Yale-payments-subsidy

SATURDAY 2 P.M. -- Direct and Indirect Government Subsidies

What follows is an honest attempt to document a two-day conference at Yale Law School, "Journalism and the New Media Ecology: Who Will Pay the Messenger?" The reporter is Bill Densmore of the Donald W. Reynolds Journalism Institute at the Missouri School of Journalism. As with a similar in-the-moment report from a gathering at Harvard University two weeks ago, I make no warranty about the accuracy of direct quotes -- captured on the fly -- but make a promise to have supplied appropriate context as best as possible. The sessions are being videotaped. Consult that source for the final history of this event.

---

Related links:

• FOLLOW TWITTER STREAM #kmedia
• Watch LIVE VIDEO STREAM (right side of page)
• What will support news?
• The collaborative idea
• MORNING SESSION: The overview
• AFTERNOON SESSION: The public option
• AFTERNOON SESSION: What is to be done locally?
• 5 p.m. SESSION: New business models

---

This session, "Direct and Indirect Subsidies," includes Edwin Baker of the Univ. of Pennsylvania Law School; Bruce Ackerman, of Yale Law School; Steven Nevas of the Knight Law & Media Program at Yale; and Susan DeSanti, of the U.S. Federal Trade Commission.

Baker's idea: A 50% tax credit for journalist salaries

Give papers a tax credit for half the salary of their journalists. I have to go into defining journalists and editors and whatnot. I'll put that issue aside for now. But give the newspapers a tax credit for half the salaries of journalists. The newspaper knows it has a better product with journalists. ... if the cost of the journalists goes down by half, you'll have more journalists. It's directly related to the problem. The justification is the greater benefits that journalists current produce."

Cost: There are 50,000 journalists employed by newspapres and the aveage salary is $50,000, if you subsidize that at $25,000, the subsidy is about $1.25 billion. It is small, in constant dollars, compared to the postal subsidy in the colonial area. And it targets the area where the problem exists. "Our problem today is in the production of quality news. This subsidy directly attracts that problem."

Is this a viable proposal in an industry that is adamanently opposed to subsidies? "It doesn't involve the goverment in any judgement about content. It should be a way to change the media landscape for the better."

Ackerman's idea: The website checkbox and endowment

The idea is to put a check box on websites that do journalism and when someone clicks, a record of that goes to a national endowment for journalism, which will track those clicks and make proportional payments to the site. The more clicks, the larger the payment, the greater the payment to the website. A couple of restrictions: The government should not be in the business of libel. So they awards should go to news organizations that have the capability to defend against libel. Also the endowment should not fund pornography. Leave the judgement to citizens.

"Since it will take hundreds of thousands of clicks to generate meaningful funds," nobody would be incented to hire professional clickers. "What we are doing here is modifying the market system, taking full advantage of the new technology to permit a very cheap, decentralized, individual votes for quality news." This is part of a more general project he has been engaged in to construct micro-contents for citizenship using these concepts. He has an idea for "patriot dollars."

He compares this to the so-called "NPR" model and says his is vastly better because the NPR model (he actually refers to the PBS model) is "under the thumb of a tyrannical government." One of the virtues of his idea, Ackerman says, is that it has no monopolistic intentions. It's perfectly compatible with PBS -- a lot of people would be clicking PBS shows. It is just significantly different and better, he says.

Writer's note: This sounds exactly like what Kachingle is about to go live with. I wonder if Ackerman is aware of it?

"We should move beyond the socialist models that inspired the BBC but move toward models that recognize that the invisible hand is more conducive to protecting professional journalism in the 21st century."

Nevas's idea: The copyright collection network

Steve Nevas is now talking about his copyright collection network idea.

You subscribe to news magazines, maybe you go to the movies in the past but now you click on Hulu or BitTorrent. Advertisers pay for much of what the news business does, but not all of it. Thousands of journalists have been sent packing to the unemployment lines. It isn't just the jobs list but the institutional and community histories. They are disappearing and what is appearing is corruption. "The emaciated bones of American journalism are being sent to the slaughterhouse." One way of looking at this is creative destruction. Another way to look at it is a complete market failure in public journalism. It's value has often outstripped what it cost.

When a market fails to provide a public good, the government may have a role, Nevas says. Journalism provides a special case. It must be benign and content-neutral to all. This is not new territory for the government. Government provided postal subsidies and then free broadcast licenses. It allows cable operators to string cable on existing telephone and utility polls.

Idea: Enact a compulsory license and require news reporters to register their works for compensation. He says the current system is clumsy. He wants to suggest an alternative.

Encourage publishers of every kind to create copyright rights organizations (CROs), and set market rights for their works. Congress would let those groups be presumtively exempt from antitrust. Where would the money come from? Congress would enact a universal license fee on every ISP for each account it serves. He's estimating it might be $5-$7 a month.

Each participanting publisher would be required to log each download on their site, without any user identifiable information. They would then have to report "samples" of all those clicks to a central authority. "The resulting data would simultaneously be reported to the CRO's and the Library of Congress."

"This approach responds to the structural difficulties of the paywall ideas." The concept compensates old and new media equally and could be adapted to Internet television. Because it would be coming from an homogeneous, public source, it would be content agnostic. "It is no secret that the devil is in the details, but we need to look beyond warmed-over ideas that have not gotten traction," says Nevas.

Selected Tweets:

• (from David Westphal): Stephen Nevas wants copyright law change and ISP license fees to support content providers. #kmedia
• (from Vin Crosbie): You don't need to invent the wheel for all this: Document Object Identifier (doi.org) sysgtem has existed for years.

DeSanti on the FTC's role: Research issues related to economy

She starts with a disclaimer -- her views are her own and do not necessarily represent the views of the commission or any commissioner.

The FTC is holding workshops on the future of journalism in early December. She is going to address the elephant in the room -- which is the FTC here? And given that the FTC is here, how is it going about approaching the topic.

WHY IS THE FTC INVOLVED?

The FTC has unique jurisdiction to research and report on issues important to the U.S. economy. "But the commissioners are reading the same stories you are reading (about decline in the news industry)." Ordinarily that wouldn't be enough to trigger the FTC to take a look. Ordinarily you would wait for the market to reach a new equilibrium. But there are market imperfections and failures here. Says DeSanti: "So you have to assume that there might actually be a reason why you would need some kind of government policy that would help in this area."

An example: Last spring there were requests for anti-trust exemptions from some news organizations. There are proposals for changes in copyright. There are proposals to enact tax law to support formation of the L3C form of corporation. If Congress comes to the FTC asking for advice, the commissioners decided they should begin to understand what's happening.

The third reason for holding the hearings, is the value of journalism to a functioning demoracy. "It is a value we have a hard time fitting into our framework of economic thinking, but it also of obvious importance."

HOW IS THE FTC APPROACHING THE ISSUES?

• Platform neutral. It is not about saving newspapers; but about the future of journalism.
• Not a regulatory agency. Because the FTC is an agency designed to ensure free markets, they are not a regulatory agency. They don't come from a history of imposing regulation. Job is to ensure anticompetitive practices don't occur. They do regulate from time to time on consumer-protection side. It's primarily about foster consumer awareness.
• Free market orientation. That's how agency will approach -- as a skeptic of government regulation. the FTC is not looking for a way to regulate.

"The first question is: Is anything necessary," she asks? "There is a need to do a serious data analysis here." There are newspapers in bankruptcy, but they are still cash flow positive. They just can't make debt service. There are serious question about the internet and ad revenue. Must something be done now? If the commissioners became convinced that something ought to be done, then it's a traditional cost-benefit analysis, with the fewest transaction costs and barriers. The more moving parts, the more difficulties.

An observation from DeSanti from the Q&A: Let's look at the how much the costs of journalism can be reduced and still get it done in the public interest. Assume, as Jay Hamilton (Duke University professor), that you can certainly say that if you look at every local community, if there is sufficient information, you might end up with the conclusion there is a massive market failure.

In the 1950s, a researcher did a study of the patent system, when it was out of favor. He did a several volume study and concluded there wasn't enough evidence to justify getting rid of the patent system; on the other hand there isn't enough evidence to justify creating a patent system.

QUESTIONS AND ANSWERS NOW

QUESTION: Jonathan xxxxxx from the FCC. Where would the endowment come from? An important part of the feasibility of the plan is to say where the funding is coming from. If the theory is that the benefits accrue to all of society then it makes sense that all of society should pay for it, not just the users.

Ackerman: If it is done through the tax system it will be seen as a tax gimmick. On principal on the revenue side he would suggest collecting it from ISPs? Or out of general revenues.