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Can Congress save local news? Two bills backed by Northwest lawmakers may help

UPDATED: Mon., June 13, 2022

WASHINGTON – America’s local news outlets are in crisis and in search of a new business model, forced to cut staff or close altogether amid rising costs and falling revenue. But two proposals backed by Northwest lawmakers in Congress may offer a solution.

The Local Journalism Sustainability Act, introduced in 2021 by Washington Sen. Maria Cantwell, a Democrat, and GOP Rep. Dan Newhouse of Sunnyside, would use tax credits to let news outlets hire more journalists and help subscribers and advertisers pay for their services. Those measures could offer a temporary lifeline while another bill, the Journalism Competition and Preservation Act, would let news publishers negotiate to get fair compensation for the content they create.

As news and advertising has moved from the printed page to the webpage, tech giants Google and Facebook have reaped the benefits, scooping up ad revenue while squeezing the news outlets that create the content on which those online platforms rely. According to the News Media Alliance, an association that represents about 2,000 outlets, as much as 70% of digital ad revenue goes to Google and Facebook – and their respective parent companies, Alphabet and Meta.

Local U.S. newspapers have been hit especially hard since the financial crisis that began 15 years ago, losing some 40,000 newsroom jobs – a staggering 57% – between 2008 and 2020, according to the Pew Research Center. Online-only news outlets have only partially filled the gap, adding about 10,000 jobs during that period.

The COVID-19 pandemic exacerbated the problem, with rising publication costs and declining ad revenues despite a surge in demand for up-to-date information about the virus and its local impacts. About 1,800 papers have closed since 2004, according to research from the University of North Carolina, with more than 100 local newsrooms shuttered since the pandemic began.

The decline of local news has a range of negative effects on U.S. society, numerous studies have found: Fewer people vote, and those who do vote base their decisions on highly polarized national issues rather than local issues that directly affect their lives. Less oversight begets more corruption and wasteful spending of tax dollars, while elected officials are less accountable to their voters.

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While the national media landscape has grown increasingly polarized in recent years, a poll conducted in late 2021 by Gallup and the Knight Foundation found Americans trust local news more than national news, with 44% saying they trust local outlets and just 27% saying they trust national ones.

Yet Americans have been largely unaware of the crisis, with 71% telling the Pew Research Center in 2018 they believed their local press was doing well financially despite just 14% saying they had paid for local news in the past year.

Danielle Coffey, executive vice president and general counsel at the News Media Alliance, said the most fundamental problem facing the news industry is the way Facebook and Google have siphoned ad revenue with little recourse for news outlets. Over the past decade, she said, online audiences have grown tenfold, yet revenue has fallen by half.

“Obviously, if you’re providing content that people are consuming at exponentially increasing rates, yet the revenue isn’t returning to the creator, there’s a problem,” Coffey said.

“Users stay within their walled gardens,” she added, referring to online platforms, “to consume our content and the platforms reap the benefits and the value of our content without returning the fair market value of that content to the content creators, like they do with other industries, such as music and movies.”

The Journalism Competition and Preservation Act, first introduced in 2019 and reintroduced last year, is modeled on a pioneering 2021 law in Australia that forces Google and Facebook to negotiate deals to compensate Australian news outlets for the stories shared on the platforms. A May report by the former chief of the Australian agency that regulates competition found the law had already facilitated annual payments of more than 200 million Australian dollars – equivalent to about $144 million.

The bill has wide bipartisan support in Congress, where “Big Tech” companies like Meta and Alphabet have been the targets of criticism from Democrats and Republicans alike. The Senate bill was introduced by Sens. Amy Klobuchar, D-Minn., and John Kennedy, R-La., while the House counterpart is backed by lawmakers across the political spectrum from Rep. Pramila Jayapal, D-Seattle, to Rep. Matt Gaetz, R-Fla.

Coffey said she expects the Senate Judiciary Committee to hold a markup in the coming weeks to amend the bill before advancing it to the Senate floor. It’s unclear when the bill could get a final vote in the full Senate, and tech companies have hired an army of lobbyists to try to shape the final legislation, but its bipartisan support in both chambers suggests the bill has a good chance of becoming law.

Meanwhile, the Local Journalism Sustainability Act, spearheaded by Cantwell and Newhouse, would offer a temporary boost to flagging news outlets while they negotiate deals with the tech giants.

The bill includes three tax credits: One would let taxpayers deduct up to $250 each year spent on subscriptions; another would let companies write off up to $5,000 in advertising costs in the first year and $2,500 in the four subsequent years; and a third credit would let news outlets deduct part of a journalist’s salary to the tune of $25,000 in the first year and $15,000 in the next four years.

“I think all three provisions of the Local Journalism Sustainability Act would benefit papers, especially in the rural areas of the West,” said Kenton Bird, an associate professor of journalism at the University of Idaho.

Bird, who worked for 15 years as a reporter and editor in North Idaho, said the advertising tax credit could help reverse a “self-perpetuating decline” whereby local businesses can’t afford to promote themselves and in turn lose business while depriving news outlets of an important revenue source.

“One of the consequences of the decline in the local news industry is that there’s simply less bread-and-butter coverage of government, of taxes, of public affairs, of law enforcement and the courts,” he said. “And so if there’s a tax benefit to the companies, I think maybe we could reverse that trend.”

Despite the bill’s bipartisan support, it appears unlikely to pass as a standalone bill. In 2021, Democrats added one of its three parts – the payroll tax credit – to the all-in-one tax and spending bill dubbed the Build Back Better Act. That legislation died amid universal GOP opposition and concerns from moderate Democrats, including Sen. Joe Manchin of West Virginia.

But Manchin, a cosponsor of the original bill, is in talks with Senate Majority Leader Chuck Schumer of New York that could yield a scaled-back version of the so-called reconciliation package that could pass with only Democratic votes. Coffey said including the payroll tax credit for news outlets in that potential legislation seems to be the most viable route to its passage.

“We know that local journalism, and competition of voices, is so important,” Cantwell said in an interview in Spokane in April, adding that she sees the tax credits as a continuation of what Congress had done with assistance to businesses during the pandemic.

“We think it’s important to continue for the next couple of years,” she said. “We don’t think we’ve figured everything out as it relates to the transformation that’s gone on in the online world.”

In a statement, Newhouse said he continues to support the Local Journalism Sustainability Act but opposes the broader legislation Democrats are aiming to use as a vehicle to pass it.

“Local journalism is important, and that is clearly reflected in the broad bipartisan support this bill has and the 72 Members who have already signed on,” he said. “I will continue to work with my colleagues to find a comprehensive solution, but if the Majority was serious about moving this bill forward, Speaker Pelosi would bring it to the floor immediately.”

Democratic leaders in the House and Senate have limited time to move legislation before this session of Congress wraps up at the end of this year, so they will have to choose their priorities. Coffey said the urgency of the local news crisis demands lawmakers make both pieces of legislation a top priority.

“Quality local news coverage in communities across our country, that’s what’s at stake,” Coffey said. “And in the pandemic we saw how valuable that information could be to a local community, because it’s about health, it’s about schools, it’s about businesses. It’s about information to ensure a functional democracy that newspapers have always provided historically, for hundreds of years.”

Orion Donovan-Smith's reporting for The Spokesman-Review is funded in part by Report for America and by members of the Spokane community. This story can be republished by other organizations for free under a Creative Commons license. For more information on this, please contact our newspaper’s managing editor.

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