'If We Don’t Act To Improve The Health Of The Newspaper Industry, We Will See Newspapers Wither And Die'—Kevin J. Martin, US Federal Communications Commission Chairman

Philip M. Stone November 15, 2007

The message we continually get from newspaper trade organizations is that newspapers are in fine shape, sure they need different business models to counter losing advertising to the Internet, but margins are still very healthy even if employment numbers are savaged. But now a leading member of the Bush Administration says, “In many towns and cities, the newspaper is an endangered species.”

Federal Communications Commission chairman Kevin J. Martin has his own political agenda – he wants to make it easier for newspaper groups to own a newspaper and a television station in the same market, something that is becoming a political hot potato in the Presidential campaign – but in a fascinating piece on the op-ed page of the New York Times Martin pitches his attempt in the guise of the government having to be proactive in saving newspapers.

Newspapers in the US are in such dire straits? They need government help to survive? Here’s the US newspaper situation as he writes about it in The Times:

“At least 300 daily newspapers have stopped publishing over the past 30 years. Those newspapers that have survived are struggling financially. Newspaper circulation has declined steadily for more than 10 years. Average daily circulation is down 2.6% in the last six months alone.

“Newspapers have also been hurt by significant cuts in advertising revenue, which accounts for at least 75% of their revenue. Their share of the advertising market has fallen every year for the past decade, while online advertising has increased greatly…

“If we don’t act to improve the health of the newspaper industry, we will see newspapers wither and die…The challenge is to restore the viability of newspapers while preserving the core values of a diversity of voices and a commitment to location in the media marketplace.”

His idea is to allow those who own newspapers in the top 20 TV markets to also own a TV station in that market, but the TV station cannot be stronger than fourth in that market’s ratings and the rule can only apply if there are at least eight independent media entities in the market -- the thinking being that the newspaper won’t have too much influence in that market if the station is no more than the fourth most frequently watched and there is a wide variety of news choices.

He sees such co-ownership in a market as actually helping newspaper publishers cover local news. “The (current) ban on newspapers owning a broadcast station in their local markets may end up hurting the quality of news and the commitment of news organizations to their local communities. Newspapers in financial difficulty often have little choice but to scale back news gathering to cut costs. Allowing cross-ownership may help to forestall the erosion in local news coverage by enabling companies that own both newspapers and broadcast stations to share costs.”

The basic newspaper industry reaction was one of great disappointment – newspaper publishers had hoped for a far more sweeping proposal to relax the cross-ownership rules -- while consumer groups said they thought the change was too great. The Tribune Company particularly needs waivers of the current rules in such markets as Chicago, Los Angeles, and Hartford so that it can implement its privatization by the end of the year and Tribune Chairman Dennis FitzSimons told staff the company is working hard to change Martin’s proposal.

If Tribune is unsuccessful then Hartford becomes a real problem where Tribune owns the Courant newspaper and two local TV stations. FitzSimons has cause for worry – if he can’t have the waivers processed by year’s end then Tribune risks even higher financing costs for its privatization, or any of its four investment banks could pull the plug, and with two of them being CitiGroup and Merrill Lynch, both of which were hit hard by the subprime mortgage crisis, they could just be looking for a way out.

Gannett, the largest US newspaper chain, commented in a statement, “Gannett agrees that the proposed cross-ownership ban must be changed, but today’s proposed rule is far too limited and does not reflect the realities of the marketplace.”

And there was an interesting statement from John F. Sturm, president-CEO of the Newspaper Association of America, a trade group that tends to put newspapers in their most positive light, but he acknowledged within his statement that American newspapers are in trouble.

“The Chairman’s proposed solution to the onerous, decades-old newspaper/broadcast cross ownership ban is extremely limited, and does not go nearly far enough to deal with the issues that he himself raises (which Sturm does not dispute) in his statement…The fundamental issues he raises concerning the vitality of newspapers and assuring their local news remains available to the public in print and broadcast are not confined to the top-20 markets.”

On the other side of the issue is Andy Schwartzman, director of the Media Access Project, that claims the new proposal “will reduce diversity. It is a much more permissive scheme than is presently in effect. It will reduce diversity in media markets throughout the country.”

There are those who might also say that since the proposal seems to please no-one then the chairman may have got it just about right.

Martin ended his proposal with yet another plea that loosening the cross-ownership laws will help newspapers survive (at least in the top 20 US markets). “A colleague on the commission, Michael Copps, for whom I have the utmost respect, has argued that our very democracy is at stake on the decisions we make regarding media ownership. I do not disagree. But if we believe that newspaper journalism plays a unique role in the functioning of our democracy, then we cannot turn a blind eye to the financial condition in which these companies find themselves.”

So, if we accept the chairman’s thesis, the condition of the US newspaper industry in the top 20 broadcast markets is bleak and needs government help. Not quite the message newspaper trade groups have been putting out.

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