‘Save local news’ — or provide a lifeline to newspaper-owning hedge funds? Time to bury the Orwellian JCPA

The U.S. Capitol Building.
(Kent Nishimura / Los Angeles Times)

Why is an anti-competitive, hedge fund-preserving bill even before Congress in the waning days of 2022? Providing tens of millions of dollars to financially driven chains that have accelerated the decline of the local media makes no sense.

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Lookout founder and CEO Ken Doctor

Would George Orwell object to how broadly the phrase Orwellian has gained applicability some 72 years after his “1984” was published? I wonder how a writer as perceptive as Orwell would see the times in which we live, and lately, I think I know how he’d assess the bill aiming to move through the lame-duck Congress, the “Journalism Competition and Preservation Act,” or JCPA. It’s a marvelous latter-day cousin of “war is peace,” “freedom is slavery” and “ignorance is strength.”

With JCPA, the words themselves, adjusted 180 degrees, tell the story, as I explain below.

And it’s a story that matters, in Santa Cruz County and in communities across the country. This seemingly faraway debate might have implications for the news you get here in Santa Cruz and more widely. Consequently, I’m sharing with you my thoughts on it, as Congress faces a pivotal decision on it by year’s end, even as opposition to JCPA has grown.

On the surface — and that’s as deep as many in Congress might have had the time to view it as it has been rushed through without adequate committee hearings — JCPA seems straightforward. Broadly, it allows newspaper publishers and broadcasters to negotiate ongoing payments from the biggest platforms of our day, notably Facebook and Google. While we all loved our new tech just so recently, now Big Tech has become a rare thing — a bipartisan bogeyman, easy to rail against.

Why does Congress have to get involved in negotiations between the platforms and the news media?

It doesn’t — news companies could negotiate one by one with the platforms. But that seems like David vs. Goliath to them. What they want is the ability to negotiate collectively with the platforms, knowing that will provide more leverage. Most probably, though, under antitrust law, that may be illegal. So for the past several years, the News Media Alliance (which represents newspaper publishers, now dominated by financially driven chains) and the National Association of Broadcasters (which represents the broadcaster chains) have been lobbying for the ability to negotiate collectively. Legally, they want a federal exemption from possible prosecution for antitrust violations. And that, again on the surface, seems reasonable.

Lurking below that surface, though, we see a different reality, one that belies the words of the act themselves:

Journalism: There’s nothing in the bill that drives the hiring of journalists — or creates more local news in the country.

Competition: It’s anti-competitive, allowing the financial companies that have hollowed out the news business and laid off journalists left and right to stay in business and improve their balance sheets. They seem to be serving their communities, thus making it harder in some places for others to compete with them. Even with new funds, these companies are likely to continue publishing “ghost papers” that pretend to be local, while filling their publications with national “wire” content and “regional” news, often from locales hours distant.

Preservation: What would the law keep in place? Huge chains, controlled by hedge funds and private equity. That’s not “preservation” in the public interest.

Act: Those supporting the bill, and many, I believe, do it with good intentions, witnessing the horror of local news decline in their districts and states, believe that acting is good. In this case, letting a bad bill die is the best alternative in the waning days of this Congress. After failing to include JCPA in the National Defense Authorization Act last week, JCPA’s proponents aim to attach it to the omnibus budget bill this week.

Already, some 26 public interest organizations have mobilized against JCPA, all, I believe, on common-sense grounds. Among the groups signed on to the opposition: the American Civil Liberties Union, Common Cause, Local Independent Online News Publishers (LION), Creative Commons and the Electronic Frontier Foundation.

The group’s letter summed up the objections: “After months of debate and broad-based opposition from a wide range of stakeholders, it looks like industry lobbyists for the JCPA have once again attempted a Hail Mary pass. Longstanding questions about the JCPA’s impact on content moderation, small and independent media, industry consolidation, and copyright law — as well as the bill’s complete lack of accountability for ensuring the funds actually help support local journalists – have all gone unaddressed. In fact, the JCPA hasn’t even had a hearing or markup in the House. This kind of backroom deal is not the way to move a bill with the problems, complexities, and contradictions of the JCPA.”

I’ll confine my thoughts to the newspaper and digital news business, though I’m concerned about the same concentration, through merger, of ownership in the broadcast business that has narrowed diversity.

Let’s consider the likely impacts of the legislation in more detail, beyond the sales pitch that has consumed attention. It would:

  • Force the platforms to pay what will be some tens of millions of dollars a year to the current owners of what’s left of America’s daily press. When I say what’s left, consider this chart, showing how the daily newsrooms of America have been decimated by job cuts.
A chart showing newsroom employment in the United States

The chart says a lot, but we can flesh it out.

Gannett — the behemoth that now owns 25% of the daily press — has cut about a thousand jobs out of its news division just in the past few months. So much of its declining (by 10% annually) revenues go just to service its debt. That debt totals $1.3 billion, a majority of it owed to its lender, Apollo Global Management, that financed its merger of three years ago. Rather than pay journalists, it’s paidoff debt of about $81 million in just the past two quarters. That’s to fund a “merger” that did nothing for journalism, but enriched a small number of financial players.

The second-largest newspaper company is one I’ve mentioned over the past couple of years, Alden Global Capital. It owns the Santa Cruz Sentinel and Monterey Herald locally, along with about 200 other newspapers across the country, including the storied Chicago Tribune. The company absorbs, without any public comment, the “vulture capitalist” criticism it receives from far and wide, from The Atlantic to John Oliver and Hasan Minhaj. Lately, it earned this headline on Scott Simon’s Saturday NPR show: “After gutting local newspapers, hedge fund Alden Global is going after mobile home parks.”

The three largest U.S. newspaper chains are all driven by financial engineers, and they control about half of the dailies in the country. Even with some potential benefit going to smaller chains and independents — print-based and increasingly digital — this legislation, as currently written, is likely to do more harm than good.

  • Force arbitration if the parties can’t agree. The bill essentially stacks the deck by mandating arbitration if the parties can’t agree. Here, too, if good public policy, that makes sense, but if it largely enriches those who are taking the money out of a dying trade, it doesn’t.
  • Set no requirements on how the news media companies receiving the payments can use the money. There is no requirement to retain or hire journalists, despite the national emergency around local journalism.
  • Allow side deals. The U.S plan is modeled on Australia’s similar legislation, which allows one or several companies working together to make their own deals with platforms. Within the bills, such groups are called “joint negotiation entities.” There’s no formula for payment, which likely means the biggest players get the best deals. In Australia, Rupert Murdoch’s News Corp reportedly emerged with the greatest sum, making its own deal. As his Australian press — he owns two-thirds of the press there — continues to foist climate change-denying nonsense on the public, it has now received government-driven help in doing so.
  • Require no transparency. This is public policy, but the public will have no way to assess it. The negotiations, and the deals, can all be done in the dark, with no requirement to provide public — or congressional — visibility.
  • Introduce potential uncertainty about what the platforms can do to “moderate” speech, this at a time when we witness what Twitter run amok may wreak. One Senate amendment to JCPA would apparently force platforms to carry the content of any digital journalism provider that becomes part of a joint negotiation entity, regardless of how extreme their content. Further, under the bill, such “providers,” or publishers, could bring a legal action against a covered platform to hold it liable for limiting the reach of content the platform owner finds offensive or contrary to its terms of service or community standards. “This is a direct assault on a bedrock principle of content moderation on the internet, and will increase the amount of networked disinformation, hate speech, and harassment found there,” said a Public Knowledge letter to Congress.

Certainly, if passed, the law might help out independent, civic-dedicated newspaper publishers, even as their ranks have thinned dramatically over the past decade. And it might provide a new stream of revenue to the Lookouts of the world as well. Of course, we’d like that — and you would benefit as we plow our revenues into greater coverage, here in Santa Cruz and beyond.

But with the opacity of this legislation, there’s no even playing field. The big money guys are likeliest to wring the biggest money out of the deals — again with no public transparency — likely leaving meager sums for those seeking to build long-term, robust local news companies.

Disproportionately, this looks like a big giveaway to those financial players who have bought up newspapers, cynically knowing they could squeeze out the last of the profits, even as their products and their paying customer base got smaller and smaller. Might they invest the money they “negotiated” and hire more journalists? Sure, it’s possible, but their track record doesn’t indicate it. Whatever our views of the overall positives and negatives of Big Tech — and there are so many — how does a transfer of money from the platforms to self-serving hedge funds better anyone, other than the hedge funds?

Congress has had before it a sensible plan that would put the power to improve local news where it belongs — locally. However, the Local Journalism Sustainability Act (LJSA), which was close to passage as part of the spring Build Back Better legislation that was torpedoed at the last minute, is nowhere on Congress’ agenda today. It would have provided tax credits to you — as news subscribers (or members) and as advertisers (or marketing partners) — when you spent money with a local news company or organization. And it would have provided a payroll tax credit for hiring and retaining journalists.

Instead of LJSA, we have the JCPA.

In my life previous to Lookout, I became the senior chronicler of local press decline — until I decided to try my own hand at reversing that decline. In November 2020, we launched Lookout Santa Cruz, believing that the citizens and local businesses would support a new, digital-only, trustworthy, nonpartisan, primary news source. We have built it, and you are coming, as readers, paying members and advertisers.

I now judge JCPA, well-intentioned “save the press” legislation, through those two prisms. One, as an experienced, and dispassionate, analyst. The other, as a passionate mission-centric entrepreneur. With either view, it’s a misguided effort that should go away as the year turns.

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