other typesof content or services, media operators have been able to sustain the production of hard news,despite its general unprofitability on its own.
It’s worth recalling that a
business model to sustain hard news production and dissemination ona mass scale really only developed mid-way through our Republic. The early history of media inthis country was characterized
by the “partisan press” due to
the heavy reliance on a patronagemodel and direct association with political parties and figures. This changed with the rise of large daily newspapers in the mid-1800s and then broadcast radio and television in the earlyhalf of the 20
th
century.
5
Media providers were able to cross-subsidize news productionindependent of private or political patronage thanks to three things: (1) high-speed printingpresses or broadcast facilities, (2) geographic-based market and pricing power, and (3) thewidespread advertising base that was made possible by (1) and (2).Over just the past 15-20 years, we
ve seen this traditional model upended. Increasedcompetition and technological/platform proliferation are placing an enormous strain ontraditional media operations and business models.
Schumpeterian “creative destruction” is at
work in a serious, and for many, painful, way.This is what is keeping theFederal Communications Commission,
6
7
some in Congress,
8
and many media worrywarts up at night: the fear that, as
3
 
“Un
til now, the iron core of news has been somewhat sheltered by an economic model that was able toprovide extra resources beyond what readers
and advertisers
would financially support. This kind of newsis expensive to produce, especially investigative repo
rting.” Alex S. Jones,
L
OSING THE
N
EWS
:
 
T
HE
F
UTURE OF THE
N
EWS THAT
F
EEDS
D
EMOCRACY
(2009) at 4.
4
 
For a long time,
publishers have used news as a ‘loss leader,’
a product sold below costs to create othersales.
The Media Consortium,
The Big Thaw: Charting a New Future for Journalism,
5
 
James T. Hamilton notes that, “nonpartisan reporting emerged as a commercial product in American
newspaper markets in the 1870s. Before that time, many papers openly proclaimed association with a
particular political party.”
James T. Hamilton, A
LL THE
N
EWS
T
HAT
S
F
IT TO
S
ELL
(2004), at 3.
6
T
he Federal Communications Commission (FCC) recently kicked off a new
effort with aworkshop on
.
 
See
Federal Communications Commission,
FCC Launches Examination of the Future of Media and Information Needs of Communities in a Digital Age
, FCCPublic Notice, GN Docket No. 10-25, Jan. 21, 2010, at 2,http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-10-100A1.pdf  
 
Progress on Point 17.4 Page 3
traditional financing mechanisms falter (advertising, classifieds, subscription revenues,
etc
.),many traditional news-gathering efforts and institutions will disappear.
And that’s leading to
calls for government intervention or assistance of some sort to prop up struggling entities ordirectly subsidize the hard news that many of them have traditionally provided but may not beable to for much for longer.
Can Vouchers “Nudge” Citizens to Support Hard News
?
One much-discussed proposal would create
a “public interest voucher” or what Robert W.
McChesney & John Nichols, authors of the new book
,call a “Citizenship News Voucher.”
9
This is a variant on
the
,an
idea first put forward in 2003 by economist Dean Baker as an alternative tocopyright law as a means of incentivizing artistic creation.
10
The regulatory activist group FreePress, which McChesney founded, has also endorsed a news voucher scheme.
11
 The idea is fairly straightforward: give every American a voucher (McChesney and Nicholspropose $200) to support the non-profit news entities of their choice by listing those entities ontheir tax return. (If half of all adult Americans actually used their voucher, that would cost atleast $20 billion/year.
12
) They assume this would be an efficient way of channeling money tohard news providers while avoiding the serious concerns that arise when government officialsor agencies are the ones providing or steering the subsidies. McChesney and Nichols go so faras to call their tax-and-redistribute proposal
“a libertarian’s dream
,
” since “people can
support
whatever political viewpoint they prefer or do nothing at all.”
13
 McChesney and Nichols seem to be building on the approach popularized by Richard Thaler andCass Sunstein in their highly influential 2008 book 
.
14
Based on behavioral economics studies, Thaler and Sunstein argue
7
T
he Federal Trade Commission (FTC) has hosted two workshops asking “
8
Both the Senate and House of Representatives have held hearings 
about “the future of journalism,” and
Senator Benjamin L. Cardin (D-
MD) recently introduced the
,” which would
allow newspapers to become nonprofit organizations in an effort to help them stay afloat
but also curtailtheir political editorializing.
See
9
Robert W. McChesney & John Nichols, T
HE
D
EATH AND
L
IFE OF
A
MERICAN
J
OURNALISM
(2010) at 201-206.McChesney discussed this idea in more detail when he spoke at the recent FTC event on saving journalism.Robert W. McChesney,
Rejuvenating American Journalism: Some Tentative Policy Proposals
, Presentation toFTC Workshop on Journalism, March 10, 2010, www.ftc.gov/opp/workshops/news/mar9/docs/mcchesney.pdf  
10
Dean Baker,
The Artistic Freedom Voucher: An Internet Age Alternative to Copyrights
11
Free Press,
Saving the News: Toward a National Journalism Strategy,
12
McChesney & Nichols,
supra
note9at 205.
13
 
Id 
. at 204.
14
Richard H. Thaler & Cass R. Sunstein, N
UDGE
:
 
I
MPROVING
D
ECISIONS
A
BOUT
H
EALTH
,
 
W
EALTH
,
AND
H
APPINESS
(2008).

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