The Journalism Funding Crisis: How is the News Funded Without Newspapers?
As the popularity of the internet grows, more and more people are transitioning away from reading print issues of newspapers to reading digital news articles. According to the Pew Research Center, a majority of Americans, especially those under 50 years old, get their news from smartphones, computers, or tablets (Shearer). Although online content is accessible and convenient for readers, the transition to digital media has not been as beneficial for journalists. Since 2008, the decline in newspaper circulation and advertising revenue has led to a 47% drop in American newsroom employment (Grieco). Local journalism has been especially affected by the loss in revenue with over 200 counties now lacking a daily or weekly newspaper (Hendrickson). As heated debates spark over the reliability of news sources around the country, it is more important than ever to reap the benefits of well-funded journalists who can investigate claims and report information on local, state, and national levels. Therefore, we should understand the history behind the journalism funding crisis and analyze proposed solutions for ensuring the proper funding of journalists.
Background
Once the primary source of revenue for the news industry and a staple of American culture, newspapers are now on the decline. Newspaper circulation fell to the lowest recorded level in 2018, and newspaper revenue dropped from $37.8 billion in 2008 to $14.3 billion in 2018, forcing many news agencies to lay off employees or shut down altogether (Grieco). However, the decline in revenue has not impacted all types of news organizations equally. Since 2004, the U.S. has lost nearly one in four local newspapers (Abernathy). On the other hand, national newspapers have continued to fare well financially, even gaining a significant increase in subscribers in recent years (Hendrickson). But if national news agencies are still doing well and online articles provide readers with instant and convenient access to news, why should we care about funding for local journalism?
Local journalism informs the public and larger national news networks about local issues and encourages political engagement. Research shows that the decline of news reports covering a local community costs taxpayers due to the lack of investigative reporters who expose mismanagement in the government and leads to disengagement in politics, resulting in a decline in voter turnout for both local and national elections (Hendrickson). Local reporters are also the foundation of the news flow, providing detailed reports of local issues for larger, national networks to build off of; as local journalism declines, “the general news flow will decrease at the national level as well” (Wadbring and Bergström). Thus, it is important to understand how to support local news, especially as newspaper revenue declines.
Potential Solutions
One logical solution for news agencies facing a decline in revenue is simply to transition their advertising to virtual platforms along with their articles. Many news organizations have already started adding digital advertisements to their websites or implementing subscription plans where content access is limited to paid subscribers. Unfortunately, digital advertising “has not replaced print revenue losses” and most organizations have not been seeing an increase in subscriber count (Ferrucci and Nelson). Furthermore, young people on the internet have grown to expect free content, which hinders the potential for media companies to charge for articles and suggests that the number of future news subscribers will continue to diminish (Wadbring and Bergström). Declining readership signals that news companies can no longer rely solely on traditional advertising and subscription methods to generate sufficient revenue.
Many news organizations are now turning to funding from nonprofit foundations to make up for the decline in revenue, but there are concerns about the foundations interjecting their own interests into the journalistic processes that they are funding. Between 2009 to 2016, foundations provided over one billion dollars to journalism projects, but the funding disproportionately went towards national nonprofit news organizations that have audiences “who already read the New York Times or Washington Post and listen to NPR”, reflecting a system of “elites supporting elites” (Ferrucci and Nelson; Nisbet et. al.). Foundations also tend to favor news organizations that cover topics that have captured the foundations’ interest. Six in ten funders, surveyed by the American Press Institute, “say [that] they have given grants in the last five years to finance particular stories, exposes or investigations–as opposed to general coverage areas” (Rosenstiel et. al.). This has resulted in journalists feeling pressured to chase and write about the latest trends, technology, and topics selected by foundations in order to receive funding (Ferrucci and Nelson). Furthermore, foundations often introduce new expectations for journalists with their funding, hoping to assist newsrooms with generating sufficient revenue but ultimately burdening the reporters with additional responsibilities. A survey of journalists and foundation employees found that the majority of foundations prioritize audience engagement, requiring journalists to make room in their schedules to take suggestions from people who “are not as knowing about a story” and to take over additional marketing responsibilities such as interacting with trade magazines and providing testimonials for the foundation’s website (Ferrucci and Nelson). Overall, nonprofit foundations can supply some newsrooms with much-needed funding in exchange for accommodating extra responsibilities, but news organizations overlooked by foundations find themselves searching for funding from other sources.
Another potential source of support for journalists is the government, which can regulate the influence of large online platforms, such as Google and Facebook, and directly provide public funding to news organizations. Large news aggregators allow users to find and read articles directly on their interface, which leads to less ad revenue for the original news publishers. For instance, readers on Google’s Accelerated Mobile Pages can finish reading an article before the ads load, and publishers on Facebook’s Instant Articles are steered towards using Facebook’s ad server to display ads, in which publishers can only keep 70% of the generated ad revenue (Hendrickson). Some proposed methods of limiting the influence of large platforms include modifying the Copyright Act to limit the aggregator’s ability to “free ride” off published articles or implementing “a content license fee to be paid by every Internet Service Provider” to publishers (Federal Trade Commission). However, when similar fees were enacted in some European countries, news publishers saw a significant drop in traffic (Hendrickson). Although an agreement between news aggregators and newsrooms can potentially benefit both parties and increase ad revenue generated from news articles, overseeing large online platforms is a complicated and lengthy process, and newsrooms need financial support promptly.
In the meantime, the government can provide funding directly to news organizations. Some countries already practice this; for instance, “the BBC already funds 150 journalists at local outlets throughout the United Kingdom” (Hendrickson). Similar programs have been proposed in the United States in the form of The Newspaper Revitalization Act, “which would have treated newspapers’ advertising and subscription revenues as tax-exempt and contributions as tax-deductible”, and Andrew Yang’s “Local Journalism Fund”, which would provide funding to local news organizations that transition to nonprofit status or experiment with leaving the commercial model (Hendrickson). In a staff discussion, the Federal Trade Commission (FTC) considered some possible ways of providing government funding to news outlets, such as establishing a national fund for local news, providing a tax credit for newsrooms for each journalist they employ, and providing grants to universities to conduct investigative journalism (Federal Trade Commission). A potential concern with government funding is deciding how to distribute government funding or benefits to news organizations that endorse political candidates. The FTC notes that the IRS would have to clarify when news reporting would be considered tax-exempt, what activities would cause news organizations to lose their tax-exempt status, and how they can avoid those activities (Federal Trade Commission). Luckily, there are still some ways the government can support news organizations without encountering the issue of political endorsements. For instance, the government can increase the accessibility of government information by routinely releasing “common records used to monitor the activities of government entities” in text-searchable formats, provide online archives of all public meetings, hearings, and town halls, and implement interactive metadata tags that allow journalists to easily find facts and figures within dense documents (Federal Trade Commission). Overall, the government can better support journalists through providing tax benefits, funding, and easier access to government information and data, but will have to clarify the allowance of political content and qualification for support before implementing any new policies.
Conclusion
Local journalism serves as the information hub for national news media and nurtures local community health and political engagement, but newsrooms are closing across the country amid declining revenues. Online ad revenue has not been enough to sustain news organizations, and various government policies have been proposed but not implemented. As organizations and researchers continue to search for better solutions for funding journalism, they should actively communicate with journalists to learn about their responsibilities and perspectives in order to prevent the implementation of ineffective solutions or burdening journalists with extra commitments.
In the meantime, how can we support journalists? As every online news article tells us, we can subscribe to news articles and pay for their work like the way we used to pay for newspapers. We can learn more about the funding crisis and journalists’ perspectives on how to address the situation. We can engage with our local journalists through emails, comments, and news tips, and we can lobby Congress to pass legislation that supports journalism. If we support and advocate for journalists, we can work towards a system that allows journalism to thrive in the digital age.
Written by Joleen Chiu, UCLA Undergraduate Economics Student
References
Abernathy, Penelope M.. “News Deserts and Ghost Newspapers: Will Local News Survive?” UNC Center for Innovation and Sustainability in Local Media. 2020.
Federal Trade Commission. “Potential Policy Recommendations to Support the Reinvention of Journalism.” 2010.
Ferrucci, Patrick, and Nelson, Jacob L. “The New Advertisers: How Foundation Funding Impacts Journalism.” Cogitatio Press, vol. 7, no. 4, 2019, pp. 45-55.
Grieco, Elizabeth. “Fast facts about the newspaper industry’s financial struggles as McClatchy files for bankruptcy.” Pew Research Center, 14 Feb. 2020, www.pewresearch.org/fact-tank/2020/02/14/fast-facts-about-the-newspaper-industrys-financial-struggles/.
Hendrickson, Clara. “Local journalism in crisis: Why America must revive its local newsrooms.” The Brookings Institution. 12 Nov. 2019.
Nisbet, Matthew, et. al. “Funding the News: Foundations and Nonprofit Media.” Shorenstein Center on Media, Politics and Public Policy, 18 June 2018, www.shorensteincenter.org/funding-the-news-foundations-and-nonprofit-media/.
Rosenstiel, Tom, et al. “Charting new ground: The ethical terrain of nonprofit journalism.” American Press Institute, 20 Apr. 2016, www.americanpressinstitute.org/publications/reports/nonprofit-news/.
Shearer, Elisa. “More than eight-in-ten Americans get news from digital devices.” Pew Research Center, 12 Jan. 2021, www.pewresearch.org/fact-tank/2021/01/12/more-than-eight-in-ten-americans-get-news-from-digital-devices/.
Wadbring, Ingela, and Bergström, Annika. “A Print Crisis or a Local Crisis? Local news use over three decades.” Journalism Studies, 14 Aug. 2015, pp. 175-190.