[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
A NEW AGE FOR NEWSPAPERS: DIVERSITY OF VOICES, COMPETITION AND THE
INTERNET
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COURTS AND
COMPETITION POLICY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
APRIL 21, 2009
__________
Serial No. 111-38
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas DANIEL E. LUNGREN, California
MAXINE WATERS, California DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida STEVE KING, Iowa
STEVE COHEN, Tennessee TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr., LOUIE GOHMERT, Texas
Georgia JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico TED POE, Texas
LUIS V. GUTIERREZ, Illinois JASON CHAFFETZ, Utah
BRAD SHERMAN, California TOM ROONEY, Florida
TAMMY BALDWIN, Wisconsin GREGG HARPER, Mississippi
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York
[Vacant]
Perry Apelbaum, Majority Staff Director and Chief Counsel
Sean McLaughlin, Minority Chief of Staff and General Counsel
------
Subcommittee on Courts and Competition Policy
HENRY C. ``HANK'' JOHNSON, Jr., Georgia, Chairman
JOHN CONYERS, Jr., Michigan HOWARD COBLE, North Carolina
RICK BOUCHER, Virginia JASON CHAFFETZ, Utah
ROBERT WEXLER, Florida BOB GOODLATTE, Virginia
CHARLES A. GONZALEZ, Texas F. JAMES SENSENBRENNER, Jr.,
SHEILA JACKSON LEE, Texas Wisconsin
MELVIN L. WATT, North Carolina DARRELL ISSA, California
BRAD SHERMAN, California GREGG HARPER, Mississippi
[Vacant]
Christal Sheppard, Chief Counsel
Blaine Merritt, Minority Counsel
C O N T E N T S
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APRIL 21, 2009
Page
OPENING STATEMENTS
The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in
Congress from the State of Georgia, and Chairman, Subcommittee
on Courts and Competition Policy............................... 1
The Honorable Jason Chaffetz, a Representative in Congress from
the State of Utah, and Member, Subcommittee on Courts and
Competition Policy............................................. 2
The Honorable Lamar Smith, a Representative in Congress from the
State of Texas, and Ranking Member, Committee on the Judiciary. 4
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan, Chairman, Committee on the
Judiciary, and Member, Subcommittee on Courts and Competition
Policy......................................................... 5
The Honorable Charles A. Gonzalez, a Representative in Congress
from the State of Texas, and Member, Subcommittee on Courts and
Competition Policy............................................. 7
WITNESSES
Mr. Carl Shapiro, Deputy Assistant Attorney General for
Economics, Antitrust Division, U.S. Department of Justice,
Washington, DC
Oral Testimony................................................. 9
Prepared Statement............................................. 11
Mr. Brian P. Tierney, Chief Executive Officer, Philadelphia Media
Holdings, Philadelphia, PA
Oral Testimony................................................. 24
Prepared Statement............................................. 27
Mr. John Nichols, American Journalist, Madison, WI
Oral Testimony................................................. 39
Prepared Statement............................................. 41
Mr. Bernard J. Lunzer, President, The Newspaper Guild,
Washington, DC
Oral Testimony................................................. 44
Prepared Statement............................................. 46
Mr. Ben Scott, Policy Director, Free Press, Washington, DC
Oral Testimony................................................. 48
Prepared Statement............................................. 51
Mr. C. Edwin Baker, Nicholas F. Gallicchio Professor, University
of Pennsylvania, Philadelphia, PA
Oral Testimony................................................. 59
Prepared Statement............................................. 61
Mr. Dan Gainor, Vice President, Business and Media Institute,
Media Research Center, Alexandria, VA
Oral Testimony................................................. 71
Prepared Statement............................................. 73
APPENDIX
Material Submitted for the Hearing Record........................ 99
A NEW AGE FOR NEWSPAPERS: DIVERSITY OF VOICES, COMPETITION AND THE
INTERNET
----------
TUESDAY, APRIL 21, 2009
House of Representatives,
Subcommittee on Courts and
Competition Policy
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:07 p.m., in
room 2141, Rayburn House Office Building, the Honorable Henry
C. ``Hank'' Johnson, Jr. (Chairman of the Subcommittee)
presiding.
Present: Representatives Johnson, Conyers, Gonzalez,
Jackson Lee, Chaffetz, Goodlatte, and Smith (ex officio).
Staff Present: Christal Sheppard, Majority Counsel; Anant
Raut, Majority Counsel; Elisabeth Stein, Majority Counsel;
Rosalind Jackson, Majority Professional Staff Member; Stewart
Jeffries, Minority Counsel; and Blaine Merritt, Minority
Counsel.
Mr. Johnson. This is the Committee on the Judiciary, the
Subcommittee on Courts and Competition Policy, and this meeting
will now come to order. Without objection, the Chair will be
authorized to declare a recess of the hearing, and I will now
recognize myself for a short statement.
The newspaper industry is facing hard times. Newspapers
report losing millions of dollars a week, and clearly this is
an unsustainable situation. So, as a result, it is nearly
impossible to open a newspaper, turn on cable news, or even go
online without reading about another newspaper threatened with
the closure of its doors forever.
A key contributor to this phenomenon is the ongoing
reduction in advertising revenue. Advertising revenue, which
was once the lifeblood of the newspaper industry, has decreased
by 25 percent in the last year alone; and over the last 15
years, public preference for news consumption has dramatically
shifted from print media to online sources; and in that time,
online readership has grown from essentially 0 to 63.2 million
people. This has contributed to a vicious cycle as readership
declines and newspapers earn less in advertising revenue, which
results in less content, which results in fewer readers, and on
and on, with no end, infinite.
So most would agree, however, that online news is not a
complete substitution for print media. Because of the digital
divide, not everyone has access to the Internet or the news
online. As print media disappears and content is moved online,
entire segments of our society are being cut out from their
access to the news. Thus, the elderly, the economically
disadvantaged, niche markets, and some physically challenged
individuals are disproportionately harmed by the decline in
print media.
In this light, access to print media, particularly print
media that covers the national news from a local perspective,
and also the local news, becomes increasingly important.
Another negative consequence of the decline of newspapers
is the erosion of responsible journalism. Over the last decade,
economic pressures have resulted in layoffs of journalists and
newspaper staff. The loss of jobs is bad enough, since every
job must be protected in this economy.
Compounding the problem is the harm to the first amendment
of the United States Constitution. I have always considered, as
many others have, the media to be our fourth branch of
government. It provides a check on government and private fraud
and abuse that may be lost to local and regional newspapers
close to Washington, DC, and international bureaus.
Even the wire services, by the way, Associated Press, I
think UPI went out of business at one time, but it is back in
operation, unlike its former self.
In addition, local news only of importance to small areas
and niche markets may be lost forever if the smaller newspapers
are unable to survive. In fact, it is exactly this premise that
the marketplace of ideas is harmed when there is not a wide
dissemination of information from diverse sources that led
Congress to allow newspapers to collaborate by joint operating
agreement as long as editorial content was kept separate.
And you all excuse me. My voice is leaving because of the
pollen count.
As more and more newspapers merge and ownership of papers
is consolidated, the free flow of information in the
marketplace of ideas is therefore restricted. This poses an
enormous risk to our democracy. And if Congress does not act or
something does not change, it is certain that a major city in
the United States will be without a major newspaper in the very
near future. Kind of like global warming is upon us much sooner
than anticipated.
And today, we discuss remedies and whether the current
business model of newspapers is sustainable. I look forward to
hearing the suggested solutions to this problem from today's
witnesses.
I will now recognize my good friend and colleague, Mr.
Jason Chaffetz, from the great State of Utah for his opening
remarks.
Mr. Chaffetz. Thank you, Mr. Chairman. I appreciate your
calling this hearing of the Courts and Competition Policy
Subcommittee, and I appreciate all of you being here today.
About a month ago, this Subcommittee considered the
antitrust implications of the Troubled Asset Relief Program,
otherwise known as TARP. That program of course deals with the
financial institutions that have received hundreds of billions
of dollars in taxpayer support. Today, we consider the health
or lack thereof of the newspaper industry. Like the banks, the
newspaper industry is in dire straits. Unlike the banks, the
newspaper industry is not seeking a government bailout. I hope
this continues to be the case, as I could not support such a
bailout. Because of the protections of the freedom of the
press, any such bailout could be constitutionally problematic,
especially if it came with the types of constraints that were
used with the TARP funds.
The newspapers' plight is largely the result of the
newspapers' failure to adjust to the changes in the
marketplace. The biggest change has been the advent of the
Internet. The Internet has facilitated the dissemination of
news in a variety of forms, from blogs and streaming videos to
online versions that were established with established news
sources such as the Wall Street Journal and even, yes, Twitter,
which I managed to send out that I was attending this event
here today.
So print newspapers must compete with this multitude of
online sources for their readers' attention at the very moment
that their main revenue source, advertising, is drying up. The
question we need ask ourselves is, why is the advertising
drying up? It is moving to be more focused media, including
cable television and, yes, of course the Internet. Loss of this
revenue threatens the ability of the newspapers to use their
strongest weapon; i.e., robust news departments full of eager
reporters to compete against each other for cheaper new forms
of news gathering.
Some entities, notably the Wall Street Journal, have been
very successful in monetizing their content. Others, like the
New York Times, have tried and subsequently abandoned efforts
to try to charge for certain news stories. However, with the
rise of a la carte pricing for online music, it seems possible
that there are a variety of pricing schemes that will
ultimately prove successful, even if a number of news outlets
go out of business in the meantime.
Which brings us to the crux of this hearing. I mentioned a
few moments ago that the newspapers have not requested a
bailout. They haven't. But that does not mean that they do not
have powerful friends on Capitol Hill. Last month, Speaker
Pelosi sent a letter to Attorney General Holder requesting that
the Antitrust Division take into account changes in the
newspaper marketplace, including for advertising, in the event
of a merger of Bay Area newspapers.
While it is appropriate for the antitrust agencies to take
into account changed circumstances in evaluating mergers in
newspapers or any other industry, this Committee should be wary
of granting any new antitrust exemptions. This is particularly
true given that the newspaper industry already has an antitrust
exemption known as the Newspaper Preservation Act.
Since the 1970's, the newspapers have been able to combine
operations to save money without fear of antitrust enforcement;
yet, such joint operating agreements have failed to save the
newspaper industry as a whole. Newspapers will only be
profitable when they adjust to an ever changing marketplace.
History has taught us that the marketplace is the best place to
determine how to price goods and services. I am hopeful that
this Committee will take a hard look at any efforts to allow
newspapers to discuss or make agreements regarding the pricing
of their online content.
I would note specifically in where I represent, the State
of Utah, we have the Deseret Morning News and the Salt Lake
Tribune who thrive in their ability to contrast their editorial
content and compete with various news report services, at the
same time share a department that consolidates some of the
advertising functions and other issues. So I have seen that in
my own community.
And, with that, I would like to yield back the balance of
my time, and look forward to hearing from each of our witnesses
here today. Thank you, Mr. Chairman.
Mr. Johnson. Thank you. And I appreciate your statement.
We are going to go now directly to my colleague, the
Ranking Member of the Judiciary Committee, my good friend Lamar
Smith.
Mr. Smith. Thank you, Mr. Chairman.
Thomas Jefferson once said ``Information is the currency of
democracy. Without access to all the facts, Americans cannot
make informed voting decisions and our democracy is
threatened.''
Journalists have a responsibility to present information
with fairness and objectivity. At their best, the news media
help promote our democracy. Unfortunately, too often the media
have fallen short.
For example, an analysis by Investors Business Daily shows
that journalists contributed 15 times more money to Democrats
than Republicans during the most recent election cycle. In the
2008 campaign, journalists who gave to Senator Obama
outnumbered those who contributed to Senator McCain by a 20-1
margin. A UCLA study rated 18 of 20 major news outlets as more
liberal than the average voter. Just two scored as more
conservative than the average voter. A Gallup Poll found that
only 9 percent of Americans say they have a great deal of trust
and confidence in the mass media to report the news fully,
accurately, and fairly. The Gallup Poll also found that more
than twice as many Americans say the news media are too liberal
rather than too conservative.
These studies reveal a troubling trend. Unfair news
reporting exists, and can influence elections at the expense of
qualified candidates. In fact, Newsweek editor Evan Thomas
estimated that the media's influence in the 2004 presidential
election was worth maybe 15 points. That is a huge impact. And
the media's influence was even greater in the 2008 presidential
campaign. They may well have determined the outcome of the
election.
Not all members of the media contribute to this problem.
Many journalists with varied political views work hard to
report the news fairly. But the media can and must do better.
Recently, as the Ranking Member just mentioned, Speaker
Pelosi sent a letter to Attorney General Holder asking him to
take into account current market realities when evaluating any
newspaper mergers in the Bay Area. Speaker Pelosi sent this
letter in acknowledgement that the fundamentals of the
newspapers' business have changed. Subscriptions are down, and
advertisers have new and different ways of targeting their
sales. This economic reality has resulted in a number of
newspapers filing for bankruptcy, cutting back on the days that
they print papers, or going to an all-online format.
And continuing the consolidation of newspapers may
contribute to increasingly biased coverage. When there are two
or more papers in the city, there in an incentive to compete
vigorously to provide the most accurate and pertinent news to
readers. When one company, such as the New York Times or the
Tribune Company, owns papers in multiple cities, there is a
risk that the editorial biases of the big city papers will find
their way into other markets.
Our democracy is strongest when the American people make
informed voting decisions based on accurate information about
the major issues facing our country, such as homeland security,
the cost of energy, immigration, educational reform, health
care, and economic growth. Journalists are aware of their
responsibility and should be held to a high ethical standard
because of their tremendous influence on public opinion and
debate. When journalists strive for the truth, the media are a
tremendous asset to our society. When journalists falter, so
too does our democracy.
It is up to the American people to demand objectivity in
the media regardless of whether they get their views online,
from television, or in a newspaper.
Mr. Chairman, as we discuss the consolidation of
newspapers, we must also address the larger issue of inaccurate
and biased reporting that has become too common today. Before
journalists can expect the American people to buy their
reporting, they must first restore the American people's trust
in the news.
Thank you, Mr. Chairman.
Mr. Johnson. Thank you for your comments also, Mr. Ranking
Member. And even though I have tried very hard to put this out
of my mind, I must confess that I inadvertently left out the
fact that Mr. Smith is Ranking Member of this Subcommittee as
well.
Without any further adieu, ladies and gentlemen, we are
going to hear from a man who needs no introduction. So I will
yield to the great Chairman, Mr. John Conyers from Michigan.
Mr. Conyers. Thank you, Mr. Chairman. You have a lot of
friends on this Subcommittee. That is all I can say.
This is a very complex hearing. We are asked to come to the
assistance of an economic institution that, to quote Rupert
Murdoch, who I have never quoted before in my life, says in his
submitted statement, ``Since the founding of our country,
newspapers have been a cornerstone of our democracy. And I
submit this statement in the hope that Congress will take all
appropriate steps to help ensure that newspapers continue to be
a vibrant and important part of our free society for the
foreseeable future.''
This is the one person in the United States of America that
owns more media than anybody I know of, and he is telling us
how important it is that the media remains free and viable
because it is an historic predicate. So this really gets us off
to an interesting start.
Now, in 1996, I think it was in October, in the spirit of
full disclosure, I was arrested in front of one of the
newspapers in Detroit. I think the offense was disturbing the
peace. There were other arrests made. One was Marianne, the
late Marianne Mahaffey, the President of the Detroit Council.
The other one was a labor organizer named John Sweeney. There
were others arrested. I got a call in to James Hoffa, who was
around there at the time, and peace activist, civil right
advocate Al Fishman. And what we were doing was protesting the
merger of the two newspapers, the Detroit Free Press and the
Detroit News. Now, for some reason, I don't have any idea why,
our arrest, we were given a trial date, too, but somewhere
along the line the case was dropped. I don't remember even if I
had a lawyer.
So I don't come to this hearing with any bias or
premeditated hard feelings or ill will toward the newspaper
industry. As a matter of fact, we invited the Detroit News and
the Detroit Free Press to come to the hearing to be a witness.
Did they ever respond? You went to the Newspaper
Association? Okay. So they will speak for them.
But just to make sure I purge myself of any bad memories or
ill will or hard feelings, I am going to ask their editors if I
can meet with them now that they are in bad shape. Maybe I
should help them.
There is another thing that puzzles me. Professor Robert
McChesney for years has been one of the people complaining with
me about the undemocratic practices commonplace in the
newspaper industry. Now, I think he has surfaced as one that is
urging us that there are many grave and important reasons why
we should rush in now and help them. So I will be calling my
old friend Bob McChesney to help get me into the correct and
fair alignment that will be required for us to determine what
it is we do in the Committee.
Now, newspapers remind me of automobile corporations; you
never hear from them until they are on the verge of disaster. I
mean, ``How are you doing?'' ``Everything's fine. Doing
great.'' And then all of a sudden they need help, and they need
a lot of help and they need it fast. That is how the former
Secretary of Treasury called the leaders of the House and
Senate together. You remember that evening. He called them
together, and he put three sheets of paper on the table, the
leaders of the first branch of government, as far as I am
concerned.
And he said: First of all, I want extraordinary powers that
no treasurer has ever had in history. And then he said, second:
I want $700 billion, and I want it fast. And then the third
sheet of paper, he said: I don't want this to be reviewable by
either the courts or the Congress.
And so we are always put under the gun, and I am anxious to
lay out my feelings before we go into this subject matter, not
just for today's hearing, but afterwards, to see if we can all
be as friendly as our Chairman, who everybody is his friend on
this Committee, including me, and let's--can we all be friends
together, everybody, on whatever positions that develop as this
hearing goes on?
So I thank you for your time, Mr. Chairman.
Mr. Johnson. Thank you, Mr. Chairman. And I have always
admired your even-tempered service on this Committee. That
evenness has been marked by passion. And so I really appreciate
the way that you run the full Committee, and I myself aspire to
be just like you and so I am proud to be serving on this
Committee, this Subcommittee, with you.
And ladies and gentlemen, I have finally in fact become
enlightened instantly; because I mentioned that Mr. Smith, my
good friend, is Ranking Member of this Subcommittee, but I was
trying to keep the great Howard Coble out of my mind but I
can't do that, either. Mr. Coble is the Ranking Member, and we
appreciate his service.
Now, what I will do now is I will introduce the witnesses
for today's hearing. Well, we have Mr. Goodlatte, the gentleman
from Virginia, who is next for a statement. You may proceed,
sir.
Mr. Goodlatte. Thank you, Mr. Chairman. But I don't have a
statement at this time.
Mr. Johnson. Well now, that is rather untypical, Mr.
Goodlatte. I guess you are saving the ammo for a full assault
later during this hearing.
Okay. And also, we have the very quiet warrior. Mr.
Gonzalez from Texas is here. Did you wish to make an opening
statement, sir?
Mr. Gonzalez. Mr. Chairman, I will be very, very brief. I
wasn't going to make one, but I just want to put our witnesses'
minds at ease. I don't believe that your testimony today, that
you would be prepared to address bailouts or campaign
contributions. And I don't believe those are the questions that
will be coming from Members of this Committee. The issue at
hand is, and I truly believe this and I think all my colleagues
would join me, is that laws have utility and meaning only when
they are relevant to a society. The question today is whether
antitrust laws as they relate to the printed media are relevant
in what has transpired and what has been a technological
revolution, which has been adopted by the majority of
Americans, which truly jeopardizes the very existence of the
printed media. So I am hoping that our witnesses will be able
to shed light.
Now, I am going to apologize to my colleagues and to the
witnesses that I probably will be absent for much of the
testimony. We have your written statements. There is a hearing
going on in Energy and Commerce that will require that I be
there as we prepare to mark up the energy bill. But again, I
just want to thank my colleagues and hope that we have a
fruitful afternoon.
I yield back.
Mr. Johnson. I thank the gentleman for his statements. And
without objection, other Members' opening statements will be
included in the record.
So now I am pleased to introduce the witnesses for today's
hearing. We have two distinguished panels of witnesses to
assist us today. Our first panel features Carl Shapiro, the
Deputy Assistant Attorney General for Economics At the
Antitrust Division of the Department of Justice. Mr. Shapiro is
also the Transamerica Professor of Business Strategy at the
Haas School of Business, and also a Professor of Economics in
the Economics Department, at the University of California
Berkeley. He previously served as Deputy Assistant Attorney
General for Economics in the Antitrust Division of the U.S.
Department of Justice from 1995 to 1996. He later founded the
Tilden Group, which was also a senior consultant with Charles
River Associates, an economic consulting company.
Welcome, Mr. Shapiro.
Mr. Shapiro. Thank you very much.
Mr. Johnson. Our second group of panelists will testify
after Mr. Shapiro has concluded. Our second panel features Mr.
Brian Tierney, Chief Executive Officer of Philadelphia Media
Holdings LLC and a publisher and CEO of the Philadelphia
Inquirer. Mr. Tierney is a nationally recognized expert in
branding, marketing, and advertising, and he is also an
accomplished entrepreneur in addition to being a lawyer. Nobody
can really hold that against you, Mr. Tierney. At least not
today, anyway.
His leadership of Philadelphia Media Holdings marks the
first time the papers are under private ownership. This is
since 1969. Mr. Tierney has received numerous industry related
awards. And we want to welcome Mr. Tierney.
Next, we have Mr. John Nichols. Mr. Nichols is a journalist
and author, and has written about politics for American
newspapers and magazines since the 1970's. He is the Editorial
Page Director of The Capital Times newspaper in Madison,
Wisconsin, and writes about politics as a correspondent for the
Nation magazine. Mr. Nichols is the author of many books on
American politics and media issues, and he is also one of the
co-founders of Free Press, the Nation's media reform expert
and, actually, media reform network. He has been honored by
numerous journalistic organizations for his editorial and
column writing as well as his investigative reporting. Welcome,
Mr. Nichols.
Next, I will introduce Mr. Bernard Lunzer, who is the
President of the Newspaper Guild Communications Workers of
America, which is affiliated with the AFL-CIO and the
International Federation of Journalists. Mr. Lunzer was elected
T&GCWA President and CWA Vice President in May of 2008. From
1979 to 1989, he worked in the newsroom in advertising,
circulation, and promotion-marketing at the St. Paul, Minnesota
Pioneer Press. Mr. Lunzer is also an integral part of the
Newspaper Guild, and we welcome him here today.
Our next witness will be Mr. Ben Scott. He is the Policy
Director at the Free Press. And I thank Mr. Scott for his
service in regularly testifying before Congress and the FCC.
Before joining Free Press, Mr. Scott was a legislative fellow
for then Representative Bernie Sanders out of Vermont. He has
been quoted in publications, including the New York Times, Wall
Street Journal, Los Angeles Times, and Salon, and featured as a
commentator on MSNBC, BBC, PBS, C-SPAN, NPR, and local stations
across the country. He is the author of several scholarly
articles on American journalism and he is co-editor of the
books Our Unfree Press and also The Future of Media. Welcome,
Mr. Scott.
And then we have Professor C. Edwin Baker. Professor Baker
is the Nicholas Gallicchio Professor of Law at the University
of Pennsylvania, and he teaches constitutional law, mass media
law, and freedom of speech, and is the author of Media
Concentration and Democracy: Why Ownership Matters. Professor
Baker is also the author of a pending article on Viewpoint
Diversity and Media Ownership. Welcome, Professor Baker.
The last witness on today's panel is Mr. Dan Gainor, who is
the T. Boone Pickens Fellow and Vice President of Business and
Culture for the Media Research Center. Mr. Gainor has served as
an editor at several newspapers, including the Washington Times
and the Baltimore News American. Mr. Gainor also has extensive
experience in online publishing, holding the position of
Managing Editor for CQ.com, which is the Web site of
Congressional Quarterly. And he is also the Executive Editor
for Change Wave. Mr. Gainor has made many radio and television
appearances and is published in a wide variety of publications
including Investors Business Daily, the Washington Times, the
Chicago Sun Times, the Orange County Register, the New York
Post, and the Baltimore Examiner. Welcome, Mr. Gainor.
And we thank you all for joining us here today.
I wanted to ensure that today's panel would be fair and
balanced with equal representation from those on all sides of
the issue. As part of that goal, we invited several entities to
testify today that could emphasize the newspaper perspective,
along with Mr. Tierney. And one such witness, Rupert Murdoch,
Chairman and CEO of News Corporation, was not able to appear
personally, but he has submitted his written statement for the
record. And, without objection, that statement will be
submitted for the record. And, without objection, the
witnesses' statements will be made a part of the record in
their entirety.
We would ask each one of you to summarize your testimony in
5 minutes or less. To help us keep the time, there is a timing
light at your table. When 1 minute remains, the light will
switch from green to yellow and then to red when the 5 minutes
are up. If anybody is colorblind, please raise your hand now.
Mr. Shapiro, will you now proceed with your testimony, sir?
TESTIMONY OF CARL SHAPIRO, DEPUTY ASSISTANT ATTORNEY GENERAL
FOR ECONOMICS, ANTITRUST DIVISION, U.S. DEPARTMENT OF JUSTICE,
WASHINGTON, DC
Mr. Shapiro. Yes. Thank you very much, Mr. Chairman. I
appreciate the opportunity to appear before the Subcommittee on
Courts and Competition Policy. As somebody who has had some
experience being an expert witness in court, I particularly
appreciate Chairman Conyers' suggestion that we all be friends
together.
As you noted, I have been a Professor at UC Berkeley for
about 20 years. During that time, I have been studying and
practicing antitrust economics. One particular area of interest
to me has been how advances in information technology,
including the Internet, have affected a wide range of
businesses, markets, and competition. I in fact wrote a book
about these topics about 10 years ago. So the issues facing the
newspaper industry are familiar to me and of interest to me as
well as of course to the Antitrust Division in the Department
of Justice.
Newspapers play a unique and important role in our
democracy. I myself very much enjoy sitting down in the morning
with a cup of tea and reading the newspapers, and I count
myself as a better citizen for what I learn while I sip my tea.
Today, newspapers are facing financial pressures, most
notably from the current recession on top of the challenge
posed by the Internet. As a result, newspapers are experiencing
a painful and ongoing decline in circulation and advertising
revenues.
Now, how does antitrust enter into this picture? Antitrust
is the cornerstone of our free enterprise system. Antitrust is
critical to ensure that the public obtains the full benefits of
competition. This is especially true in industries experiencing
technological change where competition can and does often spur
innovation, including innovative business strategies and
business models. And I noted that some of the other witnesses
discuss some of the plans they have for such business models.
Today, a wide ranging and healthy debate is taking place
about the future of the newspaper industry, with different
participants adopting different strategies for survival and
success. This is the essence of the competitive process that
the Antitrust Division is dedicated to protecting.
Our antitrust laws are over 100 years old. They apply to
declining industries as well as growing ones. They apply during
tough economic times as well as during good times. They have
proven flexible and effective in addressing a wide range of
economic settings and industries, including industries
experiencing the pressures of new technologies. And the
Antitrust Division has experience in a range of industries
where these conditions hold.
Nonetheless, some have suggested that the antitrust laws
are somehow unsuited for the newspaper industries. We at the
Justice Department disagree. If anything, the interest Congress
has expressed in preserving editorial and reportorial diversity
makes antitrust enforcement in the newspaper industry all the
more important. And Speaker Pelosi's letter to Attorney General
Holder indicated as much.
Some have suggested that antitrust enforcement at the
Justice Department in the newspaper industry is mired in the
past, failing to account for today's business reality. Our
investigation in any given matter is highly fact intensive. I
would like to assure the Committee and the public that we are
dedicated to conducting a legal and economic analysis that
reflects current business reality and accounts for emerging
trends in the newspaper industry.
Thank you.
[The prepared statement of Mr. Shapiro follows:]
Prepared Statement of Carl Shapiro
__________
Mr. Johnson. Thank you, Mr. Shapiro. And we would now begin
the questioning. And I will begin by recognizing myself for
such time as I may consume.
Mr. Shapiro, Attorney General Eric Holder has stated that
he is open to reexamining government antitrust policies that
limit mergers in the struggling newspaper industry. In your
view, is a new antitrust exemption for newspapers necessary?
Mr. Shapiro. We do not believe any additional exemptions
for the newspaper industry are necessary. We believe the
antitrust laws, as I have indicated, can work well in this
industry, reflecting as well the Newspaper Preservation Act.
Mr. Johnson. Well, tell me, do you believe that print media
and online media are within the same product market and
interchangeable?
Mr. Shapiro. Print media and online media often do compete,
for example, for advertisers' dollars. The exact contours of
the relevant antitrust market will depend on the specific facts
and specific matter that will depend on the time period, the
locale, and the products involved.
Mr. Johnson. And I would like to know from you, is it
prudent--considering antitrust policy and economic efficiencies
of acquiring businesses and also considering the public good,
is it prudent to remove impediments to further consolidation in
the newspaper industry?
Mr. Shapiro. Well, to the extent that antitrust can be an
impediment, the goal is to prevent consolidation that will
substantially lessen competition and harm consumers. That I
would not really call an impediment; I would call it protecting
the public interest.
Mr. Johnson. Thank you.
I will now recognize the Ranking Member of the full
Committee, Mr. Lamar Smith, for his questions.
Mr. Smith. Thank you, Mr. Chairman.
Mr. Shapiro, I just had a question or two for you. Could
you give us an example of a merger between two newspapers or of
two newspapers that you would question? What would the dynamics
be that you would not necessarily approve of?
Mr. Shapiro. The situation where we would tend to be most
concerned would be two local daily newspapers in the same town,
the only two, where our investigation revealed that they were
substantial direct competitors for readers or for advertisers
or both.
Mr. Smith. Would you consider in that case a city that had
a morning and an afternoon newspaper and you had one of the
papers purchase the other, would you consider that to be
questionable?
Mr. Shapiro. That certainly could be. And those situations
have arisen in the past.
Mr. Smith. And would you give me a real life example--I
realize it is totally hypothetical--of two papers that
currently exist in the United States somewhere, in some city,
that you would question if one were to purchase the other?
Mr. Shapiro. Well, there is--I am not sure whether you want
real life or hypothetical. But we do have an ongoing litigation
involving two newspapers in West Virginia where the acquisition
took place, and the Antitrust Division is challenging that.
Mr. Smith. That is the kind of example I was looking for.
Thank you, Mr. Shapiro.
Thank you, Mr. Chairman.
Mr. Johnson. Thank you, Mr. Smith.
And I will now turn to our distinguished Member from Texas,
Mr. Gonzalez.
Mr. Gonzalez. Thank you very much, Mr. Chairman.
Let me ask you, Mr. Shapiro, how would you describe the
purpose of antitrust laws?
Mr. Shapiro. To protect competition; in particular, by
preventing abuses by monopolies, by preventing mergers that
substantially reduce competition, and by policing cartels.
Mr. Gonzalez. And it is competition within--this is
obvious--in the industry itself? What I am saying is, like--I
am trying to describe it, and I apologize. Newspapers to
newspapers, TV stations to TV stations, a certain type of
enterprise to that certain type of enterprise. Right? Let me
ask you, where is the competition to newspapers in America
today? Is it among, between themselves, or is it something
totally different, a whole different medium that is out there?
Isn't that the real competition? And what we are discussing
here is the old laws may not accommodate the flexibility given
to newspaper enterprises to compete with basically an
information service that is a different platform? I mean, that
is what we really have.
So I guess, if I am hearing you right, you are saying we
can remain with the same antitrust model, and the newspapers
will still have the flexibility to adopt business practices
that will allow them to compete with these other delivery
systems?
Mr. Shapiro. The antitrust laws will not, should not stand
in the way of creative business practices and models that are
part of the competitive process and create efficiencies and
serve consumers. I know some of the later panelists want to
pursue new business strategies, and there is no reason the
antitrust laws would stop that so long as they in fact are pro-
competitive.
Mr. Gonzalez. It is interesting, and I think the next
witnesses--and I am going to be gone for part of their
testimony but I hope to be back--will shed some light on that.
I think they are going to look at it as from their business
experience. And I understand where you are coming from, and I
agree with you. I think if you listen to Chairman Conyers where
we are all so rooted in the antitrust philosophy and the
tremendous benefits that we have derived from it, but the world
has changed. And the question then comes, we may not have a
certain enterprise or certain industry because we are
worshipping at this altar of what once was sacrosanct, which
was the antitrust laws and what they attempted to accomplish.
There won't be anyone to protect. There won't be any survival.
That is what I am getting at.
I am really worried that the printed media is really faced
with a do or die situation that may encompass what we may have
found objectionable in a different setting years ago. That is
all I am saying. And I still don't think that we are going to
lose the integrity of the process and the enterprise and the
professionalism, because the truth is that is what
distinguishes the printed medium from so many of the others.
Now, I believe that you are saying they can just transport
that quality product and have it delivered by this different
platform of delivery system. I don't think it is going to be
that easy. I just don't think. And even if it is, then you
still have lost the traditional printed media. You won't have a
newspaper to sit there with your morning coffee or tea. And
maybe it is generational, I just have got to have it. I don't
like looking at this at the coffee shop in the morning, to be
honest with you.
But that is--and I understand that this is a sincere belief
that you hold, and I will just wait and reserve my own opinion
until we hear the witnesses and I read their testimony. But
thank you for the benefit of your knowledge and study.
Mr. Shapiro. Well, let me just say thank you for that. I
also can't do without my newspaper in the morning. That is why
I mentioned it.
The fear that newspapers will close or the industry will be
in grave trouble, we are here to protect competition. And of
course that means if a company is in sufficiently bad shape, we
have a failing firm doctrine, and so greater antitrust
flexibility is allowed in certain circumstances. And that
doctrine has been in place for 40 years in the newspaper
industry following the Supreme Court decision. So it is not in
anybody's interest to have there be no newspaper in any of our
towns, and antitrust would not lead to that result.
Mr. Gonzalez. Again, and I don't know the various opinions
that are going to be expressed after your testimony. There may
be some that would disagree with you. And maybe it is not
necessary, and I don't want to have to rework, modify, or
alternate something that is so basic and that we have depended
on for so long but it appears to me that there may be some
adjustments that may have to be made. I do not know. But,
again, I thank you for your testimony this afternoon.
Mr. Shapiro. You are welcome.
Mr. Johnson. Thank you, Mr. Gonzalez.
I will now turn to Mr. Bob Goodlatte, a very cerebral
Member of the Judiciary Committee as well as this Subcommittee.
You may proceed, sir.
Mr. Goodlatte. Thank you, Mr. Chairman.
And, Mr. Shapiro, welcome. Does the Justice Department have
any role in approving the Joint Operating Agreements under the
Newspaper Preservation Act?
Mr. Shapiro. Yes.
Mr. Goodlatte. And, if so, how many JOAs has it approved in
the last 5 years?
Mr. Shapiro. I am not sure of the number.
Mr. Goodlatte. Can you get that for us and submit it to the
Chairman of the Committee?
Mr. Shapiro. That would be fine. Yes.
Mr. Goodlatte. Thank you. What factors do you consider in
reviewing the JOAs?
Mr. Shapiro. Well, let me just clarify. The Antitrust
Division looks at these, but it is the Attorney General's
decision about whether to approve them.
Well, we follow the language of the Newspaper Preservation
Act, which requires that the JOA include not more than one
newspaper that is not failing and that the operating agreement
be in the public interest.
Mr. Goodlatte. To follow up on Mr. Smith's question, you
stated that the Antitrust Division takes into account both the
readers and the advertisers when it considers the impact of a
proposed merger in the newspaper industry, But you didn't
really tell us how you balance that. Do you place more weight
on readers or more weight on advertising? How do you arrive at
a conclusion that is appropriate?
Mr. Shapiro. I would say both groups we view as consumers
or customers of the newspapers. They are both sources of
revenue typically. I believe in most matters a balancing really
isn't needed. When we have seen a loss of competition, we
believe that both readers and advertisers would be harmed by an
anti-competitive merger.
Mr. Goodlatte. It is clear that online advertising has
changed the economics of the newspaper industry. Last Congress,
this Committee took a look at the proposed deal between Google
and Yahoo for search advertising dollars. At that hearing it
was alleged that Google already had a dominant position in
search advertising. How does Google's dominance in search
advertising affect the Department's review of newspaper
mergers, particularly as to how such a merger would impact
advertisers?
Mr. Shapiro. When we look at a proposed newspaper merger,
we are looking at the choices that advertisers would have and
the extent to which the newspapers compete directly for each
other--excuse me, for advertisers. Alternative choices for
those advertisers, be it search advertising, be it television,
radio, other media, would all be considered in our analysis.
And we would typically--we would see a problem with the merger
if the extent of direct competition between the merging parties
was significant, even though there would typically be some
competition; that is, advertisers would spend some of their
money on these other media, including Google.
Mr. Goodlatte. In his written testimony, Mr. Tierney of the
Philadelphia Inquirer calls for expedited Department of Justice
review of these Joint Operating Agreements, and he also calls
for a limited antitrust exemption for newspapers to discuss new
business models. How would the Department view such an
exemption?
Mr. Shapiro. Well, we generally don't believe exemptions
are the way to go. We feel the antitrust laws are flexible and
have proven that flexibility over many years.
In terms of specific discussions among newspapers to pursue
a new business model, those could easily be handled without
running into antitrust problems. Obviously not price fixing
discussions, but discussions about a legitimate new business
enterprise. And if there are concerns about that on occasion we
can issue a Business Review Letter to give assurance to
companies who are doing something that is not or not clear to
them how it would be treated by the Antitrust Division.
Mr. Goodlatte. Are these Joint Operating Agreements always
entered into by newspapers in the same market, the same SMSA,
if you will? I mean, are they always newspapers within the same
city?
Mr. Shapiro. To the best of my knowledge, yes.
Mr. Goodlatte. How many cities still have more than one
daily newspaper?
Mr. Shapiro. I could not give you a number on that. It has
declined, to be sure.
Mr. Goodlatte. Thank you very much, Mr. Shapiro.
Mr. Chairman, I would ask that the statement by Rupert
Murdoch, the Chairman and CEO of News Corporation, be made a
part of the record.
Mr. Johnson. Yes. Thank you, Mr. Goodlatte. And so it will
be done, without objection.
Mr. Goodlatte. Thank you, Mr. Chairman.
Mr. Johnson. You are welcome.
Mr. Shapiro, I thank you for your testimony here today and
the time spent today.
And we will now move to our second panel. Hear ye, hear ye,
hear ye, the next panel come forward and assume the position.
Mr. Johnson. We will now begin with opening statements from
Mr. Tierney. Proceed, sir.
TESTIMONY OF BRIAN P. TIERNEY, CHIEF EXECUTIVE OFFICER,
PHILADELPHIA MEDIA HOLDINGS, PHILADELPHIA, PA
Mr. Tierney. Good afternoon, Chairman Johnson, Members of
the Subcommittee. I am Brian Tierney, the Chief Executive
Officer of Philadelphia Newspapers. We own the Philadelphia
Inquirer, the Philadelphia Daily News, and about 30 weekly
newspapers in southeastern Pennsylvania and southern New
Jersey.
In 2006, I joined forces with a diverse group of local
investors, men and women, Black and White, entrepreneurs, CEOs,
and a union pension fund to purchase these publications, and we
are the largest locally owned news organization in America.
Philadelphia Newspapers, like virtually all of our Nation's
newspaper publishers, have recently faced a severe revenue
decline. Consequently, we have had to make some very difficult
choices in order to continue serving as the top quality news
source in the Pennsylvania and New Jersey area we serve.
In order for our newspapers and other newspapers to succeed
in the Internet age, in order for us to continue to serve as
our country's preeminent source of local news, the newspaper
publishers and journalists need greater flexibility from
lawmakers and regulators to discuss and implement new and
sustainable business models.
Newspapers serve as the vital source of local, national,
and international information, and, as such, we provide high
quality public service journalism that is critical to the
functioning of a vibrant democracy. The news gathering
resources and investigative arsenals commanded by our daily
newspapers typically dwarf those of any other local media. In
Philadelphia, for instance, we spend more than $51 million in
news gathering operations, and we have more reporters on the
street every day than all other local media combined.
In addition to serving as an effective watchdog of business
and local government, newspapers play another role. We connect
our communities to themselves. Newspapers serve as a primary
source of information for other news outlets as well. Most
local television stations in Philadelphia begin their news
meetings by leafing through the newspaper and doling out
assignments based on what we have reported that morning.
In addition, while online news sources and citizen
journalists certainly add a perspective to the news, they
seldom provide original reporting, and even fewer ascribe to
the same professional journalism standards.
In short, many new sources of news are actually free riding
on the investments in journalism made by newspapers.
By all accounts, the industry is in a real crisis. The
problem, ironically, is not a readership or an audience
problem. In fact, more people read a newspaper the Monday after
the Super Bowl than watched the Super Bowl. In fact, in
Philadelphia, more people read the Inquirer today than they did
10 years ago when you add our print and online readership
together. The problem is the business model we have today and
the fact that advertising revenues, which account for 80
percent of our earnings, of our revenues, have dropped by 23
percent in 2 years. Recent news reports predict a 30 percent
decline this quarter alone. Classified advertisement has been
hit the hardest, and dropped $4 billion just that year; and
most of that is not coming back even when the economy returns.
Online advertising, which was often hailed as the industry
saviour, declined in 2008 and accounted for less than 10
percent of revenue. Our online traffic in Philadelphia is up
over 300 percent. You can add up every other source of news or
information in the marketplace; it doesn't compete with it, but
our revenue is flat.
In fact, it is interesting, here in town, POLITICO.com,
which is very successful, has about 30 or so reporters, maybe a
little bit more, almost all of their revenue comes from the
printed newspaper product that is distributed free.
The result of these seismic shifts in advertising has been
devastating. In February, our company announced that it was
voluntarily restructuring under Chapter 11. The factors that
led us to this difficult choice are similar to those facing
publishers across the country.
But even in these trying times, our commitment to the
communities we serve has remained steadfast. And I am
incredibly proud of the relationship we have also built with
our unions. We are working hard to find efficiencies, cut costs
and preserve jobs, good jobs that a man or woman can raise
their family on.
Other newspaper companies, such as Tribune company, Lee
Enterprises, the Minneapolis Star Tribune, to name a few, have
had to file for bankruptcy in recent months. The Seattle Post-
Intelligencer is all online, but they have had to lay off 130
of their 150 journalists. So it is hardly going to be able to
serve the same function in Seattle. And of course, the Rocky
Mountain News closed in February. Some analysts are predicting
that major cities may be left without a single daily newspaper
soon unless we act.
While we may have once hoped that we could merely shift our
operations online and continue operating as usual, the much
smaller revenue generated from Internet advertising has shown
that we must look for another answer, and we need the freedom
now to experiment with new business models.
With the critical role of daily newspapers, we at
Philadelphia Newspapers believe strongly that we have the
possibility to evolve. But in order to do so, however,
newspaper publishers need the flexibility to explore new
approaches and innovative business models without the delay,
burdens, and uncertainty created by the competition laws we
have now. When it comes to daily newspapers, the enforcement of
antitrust laws has not yet caught up with market realities.
Past enforcement actions have been premised on the now outdated
view that daily newspapers compete exclusively with one another
and that they dominate their local advertising markets. And in
fact, newspapers' share of overall advertising has declined so
much that it is less than 15 percent today.
In today's precarious and ever-changing environment,
antitrust enforcers must be vigilant to ensure they are not
frustrating the possibility of a reinvigorated newspaper
industry. Since, for many newspapers, time is of the essence,
Congress, I respectfully request, should act quickly on
legislation that would, one, provide for expedited Department
of Justice review of newspaper transactions that can reduce
costs and achieve other efficiencies; and, two, provide limited
antitrust relief for newspapers and journalists to discuss and
experiment with new and more sustainable business models.
Mr. Johnson. Mr. Tierney, if you could go ahead and close
out now. The light is green.
Mr. Tierney. From my own experience, antitrust concerns are
preventing the industry from even the most rudimentary
discussions which could potentially lead to the next big idea.
Thank you for the opportunity to appear at this hearing
today. The publishing industry remains one of our Nation's
foremost providers of in-depth and locally oriented news, and
it is my hope today that we begin the road back. Thank you.
[The prepared statement of Mr. Tierney follows:]
Prepared Statement of Brian P. Tierney
__________
Mr. Johnson. Thank you, Mr. Tierney.
We will now hear from Mr. John Nichols.
TESTIMONY OF JOHN NICHOLS, AMERICAN JOURNALIST, MADISON, WI
Mr. Nichols. Thank you, Chairman Johnson, Chairman Conyers,
and Ranking Member.
My name is John Nichols. I grew up in Union Grove,
Wisconsin; population 970. When I was 11-years-old, I rode my
bike down Main Street and walked into the office of our weekly
newspaper, The Union Grove Sun. I explained that I had read the
Bill of Rights, Tom Paine, and I.F. Stone. I knew a free press
was the essential underpinning of the American experiment and
the journalists were front-line soldiers in the struggle for
democracy. I snapped to attention and announced that I was
reporting to duty.
It would give you a sense of the Sun circumstance that the
editor responded, I will give you $5 a story and $1 for every
picture that turns out. I was a journalist. I have practiced
the craft of journalism ever since as a reporter, columnist,
and editor of metropolitan dailies, part owner of a weekly
newspaper, editorial page editor of a State capital daily, The
Madison Capital Times, and political writer for The Nation
magazine. Along the way, I have written and co-written seven
books on the state of American politics and media.
So what is the state of the print press? Our country's
first great journalist, Tom Paine, would surely describe it as
``the crisis.'' A daily newspaper industry that still employs
roughly 50,000 journalists, the vast majority of the remaining
practitioners of this craft teeters on the brink. Media
corporations, after running journalism into the ground, have
determined that news gathering and reporting are no longer
profit-making propositions. So they are jumping ship.
The Denver Rocky Mountain News recently closed, ending
daily newspaper competition in that city. The San Francisco
Chronicle may soon close, along with the Boston Globe. The
Chicago Tribune, LA Times, Minneapolis Star Tribune, and
Philadelphia Inquirer are in bankruptcy. The Christian Science
Monitor has folded its daily print edition, as has the Seattle
Post-Intelligencer. Whole newspaper chains struggle as the
value of stock shares fall below the price of a daily
newspaper.
Those are the headlines. Arguably uglier is the death by
small cuts of newspapers that are still functioning. Layoffs of
reporters and closings of bureaus mean that, even if newspapers
survive, they have few resources for journalism. Job cuts
during the first months of the year, 300 at the Los Angeles
Times, 205 at the Miami Herald, 156 at the Atlanta Journal-
Constitution, and on and on, suggest that this year will see
more positions eliminated than in 2008, when almost 16,000
newspaper jobs were lost. Even Doonesbury's Rick Redfern has
been laid off by the Washington Post.
Whole sectors of our civic life are going dark. Newspapers
that long ago closed foreign bureaus and eliminated
investigative operations are now shuttering Washington bureaus.
The Cox chain, publisher of the Journal-Constitution, padlocked
its D.C. bureau April 1, a move that follows the closures of
the bureaus of Advance Publications, Copley Newspapers, and
great dailies in Des Moines, Houston, Pittsburgh, Salt Lake
City and Toledo.
Newspapers as we know them are dying, and there is little
evidence that broadcast or digital media is prepared to fill
the void. The digital day may come, but it is not here. Thus,
those of us who believe in the essential role of an informed
citizenry fear that we are facing not a journalism crisis, not
a media crisis, but a democracy crisis.
So it is appropriate to consider the steps the Federal
Government, which has historically aided publishers with
favorable postage rates and broadcasters with free access to
the airwaves, might now take to protect the public's right to
know. The congressional response to the crisis must, however,
recognize the importance of maintaining and expanding the
practice of journalism as a tool of informing and engaging
citizens. The emphasis should be on fostering competition,
diversity and localism, not on protecting the bottom lines of
media companies and speculators who balance their books by
dismissing reporters and shuttering news rooms.
A crisis for journalism and democracy must not become an
excuse for eliminating existing rules that promote competition
and diversity, especially antitrust and cross-ownership
restrictions that prevent consolidation of print broadcast and
digital newsrooms into one-size-fits-all content-provider
services.
Congress should recognize that the existing ownership model
has proven in this crisis to be anti-journalistic. Government
policies and spending should be tailored to support the
development of new ownership models, not-for-profits,
cooperatives, employee-owned publications, and on allowing
citizens, unions, foundations and enlightened local owners to
purchase financially troubled daily newspapers.
We should encourage the consumption of journalism perhaps
by providing tax breaks for newspaper and magazine
subscriptions. Postal rates should be structured to help
journalists of inquiry and dissent stay afloat.
I am a journalist. I love my craft and hope to continue
practicing it for a long time. But I love our democratic
discourse and the diverse society it fosters more. I would ask
my Congress to recognize, as did the Founders, that journalism
and democracy are closely linked. James Madison was right when
he said ``a popular government without popular information or
the means of acquiring it is but a prologue to a farce or a
tragedy or perhaps both.'' We are deep in the prologue moment.
It is essential now to act wisely and responsibly to avert
tragedy and farce.
Thank you.
[The prepared statement of Mr. Nichols follows:]
Prepared Statement of John Nichols
__________
Mr. Johnson. Thank you, Mr. Nichols.
And if someone would call the Physician's Office and have
them to come forward because we have several people who have
developed a sudden case of color blindness.
So our next witness will be Mr. Lunzer.
Mr. Lunzer, please proceed.
TESTIMONY OF BERNARD J. LUNZER, PRESIDENT,
THE NEWSPAPER GUILD, WASHINGTON, DC
Mr. Lunzer. Chairman Johnson, I want to thank you, the
Ranking Member and other Members of the Committee for this
chance to testify.
I am Bernie Lunzer, president of the Newspaper Guild of the
Communications Workers of America representing media workers
throughout the U.S.
I have worked in the industry for 30 years, 10 of those at
the St. Paul Pioneer Press, in the newsroom, in advertising and
circulation. I welcome this opportunity to talk about the
current crisis within American journalism. This crisis affects
all Members of this Committee, all your colleagues, and all
Americans.
American journalism is and will continue to change
radically in the next 5 years. The policies you promote will
decide whether we have a strong and fair press or a limited-
opinion press, regardless of the medium.
The underlying premise of this hearing is that Hearst
Corporation and MediaNews wants Congress to relax antitrust
law. The Newspaper Guild is not convinced that such a remedy
will be good for journalism in California or in the United
States. History has demonstrated that relaxing antitrust law
may actually do more harm than good.
MediaNews purchased over 20 publications in northern
California, some unionized, some not, to create a new entity
called the BANG-East Bay. Once completed, the company withdrew
recognition of the Newspaper Guild-CWA. We lost a legal
challenge but later won representation of the full group
through a hard-fought organizing campaign.
Despite this, almost 2 years later, our members still don't
have a contract. If this exemption is granted in northern
California, others will demand the same ability to create
monopoly markets resulting in other workers throughout the
country becoming targets for similar actions.
There is now one combined copy desk for all of the
publications within BANG-East Bay. MediaNews has laid off
roughly one-third of the original journalists. The result is a
homogenized mix of publications with readers complaining that
their local newspapers have little local content and are
increasingly irrelevant to their communities.
Unhindered by antitrust law, a newspaper monopoly across
northern California will lead to job loss and to diminished
products. This is contrary to the notion advanced by Hearst,
which argues that its proposal would save something vital to
the community. The Hearst-owned Chronicle now has fewer than
half of its original workers, and coverage in large sections of
the community has already been diminished.
History shows us that such a monopoly will not benefit the
local market and will further marginalize underserved minority
communities within the market. Currently, publishers have
recourse to an antitrust exemption through the Newspaper
Preservation Act, which maintains separate newsroom but
combines business operations. The sole purpose of the exemption
was to help preserve the diversity of journalistic voices.
But these Joint Operating Agreements, or JOAs, often
resulted in inflated advertising prices. So they have not
proved to be a panacea for newspapers' problems. Furthermore,
out of over two dozen JOAs, only 10 exist today.
President Obama campaigned in favor of more antitrust
enforcement, stating in Gresham, Oregon, May 18, 2008, ``there
are going to be areas, in the media for example, where we are
seeing more and more consolidation, that I think it is
legitimate to ask, is the consumer being served.''
The fundamental question of what is gained through such
consolidation remains very relevant. The largest concern we
have about such a monopoly in northern California is that, is
it an answer to the very real problems that exist in our
industry? We think they will remain unanswered and that real
innovation will be stifled. The two large corporations behind
this initiative will only have forestalled the inevitable
reckoning. The result will be underserved communities.
If there is to be serious consideration of the problems
facing newspapers, Congress needs to look at alternative
ownership ideas, like employee stock ownership, nonprofit
approaches and the new L3C concept. The L3C approach would
allow publications to serve a stated social purpose in exchange
for the ability to accept nonprofit money. Smaller, more
committed news operations will be more successful in providing
real coverage to communities.
Bigger is not better. The current financial crisis is
evidence of this. An antitrust exemption for such large
corporations could create real barriers to entry for others.
Without oversight, congressional and local oversight, this
exemption may not work. While these companies become a single
voice for over half of our most populace State, similar
consolidations elsewhere would create incredible power for a
select few.
A commitment must be made to local coverage and local job
creation. These same entities that are promoting this current
proposal have been the loudest in supporting the outsourcing of
jobs, causing one to truly question any commitment to local
communities. Agreements amongst competitors to shut down or
reduce capacity or output are normally illegal per se under the
Sherman act. Any effort to assist the newspapers in this regard
will have far-reaching consequences.
Newspaper workers have made great sacrifices to invest in
the future of their publications. We have given up a lot, pay
increases, vacations, and other benefits, to preserve quality
local media coverage and a diversity of voices. We have
accepted these concessions with an understanding that we are
investing in a long-term recovery plan. There must be a focus
on new ways to generate revenue and on creating new business
models that recognize the deep changes we are experiencing.
We look forward to working with your Committee to address
the long-term problems of the newspaper industry in an
equitable and progressive manner. Thank you.
[The prepared statement of Mr. Lunzer follows:]
Prepared Statement of Bernard J. Lunzer
__________
Mr. Johnson. Thank you, Mr. Lunzer.
And now we will hear from Mr. Ben Scott.
TESTIMONY OF BEN SCOTT, POLICY DIRECTOR,
FREE PRESS, WASHINGTON, DC
Mr. Scott. Thank you, Mr. Chairman, Chairman Conyers,
Members of the Committee, thank you for the opportunity to
testify today.
I am the policy director for Free Press, which is the
largest public-interest organization in the country working on
media policy issues. As the name of the organization implies,
Free Press has a strong interest in the future of journalism
and the vibrancy of the news marketplace.
I would like to begin by addressing the nature of the
problem we face, since the crisis in the newspaper business is
often seen as monolithic, but in reality, there are several
major problems hitting different parts of the news industry in
different ways.
The most immediate problem, of course, is the debt load
carried by major news companies that are pushing them into
bankruptcy. But a more general problem is the decline in print
circulation and advertising revenue as readers shift to the
Internet. And online papers are up against more national and
international news competition.
Some newspaper companies have made things worse and
accelerated their demise by pursuing flawed business models of
consolidation. The short-term benefit emerges, of course, as an
increase in revenue and market share, but the long-term
consequences are mounting debt, a debt that now threatens to
sink the ship. The revenue declines, and shareholder demands
then force budget cuts. Budget cuts force layoffs. Layoffs mean
fewer journalists. Fewer journalists, fewer stories and a lower
quality product for the American public.
But that doesn't necessarily mean that the core business of
news production isn't profitable anywhere, at least for now.
Many papers actually have profitable newsrooms, complete with
double-digit margins and executive bonuses. The demand for
text-based news is at an all-time high, but the readership no
longer translates into big dollars because of the Internet. And
that is the fundamental problem.
The historical alignment of technology, market demand and
public good that made monopoly newspapers a revenue engine for
decades is coming to an end. But the outlook is not all dark.
There are new journalism experiments cropping up all over the
Internet. However, none has the clear financial base to scale
up to replace the quantity and scope of news production that is
disappearing around them.
So we are left with a conundrum. As the news shifts online
and advertising dollars dry up, will the remaining revenue base
be sufficient to pay for the journalism that a democratic
society needs? If it won't, then that is the policy problem
that you have to solve.
A decline of print newspapers doesn't necessarily mean the
decline of journalism. Journalism just needs journalists, and
lots of them. And the risk that we face today is that market
failure will result in the departure of tens of thousands of
experienced reporters.
So what is to be done? Combining the best elements of
traditional and new media, we need to create and sustain
journalism models where it is possible to earn a living writing
the news. And we need the resources to cover expensive
international and long-term reporting alongside the local daily
news.
We also have to recognize that the Internet can't solve all
of journalism's problems. More than one-third of the country is
not yet connected to high-speed Internet. So solutions that
rely on technology will have to deal with the digital divide.
Quite rightly, people are alarmed when they hear that their
daily newspaper is about to stop publishing. But we should
avoid the temptation to turn to policies that resemble
bailouts. Relaxing the antitrust standards to permit further
consolidation won't solve the problem. Uniting failing business
models will not produce success any more than tying two rocks
together will make them float.
While expanding scale may pay short-term dividends, in the
long rum, it will deepen debt, shed jobs and reduce the amount
of local coverage. That is the exact opposite of what we should
be doing. We should be expanding the diversity of ownership and
with a special focus on minority ownership.
There are no easy answers here. And that is why we need a
comprehensive policy approach. Just as we have created national
strategies to address crisis in health care, energy
independence and education, it is time to craft a national
journalism strategy to get out ahead of this problem and take
advantages of the opportunities it creates.
It will begin by understanding how this happened and
recognizing that journalism and journalists are essential for
democracy. It will begin by showing why the Internet is a
powerful force for positive change but not a substitute for
everything of value that has come before. And it will begin
when we recognize that the future of journalism is a policy
issue. Policy makers should seek to join the robust discussion
happening already about the future of the news room. The answer
is certainly not to relax antitrust standards and double-down
on the bad decisions of the past. The most likely answer, based
on the evidence available today, is that there will be many,
many answers. And that is good news.
I thank you for your time. And I look forward to your
questions.
[The prepared statement of Mr. Scott follows:]
Prepared Statement of Ben Scott
__________
Mr. Johnson. Thank you, Mr. Scott.
Now we will now hear from Mr.--actually Professor Edwin
Baker.
Please commence your testimony, sir.
TESTIMONY OF C. EDWIN BAKER, NICHOLAS F. GALLICCHIO PROFESSOR,
UNIVERSITY OF PENNSYLVANIA, PHILADELPHIA, PA
Mr. Baker. Thank you.
I wish to make six points. First, the market cannot be
expected to adequately support professional-quality journalism.
Much of the value produced by newspaper journalism goes to
people other than the media companies' customers. We all,
including nonreaders, benefit from the work of journalists in
exposing corruption. We all benefit when corruption and
negligence do not occur due to news media's reputation for
watchfulness. We all benefit from the wiser voting of those
informed by journalism. Newspaper companies cannot turn
benefits to nonreaders into revenue. The gap between benefits
provided and revenue obtainable results in inadequate
incentives to put resources into producing news.
Second, this inadequacy has been understood since the
country's founding. Recognizing both the vital role of
newspapers in holding the fledgling country together and
inadequate support provided by the market, Congress, beginning
in the first years of the Republic, provided huge subsidies on
which newspapers were highly dependent. By the early 20th
century, the annual postal subsidy to newspapers was $80
million, which on a per-person basis equals roughly $6 billion
in today's dollars.
Third, the highly publicized decline in newspaper
circulation does not indicate any decline in public interest in
newspaper journalism. Rather, it mostly arises from two
factors. Primarily, it represents a shift to online readership
of newspaper stories with little or no real decline in actual
readership, only a change in people's method of access. In
addition, huge layoffs of journalists degrades a newspaper's
product. Circulation predictably declines from a level more
reporters and editors could achieve.
Fourth, bankruptcies, newspapers closures and huge layoffs,
over 30 percent, up to 50 or more percent at some papers,
together represent the daunting nature of the crisis. But the
key concern should be the last, layoffs. Bankruptcies primarily
reflect papers' inability to generate sufficient operating
profits to make huge interest payments, usually from debt taken
on to finance recent unwise purchases. Unduly lax laws
exacerbate this problem by failing to restrict these sales of
newspapers. Still, these papers will continue after
reorganization. Losses to unwise purchasers merit no public
concern.
Next, closures of the second paper in two-newspaper towns,
illustrated by the Rocky Mountain News or the Seattle P-I,
merely continue a 100-year trend of towns being unable to
support more than one English-language daily paper.
In contrast, huge layoffs of journalists and threatened
closure of the town's only daily paper are major threats to
democracy. As ad revenue declines, so does the value to the
paper of journalism and attracting readers to sale of
advertisers. The paper consequently lays off journalists,
despite knowing that these layoffs cause a decline in
circulation and paper quality. Temporary declines in ad revenue
always occur during recessions. More worrisome now is a major
long-term shift of advertisers' budgets to online sites,
especially to support search engines and the migration of
previously highly profitable classified ads to online specialty
sites. Unless public policy can create replacements for these
lost revenue streams, we may lose much of the professional
journalism on which our country's Founders knew any robust
democracy depends.
Fifth, corporate consolidation is a problem for a
democratic press, not a solution. Relaxing antitrust laws can
increase the problem. A primary rationale for mergers is to
save money, often through laying off journalists, thereby
endangering the democratic contribution to the media. In
contrast, the widest possible dispersal of media ownership
serves to democratize voice within the public sphere, serves to
increase the number of watchdogs, provides a safeguard against
demagogic abuse of media power, and places ownership in the
hands of people most likely to be committed to quality
journalism.
Sixth, the crisis justifies a public policy response. The
central problem, the decimation of employed journalists,
follows from the inability of media companies to obtain revenue
that even approaches the real value that journalists' efforts
produce for the community. The government would serve the
public interest by giving media a tax credit for half the
journalists' salary. This tax credit would reverse newspapers'
incentive to lay off journalists. More journalists would in
turn increase the quality of newspaper and cause circulation to
rebound.
For the roughly 48,000 journalists now employed by the
Nation's newspapers, this tax credit would cost about 1 and a
quarter billion dollars, a fraction of the amount in today's
dollars, per person, that the country provided newspapers in
postal subsidies 100 years ago. This targeted subsidy would
duplicate the financial commitment that the country's Founders
made to the news media of their time.
Thank you.
[The prepared statement of Mr. Baker follows:]
Prepared Statement of C. Edwin Baker
__________
Mr. Johnson. Thank you, Professor.
And it has always been my dream to be able to gavel into
submission one of my, or any, law school professors. And I was
really at the 3-minute mark thinking that I would. It is just
so tempting. But I was able to restrain myself.
Next, we shall hear from Mr. Dan Gainor.
Mr. Gainor, please.
TESTIMONY OF DAN GAINOR, VICE PRESIDENT, BUSINESS AND MEDIA
INSTITUTE, MEDIA RESEARCH CENTER, ALEXANDRIA, VA
Mr. Gainor. Thank you, Mr. Chairman, Members of the
Committee, ladies and gentlemen, I am Dan Gainor, vice
president of business and culture for the Media Research
Center.
It is an honor and a privilege to come here and speak about
one of my favorite topics, newspapers. From the first time I
ever read on my own, newspapers have been a part of my life. I
have worked at three different dailies and several weeklies and
online news operations following that calling.
You don't have to tell me that the newspaper business is
changing. Three of those organizations I have worked for are
now out of business. Until recently, I wrote a column for the
Baltimore Examiner, but it closed, putting dozens of friends
and fellow journalists out of work.
The news media are going through a time of epic changes,
and that is never easy. In a few short years, evening dailies
have all but died out. The rise of the Internet has changed
even more. Newspapers first lost employment advertising to
firms like Monster.com and since have lost classified ad
revenue to Craigslist. Other sources of revenue, from personal
ads to real estate, have met with smarter, more nimble
competition.
While it is fair to blame much of this decline on
newspapers to technology, it is not the only factor. The
newspaper industry has changed too for the worst. Standards
have slipped or all but disappeared. The concept of a
journalist as a neutral party has become a punch line for a
joke, not a guideline for an industry.
We all saw how poorly the mainstream press covered the last
election. According to the Pew Research Center for People and
the Press, voters believed that the media wanted Barack Obama
to win the presidential election. Here is a quote from them,
``By a margin of 70 percent to 9 percent, Americans say most
journalists want to see Obama, not John McCain, win,'' Pew
reported.
Other surveys confirmed it. According to Rasmussen, ``over
half of U.S. voters, 51 percent, think reporters are trying to
hurt Sarah Palin.''
It wasn't just the surveys; it was journalists themselves.
According to Washington Post ombudsman Deborah Howell in a
column headlined ``An Obama Tilt in Campaign Coverage,'' the
paper's election coverage consistently supported Obama in
everything from positive stories to flattering photos. That
same slant reappeared last week during the Tax Day Tea Party
protests. The Post didn't write a story about more than 750
events nationwide until the day they happened; far different
than how they handled other protests. Their own media critic,
Howard Kurtz, even knocked such minimal coverage. While the New
York Times did preview the events six times, five of those were
negative.
Such one-side reporting has destroyed the credibility of
the print press. Among newspapers, the most trusted name in
news is the Wall Street Journal, and just 25 percent of readers
believe all or most of what that organization says, according
to Pew. For the New York Times, the number is 18 percent; and
USA Today, 16 percent. The only publications lower are People
Magazine and the National Inquirer.
In fact, for the New York Times, the number who believe
almost nothing in the newspaper is nearly identical to those
who do believe.
And while newspaper credibility has taken a hit among both
Democrats and Republicans, it is lowest among Republicans, with
the Times having just 10 percent credibility rating with that
group; 1 person in 10. You could write graffiti on a wall and
have more people believe you.
But the Times still has widespread influence, and a story
on the front page can be picked up and appear in some form in
countless media outlets. The Times's former public editor,
Daniel Okrent, answered the question, is the Times a liberal
newspaper, by saying, ``of course it is... These are the social
issues: gay rights, gun control, abortion and environmental
regulation, among others, and if you think the Times plays it
down the middle on any of them, you have been reading the paper
with your eyes closed.''
For decades, many in the media have been working with their
eyes closed, convinced of their own neutrality when all around
them feel otherwise. In study after study, journalists
consistently admit they support liberal causes and vote for
Democratic candidates. In 2004, Pew found journalists
identified themselves liberal over conservatives by a five to
one ratio. Were journalists the only ones voting for President,
they would have elected a Democrat every time since 1972.
The Society of Professional Journalists, to which I proudly
belong, has a detailed Code of Ethics. At its heart, it says
journalists should provide ``a fair and comprehensive account
of events and issues.'' They do neither.
It is fitting, then, in a hearing to discuss ``diversity of
voices,'' that every one here grasp a key point, the diversity
of voices in print isn't about news. It is fiction.
Thank you.
[The prepared statement of Mr. Gainor follows:]
Prepared Statement of Dan Gainor
__________
Mr. Johnson. Thank you, Mr. Gainor.
And before we commence with my questionings, I would like
to recognize a large group of students who are here today to
observe democracy in progress. I appreciate you all's
attendance.
And do we know whether or not there are any spies amongst
you? If anyone is--yes, I see one hand.
Thank you, sir, for being honest.
More shall been revealed later with you all. Don't forget
that torture was once ruled legal.
And so, but now I would like to at this point recognize the
fact that I have heard through the grapevine a couple of times
that there is a secret relationship that exists between some
Members of Congress, who predominantly are of Republican. I
understand that there is, and this is from folks I talk to,
some believe strongly that there is an unhealthy connection
between FOXNews and the Republicans.
Mr. Gainor, I would like to hear your take on that, and
also Mr. Lunzer.
Mr. Gainor. We are spinning a little out of newspaper
territory, but I think what FOXNews does what a lot of
publications do in journalism. They have a target market. They
identified a market that is clearly underserved by the
mainstream media because the mainstream media, by all reports,
don't pay attention to the concerns of conservatives, which
represent a fairly sizeable portion of the American public. So
Fox decided--and clearly records show, they are right--that
they found a target market that was very viable. So since we
had Rupert Murdock's comments read into the record, I am not
about to dispute Rupert Murdock's business acumen.
Mr. Johnson. Thank you very much, but I have been told that
the tea party held last week was a result of an organized
effort by politicians in conjunction or in conspiracy with the
Fox TV Network that was an unholy alliance, if you will,
between those two, as opposed to just a spontaneous outburst
from uninformed people.
Can someone comment on that?
Mr. Nichols, please.
Mr. Nichols. I attended one of the tea parties. And the
people I saw at the tea party were grassroots Americans who are
deeply concerned about the bailout of the banks and about the
PATRIOT Act and a host of other matters, many of which this
Committee has dealt with. I think we should be cautious about
being too worried about media outlets, be they Fox or the New
York Times, having a connection with their readers that might
inspire them to go and do something, to go and turn out and
act.
You see, this is really the core of what we are talking
about here. The core of what we are talking about is that we
need a diverse media with many different voices. We need a
media that will speak to those folks who would go to a tea
party. We need a media that will speak to the folks who
wouldn't go to a tea party. What we desperately, desperately,
need and what is dying, and I want to emphasize it is dying in
this country today is that competition of strong media outlets
coming from many, many different perspectives.
And what troubles me the most is the notion that we have a
liberal media or a conservative media. The fact is, by and
large, we have a lousy media in this country. And I want to
tell you how lousy it is. The fact of the matter is George Bush
shouldn't have been surprised that there weren't weapons of
mass destruction in Iraq. We should have had a media that was
on top of that story and did a good job. It didn't. And all
these people, many people blame George Bush or criticize him; I
will be very blunt with you, I blame the media. Our media
didn't do its job. It didn't do investigative, challenging,
aggressive journalism. And the way you get investigative,
challenging, aggressive journalism is to have a lot of media
outlets that employ a lot of journalists and send them out from
different perspectives to go do their job.
Mr. Johnson. Thank you.
And Mr. Ben Scott, would you like to respond to that
vicious rumor that is going around?
Mr. Scott. Well, I can't comment on the veracity of that
rumor, although it wouldn't surprise me. I think what the key
issue here that I am hearing is a widespread agreement at this
table that what we need is a diversity of viewpoints in the
media. It strikes me that, at a moment of crisis in the
newspaper industry, the print newspaper industry, largely the
daily newspapers, is also a moment of opportunity for us to
take advantage of new technologies, to create new business
models, to see the market and the government work together to
figure out how we can support more journalists, not to
replicate the status quo on the Internet that we once had on
the newspaper pages, but to create a better media system, to
create a media system that creates more journalists, to create
a media system that can aspire both to the goals of objectivity
and to the goals of partisanship, so that, for the first time
since the 19th century, when every major city had a
dozennewspapers, we can see a robust marketplace of ideas in
this country.
Mr. Johnson. Thank you, and unfortunately, I wish I could
hear from the other Members on this point.
But I will at this point in time note that my time has
expired, and it took a while for me to see that red light.
Mr. Conyers. Mr. Chairman, I would ask unanimous consent
that the Chairman be given 1 additional minute.
Mr. Johnson. Does anyone have the courage to disagree with
the Chairman?
Mr. Goodlatte. Not me.
Mr. Conyers. Without objection, we shall do so. Thank you.
Mr. Gainor, if you would respond to that.
Mr. Gainor. If I just might remind people a little bit
about the history of the tea parties is, tea parties were
spawned by comments made by Rick Santelli on CNBC, which is
part of NBC and ultimately GE. Santelli had what is called the
``rant heard round the world'' complaining about spending in
government. Soon after that, there was an event in February
that, yes, did not get much media coverage, but it included 50
different tea parties on February 27.
Mr. Johnson. Did it get covered on Fox like this one did?
Mr. Gainor. Actually, it didn't get very much coverage. It
did coverage on Fox some. Fox saw, again, I think an
opportunity that people were not covering it much. But, again,
the cause of this, and the tea party people themselves,
proclaim on their Website that this was spawned by comments,
inspired by comments made by Rick Santelli. So to say it is a
Fox conspiracy, not one that I held any credence for.
Mr. Johnson. All right.
Thank you, sir. I will next turn to Mr. Goodlatte.
Mr. Goodlatte. Thank you, Mr. Chairman.
Mr. Gainor, to follow up on that, according to a Gallup
poll, only 9 percent of the Americans say they have a great
deal of trust and confidence in the mass media to report the
news fully, accurately and fairly. That is even lower than
Congress's approval rating.
The same poll found that more than twice as many Americans
say the news--we are not talking about just FOXNews here, by
the way. We are talking about all sources of information
through the media. That same poll showed that more than twice
as many Americans say the news media are too liberal rather
than too conservative. How has Americans' lack of trust in the
media exacerbated the news industry crisis? What can be done to
restore that?
Mr. Gainor. What can be done to restore it, first of all,
is to do a better job. That is something everybody on the
Committee, the panel, can at least agree on. Before we get too
lost in the woods talking about Fox in a newspaper discussion,
I want to remind everybody the scale of the media in this
country. If you talk about Fox and the tea party day, when they
had 3.9 million people watching their one program, their
highest rated program that night, they did very well. They are
one-sixth of what ABC, NBC and CBS get on a typical evening
news show. They roughly equalled that night what MSNBC, CNN,
and CNN Headline News, so you are talking about a drop in the
bucket by comparison, so it is not an apples-and-oranges
comparison.
What can the media do? They need to do a better job. They
need to recognize, we talked about diversity of voices; they
need to recognize that there aren't a diversity of voices in
the newsroom. In a typical newsroom, you will see a diversity
plan that talks about gender, talks about race, some of the
more advanced diversity plans will talk about religion. They
won't talk about opinion. So you will find a newsroom where
they were forced in one case, where they did a story on
religion where they had to go to a graphic artist who actually
was more actively religious because they didn't have enough
people in the newsroom who went to church. You need to have a
newsroom, if we are going to have a newsroom reflect America,
it certainly hasn't been doing so for a long time.
Mr. Goodlatte. Let me turn to Professor Baker.
In your testimony, you stated that huge layoffs of
journalists have resulted in degraded newspaper product.
Can you tell us more about what that degraded product is?
Has it led to more one-sided or biased news coverage, or is it
possible this degraded product has caused news consumers to
switch to alternative news sources?
Mr. Baker. Actually, when they switch, they usually switch
to the online newspaper product for the most part. When----
Mr. Goodlatte. Is the online newspaper product a degraded
product, too?
Mr. Baker. But both of them are. Any editor will tell you
that with more newspaper resources, they can do a better job
covering the various things that newspapers ought to do. Now
they may do it from a particular slant. Fox might do it from
one slant. Another media entity might do it from a different
slant. Under the first amendment, that is not really our
concern.
But for a democracy, our concern is that they do it in a
quality way with resources. So when newspapers have invested in
hiring more journalists, they have actually increased their
circulation. The trouble is that circulation isn't as valuable
to the paper as it costs the paper in salaries. So they lay off
the journalists.
Those journalists are providing a public service by
providing a better paper. So when the paper fires their
journalists, the data tends to show that they lose some of
their readers. That is what I mean by degraded product. When
you use more money to produce something and sell it for the old
price, it is going to be a better deal----
Mr. Goodlatte. Let me follow up on that point because I
think it is a good point, but by the same token, newspapers
have got to be able to raise the money necessary to be able to
afford that quality reporting force. So why has the newspaper
industry been unable to monetize its content in recent times?
Is it strictly the fact that they are competing with free, on
the Internet, oftentimes on the Internet--they may be competing
with--anybody can be a publisher. Anybody can be a reporter on
the Internet. The quality of that is often subject to
considerable question. But nonetheless, they are having to
compete with that.
Is there a model that the newspaper industry could follow
that they have haven't? Itunes, for example, has changed pretty
dramatically how you buy music by selling it one song at a
time. Are we headed toward that where you are going to pay for
your story, story by story?
Mr. Baker. Most everybody in the industry is looking for
those models. And some of those people are pretty good business
people, and they will probably find what is available. What
they won't find is enough to support the type of journalism
that the country historically supported basically with
government subsidies. As long as the benefits are going to
people beyond the readers, there is no way to monetize those
benefits.
If you are talking about readers, there is at least the
possibility of monetizing it. And newspapers are trying to find
how to do that as a way of capturing more money from their
online readers. They are not going to be entirely successful.
They are going to do somewhat better than they are doing now.
It is going to help a little. It is not going to deal with the
real crisis problem.
Mr. Goodlatte. Well, I take it the subsidy--Mr. Chairman,
if I might, I see my red light is on as well, if I might have
leave to ask a follow-up question to Mr. Baker.
Mr. Johnson. Mr. Goodlatte, if there is no objection, I
will give you 30 seconds extra.
No, to be fair, though, we will do 1 minute. Is that fine?
Mr. Goodlatte. That should do it.
Professor Baker, to follow up on that point, you referenced
government subsidies, is that in terms of the postal costs of
sending newspapers? What subsidy are you talking about?
Mr. Baker. At this time, today, the newspaper industry is
not being subsidized. One hundred years ago or 200 years ago,
it was being hugely subsidized. One hundred years ago, the $80
million would be in today's dollars per person $6 billion that
they were getting from the government 100 years ago. Today, it
is not there.
Mr. Goodlatte. You are saying the newspaper industry was
subsidized 100 years ago? It is not today?
Mr. Baker. One hundred years ago, the postal subsidy to the
newspaper was worth--according to a Supreme Court case--was
worth $80 million.
Mr. Goodlatte. But the reality is that now, the problem is
that subsidy, at almost any price, would be very difficult to
compete with getting information online. So are you proposing a
subsidy for online journalism? Because that is where this is
all headed.
Mr. Baker. What democracy requires is journalists. I think
it also requires newspapers. But I am not as much concerned
about newspapers as I am about journalists. If you gave a tax
credit to newspaper companies for half the salary of their
journalists, they would suddenly find it valuable, desirable to
hire more journalists.
Mr. Goodlatte. Who would be eligible for that? In an online
world, wouldn't anybody be able to say, I have an online
newspaper, I want to have a one-half subsidy of my journalists?
Mr. Baker. Most of the journalists today, most of the news
being produced today is by the print newspaper sometimes also
operating online sites. If you went forward with my proposal,
one of the questions would be whether or not it should be made
available to various types of online publications which had
paid staff, paid journalists working for them. There is nothing
in principle that would say that you shouldn't, but we would be
dealing with the problem even if we didn't extend the subsidy
that far.
Mr. Goodlatte. The Chairman has been very generous with my
time, so I will yield it back. But I would be interested in any
other, if any of you want to submit in writing any thoughts
about how such a subsidy could be sustained in a world where
anybody can define themselves as a journalist.
Mr. Johnson. Thank you, Mr. Goodlatte.
And now we will have questions from Chairman John Conyers.
Mr. Conyers. Thank you, Mr. Chairman.
This is an important issue. And what we will begin to look
at, as this examination of what to do with newspapers in crisis
continues, is the exact nature of the crisis. I have had, I
think pretty, good examples, but we need to know precisely what
it is we are going to fix.
But I was moved by the Scott recommendation that we come up
with a national strategy for dealing with papers. And would
like to have you and Nichols and others expand on that, if you
would.
Mr. Scott. Certainly. I think the first thing to do is to
look at the different dimensions of the problem. That problem
that is happening for a major daily newspaper is not the same
problem that is happening for a rural weekly. It is not the
same problem that is happening for a new experiment in online
journalism. It is not the same problem that is happening for a
hybrid that does specialization, like investigative journalism
or government reporting.
So I think we need to understand the different kinds of
problems, and I think we need to begin to design solutions. And
I think the main problem that we are trying to get at here is,
if the historical accident of advertising-supported newspapers
no longer works, and there is no longer a revenue model in the
marketplace that produces the news that we need for our
democracy, how do you fill that hole?
First, there is reduction of costs with the distribution
model provided by the Internet. But there is always going to be
a core expense for production of news. And I think we need to
get at that through----
Mr. Conyers. But how do we go about putting together a
national strategy? Would this Committee be a place to begin? Or
would we call in all the newspaper leaders in the country or
invite them to start a conference themselves to come up with a
strategy?
Mr. Scott. I think you can begin by taking the leadership
of those who have begun, such as the Knight Commission has a
panel on this subject. A number of university professors have
written extensively on the subject. I think that we need to
begin to look at solutions that range the gamut from tax
policy, bankruptcy policy, direct investments in education and
public media. Those are all areas in which I think potential
solutions lie. And it will be a combination of those things
which produces a desired result.
Mr. Conyers. Which would include the subsidies that they
are already enjoying. You know, when you raised the cost of a
postage stamp, do you know what we are paying for?
Mr. Scott. We are paying for the news media and the
periodicals class.
Mr. Conyers. Exactly.
John Nichols.
Mr. Nichols. If I can just come off that and actually,
Congressman Goodlatte's very, very good questioning in this
area, the notion of a subsidy from the government to a
newspaper is, I think, abhorrent to most journalists. What you
really want to do is----
Mr. Conyers. That is capitalism at its worst.
Mr. Nichols. Well, we did it with banks, and I am a little
troubled by that.
Mr. Conyers. That was the same--and yeah, it applies to
whomever.
Mr. Nichols. What we are talking about here is democracy.
We want the people to be able to get information. We have all
said that in some way or another.
And so the way that you might look at congressional action,
one piece of congressional action, is to do what some European
countries have done, which is to allow people to take the cost
of their subscriptions off their taxes. You can deduct your
subscriptions from your taxes.
As a journalist today, professionally, I can deduct my
subscriptions from my taxes. But a citizen cannot. I would just
suggest to you that this is a way where we democratize a
support of journalism. We come in, and Dr. Baker has offered
some very wise proposals, but imagine this, where we
democratize journalism by saying to people, yeah, if you want
to subscribe to a conservative Internet site that charges or a
liberal newspaper that charges, that is great. And you can, you
pay your money in and then attach that, staple it to your
taxes, like a lot of us did on April 15, and it is a way to
support media that you approve of without sending the money--
and this is my personal bugaboo here--without sending it down
the rat hole of the existing companies, because the existing
companies have done a horrible, horrible job of running
newspapers.
Newspapers, I mean, imagine, we are all talking about how
much we love newspapers. And yet somehow they have managed them
into extreme crisis. And this crisis did not begin when
somebody flipped the switch on the Internet. If you monitor the
declining advertising revenues of newspapers, it started before
the Internet hit its stride.
And frankly, the bottom line is also on circulation. We
have had basically stagnant circulation since the 1950's. And
so the reality is newspapering has had a long-term problem. It
has come to a head in the current economic crisis. But what we
need to do is realize that a lot of these companies that have
been running these newspapers haven't been doing a particularly
good job, and I will close with one of the explanations for why
they are in so much trouble right now that we have not talked
enough about right now. They, big companies went to buying
sprees. They spent too much money to buy daily newspapers in
communities, took on huge debt, and now they are laying off
working journalists so that they can pay their debt. And at the
end of the day, what they will end up with is perhaps a paid-
off debt but no newspaper that is worthy of reading.
Mr. Conyers. Mr. Chairman, I ask unanimous consent for one
additional minute.
Mr. Johnson. In the absence of any objections, please, sir.
Mr. Conyers. I just wanted to ask Mr. Gainor if he is
familiar with an organization called Freedom Works.
Mr. Gainor. Yes, sir.
Mr. Conyers. I wanted to ask you further, are you familiar
with an organization called Americans for Prosperity?
Mr. Gainor. Yes, sir.
Mr. Conyers. And are you familiar with an organization
called the Heartland Institute?
Mr. Gainor. Yes, I am.
Mr. Conyers. I am glad to know that. I am not, but I think
I am going to get more familiar with them.
Mr. Gainor. They are conservative. You should check them
out.
Mr. Conyers. Thank you. Maybe that is why I never heard of
them before. But I understand they are pretty effective, that
they influence the business of getting news out to the people
and, in their own way, quite effectively.
Mr. Gainor. I think they are public policy organizations
that, like probably about a thousand of public policy
organizations in Washington, try to do their best to get their
word out. They are probably just fairly good at it.
Mr. Conyers. And you recommend them to my attention?
Mr. Gainor. Absolutely.
Mr. Conyers. And to everybody else in the country as well?
Mr. Gainor. Certainly.
Mr. Conyers. Thank you very much.
Mr. Johnson. Thank you, Mr. Chairman. There being no others
from the other side of the aisle who are present at this time,
I will now turn to Representative Gonzalez.
Mr. Gonzalez. Thank you very much, Mr. Chairman. I am not
sure that I would even have agreement among all the witnesses
if I said, do we all agree that the newspapers provide us
something that is very unique, different from any other media
source? And we can complain about the bias, the prejudice, the
incompetence, and so on in the newspaper. The real question is,
as opposed to what? TV? Radio? The Internet? Suddenly,
newspapers truly become essential and vital in the professional
product that they provide more often than not and that you will
find in the newspaper setting that you will not find as often
in any other delivery system. That is my premise. If we don't
agree with that, then we can all pack it up and go home and say
let nature take its course, survival of the fittest, and the
wonders of the free market, and it is over.
The question is, are the laws antiquated? Do we need to do
something about it? Maybe, maybe not. Or is it just a matter of
the application of the laws in a manner that will take into
account all relevant factors? Your competition not necessarily
within the same similarly situated industry, but rather who are
your competitors?
Now, I am going to say, I saw everybody kind of shaking
their head that we all agree that the newspapers provide
something that is very unique and valuable that cannot be
replicated elsewhere or presently is not being replicated. So,
how did we get to where we are today? And now I am going to
quote from newspaper articles.
June 5, 2008. Whenever I find something interesting, this
is the wonders of technology. Isn't it? We used to just
highlight it, cut it out, put it in the your file. Now it is in
your BlackBerry or iPhone.
June 5, 2008. Peter Moresky from the Post, quoting Steve
Balmer, CEO of Microsoft. Quote. Here are premises I have.
Number one, there will be no media consumption left in 10 years
that is not delivered over an Internet protocol network. There
will be no newspapers, no magazines that are delivered in paper
form. Everything gets delivered in electronic form.
And if that is what we need to prepare ourselves for, that
is fine. But what happened is that businesses adopted certain
business models and revenue streams. And maybe it is
irreversible and it is an irrevocable future out there. I mean,
we have set something in motion.
June 6, 2008, New York Times, Paul Krugman column. Quote:
In 1994, one of those gurus, Esther Dyson, made a striking
prediction that the ease with which digital content can be
copied and disseminated would eventually force businesses to
sell the results of creative activity cheaply or even give it
away. Whatever the product, software, books, music, movies, the
cost of creation would have to be recouped indirectly.
Businesses would have to distribute intellectual property free
in order to sell services and relationships, and we will have
to find business and economic models that take this reality
into account.
That is where we find ourselves. The question is, is there
a role for us? I think, Mr. Scott, you said the future of
journalism is really dependent on policy. And I assume you mean
policymakers, Washington and elsewhere, which I think is what
Steve Kay said about the Internet: The future of the Internet
is not dependent on technology but on regulation. So I think
there is a role for us.
So what is it that newspapers bring that is so valuable
that we all have to work together to salvage the survival of
the printed media in America? And I will start to my left. And
that is the only question I have.
Mr. Tierney. Thank you very much. Congressman, I think it
is an advantage, sometimes it seems like a disadvantage,
actually running a newspaper. And I am not a theorist and I am
not somebody who testifies here. It seems that the good ones
can hit that 5-minute mark right to the second.
I actually have 10,000 men and women, full-time, part-time,
and independent contractors that are depending upon me in this
organization. We are probably as close to the ideal kind of an
ownership group as you can want. Four Republicans, four
Democrats, and four Independents, all self-made folks who
really cared about it, who put up 30 percent so it wasn't
highly leveraged at the time, who are willing to put more money
into it.
The idea that somehow it is because the news media is too
liberal or conservative; Rupert Murdoch is a really smart guy.
Right? The New York Post is struggling. I hear it loses money.
The New York Times is struggling, and the Boston Globe. So
Republican, Democrat, liberal, conservative, the business model
is not working. And part of that is as simple as classified
advertising.
I have only been in the industry 3 years, and I have found
since coming in here that there were some mid-level business
people in the industry that weren't up to snuff. I know when I
was at Penn there were people who wanted to go in to be
reporters at the Philadelphia Inquirer, but nobody said at the
Wharton School, ``I want to go in to circulation at Knight-
Ridder.'' I understand that is the case. But at the top of
these companies there are really smart people who are really
successful in--Rupert Murdoch in television, and he is
struggling in newspapers. Don Grant, a very, very bright guy,
the Washington Post, 50 percent of their revenue comes from the
Stanley Kaplan Learning Center. So they are not all dummies,
and there is a real systemic problem here. And part of the
problem that I have noticed repeatedly, most recently with a
group of publishers in San Diego at a meeting, is everybody is
afraid to talk to each other. We had an antitrust lawyer in the
room. I have been in advertising for 20 years, I have advised
large corporations, and I have never seen an industry that
everybody is so afraid to even begin to have a discussion. Now,
perhaps they are more conservative by nature, but it was
shocking, about issues about, well, could we kind of cooperate
on some kind of a free classified space? Couldn't we cooperate?
Listen, nobody is trying to decide whether they should buy
the Philadelphia Inquirer or the Dallas Morning News tomorrow
morning. They don't. And there are opportunities but--to find a
new business model. Because, you know what? Nobody does what we
do. The bloggers comment on what we do, or they rip it off and
copy it and put a sentence in front of it.
Eric Schmidt said the average blog in America is read by
one person, I am all for other things. And if there could be
subsidies for subscriptions, et cetera, we have to look at the
impact of some of those things. But fundamentally, you know, if
I thought the answer was to hire more journalists to fix the
problem, we would do that. The question is--I mean, and forget
our debt. We have a lot of debt; it is going to be
restructured. Even if I have zero debt--and we are the number
three in advertising sales among top newspapers so far this
year, number three among the top 25 papers, one of the most
efficient newspapers in the country according to an industry
report as well. So, number three in advertising, one of the
most efficient. At the same time, our profitability has gone
from 70 to 49 to 36 last year to 11 this year. And that is with
making a lot of savings. So to somehow think that even if we
had no debt, even if we had no debt--our investors are so
committed to this that they haven't received a dividend--the
model doesn't work. Conservative paper, liberal paper, however
you want to do it. And I think most people just try to--over
the course of the whole baseball season, it is pretty fair,
most papers. But the fact of the matter is--and we have to look
at that because there won't be anybody here--like I had a great
situation, whether it be Toys for Tots was struggling in
Philadelphia, we wrote about it, they got 50,000 toys. Or
somebody who wrote to me and said: I never thought of taking my
children to the Philadelphia Orchestra. I am a construction
worker. I happened to see something, and how neat it was for
the first time at 52 years of age to walk in to hear the
Philadelphia Orchestra. Or vice versa.
I mean, nobody does what we do. And over a million people
every day read our paper in Philadelphia, and another half a
million people go online. We have to figure out how to charge
them. All of us are afraid to talk to each other about how to
create a one-pass system for that. I mean, we really need some
help. We don't need a subsidy, we just need a little bit of
room for things that will come before the Justice Department
again to be approved before they are done. We just want to be
in Philadelphia. We are not trying to create a media empire.
None of us would be interested in buying a paper in Chicago or
Los Angeles. We are Philadelphians; this is the only reason
that we are here. But we do need--I am telling you as a
relative newcomer to the industry, this industry is in extreme
situation. Once it goes, democracy will suffer.
Mr. Conyers. So why don't you create a new model?
Mr. Tierney. Well, we are struggling to some extent to do
that, Mr. Chairman, in terms of what we have done. We have come
up, and now we are willing--we are in negotiations with the
banks and putting in more equity, et cetera. But even if we
have--when we are competing to some extent with a Google, I
mean, think about that. They have 70 percent of the search. And
they--I mean, and they are in many ways a competitor to us. We
don't control the advertising. All the newspapers in the
Philadelphia market together aren't that powerful as an
advertising vehicle compared to a Google. That is--I won't get
into that. But, anyway, that is probably for another hearing.
Anyway, but so there are--and I guess what I am suggesting is
that I have never seen a more fearful industry about talking
about cooperation. Honestly. And I have advised people in the
electric utility business, you name the business, and it is an
industry that--and there is so little concentration. I think
the largest chain of newspapers has less than 10 percent, and
then it drops off after that. We are probably the most
deconsolidated industry compared to cable or any other
business.
I am sorry, I know I have gone over the 5-minute mark, but
I appreciate the opportunity. Thank you, sir.
Mr. Johnson. Thank you, Mr. Tierney.
Mr. Conyers. Mr. Chairman, I ask unanimous consent so that
Mr. Gonzalez's question can be gone down the row here.
Mr. Johnson. Without objection, so ordered. Proceed.
Mr. Nichols. I am very honored to be on a panel with Brian
Tierney, because he stepped in at a time when we had a major
chain breaking up and put together one of the few situations
where local people actually bought their paper. And this is
something we should be about. We should be about local
ownership of newspapers.
I can't tell you how much damage has been done. I know it
is a relatively unconsolidated industry, but let me tell you,
chain ownership by and large has been a nightmarish situation
for the daily newspaper business. And when you have distant
owners who are taking profits out but not putting much back in,
you see the dumbing down and the destruction of the daily
newspaper.
So at the end of the day when we start to deal in these
consolidation, antitrust, cross ownership issues, all central
to this discussion, we have to be very, very careful. If we
simply make it easy for distant owners to consolidate more and
do less, we will end up in the newspaper business with
something much like what happened in radio. In 1996----
Mr. Conyers. But isn't that the nature of capitalism?
Mr. Nichols. The nature of capitalism, frankly, if I
understand it, has something to do with free markets. And when
you have a monopoly owner----
Mr. Conyers. Free markets. That means global.
Mr. Nichols. When you have a monopoly owner in one place, I
am not sure if that is a free market operating there. So what I
would hope is that Congress would be in the business of trying
to promote a real free market of ideas, where you set up a
situation where it is possible for competing newspapers,
competing media outlets in the same town to employ journalists
and do something of quality.
But just to close off that thought, I think it is the great
danger, the great danger in saying, well, let's just throw off
the antitrust rules, let's just throw off the cross-ownership
rules, let's just throw off the consolidation rules, is that we
then begin to end up in a situation where people who have
already shown a penchant--not Mr. Tierney by and large, but the
people who have shown a penchant for taking freedom, more
freedom as an opportunity to dumb down, downsize newspapers and
newsrooms and to take more profits out.
We saw this happen in radio when Congress passed the
Telecommunications Act of 1996, allowing one company to own as
many as eight radio stations in a market. These companies,
Clear Channel is the first example, came in, bought eight
stations, shut down seven or eight competing newsrooms, and put
one kid running from microphone to microphone. And we ended up,
as Senator Dorgan has revealed in his hearings, with situations
in some communities, substantial communities, where there was
not a single broadcast journalist on the job.
Now, that is the danger of throwing off some of these
controls, throwing out some of these rules in an irresponsible
manner. You could well end up not helping newspapers but
actually hastening the decline of newspapers and, more
importantly--because this isn't really about newspapers--more
importantly, the decline of journalism. And a democracy cannot
function without journalism.
Mr. Lunzer. If I may. In Chairman Conyers' town just this
last week two very enterprising journalists as part of a team
won a Pulitzer Prize for the work they did in investigating an
ethically challenged mayor. They didn't ask what party he came
from. They had heard the rumors, they did the work. It was
something that ultimately was very tragic but also very
important to that community.
When people say what do newspapers represent? What will be
lost? That kind of work isn't being done by MSNBC or Fox News.
This is the kind of work that good journalists do every day in
organizations that are big enough to support this kind of
information. They are hardworking. They really don't pick
sides. I reject all this talk of bias. I think that is more
about the polarization of politics.
But what I would say is this in terms of policy. You want
to encourage journalism, you don't want to try to pick winners.
And that is the direction we need to go in. Thank you.
Mr. Scott. Mr. Conyers, you asked me earlier how Congress
could go about constructing a national journalism strategy, and
I did a poor job of answering that question. But it occurs to
me that the answer to your question is the same answer to Mr.
Gonzalez's question, and I think he is absolutely right, which
is, what we need to do is we need to bring people together in
the spirit of cooperation, which Mr. Tierney rightly points out
has been absent in this space, and bring together the industry
and the unions and the readers and the new Internet journalists
and the academics who have all been thinking about these
questions, and we need to identify what is the essential thing
about print journalism that we need to preserve in this
transitional technological environment. And, how do we support
those things in a business model where advertising revenues
have been decoupled from the value of news? And, third, what
are the policies that we can put in place to facilitate that
transition so that those essential elements are preserved?
That is the challenge I think that sits before this body
and the one that would be the first objective of a national
journalism strategy.
Mr. Baker. Mr. Gonzalez's question about what is unique
about newspapers, I think it has to be the journalistic unit.
And if that survives, whether the paper edition survives or
not, is a somewhat marginal question. But to have those
employed journalists--and most of the journalism done in this
country today is done by newspaper journalists, not all of it.
And we should be supporting it wherever it exists. But
newspapers do most of it. And if we do something that
sacrifices that, democracy suffers.
Evidence is, from around the world and also within this
country from State to State, that the biggest correlator with
less government corruption is newspaper readership. When people
are reading newspapers, corruption goes down. That happens
place after place. My suspicion--these studies were mostly pre-
movement of all the readers to online. I suspect it is not just
the readership of the newspaper that has been crucial for this
reduction of corruption, but it is the fact that there are
journalists out there making reports on what people in
government are doing.
It has been suggested by somebody that in the recent
stimulus bill we would get much better use of that money if a
small fraction of it was used to support investigative
journalism; then the other money that is spent would be used
much more wisely.
As for how we keep these journalistic units together, the
history has been that when you allow the exemptions from the
antitrust law, the general result is, as has been mentioned in
the radio example, is that the merged entities lay off the
journalists, that that is the part that is hit first and
hardest. The Newspaper Preservation Act, which I think was a
wonderful idea in terms of keeping competing newspapers alive,
keeping the competing journalistic units alive, has as a
practical matter not turned out well: Once you have allowed
them to join forces as a monopoly business enterprise, then
they discover that it is really not all that valuable to still
have to produce two products when they could have a monopoly
with one product. So the JOAs have largely been hospice care.
They keep one paper alive for a while and then eventually put
that one out of its misery, and then the monopolists can split
up the profits of a single newspaper in a town.
The exemptions from antitrust laws have never been a good
method of making sure that these journalistic units stay alive.
Other policies of a variety of sorts, I offered a subsidy
scheme, the notion of new ownership forms has been mentioned by
other panelists. There is a variety of other things that could
be usefully done. But it is these journalistic units that is
the crucial thing that newspapers have offered us, and it has
been something vital for democratic societies.
Mr. Gainor. First, I want to thank Congressman Conyers for
giving us a chance to answer this question. It is very
important.
Yes, what newspapers or what news organizations do is
unique but it is not always going to be in print. You can ask
any of the people who work on your staff or any of your family,
they are getting their news from other venues. They are getting
their news on their BlackBerry or online in some form or
another. Times are changing and changing very rapidly.
But I get very concerned, people are thinking that there is
no strategy. There are strategies that are working. People are
paying for content. You can find financial news, people will
pay, readers pay for financial news online. They will pay for
health news online. They even pay for sports news online. There
are models that work for the news industry where these are
working. So I reject the contention that there are no business
models.
I think the problem is, and I think we would all agree that
the industry has not been very well run, they haven't found
them yet. But nothing scares me more in the middle of a
congressional hearing than three words that say: National
journalism strategy. For Congress to be mandating a national
journalism strategy results in what you to some extent have
even here in this hearing right now, journalists lobbying
government, and then in turn being beholden to the decisions
and whatever moves you make to then aid them in protecting
their career and their employees. It is natural. It is human.
We all have friends in the industry. We all want the industry
to survive. If Congress bails them out, how hard are they going
to be then treating those Congressmen who voted for that the
next day?
So I want to close just with--an editor and publisher
actually addressed the issue of bailouts in September. This is
an industry publication, and it came out against them. And it
ended its editorial by saying: There is no reason to believe
bureaucrats would do any better picking winners and losers
among newspapers, and plenty of reason to fear turning the
financial future of newspapers over to a Federal Government all
too enamored of secrecy and surveillance.
I second that opinion. Thank you.
Mr. Johnson. Thank you, Mr. Gainor. I will now ask this
very simple question. Mr. Chairman, Chairman Conyers is about
the only one who actually ran with the dinosaurs, and he
regrets that he can't run with them today. But--because of
course they went extinct, and we were not able to as a
government save them. And now we are talking about the polar
bears getting ready to leave, the famous seals whom our Navy is
so fond of are threatened with imminent demise due to this
alleged global warming phenomenon.
And you know, so that being the case, things change,
dinosaurs come and go. Newspaper industries come and go. Why is
it so necessary for government to get into the pockets of the
people and save this dinosaur? Why should we move toward
socialism?
Mr. Tierney. Let me just say from the perspective of
somebody again who actually is running a newspaper, I can say
our industry is not looking for a bailout. We are not looking
for a dime, we are not looking for a dollar. We are just
looking for the ability to have discussions which may or may
not bear fruit. But the industry is still--when I hear about
the monopoly. If it is such a great monopoly, there wouldn't be
dozens of newspapers for sale right now with no buyers. If this
was the biggest monopoly in the world, you would think that
somebody would want to buy a newspaper in town after town.
The value of stocks like Gannett is down about 85, 90
percent in 2 years. The McClatchy Company, the second largest
newspaper chain, has dropped 99 percent from $60 to 60 cents in
2\1/2\ years. The New York Times Company. And, again, we are
not looking for a subsidy at all, unlike other industries that
have come before you. We are just looking for the ability to, I
believe, have a chance to--because you would be surprised,
Congressman, if you were there as an attorney, the fear of
these publishers to have any discussions at all even with a
lawyer present I think stymies the ability to begin to kind of
say, gee, how can we find some ways to save some money, or can
we find some ways to compete with one of the big Internet
sites, et cetera.
Mr. Conyers. Mr. Tierney, you are confusing cause with
effect. The reason these big monopolistic newspapers may be
going into the toilet isn't because of the system. It is
because of the way they have run it and the poor quality and
the fact that there are competing technologies that weren't
there when the Founding Fathers started off bragging about
newspapers. So to tell me what their stock is worth now may be
a direct result of their causation, not anybody else's or the
government's.
Mr. Tierney. Respectfully, Congressman, they are not all
rotten operators, and they are all down. And they are not--and
that is kind of what is going on. And what is going on now----
Mr. Conyers. Wait a minute. You say they are not all rotten
operators. How do I know that?
Mr. Tierney. Well, it would be a--like, again, I will look
at Rupert Murdoch. We think he is a good businessman.
Mr. Conyers. Well, I suppose there are people that think he
is a good businessman.
Mr. Tierney. Maybe I should find another example. No. You
know, it is interesting, too, because people say I can get that
information online. If you get that information online and it
is about Philadelphia news, nine out of 10 times it is going to
be coming from the Philadelphia Inquirer or the Philadelphia
Daily News. It is just what we are now--and that is a whole
issue of copyright and rights, because people can basically get
it, paste it in, and what is fair use is what is--I mean, when
people say information wants to be free, they are not in the
business of paying people to create information. You know? I
mean, I think that I have heard people related to Google saying
that it all should be free. Well, the ads aren't free. It is
kind of like somebody who has the right to--you will excuse
this analogy--but the right to sell, the exclusive right to
sell beer at a dance club, let's just say. So you think that
dancers shouldn't be paid, but the beers are 10 bucks each?
Well, the dancers have to be paid, too, in this situation, not
just the guys selling the beer. And we have too many situations
where people are selling the ads around our content, the
content that we create. And that is--you just can't create
something for free. We can't have great journalists that we
have, such as we have in our two papers from the Guild, and not
pay them.
Mr. Conyers. Was your example in reference to a gentleman's
club?
Mr. Tierney. I think that is the kind of club I meant, sir.
Is that a first for Congress, I don't know, for me to reference
that? I am sorry, sir.
Mr. Johnson. Ladies and gentlemen, we have been--I think I
would be remiss not to recognize the imposter who has just
entered the room. And though she is very low profile, you know,
folks like me, nerds and that kind of thing, definitely know
what she looks like. And--but the individual on stage on the
panel with us, I guess we have checked her ID and everything.
And I personally have--I want to say the real Sheila Jackson
Lee. I missed her over the last couple of weeks when Congress
has been on district work periods.
And so I want to recognize that we have been joined by my
good friend Congresswoman Sheila Jackson Lee from Texas.
Welcome. Thank you. And we will ask you to proceed with your
questions on this issue as soon as we can--I think instead of
answering my questions, I will just yield--instead of you all
doing that, I am going to yield again to Mr. Goodlatte.
Mr. Goodlatte. Well, thank you, Mr. Chairman. But I am
going to go back to my first statement: I don't have any other
additional questions. If Ms. Jackson Lee has any questions, you
should go right to her.
Mr. Johnson. I am sure--Ms. Sheila Jackson Lee, how do you
feel about that? And if it is okay with you, please proceed.
Ms. Jackson Lee. Thank you. I know that the hearing is
winding down. I want to thank the Chairman of the full
Committee, Mr. Conyers, and I want to thank you for your
leadership. This is a vital continuation of this Committee's
assessment in this economic arena of the various entities and
bastions of business. But in this instance, we are talking
about a very vital aspect of the first amendment, something
that we treasure here in the United States.
And so my questions, in light of the fact that I apologize
for just arriving back into town, and I wanted to have an
opportunity to at least comment very briefly on this question
that I think has to be a studied question and we have to come
up with some answers. Because on one hand we are losing the
Nation's very vital source of information. One reason of course
is the fact that everyone believes that they are tied to the
Internet. I think there is something good about the morning
paper and the afternoon paper and being able to have that. I
also think that communities suffer, frankly, when--though I
respect small papers--when papers close and there is only one
source of information, explanation, if you will, in the arena
that is necessary.
So I guess, let me just try to go straight to Mr. Nichols,
who is the man on the ground. And he has got his hands in the
mix because he is a journalist. Let me tell you the respect
that we have for you in this Committee. I know that you know
that we have passed legislation to protect the rights of
journalists as regards to sources, and the Chairman of this
full Committee has been a leader on those issues and I have
been glad to join him along with the leadership of Chairman
Johnson.
What are we looking at here from your perspective in
essence to be considered not only a journalist but an employee
if you were working for a major newspaper, what is the major
economic impact that we are talking about? And I would
appreciate if you would mix the economic impact question with
the whole issue of the first amendment. Antitrust, obviously we
are dealing with the economic impact, the business of
newspapers, which I think is very important as well, deals with
advertising. But economic impact, what it does to the first
amendment if we begin to see either mergers or closings. We are
looking at whether we should intervene governmentally. What is
your assessment? And forgive me for asking a redundant question
that you may have already answered.
Mr. Nichols. It is not so redundant. And also, I would be
remiss if I did not thank the Committee for--and Republicans
and Democrats, conservatives and liberals, for their commitment
to protecting reporters and the pursuit of information in this
society. We have just had so many examples in the last week.
Mr. Jackson Lee. Absolutely.
Mr. Nichols. Stories that have come out that relate to this
Committee and--on surveillance and torture and other issues
that were driven by journalists who felt free to do their job,
and so it is very important what you do.
I would just suggest to you that--I keep looking over at
Chairman Rodino and remembering that Chairman Conyers was on
this Committee when a newspaper revealed the wrongdoing of a
President and empowered, much more than any congressional
investigator or any judge or any lawyer, the Congress of the
United States to make the Constitution real. And the
Constitution is real when we use it. When you held those
impeachment hearings in 1974, the Constitution became real.
Similarly, free speech and freedom of the press is only
real when it can be practiced in a meaningful way. And so if we
lose newspapers and if we lose journalism, we begin to lose
freedom of the press as something meaningful. And we have had
this question bounced around somewhat before you came,
Congresswoman, about the role of government, how government
might step in. And I just want to remind you, I am a historian
of these issues. I write books about it. And the fact is,
government has always been involved in trying to assure that
freedom of the press is real. This country was founded by
journalists. Tom Payne was a journalist. Ben Franklin was a
journalist. Jefferson and Madison were contributors to
newspapers.
So what we need to do at this point is figure out how the
government can engage with these issues without becoming a Big
Brother, a heavy hand, the institution that is giving you your
resources so you have to be kind to them. We don't want to
recreate the king supporting his favorite newspaper. We want a
free press.
And I do think government has a role there. I think that
role, though, is mainly in empowering the subscribers and the
users of media, of journalism. And one of the ways that you can
do this is to consider this notion that has been put forward of
allowing subscribers to deduct or get a rebate for their
subscriptions in their taxes. They get to choose what they
read, what publications, what Internet sites they support. Not
the government. And hopefully this provides some resources
coming in, and maybe even an increase in readership and things
of that nature.
And I would suggest it has worked rather well with
churches. We do allow people to take a bit of a deduction when
they give money to their chosen house of worship. And I don't
say that I worship at the altar of journalism, but I come
pretty close. And I would appreciate very much if Congress
looked at all the creative ways in which it could involve
itself in making sure that freedom of the press is real and
that the Constitution is real.
This democracy will not survive without newspapers and
journalism. It won't. And so you are at a very critical moment
here. If you fail to take this task seriously, look at all the
options, look at all the possible actions, make sure that you
do it in the right way, you will be a part of watching those
dinosaurs pass away. And I don't want--I am young enough that I
would like the dinosaur to last for a little longer.
Ms. Jackson Lee. Thank you for your eloquence. Let me ask
Mr. Tierney and as well as--in fact, let me, other than Mr.
Nichols, answer this question on the antitrust exemption. One
would think that the legislation, the Newspaper Preservation
Act, which allowed I think the merger of newspapers would have
helped preserve some of these entities. And, however, it
certainly merged newspapers and I think lost a lot in the
political thought and independence of political thought.
Since we are at the end of the hearing, why don't I ask
each of you just to give me your perception of the kind of
intervention now that we should have with respect to, say,
newspapers? Why don't we begin with you, Mr. Tierney?
Mr. Tierney. It is interesting, this is my own perspective,
the Newspaper Preservation Act of 1970--if your roof lasted for
40 years, you would think that was pretty good. So I don't
think it is a failure in that it did help in the 1970's,
1980's, and 1990's, and they don't seem to be working as well
now. The issue now isn't so much preserving two newspapers in
most towns, but it is preserving the one.
And so I think that is--what we need is a period of time--
we don't need any subsidies or anything like that, although
that is wonderful to have them but I think it is problematic in
this, and then you will have a lot of people saying, ``Me, too.
Me, too.'' But we provide something unique to our community,
where the source of alt-journalism, television journalism,
everything else springs from what we do in our communities, and
what we are asking for is the ability--and we all agree that
journalism should be saved and we play a unique role. So what
we are just asking for is a period of time, perhaps it is 18
months--and I am not an expert on this, so I am probably
speaking out of line in terms of the industry--but where there
could be discussions which would then be reviewed with the
Justice Department on some basis. So it is not as if anything
can be done unless it is approved, so that we could begin
discussions among newspaper publishers.
And, again, I said earlier, ma'am, before you were in the
room that here in Philadelphia we are a locally owned diverse
group. We are not looking to build the next empire of
newspapers. But I think if we could work with the folks in
Dallas or Los Angeles and Chicago, we could come up with new
products that would be national in scope which we don't have
now, but online classified advertising, all the rest of it, to
compete against some other players. And we are afraid to even
begin to have those discussions. And I said before you got
here, it is amazing; I have been in advertising for 20 years
before this, the last 3 years, I have never seen an industry
where people are paralyzed even with lawyers in the room to
begin to scratch at the surface.
Ms. Jackson Lee. Is that because of the regulatory
structure that the newspapers are operating under?
Mr. Tierney. Exactly. Yes, Congresswoman. And I don't have
a history of it, but I feel like some people must have really
been spanked sometime in the past, because it is amazing how
afraid people are to talk.
So if we could have a period of time where we could have
some of these discussions, and again subject to the DOJ review
and a final approval, I just think that would be one step
without a subsidy or anything like this where the industry
could begin to come--because we need to come up with our
version of a Craigslist. And when it is Philadelphia for Free
Rentals and then it is Dallas for Free Rentals, it is not a
national brand. And I just offer that as one example. And that
is how we can compete in our own way. But people are afraid to
do that right now.
Ms. Jackson Lee. Mr. Lunzer.
Mr. Lunzer. It is very difficult to answer, because before
this hearing took place there really has not been much
specificity about what people believe the current barriers are.
I frankly don't see them. I do know that in the San Francisco
Bay Area, where there was talk of a need for relaxation of
antitrust, the only reason why they could have been requesting
it is because they wanted to share journalists. And the
fundamental fear that we have is the union that represents the
vast majority of journalists--newspaper journalists in the this
country is that if the solution is to further diminish these
products by having fewer and fewer journalists and now use them
across more publications and perhaps with broadcasts, we are
going to have a dozen journalists working in one town chasing
stories and you are not going to get the story. You are going
to lose voice, you are going to lose diversity, you are going
to lose a lot of things that matter.
So you need to encourage journalism. The crisis is real.
And we want these people to be successful, but you have to be
cautious about the way you go about encouraging it. We need the
discussion, and I applaud you for having this discussion.
Ms. Jackson Lee. Mr. Chairman, I know we are concluding.
Could I get a quick answer from these remaining witnesses on
just that question?
Mr. Johnson. If there is no objection.
Ms. Jackson Lee. If they remember the question, which is
the NPA and the structure that we have now. And thank you. That
is important, Mr. Lunzer, for--with respect to the concept of
what you do with the talent of journalists.
Yes, Mr. Scott.
Mr. Scott. I think that we have to evaluate a
recommendation of relaxing antitrust standards in the context
of policies to address the crisis in journalism. But before you
came in, I suggested that we ought to convene a national
journalism strategy. Mr. Gainor objected because he fears that
as sort of a Big Brother intervention from the government in
the business of the news. And I hear that concern and I share
it. However, I think it is a historical--because the government
has always been involved in the news business to some extent.
And though the Constitution says do not abridge the freedom of
the press, it does not say do not promote the freedom of the
press. And in fact, many laws have been made in the history of
this great country to promote the freedom of the press,
including the Newspaper Preservation Act.
Ms. Jackson Lee. So we are looking for answers, and you
think we should be meeting to get that?
Mr. Scott. So I think, just to conclude that thought,
convening a national journalism strategy and bringing together
experts from all camps allows you to evaluate different
proposals. One proposal is to relax the antitrust standards.
Now, we have to evaluate against--that proposal against others
and against the facts of what caused this crisis and what we
are trying to achieve with a solution. So if what we are trying
to achieve is more journalists and healthier business models
and the diversity of business models to produce more and better
news in the marketplace of ideas, we need to see whether that
proposal meets that standard. In my view, on my analysis it
does not meet that standard and should not be one of the
solutions on the table. But I think having a form in which to
evaluate multiple policy options is a good idea.
Ms. Jackson Lee. Thank you. Mr. Baker.
Mr. Baker. I went into law teaching primarily because of my
commitment to the first amendment and wanting to write about
it, and I have been one of the strongest advocates of first
amendment protections in the academy.
The first amendment in the area of the--let me refer to
both your question about the first amendment and about
antitrust and the Newspaper Preservation Act.
The first amendment in the press area mandates some things,
allows a lot of things, and has been used perniciously to make
a lot of irrelevant claims. It mandates that the government not
engage in any type of censorship. When we earlier discussed
whether or not Fox News was too connected to the Republican
Party, I thought that, whatever your view on that subject is,
that should be irrelevant under the first amendment. What we
want out of the government is policies about how we can promote
a media industry, not make judgments about the goodness or
badness of particular publications.
It has been irrelevant but been used perniciously to claim
lots of things. Newspaper publishers claim that the first
amendment was the reason why they didn't have to pay their
workers minimum wage. The Supreme Court slapped them down
unanimously when they made that type of claim. It has also been
used to claim that antitrust laws couldn't be applied to
newspapers. The Supreme Court rejected that claim in a stirring
opinion by Justice Black that said that the first amendment
doesn't disable the government from protecting freedom of press
from private combinations that would suppress it.
The history of the country has been involved with the
government being involved with the media. What the first
amendment should do is make sure that the forms of those
involvements not be of an objectionable sort. And so what we
want to see is the objectionable forms of involvement, in
particular censorship, not be allowed, but that the role of the
government from the country's founding has been intently
involved----
Ms. Jackson Lee. So we can't intervene on the antitrust if
we are trying to save newspapers, we have a legitimate standing
in that instance?
Mr. Baker. You clearly have legitimate standing to try to
save newspapers. Then the question becomes, would relaxation of
the antitrust laws be an effective way to do that? If it is--
you certainly would have the power to relax them for that
purpose; however, the evidence seems to me--and this is what
Mr. Lunzer suggested--is that the main result of relaxing
antitrust laws historically has been and most likely now would
be to reduce the key value of newspapers; namely, to fire or
get by with less journalists.
When I hear Mr. Tierney, who as an analyst of the industry
seems dead right, everything he says about the industry
situation is right. But when he says this is an industry that
is more scared to talk than people in any other industry, well,
why would they be scared to talk? They live, for instance,
under the same antitrust laws under which everybody else lives.
In the first panel, Carl Shapiro suggested that if they think
that the antitrust laws are interfering with them talking, they
could just go to the Justice Department and ask for permission
to talk. But there hasn't been any suggestion that he has made
of anything that they would talk about that would in fact do
anything that would save journalists. What they might do with
some alleviation of antitrust laws is to make money for the
companies as they engage in their firing of journalists.
So I see antitrust law reduction in this area as not
accomplishing anything for the key value in the news industry,
which is provision of news. It may do something to help some
owners of businesses make more money, but not in a way that
serves the public interest.
Ms. Jackson Lee. Thank you.
Mr. Gainor. Professor Baker makes the point that--raising
the issue that you can intervene. The real question is, the
better one: Should you? Should Congress get involved in trying
to save newspapers?
It is like we are trying to catch lightning. The situation
is it is moving so fast. Almost every major newspaper in the
country has already switched from just print to now providing
video on their Web sites. The escalation of technology is so
rapid.
We are all sitting here. We love newspapers. With the
exception of the Congresswoman, I would say we all love
newspapers because we are old.
Ms. Jackson Lee. Thank you.
Mr. Gainor. I grew up with newspapers. Generally, the first
thing I ever read was a newspaper.
Mr. Johnson. Mr. Gainor, speak for yourself, sir.
Mr. Gainor. I gladly speak for myself, Congressman, on that
point.
But we like the technology. But news is not a delivery
mechanism. News is the people providing it, how they provide
it. And we now have more news sources and more opportunities
for people to read than ever before. Newspapers are now
competing, instead of--their national coverage is actually
competing with global national coverage.
So the situation is still being sorted out. To try to
overreact and get involved in something that is just a rapid
technological change I think would be a big mistake.
So when you ask, what should Congress do? I would say
nothing.
Thank you.
Ms. Jackson Lee. Mr. Chairman, thank you for your
indulgence. I think that we have just seen sort of a mountain
being built, and I think we have got to find a way to overcome
it and answer a lot of questions. Thank you for this hearing. I
yield back.
Mr. Johnson. Thank you, Congresswoman Jackson Lee. And I
will say that there is no way that we can stop this ``too big
to fail'' phenomena as it relates to the media and our precious
first amendment right. There is just simply no way that I know
of.
But at any rate, I want to thank the witnesses for your
testimony today. And, without objection, Members will have 5
legislative days to submit any additional written questions
which we will forward to the witnesses and ask that you answer
as promptly as you can, and then those responses will also be
made a part of the record.
And, without objection, the record will remain open for 5
legislative days for the submission of any other additional
materials.
Again, I want to thank everyone for their time and
patience, and this hearing of the Subcommittee on Courts and
Competition Policy, though long and complicated, has now come
to an end.
[Whereupon, at 4:55 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record