This is an oldish report from Inside Story. But the points it makes are still relevant.
The idea that governments should provide financial assistance to news publishers is receiving more serious consideration in Australia than at any time in living memory. At the heart of the Senate inquiry into the Future of Public Interest Journalism, established in May in the wake of another round of lay-offs at Fairfax, lies the question of government’s role in ensuring a “viable, independent and diverse” news media. During the committee’s hearings – and in submissions it has received – some form of public subsidy is figuring prominently among the potential answers.
The reason is straightforward enough. Australia has lost between 2500 and 3000 media jobs this decade. That’s a quarter of our total journalistic capacity. Advertisers have left for Google, Facebook and other non-journalistic vendors of eyeballs, and they’re not coming back. Subscriptions to news outlets are growing but even non-subscribers enjoy the benefits of public interest journalism – liberal freedoms, democratic participation and low corruption. That means public interest journalism is unlikely to be privately purchased in the kind of quantities a healthy democracy needs.
And yet, as Matthew Ricketson, professor of communication at Deakin University and key player in the 2012 Finkelstein Review, told me, “I think if you asked the average person in the street, should the government provide money to the media, and put it like that, they’d probably be wary about it. Because they’d be worried about control and editorial interference.”
Ricketson is no doubt right. We don’t even need to accost people on the street. A submission to the Senate inquiry by libertarian researcher Chris Berg articulates exactly this anxiety. Arguing against state support for individual firms and journalists, Berg claims that the “real or perceived political interference, or just funding decisions that favour particular sides of politics, would undermine their democratic function.” Berg imagines an unsustainable conflict of interest in which “government planners would have to support organisations which are specifically dedicated to countering the planners’ interests, and would have to do so in a way that does not affect the political balance of the industry.”
In outlining this case, Berg makes no reference to the experience of any country in the world where subsidies already exist. And for good reason: the international evidence flatly contradicts his position. The five countries that topped the Reporters Without Borders World Press Freedom Index in 2017 were Norway, Sweden, Finland, Denmark and the Netherlands. All five provide direct subsidies to their newspapers (typically targeted at publications with weaker market positions). Lest the conjunction of state support and press freedom be dismissed as a Scandinavian curiosity, consider the finding of a 2014 policy brief from the London School of Economics. Of ten countries where governments provide direct assistance to their news industry, only Italy has any issues in relation to press freedom – and it still generally ranks in the top third of press freedom indices.
Senators and observers need only review the very comprehensive appendix to the submission of the Journalism Education & Research Association of Australia (itself an updated version of Annex K in the Finkelstein Report) to see just how widespread subsidy systems are. As well as the Nordic countries, Austria and the Netherlands provide annual direct subsidies. The Dutch government also offers loans and loan guarantees to support new media start-ups. The French employ a suite of measures, including subsidisation of transport, distribution and communications, a digital innovation fund, and tax incentives for journalists and publishers. Newspapers in Britain are exempt from the value added tax, normally levied at a rate of 20 per cent. A dozen other European countries, including Germany, Italy and Ireland, also provide a total exemption or significant reduction in their VAT.
That Berg didn’t feel the need to explore evidence from any of these countries is a symptom of the prevailing assumptions of our political culture. In Australia, we have taken it for granted that there would be something fundamentally dubious about governments handing over cash to newspaper owners. And yet this practice is as accepted in other parts of the world as it seems strange to us.
Internationally, subsidy regimes tend to be around half a century old. They have endured as governments have changed and power has oscillated between left and right, and they generally enjoy broad support across party lines. Josef Trappel, head of Communication Policy and Media Economics at the University of Salzburg, told me that “there is support for these kinds of subsidies almost across the entire political spectrum” in his country. “The strong parties in Austria, which are basically the Social Democrats, the Conservatives, the Freedom Party and the Greens – they are convinced that public subsidies for the press are a good thing.” It’s hardly the kind of consensus that would exist if governments were using subsidies to favour friends and intimidate opponents.
Robert Picard is one of the world’s leading academic experts in the field, dividing his time between the Reuters Institute at Oxford and the Information Society Project at Yale. “What we have been able to show in studies over the last four to five decades now,” he told me, “is it is possible to fashion subsidy mechanisms where the discretion to give the money is taken out of the hands of the existing government.” There are two critical elements in the design of subsidy schemes that protect them from abuse. The first is that subsidies are disbursed by a body that’s at arm’s length from the government of the day. Typically, it’s an independent statutory commission, but in Belgium, for example, the responsibility is delegated to an industry organisation. The second feature is that subsidies are allocated according to explicit and objective criteria, meaning that even the independent body has very little discretion.
In these respects, press subsidies tend to work in much the same way as the election funding provided through the Australian Electoral Commission, which makes its allocations according to first-preference votes received. As with election funding, we shouldn’t be complacent about the possibility that public assistance to the news industry could be abused. But like election funding, we have every reason to be confident that the risk can be managed satisfactorily. As well as Picard and Trappel, I spoke to media scholars in Denmark, Sweden and Britain. None could think of an example of an allegation of subsidies being used by governments to intimidate or favour news organisations – or the appearance of such.
It turns out that news publishers can accept support from the state without compromising their independence. The freest media in the world are subsidised by the very governments they hold to account. There’s nothing to stop the Public Interest Journalism Senate committee – chaired by Labor’s Sam Dastyari with the Greens’ Scott Ludlam as deputy – from concluding that subsidies don’t harm democracy.
But do they do any good? The answer to this question is more complicated, partly because it raises another: good for what? In the twentieth century, the newspaper industry was swimming in cash. The problem was a tendency towards monopoly – so subsidies worked if they increased diversity and competition. In the twenty-first century, newspaper companies, big and small, are losing revenue and shedding the journalists vital to a healthy democracy. Whether subsidies can do any good in response to this problem is the question everyone is asking.
Sweden is widely regarded as having one of the most successful subsidy schemes in the world. The Swedish Press Subsidies Council oversees subsidies for newspaper distribution and digital development, and what are called operational subsidies – annual payments targeted to the weaker players in news media markets. To qualify for the subsidy – which is funded by a tax on advertising – a print or digital newspaper needs to be published at least once a week, meet a minimum circulation requirement and, critically, have less than 30 per cent market share. The paper also needs to be at least 51 per cent original editorial content (and the more there is, the greater the subsidy). The subsidies constitute only 2–3 per cent of total industry revenue but typically amount to between 15 and 20 per cent of revenue for the weaker titles that are their main beneficiary. For some, the subsidy can amount to as much as a third of total earnings.
Sweden introduced its subsidy system in 1970 after two decades in which a net sixty newspapers had gone out of business. While there were local factors at play, this was an instance of an international phenomenon: the strong tendency towards monopoly in twentieth-century newspaper economics, memorably described by Warren Buffett as “survival of the fattest.” The “fattest” newspaper in a market enjoyed highly advantageous economies of scale and was the most attractive to advertisers. Over time, thinner rivals were driven out of business. In most Western countries, the total number of newspapers, newspaper proprietors and cities where two newspapers competed all sharply declined over the course of the twentieth century.
The Swedish government’s intervention mitigated against this trend by tilting the scales in favour of the second and third newspapers in each regional market. On the eve of the global financial crisis, Sweden – a country with a population of fewer than ten million people – had seventy-eight daily newspapers and the same number of weeklies. There were five geographical markets with separately owned newspapers, and a further ten where there were two competing newspapers owned by the same company. (Recall that the test for receiving the operational subsidy revolves around producing original editorial content, not being independently owned.)
How much credit the subsidies deserve for this happy state of affairs is a matter of scholarly debate. Affluent and highly literate, the Swedes have always had remarkably high rates of newspaper readership. (Historically around 75 per cent of adults reported reading a newspaper each day, almost twice the percentage in countries like Australia and Britain.) The strong tradition of “political parallelism” – close alignment between newspapers and political parties – has probably helped smaller papers stay in business. These factors are important, but few question the role of subsidies in the remarkable diversity and vitality of the Swedish news industry.
Yet it’s also the case that subsidies have not spared the Swedish news industry from the problems associated with collapsing advertising revenue in the digital environment. The Swedish Newspaper Market During the 21st Century, a report delivered to the Swedish government this year, describes how “the newspaper industry is not employing as many people any more, and the number of local editorial offices has decreased.” Total industry revenue has declined to levels not seen since the 1980s, and where five cities had separately owned newspapers a decade ago, now there are none. “What has happened,” Lars Nord from Mid Sweden University told me, “is that second-ranking newspapers have in many cases been bought by the leading newspaper and merged into one newspaper company, sometimes with two different titles and sometimes with one single newspaper.” The last remaining city in Sweden with separately owned newspapers was Karlstad. The city’s two newspapers announced a merger in January.
Perspective is important here, though. The same report describes a level of ownership concentration, nationally, that Australia – with its duopoly controlling 90 per cent of the market – would love to have. “The eight largest newspaper groups,” the report explains, “now control seventy-six out of Sweden’s ninety-three mid- and high-frequency daily newspapers.” That’s right, the eight largest newspaper groups have a combined 82 per cent market share.
The Swedish case makes it clear, if it wasn’t already, that subsidies aren’t a silver bullet. The problem of lost advertising revenue is orders of magnitude greater than any existing subsidy solution. In Sweden, state support amounts to less than 3 per cent of total industry revenue; advertising has traditionally accounted for two-thirds of revenue. So the question Australia should be asking is not whether industry assistance is going to be the solution but whether it can be part of it. Josef Trappel suggests that “the composition of revenue in the future might be a certain kind of mosaic of different elements. And I think one piece in that mosaic can and should be subsidies. It should not be the most important one. It should not be the only one. It should not be the dominant one. But it can help.” He observes that “in those countries where there are subsidies, newspapers are doing better than in others.” Isolating the effect of state support, amid all the variables at play, is as challenging as it is important. But, on the face of it, there are grounds for believing that appropriately designed subsidies make a difference.
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| The best thing about competitive newspaper subsidies is that it will reduce the influence of this man. |
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