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[Joint House and Senate Hearing, 111 Congress]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 111-457
 
   THE FUTURE OF NEWSPAPERS: THE IMPACT ON THE ECONOMY AND DEMOCRACY 

=======================================================================

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 24, 2009

                               __________

          Printed for the use of the Joint Economic Committee

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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES             SENATE
Carolyn B. Maloney, New York, Chair  Charles E. Schumer, New York, Vice 
Maurice D. Hinchey, New York             Chairman
Baron P. Hill, Indiana               Jeff Bingaman, New Mexico
Loretta Sanchez, California          Amy Klobuchar, Minnesota
Elijah E. Cummings, Maryland         Robert P. Casey, Jr., Pennsylvania
Vic Snyder, Arkansas                 Jim Webb, Virginia
Kevin Brady, Texas                   Mark R. Warner, Virginia
Ron Paul, Texas                      Sam Brownback, Kansas, Ranking 
Michael C. Burgess, M.D., Texas          Minority
John Campbell, California            Jim DeMint, South Carolina
                                     James E. Risch, Idaho
                                     Robert F. Bennett, Utah

                     Nan Gibson, Executive Director
               Jeff Schlagenhauf, Minority Staff Director
          Christopher Frenze, House Republican Staff Director

                            C O N T E N T S

                              ----------                              

                                Members

Hon. Carolyn B. Maloney, Chair, a U.S. Representative from New 
  York...........................................................     1
Hon. Kevin Brady, a U.S. Representative from Texas...............     2
Hon. Michael C. Burgess, M.D., a U.S. Representative from Texas..     3

                               Witnesses

Statement of Tom Rosenstiel, Director, Pew Research Center's 
  Project for Excellence in Journalism, Washington, DC...........     7
Statement of Paul Starr, Professor of Sociology and Public 
  Affairs, Stuart Chair of Communications and Public Affairs at 
  The Woodrow Wilson School, Princeton University, Princeton, NJ.     8
Statement of John F. Sturm, President and Chief Executive 
  Officer, Newspaper Association of America, Arlington, VA.......    11
Statement of Denise Rolark Barnes, Publisher, The Washington 
  Informer, Washington, DC.......................................    12

                       Submissions for the Record

Prepared statement of Representative Carolyn B. Maloney, Chair...    32
Prepared statement of Representative Michael C. Burgess, M.D.....    33
Prepared statement of Tom Rosenstiel.............................    33
Prepared statement of Paul Starr.................................    34
Prepared statement of John F. Sturm..............................    36
Prepared statement of Denise Rolark Barnes.......................    38

   THE FUTURE OF NEWSPAPERS: THE IMPACT ON THE ECONOMY AND DEMOCRACY

                              ----------                              

                      THURSDAY, SEPTEMBER 24, 2009

             Congress of the United States,
                          Joint Economic Committee,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:10 a.m., in Room 
210, Cannon House Office Building, The Honorable Carolyn B. 
Maloney (Chair) presiding.
    Representatives present: Maloney, Cummings, Brady, and 
Burgess.
    Staff present: Nan Gibson, Gail Cohen, Chris Frenze, Robert 
O'Quinn, Colleen Healy, Andrew Wilson, and Aaron Rottenstein.

OPENING STATEMENT OF THE HONORABLE CAROLYN B. MALONEY, CHAIR, A 
               U.S. REPRESENTATIVE FROM NEW YORK

    Chair Maloney. The committee will come to order. Mr. Brady 
will be with us in a moment. And I want to, first of all, thank 
our witnesses for joining us today to discuss the future of 
newspapers and their impact on the economy and our democracy.
    The newspaper industry has experienced serious financial 
problems resulting from dwindling advertising revenues, falling 
print subscriptions and a fundamental change in the way people 
get their news. Recently the plight of the newspaper industry 
has been punctuated by substantial job losses, downsizing at 
various bureaus, and the halting of either printed editions or 
businesswide operations. According to the Bureau of Labor 
Statistics, newspaper publishers cut nearly 50,000 jobs between 
June of 2008 and June of 2009, a record rate of job cuts 
representing 15 percent of its workforce. Regional outlets like 
the Seattle Post-Intelligencer and the Detroit Free Press have 
either scaled back or halted printed editions, while others 
like the Rocky Mountain News and the Cincinnati Post were 
closed entirely.
    Though a decline in printed newspaper readership is partly 
to blame for recent developments, there are multiple factors 
contributing to newspapers' declining quality and 
profitability. Technological change has created structural 
challenges for newspapers, which were reliant on subscription 
and classified ad revenues to cover operating costs. On top of 
that, the current recession has eroded advertising revenues 
substantially. Between 2006 and 2008, ad revenues declined 23 
percent, from $49.5 billion to $38 billion, and are expected to 
fall further during 2009.
    The way information moves today can make even the tech-
savviest New Yorker's head spin. Today's Kindle-clutching, 
iPhone-toting subway rider who braves the rush-hour commute 
spends every waking hour in a world of nonstop news and 
information which none of us could have imagined just a few 
years ago. Digital media, bloggers, news aggregators and 
citizen journalists all on the Internet have forever altered 
the speed at which news and ideas are disseminated. And while 
there are many out there chronicling what ails our country's 
newspapers, community dailies and weeklies continue to shut 
down their presses, and not nearly enough is being done to find 
ways to preserve these institutions that are so absolutely 
critical to our democracy.
    Last week I introduced H.R. 3602, which is carried in the 
Senate by Senator Cardin, a bill which will enable local 
newspapers to take advantage of nonprofit status as a way to 
preserve their place in communities nationwide.
    Since the ratification of the Bill of Rights, the Federal 
Government has acknowledged that the press is an institution 
which is afforded special protections by name. In this spirit I 
think that the government can help foster solutions for this 
industry in ways which protect the independence of newspapers 
and enables their objective reporting to thrive in a new 
economic and media climate.
    In so many ways the change brought about by the digital 
media amplifies what is written in newspapers. The Internet and 
mobile devices extend news and information in a way that opens 
dialogues to more and more aspects of our life. The Internet 
has allowed anyone, regardless of background or world view, to 
express themselves, connect with others, and access an entire 
world of electronic information. Journalists play a critical 
role in monitoring the activities of individuals and 
institutions that are supposed to be working in the public 
interest. As our witness Dr. Starr put it, ``they provide a 
civic alarm system.'' The absence of a strong media may even 
allow corruption to flourish unchecked.
    In addition, studies show that journalism fosters civic 
engagement by the population at large. A recent study showed 
that when the Cincinnati Post shut its doors, voter turnout in 
local elections dropped. Without our newspapers we lack a 
critical uniting feature which fosters broad participation in 
our democracy and community.
    Minority-owned publications are among the hardest hit by 
recent trends, and more must be done in order to ensure that 
these institutions continue their important public service. The 
reporting done by minority-owned newspapers is a critical voice 
in communities across the Nation that must be preserved.
    It is clear that we need to explore alternative business 
models to ensure an independent and vibrant press in the 21st 
century. I look forward to the testimony of our witnesses, and 
I thank you so much for being here today before the committee.
    [The prepared statement of Representative Maloney appears 
in the Submissions for the Record on page 32.]
    Chair Maloney. And I recognize Mr. Brady for 5 minutes.

    OPENING STATEMENT OF THE HONORABLE KEVIN BRADY, A U.S. 
                   REPRESENTATIVE FROM TEXAS

    Representative Brady. First, thank you, Madam Chairman, for 
calling this hearing, and thank you to the witnesses for coming 
today to talk about what is clearly a critical issue in the 
country. I will submit my notes for the record, but just some 
thoughts.
    I think it has been widely known that a transformation in 
the news business was coming, but I, for one, have been 
surprised at the speed of it in recent years. Everyone has been 
impacted in some way by the mergers and closings and layoffs, 
but I guess I have been troubled most by the loss of so many 
good, knowledgeable, highly respected journalists and 
reporters, many of whom have the widest base of institutional 
knowledge, and they are gone, and it places even a greater 
burden on those left behind to cover an ever broader and more 
complex range of issues at the state and national and local 
level.
    There are a lot of ideas floating around about what the 
next business model is that is sustainable for the future. I am 
anxious to hear about those ideas myself today.
    One word of caution. I think the freedom of the press is 
too important to rely upon philanthropy or the government. 
While all ideas ought to be explored, I think those that touch 
the government should have the greatest scrutiny and be most 
thoroughly examined.
    For example, nonprofit status. I serve on the Ways and 
Means Committee that deals with tax treatments of all types of 
businesses. Nonprofit status for news institutions raises 
important policy questions. Is the political speech from a 
pulpit, including endorsements, to be viewed differently from 
the political speech of a publication? Can the politicians that 
bestow nonprofit status also threaten to rescind it if they 
don't like the opinions or endorsements or the views in reports 
from those publications?
    Special tax treatments like exemption from the payroll tax 
also raise questions about preferential treatment versus other 
types of free enterprise, as well as raising questions about 
the continued viability of some of our key programs like Social 
Security and Medicare that already face a bankrupt future. And 
as you open that door, the reason it hasn't been opened for 
exemptions is there is no good determination where to stop once 
you have opened that door.
    The point is this, that Congress, I think, as we sincerely 
look for ways to help smooth that transformation, we just need 
to tread carefully, examine all these issues. It is every bit 
as complex as the witnesses today will tell us, plus more. And 
it deserves, I think, some real, again, thoughtful look at, and 
at the end of the day, I am really hopeful that the next 
sustainable business model can be sooner rather than later.
    So, Madam Chairman, thank you very much. This is a great 
issue for us to be looking at.
    Chair Maloney. Thank you so much.
    Mr. Burgess.

OPENING STATEMENT OF THE HONORABLE MICHAEL C. BURGESS, M.D., A 
                 U.S. REPRESENTATIVE FROM TEXAS

    Representative Burgess. I was going to say, as usual, my 
microphone is not working.
    I probably feel a little differently than my colleagues up 
here. In the interest of full disclosure, my middle child is a 
journalist. She is now retired and teaching school, for which I 
am grateful. But it did give me a little bit of a peek inside 
the schooling and then the work that carries on at a large 
daily newspaper.
    Dr. Starr, I have contributed to your well-being in the 
past by buying your book, albeit 15 years ago, but I still have 
it in my office. It is certainly a well-researched volume, and 
for someone who came from a medical family, whose father and 
grandfather were physicians, it was very interesting to read 
the history even going back now the last two centuries.
    But I have to tell you, I used to be a student of medical 
irony; now I am just a student of irony at large. Here we are a 
year after the Bush bailout bill for which some of us still 
bear the scars--I voted against it, just for the record--and we 
are talking about a newspaper bailout. I would think that 
people in the newspaper business would have gotten the word 
that bailouts are not really a very popular concept in this 
country right now. In fact, there is a significant backlash.
    Not only did we do the Bush bailout in October, September/
October of last year, we did a stimulus bill in February and 
obligated $787 billion of America's taxpayers' money toward 
economic stimulus. Now, problematic that we have only spent a 
small portion of that, problematic that we have not made 
investments in what I would consider capital expenditures in 
infrastructure, instead have gone for operational expenditures, 
but nevertheless there is a significant feeling out there in 
the country that this Congress, this year, has spent way too 
much money, has spent way too much money on things that are of 
questionable value, and so now the concept of bailing out the 
fourth estate is one that is met with considerable skepticism.
    There is no question about the contribution of newspapers 
and journalism over the course of history, and even in my brief 
lifetime things like the Watergate, like Iran-Contra, probably 
would not have come to the surface of the public consciousness 
had it not been for dedicated journalists and dedicated 
newspapers and editors who were willing to listen to what the 
problems were. But that separation between the world of the 
journalist and the world of the legislative body, that is 
something, in my mind, that really should be inviolate.
    Now, I recognize that opinions are what right now drive so 
much of the Internet and the blogs and the Twitters and what 
have you, but for us to interject the legislative body into 
what you do almost seems to--it almost seems to defy gravity. 
And it is just something that to me is so repugnant that I 
almost can't allow myself to think about it.
    Couple that with the fact that the bailout, the whole 
concept of a bailout right now--and, again, you guys are 
journalists, you report on this stuff, you know what the 
feeling out there is right now. You saw it during the long, hot 
summer of what the feeling is of the American people on their 
opinion of Congress, their opinion of the spending that we have 
done, their opinion of how we have handled ourselves during 
this recession. We should be focused, like Bill Clinton said, 
we should be focused like a laser beam on jobs right now, and 
we are having a hearing on bailing out newspapers.
    Well, the American people are going to look at this and 
say, what in the world are those guys thinking? There are 
things that we could be doing, whether it is within our tax 
code, whether it is within how we structure the spending in the 
stimulus, that would drive job creation right now and not just 
in the newspaper world, but would drive it in a way that would 
be beneficial for all sectors of society, and yet Congress has 
chosen to ignore that.
    Now, I came to Congress in 2003. There was a recession 
ongoing then. Then-President Bush received a great deal of 
criticism because his recovery was a jobless recovery, and 
obviously he was doing something wrong. He didn't understand 
economics, or there would be jobs going on coincident with the 
recovery. Well, here we are again. We are in a jobless 
recovery, and Congress is doing nothing that would focus on the 
number one issue that people out there are concerned about.
    We hear about people losing their health care every day. 
But they lose their health care every day because they lose 
their job, and they can't afford the COBRA payments because, 
oh, by the way, they just lost their job. Why are we not 
focusing on that, Madam chairwoman, I, for one, cannot--it just 
simply mystifies me why we would be spending our time on this 
hearing, as valuable as it is this morning----
    Chair Maloney. The gentleman's time has expired.
    Representative Burgess [continuing]. When in reality the 
American people want us to focus on job creation.
    I will submit my statement for the record like my Ranking 
Member, and I yield back the balance of my time.
    [The prepared statement of Representative Burgess appears 
in the Submissions for the Record on page 33.]
    Chair Maloney. As this hearing is taking place, the 
Financial Services Committee is having a hearing on regulatory 
reform and job creation. This committee should not be partisan, 
but I feel I should respond to the gentleman. When President 
Obama came to office, he said if you are driving toward a cliff 
and are about to fall off, you change course. And he came 
forward with a series of actions that helped stabilize our 
financial system so that our economy can move forward. He put 
forward a stimulus package that saved jobs and created jobs, 
and he took steps to reform the subprime crisis that caused 
many other problems.
    Lots of jobs have been lost, that is true. And there are 
many jobs that have been lost in the publishing and newspaper 
industry, well over 50,000 jobs, and hopefully now with the 
economy turning around, the economy of the newspaper and media 
will improve. But as all of us agree, the independence and 
contribution of the independent press, which we all support, is 
a fundamental part of our democracy.
    Many Americans have become concerned that major 
publications and their independent research, which has been a 
check on government, a check on corruption and abuse of power, 
is facing many troubling challenges that we are concerned 
about. Hopefully with the improved economy, the economy of 
journalism and the media will improve, too. So maybe we are 
moving in the right direction.
    But I think it is perfectly legitimate that Congress look 
at what has been a fundamental part of our democracy since the 
Bill of Rights, an independent, strong media. The entire system 
has changed dramatically in ways that impact the economy. It is 
appropriate that we look at the economics of the print and 
media industry and what the changing implications are.
    So with that I would like to introduce our panel. Tom 
Rosenstiel is the director of the Project for Excellence in 
Journalism for the Pew Research Center and serves as Vice 
Chairman of the Committee of Concerned Journalists, an 
initiative engaged in conducting a national conversation among 
journalists about standards and values. A journalist for more 
than 20 years, he is a former media critic for the L.A. Times 
and chief congressional correspondent for Newsweek magazine. He 
is the editor and principal author of ``Project for 
Excellence'' in Journalism's Annual Report on the State of the 
News Media, a comprehensive report on the health of American 
journalism.
    Paul Starr is the Stuart Professor of Communications and 
Public Affairs at Princeton University's Woodrow Wilson School. 
He received the 1984 Pulitzer Prize for nonfiction and the 
Bancroft Prize of American History for ``The Social 
Transformation of American Medicine,'' and the 2005 Goldsmith 
Book Prize for ``The Creation of the Media.''
    His most recent book is ``Freedom's Power: The History and 
Promise of Liberalism.'' He is the cofounder and coeditor of 
the American Prospect, and his article, ``Goodbye to the Age of 
Newspapers (Hello to a New Era of Corruption),'' published in 
the New Republic last March has received wide attention for its 
analysis of the implications of the current crisis in the 
press.
    John Sturm is the president and CEO of the Newspaper 
Association of America, the newspaper industry's largest trade 
organization. NAA has more than 2,000 member newspapers in the 
United States and Canada, the majority of which are daily 
newspapers that account for almost 90 percent of U.S. daily 
circulation. He joined NAA from CBS, Inc., where he was vice 
president of government affairs in the CBS Washington office. 
Prior to his 8 years with CBS, he was at the National 
Broadcasting Company; he worked with them as senior counsel in 
NBC's Washington office. He is a graduate of the University of 
Notre Dame and holds a law degree from Indiana University 
School of Law.
    Denise Rolark Barnes is the host of Reporters Roundtable 
and publisher of The Washington Informer, the leading newspaper 
serving the African American community in Washington, D.C. She 
joined the staff of The Washington Informer after law school 
where she served as managing editor. After working with her 
father, Dr. Calvin W. Rolark, who established The Washington 
Informer in 1964, she took over as publisher of The Washington 
Informer in 1994 and continues his important legacy serving the 
residents of the District of Columbia. She is a member of the 
board of the National Newspaper Publishers Association 
Foundation. She received a bachelor of arts degree from Howard 
University and a law degree from Howard University School of 
Law.
    Thank you both very much, and, Mr. Rosenstiel, you are 
recognized for 5 minutes to place your entire statement in the 
record and summarize your remarks.

 STATEMENT OF TOM ROSENSTIEL, DIRECTOR, PEW RESEARCH CENTER'S 
      PROJECT FOR EXCELLENCE IN JOURNALISM, WASHINGTON, DC

    Mr. Rosenstiel. Thank you, Madam Chairwoman, for the 
opportunity to testify today. In the next couple of minutes, I 
would like to offer an overview of what is occurring in the 
newspaper industry and what it may mean for our civic life.
    There are first a lot of misconceptions about where we get 
our news. Only 54 percent of Americans say they regularly read 
the print newspapers, but those surveys don't tell us much 
about where the news actually comes from. Far more of what we 
know about our communities today still originates in newspaper 
newsrooms. A good deal of what is carried on radio, television, 
cable, wire services begins in newspaper newsrooms. These media 
then disseminate it to a broader audience.
    In every community in America I have studied in 26 years of 
being a press critic, the newspaper in town has more boots on 
the ground, more reporters and editors than any news 
organization in the community, usually more than all the other 
media combined. When we imagine the news ecosystem in the 21st 
century, the newspaper, with all its problems, is still the 
largest originating, gathering source.
    The second misconception about newspapers is that their 
crisis is rooted in a loss of audience. It is not so. Weekday 
print circulation last year for newspapers fell by 4.6 percent, 
but the number of unique visitors to newspaper Web sites grew 
by 16 percent, to 65 million. When you combine the print and 
on-line audiences of newspapers, the industry is faring far 
better than other legacy media, and many newspapers are seeing 
their audiences grow for the first time in decades. What is 
more, the Internet offers the potential of a more compelling 
and more dynamic, more interactive journalism, a better 
journalism than print, coming from these same newsrooms.
    The crisis facing newspapers is a revenue crisis. 
Advertising, the economic foundation of journalism for the last 
century, is literally collapsing, particularly classified. 
Print newspaper ad revenue fell by 25 percent in the last 2 
years and in 2009 will certainly be worse. Meanwhile on-line 
display advertising for newspapers is also now declining. Last 
year the traffic to the top 50 news Web sites grew by 27 
percent, but the price of an on-line ad fell by 48 percent.
    The consequence is that the amount of our civic life that 
occurs in the sunlight of observation by journalists is 
shrinking. The number of city councils and zoning commissions, 
utility boards and statehouses, Governors' mansions and world 
capitals being covered on a regular basis even by a single 
journalist is diminishing. One out of every five people working 
in newspaper newsrooms in 2000 was gone at the beginning of 
this year, and the number is doubtless much higher now. My old 
newspaper, the Los Angeles Times, has half the reporters it did 
5 years ago.
    The problem is more acute at bigger papers than at smaller 
ones, but no one is immune, and I venture metropolitan suburban 
areas may be among the most vulnerable. Alternative news Web 
sites such as Voice of San Diego, MinnPost in Minneapolis are 
exciting innovations and offer options for the future, but the 
number of people working at these places does not yet come 
close to the lost numbers, and none of these sites has so far 
found a sustaining business model.
    More of American life now occurs in shadow, and we cannot 
know what we do not know. The newspaper industry is more than 
partly to blame. Like other legacy industries before them, 
newspapers let a generation of opportunities slip through their 
fingers, from eBay to Google to Realtor.com to Monster.com. The 
industry is running out of options, though I believe some 
remain, purely commercial ones. These include charging for 
content, getting tough with aggregators, creating on-line 
retail malls and much more. No one knows which one of these 
options will prevail. I am an analyst, not an advocate. The 
only thing close to a consensus among experts is that likely no 
one revenue source will be sufficient.
    So should we care whether newspapers survive? Perhaps not. 
Typewriters have come and gone; we are still here. But I 
believe we do have a stake as citizens in having reporters who 
are independent, who work full time, who go out and gather 
news, not just talk about it, and who try to get the facts and 
the context right. And it is not just high-flying investigative 
reporters that I have in mind, but perhaps, even more so, the 
reporters who simply show up week after week, who sit in the 
front row, who bear witness, and who simply, by their presence, 
say to those in power, on behalf of the rest of us, you are 
being watched.
    Thank you.
    Chair Maloney. Thank you very much.
    [The prepared statement of Tom Rosenstiel appears in the 
Submissions for the Record on page 33.]
    Chair Maloney. Dr. Starr.

  STATEMENT OF PAUL STARR, PROFESSOR OF SOCIOLOGY AND PUBLIC 
 AFFAIRS, STUART CHAIR OF COMMUNICATIONS AND PUBLIC AFFAIRS AT 
 THE WOODROW WILSON SCHOOL, PRINCETON UNIVERSITY, PRINCETON, NJ

    Dr. Starr. Madam Chairman, thank you for this opportunity.
    Ever since the founding of this country, newspapers have 
been Americans' principal source of news. With the coming of 
the Internet and other new media, we are now in the midst of a 
great upheaval that is bringing us many advantages in access to 
information. But chiefly because of its indirect effects on 
newspaper advertising revenue, the Internet is also undermining 
the financial basis of the press. And the question that we now 
face is whether the Nation ought to provide support for 
journalism not as a special favor to the news media, but to 
advance the general interest in an informed public.
    Although some people may consider support for the press to 
be inconsistent with our national tradition, the Founding 
Fathers would have disagreed. Besides guaranteeing freedom of 
the press in the First Amendment, they used cheap postal rates 
to subsidize newspapers in the creation of a national news 
network. The British singled out the press for high taxes. The 
United States Congress, beginning in 1792, singled out the 
press for extensive subsidies through the postal system. If we 
had not repudiated and reversed British policies, we would not 
have had the extensive system of the free press that developed 
throughout the country from the earliest days of the Republic.
    In the United States, the press has not been regarded and 
it should not be regarded as just another industry. Government 
has sought to advance it because a democratic political system 
just can't function without diverse, free and independent 
sources of news.
    Now, for a long time we have been able to take newspapers 
just for granted because they came to occupy a strategic 
position between advertisers and their customers, and, out of 
the profits from that advertising, they were able to cross-
subsidize the production of news which really could never have 
been justified on a strictly profitable basis. That system for 
cross-subsidizing news has collapsed.
    Unlike many other countries, the United States has 
historically had a highly decentralized press spread through 
every State and city as well as a multitude of smaller 
jurisdictions. My concern is not so much that there will be a 
shortage of national news coverage. The national news media, I 
think, will be able to aggregate audiences of sufficient size 
to sustain competition.
    The situation at the state and local level is altogether 
different. According to a recent survey, the number of 
statehouse reporters has declined by one-third in the past 5 
years and shows every sign of declining further. Some cities 
are losing their last daily paper, and many more are likely to 
do so. Resources for traditional journalism at this level are 
disappearing far more rapidly than they are being created on 
line, and those who are most closely involved in the on-line 
news at the state and local level see no prospect that that is 
going to become self-sustaining.
    So increasingly, the production of news will require 
subsidy, and the question is really--despite what we may think 
right now, the question is going to be where and under what 
condition those subsidies will come. But there is legitimate 
concern that any subsidy, whether from government or private 
philanthropy, will induce subservience and dependency in the 
press. But we should take encouragement from the facts that 
early in our history the Federal Government aided newspapers 
through postal policy without impinging on their freedom; that 
in recent decades government at both the Federal and State 
level has helped to sustain a system of public broadcasting 
that has become an important source of news and public affairs 
discussion; and that besides supporting public service 
broadcasting, democratic governments elsewhere in the world, 
notably in northern Europe, have successfully used subsidies to 
maintain competition and diversity in a free press.
    Still, to avoid compromising press freedom, any public 
support for journalism in the United States must be approached 
with great caution, and it seems to me at least three 
principles ought to be kept in mind. First, any subsidies must 
be viewpoint-neutral. They cannot favor one viewpoint over 
another. Second, they should be platform-neutral. They should 
not favor print media over on-line media, for example. And 
third, they should be neutral, or at least reasonably balanced, 
as to organizational form. Taken as a whole, they should not 
favor for-profit over nonprofit organizations or vice versa. To 
be sure, some policies by their nature may benefit one type of 
organization, but the sum total of policy should be indifferent 
as to whether the news is provided via a for-profit or 
nonprofit enterprise.
    Nonprofit support of journalism is already increasing, and 
many Americans would be more comfortable seeing support from 
journalism come from a great variety of private philanthropies 
than from government. To facilitate that development Congress 
should seek to remove any legal obstacles that may stand in the 
way of newspapers receiving tax-exempt support or becoming 
nonprofit, tax-exempt organizations themselves.
    But here we face a new question. From the founding of the 
Republic, newspapers have played a central role in politics, 
endorsing political candidates, for example. It would be a real 
loss to freedom of the press if, in becoming nonprofit, 
newspapers had to restrict their political expression. I 
believe, therefore, Congress should consider creating a new 
category of nonprofit journalistic organizations that are free 
from traditional limitations of 501(c)(3) organizations. When 
Congress originally subsidized numbers through the postal 
system, it did not require that they be nonpartisan. In fact, 
most of those newspapers were partisan. Neither should we 
require newspapers to limit their political expression to gain 
the advantages of nonprofit status.
    Financial support of journalism could take a number of 
other forms. Direct grants might allow for political 
manipulation of the flow of funds, unless there was some 
intervening professionally run organization strongly insulated 
from political control. The public broadcasting system offers a 
model, and rather than create an entirely new structure, 
Congress might simply broaden the mandate of the one that 
exists.
    Indirect forms of subsidy through the tax system also ought 
to receive consideration. As I mentioned, many other countries 
do provide support. They exempt the press from the value-added 
tax. The equivalent in the United States would be an exemption 
from the payroll tax, or at least the employers' share, with, 
however, the idea of replacing those contributions to the 
Social Security Trust Fund with general revenue. To be 
platform-neutral, this tax exemption would have to apply not 
just to newspapers, but to journalist organizations more 
generally. Defining eligible organizations and individuals 
would be difficult, but the same problem arises in many other 
areas, such as State ``shield'' laws that provide journalists 
with an exemption from some demands to testify under subpoena.
    The Founders were right to see a robust free press as a 
bulwark of liberty, and they were right in their time to 
provide assistance to ensure the press develop throughout the 
country. We have to figure out how to keep that tradition going 
in our own time as well.
    Chair Maloney. Thank you very much.
    [The prepared statement of Paul Starr appears in the 
Submissions for the Record on page 34.]
    Chair Maloney. Mr. Sturm.

   STATEMENT OF JOHN F. STURM, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, NEWSPAPER ASSOCIATION OF AMERICA, ARLINGTON, VA

    Mr. Sturm. Good morning. I am John Sturm, president and CEO 
of the Newspaper Association of America, as mentioned, the 
trade association representing most of the daily newspapers in 
the U.S.
    I think my colleagues and I agree today on this one point: 
What is really at issue today is the preservation of local 
journalism. And for decades newspapers have been the primary 
source and financial support system for local news and 
investigative journalism.
    Among all local media, newspapers have the greatest 
commitment to local news and information. As a result of the 
longest recession in our Nation's history and intense 
competition for advertising particularly from Internet-based 
services, newspapers have experienced declines in advertising 
revenue of now nearly 40 percent over the past 2 years, 
including a precipitous decline in classified advertising, 
which has had a severe impact on major market newspapers.
    Overall, the newspapers' share of the local advertising 
market has decreased to less than 15 percent when it was once 
30 percent. Interestingly, as Mr. Rosenstiel mentioned, while 
revenues have been shrinking, newspaper audiences are actually 
growing. Print editions, combined with successful local Web 
sites, have a larger audience than ever, and their content has 
never been more popular.
    Unfortunately, the dramatic decline in advertising revenue 
has forced publishers in virtually every market, large and 
small, to lay off highly valued veteran journalists and other 
employees and to take other cost-saving measures. Since 2007, 
thousands of jobs have been lost in the newspaper industry. So 
what can Congress do to help newspapers maintain the type of 
journalism that local communities deserve and expect? What can 
they do now?
    First, I want to make clear that the newspaper industry is 
not seeking a direct financial bailout or any kind of other 
special subsidy. We don't believe that direct government 
financial assistance to newspapers is appropriate or wise for 
an industry whose core mission is news gathering, analysis and 
dissemination, often involving that very same government.
    Second, we would suggest that you pass legislation that 
would allow all businesses to carry back net operating losses 
for 5 years instead of the 2 years under existing law, a bill 
that the learned Chair and the learned Ranking Member have 
cosponsored. Newspapers need cash now to preserve jobs next 
year. It is really that simple.
    Third, allow businesses to spread out future contributions 
to defined benefit plans. If not extended, businesses will be 
required to use cash reserves to fund pension plans to meet 
statutory requirements instead of preserving jobs and 
generating businesses. We suggest Congress give the markets 
more time to recover and businesses more time to stabilize 
their finances.
    Chairman Maloney, we appreciate the bill that you 
introduced last week, the Newspaper Revitalization Act, to 
allow newspapers to organize as nonprofit entities while 
continuing to generate some advertising revenue. I think your 
heart is in the right place, and this is a step in the right 
direction that could help in a few communities, but, candidly, 
we don't see it as a comprehensive solution to the many 
problems in the industry at this time.
    In the near term we recognize that newspapers on their own 
must adjust, as you said, their business models, to find a way 
to monetize on-line content in a way that contributes to local 
journalism. And our companies have been exploring new systems 
that would allow newspapers to detect and license on-line 
content which is being used by portals and aggregators for 
their own commercial gain.
    The creators of valuable content cannot survive without 
compensation from those who currently use and profit from the 
creative works of others. It doesn't work for music, books or 
movies. In the long run it will not work for newspaper-
generated content either.
    The industry is working on a variety of solutions to 
address these issues, solutions that will make it quite 
convenient for present unauthorized users of newspaper-
generated content to license and pay reasonable fees for such 
use in the future.
    I hope today's discussion will lead to practical actions 
that will help support local public service journalism now and 
to sustain it in the future. Thank you for this opportunity to 
present the industry's views. I look forward to your questions 
a bit later.
    Chair Maloney. Thank you very much.
    [The prepared statement of John F. Sturm appears in the 
Submissions for the Record on page 36.]
    Chair Maloney. And Ms. Barnes has indicated she has to 
leave at 11 o'clock, but will answer any questions in writing 
if we don't get a chance to get all our questions to her.
    Thank you so much for being here. You are recognized for 5 
minutes.

 STATEMENT OF DENISE ROLARK BARNES, PUBLISHER, THE WASHINGTON 
                    INFORMER, WASHINGTON, DC

    Ms. Barnes. Thank you, Madam Chair, members of the Joint 
Economic Committee for the opportunity to address you on the 
future of newspapers, the impact on the economy and democracy. 
I salute you for your interest in hearing from a diverse group 
of newspaper publishers regarding our struggles and how this 
very unique piece of legislation might impact the future of the 
newspaper industry.
    As you heard in my introduction, my name is Denise Rolark 
Barnes, and I succeeded my father, Dr. Calvin W. Rolark, as 
publisher of The Washington Informer when he died in 1994. He 
and his colleagues in the Black press impressed upon me the 
role and responsibility of the Black press, which was founded 
by two freed men, Samuel E. Cornish and John B. Russwarm, 
publishers of the country's first black newspaper established 
in New York City in 1827. Freedom's Journal was published 
nearly 123 years after the Nation's first continuously 
published newspaper and nearly 40 years before the U.S. 
Congress abolished slavery in America in 1865.
    The Wisconsin Historical Society describes Freedom's 
Journal as a newspaper that provided international, national 
and regional information on current news and contained 
editorials declaiming slavery, lynching and other injustices. 
Freedom's Journal circulated in 11 states, the District of 
Columbia, Haiti, Europe and Canada. Russwarm and Cornish wrote 
in their first editorial to their readers, ``We wish to plead 
our own cause. Too long have others spoken for us.'' The paper 
published for only 2 years due to a lack of advertising 
support, but it laid the foundation for thousands of newspapers 
who shared a mission and purpose that was no different than 
their white counterparts', to provide clear and truthful 
information about the actions of those who we put in charge, 
and to provide a voice for those who are affected by their 
decisions.
    Ten years ago I could confidently say that the National 
Newspaper Publishers Association, the trade association serving 
the Black press, had a membership of more than 200 newspapers 
across the country. Today attendance at conventions indicates a 
drastic decline in the number of papers that currently exist, 
possibly half.
    The Washington Informer has also joined the ranks of 
publishers of other community and metropolitan ethnic 
newspapers that serve a targeted audience who are also 
exploring ways to keep their papers alive and viable during 
these difficult economic times.
    The one thing we all share in common is our dependence on 
advertising. And as my dad used to say, advertising is the life 
blood of every newspaper, and circulation is a necessary evil. 
Minority or ethnic newspapers have always experienced a 
recession when it comes to advertising. We are rarely top of 
mind when it comes to ad placements made by advertising 
agencies, nor are we treated equitably when it comes to 
advertisers accepting and paying our rates. Our operations are 
small. Our reporters cover a broad range of issues, often for 
little or no pay, and the quality of our publication suffers 
due to our inability to hire editors, to fact check and clean 
up copy before it goes to print.
    Yet the demand from our readers is growing. They remind us 
daily of how much we are needed to address their particular 
issues and concerns that are often ignored by the mainstream 
media, issues such as health disparities, housing and 
employment discrimination, racial profiling and immigration 
issues to name a few.
    While I applaud you, Congresswoman Maloney, and Senator 
Cardin and members of this committee's intention to address the 
growing crisis that is affecting the entire newspaper industry, 
I view the legislation before us as just one step towards 
fixing a problem that is steadily growing worse. I would 
suggest, however, that since there are no daily African 
American newspapers, that you broaden the language in the bill 
to include weekly publications. Also the term ``general 
circulation,'' which is often used to exclude minority and 
ethnic newspapers, should be broadened to ensure greater 
opportunities for equal access to advertising revenue under the 
legislation.
    I appreciate the fact that you are considering a different 
kind of business model that is reportedly being used by some 
newspapers. It also suggests that you may be open to consider 
other options that may prove effective as well. What papers 
like ours need is legislation that will end discrimination on 
the part of advertising agencies as it relates to ad purchasing 
in minority-owned media, and that promotes diversity in 
advertising agencies' hiring and promotions practices. We need 
to run our businesses on a level playing field. Whether we are 
for-profit or nonprofit entities, the decisionmakers need to be 
incentivized to do business with minority- and ethnic-owned 
media, or else, for us, there will be no end to the recession.
    The country must maintain a free and independent press that 
serves all the people, and as you consider the options, this 
must be foremost in your mind.
    I am open to taking your questions and sharing more of my 
experiences, thoughts and suggestions if needed. Once again, 
thank you for this opportunity to testify before you today.
    [The prepared statement of Denise Rolark Barnes appears in 
the Submissions for the Record on page 38.]
    Chair Maloney. Thank you so much.
    And I appreciate all of your testimony, and I would like to 
ask a question beginning with Mr. Sturm, and then everybody 
else jump in if you so wish.
    You mentioned the intellectual property of newspapers. 
Often the research done by reporters is very valuable, and 
often the paper is not compensated for it. And I would like the 
panelists to talk about a proposal that some have put forward 
to charge for each individual story, similar to how iTunes 
charges for each song now. And before the iTunes, the music 
industry was suffering from its file sharing by users, but the 
low prices and easy interference and simple payment system 
seems to have given more economic strength to the music 
industry.
    Do you believe that a similar system would work for news in 
really supporting the intellectual property of the research and 
effort and time that went into creating stories that are now 
just freely given across the country?
    Mr. Sturm. Madam Chair, thank you. Indeed what is happening 
now is a lot of stories that are going on line from newspapers, 
the Associated Press, et cetera, are being taken by news 
aggregators, used elsewhere, and ads are being sold around 
them. The revenues from those ads do not go to the creator of 
the content. They go to ad networks and the Web sites that use 
the content.
    Fortunately and presently, there are a lot of ideas out 
there that have been brought forward of ways to compensate the 
creator of that content. Some would charge or would make some 
charge to the public. I think probably from a revenue 
standpoint, the more potential is with systems that would 
track, as I mentioned in my testimony, track the use of that 
content that are used by news aggregators and large portals who 
make millions and millions of dollars from that content. There 
is a convenient way that is being developed now to have that 
content licensed so it is used and it is available to the 
public in a ubiquitous way. But, nonetheless, the revenue goes 
back to the creators--that is indeed what I think would be of 
great benefit to the industry. And there are a lot of ideas out 
there, and that is something that we are working on very hard.
    Chair Maloney. Also, Journalism Online, created by Steven 
Brill, is planning to serve as an e-commerce platform 
aggregator that news sources around the world can use to charge 
daily, monthly or annual subscription fees, similar to charges 
that cable or satellite TV companies charge. Do you think that 
Internet users have become so accustomed to free use, or do you 
believe that users will pay for on-line news? Again, I ask 
anyone to comment, or everyone.
    Dr. Starr. I think measures like this can work for the 
elite press, particularly the financial press where the readers 
have the resources and they have the interest to pay. But I am 
much more doubtful that this will work for ordinary news at the 
state and local level, where the demand is much less strong.
    What I think is really crucial to understand is that the 
people who have been reading newspapers have never really had 
to pay for the full cost of the content. Most of that cost has 
been paid by the advertisers. The readers have paid a very, 
very small fraction of it. Now, if you shift more of the burden 
on the readers, if, in effect, you raise the price to them, and 
the price will be raised even more after this period where it 
has been zero, there is unquestionably, I think, going to be a 
significant drop in the consumption of that news. And so what 
may be or look like a solution from the newspaper's point of 
view is really not a solution from the point of view of civic 
literacy.
    Mr. Rosenstiel. A couple of points. First of all, to add to 
what Paul just said, newspapers make only 20 percent of their 
revenue from subscriptions and payments from the consumers. The 
model is very different, particularly in Europe, where as much 
as 70 percent of the revenue comes from subscriptions. We have 
a model in the United States that depends more heavily on 
advertising than other countries.
    On the question of micropayments, paying per article, I 
think there is a civic problem there which is you are 
discouraging use. You are making it more expensive the more 
knowledgeable, the more news people consume, and I am not sure 
from a public policy standpoint or even from a civics 
standpoint that is really where we want to go.
    The problem that news companies had in charging for content 
originally was that it was very difficult for one news 
organization to charge for its content if similar content was 
free from others. For this to work I think it is going to have 
to happen en masse. As long as I can get the AP story, why 
would I pay 15 bucks for the New York Times story? Is the 
marginal difference between the two accounts so much greater?
    Well, history would suggest consumers said no. So it is 
going to have to be packaged probably to work. And that might 
address Paul's concern about, well, people might have a high 
demand for some kinds of content, but not others. The more you 
can sort of bundle this stuff and say, here is a fee that you 
pay on a monthly basis or an annual basis to the news, then you 
are in Newsland, and you can consume what you want, that, I 
think, may be a way of protecting the news that is important, 
but maybe less titillating or fascinating than some other news.
    Chair Maloney. Mr. Sturm, and then we will go to Mr. Brady.
    Mr. Sturm. There are, as I mentioned--Journalism Online is 
another one of the ideas that are out there.
    Whether to put material behind a pay wall by an individual 
newspaper is a matter of great discussion in the industry right 
now, and there is no consensus. There are some who believe it 
is the right thing to do to charge in some fashion the 
consumer; others don't think it is the right thing to do. What 
we are concentrating on, what the industry does agree on, 
though, is those entities that use newspaper content for their 
own commercial gain should be paying a fair and reasonable fee 
for the use of that content. And that is what target one is 
right now.
    Ms. Barnes. If I can just add to that is that when your 
content is particularly specialized, like minority publications 
offer, that value is what is being sought after. We get phone 
calls constantly from organizations that are setting up these 
specialized sites so that they can draw diverse communities to 
their sites, and so they want to use our content for their 
sites with no compensation to follow. So, adding that on.
    Chair Maloney. Thank you.
    We have been called for a vote. I am going to recognize Mr. 
Brady for his questioning, and then we will have to adjourn to 
run and vote and run back as quickly as possible.
    Mr. Brady.
    Representative Brady. Thank you, Madam Chairman.
    Like others, I want to make it clear I am not here today to 
bail out the newspaper industry. I am here to learn what that 
sustainable business model could be. And I think from the media 
newspaper standpoint, too, there is caution, I think, from the 
sense that when you feel like you are drowning, every lifeline 
looks good, but you have be to careful whose boat you are being 
pulled into, and if it is the government's boat, there are 
really repercussions from your standpoint as well, and I think 
we all recognize that.
    You sort of answered part of the question I have, which is 
why don't you charge what you are worth as an originator of 
news? Most businesses--I come from a Chamber of Commerce/small 
business background. Most businesses struggle when the demand 
for their product goes down. Demand for news and information is 
increasing, as you all rightly said. How do you capture the 
revenue to do that is the question.
    So who out there has that sustainable business model? Who 
is getting closer to replacing classified revenue losses and 
even some of the ad--the major retailers and others who are 
advertising, which is also being impacted? Who is doing the 
best job or getting closest that you know of to that 
sustainable business model?
    Mr. Rosenstiel. Well, where we are seeing some success is 
in niche and elite publications where people are paying for 
this material often out of their business expenses.
    So on-line newsletters that are targeted at professional 
audiences and in some cases elite magazines like ``The 
Economist'' are having more success. But that is not addressing 
this. None of those address the question of general civic 
knowledge.
    Dr. Starr. Can I just respond to this point? The Internet 
is unbundling the package of things that were put together in 
the local newspaper. And many people bought that local paper 
not because they were interested in the public affairs or 
political news, but because they were interested in lots of 
other things, the sports news, business news. But the newspaper 
was able to collect revenue from all those diverse sources.
    On line, all that breaks apart. And, yes, there is going to 
be--there is profitable business in sports, in finance, in all 
these different areas, but there may not be a profitable 
business in public affairs news. The demand specifically for 
public affairs journalism is shockingly low. And so to expect 
that we are going to have the kind of journalism that keeps 
government accountable, that keeps a watch on potential 
problems at the local and State level in particular, where in 
my state, New Jersey, we have an endemic problem of corruption, 
we have an endemic shortage of good news in the State, this is 
the kind of thing where I think we have some public problem 
that needs to be publicly addressed.
    Mr. Rosenstiel. Let me add one other thing. In simplest 
terms, the Internet is decoupling advertising from news. 
Advertisers don't need the news to reach their audiences 
anymore. And so the fundamental question is can the news 
industry find other sources of revenue that aren't basically 
display advertising and classified advertising?
    Representative Brady [presiding]. Mr. Sturm, thank you.
    Mr. Sturm. I would say, to your point about do people pay 
for the whole amount, the answer, as Tom mentioned, is that 
newspapers have traditionally only had 20 percent of their 
revenue come from circulation. That actually may be changing a 
bit for two reasons: One, advertising has dropped off, and 
frankly, a lot of newspapers have had to, as a result, raise 
the circulation prices. So that 80-20 ratio is changing. The 
point I wanted to make about the Internet versus print from a 
traditional standpoint, a print user, a reader, a subscriber 
has always been worth a considerable amount of money on an 
annual basis to a newspaper for viewing print ads. And all 
traditional media have had some limit on the number of ads or 
the amount of time they can sell, broadcast, magazines, radio--
there has always been a limit.
    With the Internet there is no such limit. And as a result, 
Internet pricing is very low. Advertising on the Internet is 
extremely cheap. Now, it has some disadvantages and advantages, 
but it is very, very inexpensive. So if you take that same 
newspaper reader and you move them online, reading the 
newspaper online, their worth as a source of revenue drops 
considerably. In fact, well beyond half. So it is just a 
difficult balancing situation right now because what newspapers 
are doing in effect is they are replacing some of their print 
readers with online readers. But, the money doesn't flow in on 
an equal basis.
    Representative Brady. Thank you.
    Ms. Barnes. I just wanted to add also that the way minority 
and ethnic newspapers have survived might be a model that might 
work for others. I mean, when we approach an advertiser, many 
times they have two pockets, they have got the advertising 
pocket and then they have got this diversity pocket. And we 
happen to always end up in the diversity pocket, which those 
dollars are not as great as the advertising dollars. But that 
is the pocket we end up in. And to meet their diversity needs, 
this is where they spend money to advertise with us. But what 
we find is that a lot of these advertisers are trying to reach 
our communities in different ways. The advertising for them, 
placing an ad in our publications may not be as important as 
other ways in which to reach our communities. So we have gotten 
involved in things that are really non-journalistic in some 
ways that we have had to make journalism by sponsoring events 
and town hall meetings and different things that are advertiser 
sponsored, and there happens to be advertising that is attached 
to that. And that has proven to be successful, because we are 
still here. But we are still trying to figure out how to open 
that other door so that we have an equal opportunity there. But 
that is somewhat of a model that we have had to operate under 
for many years.
    Representative Brady. Right. We could go on for a while. 
The chairman has gone to vote. Let's announce a recess. We will 
come back right after this vote. Thank you.
    [Recess.]
    Chair Maloney [presiding]. The meeting will come to order 
again. And first of all, I want to be very clear that this 
hearing is not about bailouts. We are not talking about 
bailouts. We are through with bailouts. But we should always 
talk about the best ways to have a tax and regulatory 
environment that will help businesses thrive and create jobs. 
Newspapers are an important business that plays an important 
role in our economy and in our system of checks and balances. 
But it keeps being characterized as a bailout. No one has 
mentioned a bailout except for my colleague. And I want to make 
clear that that is not the purpose of this hearing. Our last 
questioner was Mr. Brady, so I will go to Mr. Cummings from the 
great state of Maryland.
    Representative Cummings. Thank you very much, Madam Chair. 
And I apologize for not having been here to hear the hearing 
earlier, and I have got to get to another markup. But I just 
was wondering, gentlemen, what can we do to see that media 
continues to serve the public interest as the newspaper 
industry transitions to a new business model? Mr. Starr? Dr. 
Starr?
    Dr. Starr. Well, I am not entirely sure that the newspaper 
industry as a whole will arrive at that destination of a new 
business model. There certainly will be some. And I think 
particularly the more elite newspapers with a national 
audience. There will be those with niche audiences. They will 
be able to survive very well I think in this new environment. 
What I am much less confident about is that the ordinary 
political, public affairs coverage at the State and local 
level, that that will survive. Because it is not clear to me 
there is going to be a business model for that.
    Representative Cummings. Yeah.
    Mr. Rosenstiel. It is worth probably noting that in the 
20th century, with the development of radio and then 
television, we had a rise in what social scientists called 
incidental news acquisition, incidental knowledge about civic 
life. In other words, if you watched a TV news show Walter 
Cronkite started with his first story and his second story and 
his third story, and you learned things because the 
broadcasters wanted you to that you might not be interested in. 
You would find out things that you would in a newspaper have 
skipped. And the technology that we have now of the Internet, 
which is putting more power into the hands of the end user, the 
consumer, increases the consumer's ability to say I am not 
interested in that. And it is extremely difficult to imagine 
how we are going to change that. The age of force feeding the 
public by the media is going away.
    Representative Cummings. Mr. Sturm.
    Mr. Sturm. Mr. Cummings, I am the trade association hack 
here. And I have got members that need to make payroll sooner 
rather than later. We are living through a very difficult 
recession, as you know. And we are living through an enormous 
drop in advertising revenues that support local journalism. As 
a result, to answer your question on a very practical scale, we 
would like to see the Congress pass some legislation that would 
do things like let us write our losses back over a 5-year 
period instead of a 2-year period. That was something that was 
part of the stimulus bill, and at the last minute it was made 
only for small business. We, like other businesses, would like 
to have that ability because that would give us cash to save 
jobs today. We would like to be able to spread our pension 
funding obligations out over a longer period of time. That too 
would give us cash to save jobs now. That is what is really on 
our minds at the present time.
    Representative Cummings. We watched the Sun paper in 
Baltimore, I mean, it has been amazing to watch year after 
year, or really month after month the loss of employees and to 
see how the paper had shrunk. And when I talked to my 
constituents, what they say is they read the Sun paper only to 
try to get the local news. And other than that, they will go to 
The New York Times or The Washington Post when they want to get 
national news because they find that they can get much more 
news. Now, you know, when I also look at the cable shows, and 
it is not just the Internet, it is the cable shows, I mean, 
they are constantly putting out news with commentary. And I 
think that perhaps--I mean, when you look at--I am not going to 
name any of the shows, but sometimes I think that commentary is 
what attracts people, too.
    So I mean, you know, it is one thing to get some straight 
news. It is another thing to have a whole host of conservative, 
moderate, liberal folk talking about that news and interpreting 
it and giving people insight. Because the average person, if 
you look at Jay Leno or some of those shows, a lot of people 
don't know the difference between a city councilman and a 
Congressman. But to have that kind of news, those news shows, I 
think, is very helpful. I see my time is out. Thank you all 
very much.
    Chair Maloney. Would anyone like to comment back to his 
question? Any comments?
    Dr. Starr. Can I just add one further grim aspect to this 
whole picture? And that is that newspapers are living off their 
aging readership. They are not replenishing that readership 
with younger people at the rate that they would require. And so 
we are probably only seeing the beginning of this crisis. It 
is, in fact, likely to intensify. There is a very sharp 
difference today that did not exist 30 years ago in the rate at 
which people in their 20s versus older people follow the news 
in any media, whether it is online, print, broadcast, and so 
forth. And we really are facing a future in which there is 
likely to be a diminishing audience for news.
    Mr. Rosenstiel. I would like to add something to that and 
counter it slightly. And that is that what I see in the 
research is that younger people have a different approach to 
news. They are on demand news consumers. They want to know what 
they want to know when they want to know it. And there has been 
a big problem with the delivery system of old media with those 
audiences, television and print. We have seen for 15 years or 
longer younger people not gravitating to those old platforms. 
They do get news on the Internet. And the chance that these 
older media institutions can survive by attracting new 
audiences is actually enhanced by the new technology, by the 
Internet, because they can deliver news to a new generation of 
people on a platform that that generation wants to receive it 
if they can find a way to monetize that. So although this is a 
dark aspect, there is some light on that horizon.
    Mr. Sturm. Just one quick comment: newspapers have 
traditionally been, in print, a one time a day operation. Now, 
with the Web sites, newspapers can address and disseminate 
breaking news as well. So it puts us in a different ball game.
    Chair Maloney. Thank you. Mr. Burgess is recognized for 5 
minutes.
    Representative Burgess. Thank you, Madam Chairwoman. And I 
apologize for having used the words newspaper and bailout 
together in a sentence. I suppose I could be forgiven because I 
read in the newspaper, Obama open to newspaper bailout bill. So 
you only know what you read in the papers. And they wouldn't 
print it if it wasn't true, doggone it. The chairwoman brought 
up an interesting point. She talked about the taxing and 
regulatory environment for print journalism. Valid concerns.
    Last week we were back in town after a few weeks of being 
gone, and a number of constituents, small businesses were 
through my office. I had a lady who owned a saddle making shop 
in Fort Worth, a cardiologist, someone who did financial 
services, a man who rebuilt the compressors of automobile air 
conditioners and exported them to countries in Latin America. 
So it was sort of a varied group of entrepreneurs, small 
businesses in my district. And I asked them how they were 
doing. They obviously all are struggling, but maybe some things 
are starting to turn around for them.
    And I said, well, are you planning on adding any jobs? 
Because I am really concerned about where the jobs are going to 
come from. And every one said, no, because we don't know what 
you, Members of Congress, are going to do to us with the 
financial services bill, with the health care bill, with the 
energy bill, the cap-and-trade bill. So a lot of anxiety out 
there in the small business community about the next steps that 
Congress is going to take and how that will affect their 
ability to maintain their businesses and their profitability.
    And I suspect the newspaper business is not immune to that. 
And it likely is suffering from some of the same things. So 
perhaps if we were to look at this critically, we might say how 
do we set the regulatory and tax environment so all businesses 
might benefit, not just picking winners and losers in the 
equation. So let me ask you a question.
    Dr. Starr, you have been a prolific writer on health care 
and health policy. We are looking at bills on the House side, 
the Senate is looking at bills on the Senate side, and the 
President has committed to signing something if not this year, 
this congressional term, but there is some anxiety out there 
about what the impact of this will be. Now, if we sought to set 
up newspapers, insulate them from some of the slings and arrows 
of congressional regulation and taxation, should we go so far 
as to insulate the newspaper business from the 8 percent 
payroll tax that possibly could be enacted if the House bill is 
followed to the letter?
    Dr. Starr. I don't think the case for health care reform 
ought to rest on its particular effects on one industry or 
another. But I could make a case, although it is not really 
appropriate for this hearing, that health care reform will be 
good for the economy as a whole, that for example, many people 
are reluctant to change jobs, face job lock because of the 
potential loss of coverage if they go out and start a new 
business, for example. And we would see an improvement in 
productivity if people weren't limited in that way.
    Representative Burgess. We could debate the merits, and 
clearly not the scope of this hearing nor the time. But again, 
the point is out there that there is concern, not just in the 
newspaper industry, but in business across the board that what 
is Congress going to do to us. And our future is uncertain 
because of some of the things that we are observing in the 
United States Congress. Mr. Sturm, I apologize, I was out of 
the room when you gave your testimony. And certainly you dealt 
with the concept of the bailout. But just for my edification, 
perhaps you could just briefly run through that concept again 
of what the newspaper industry is asking for and what they are 
not asking for.
    Mr. Sturm. Let me start with what we are not asking for. As 
I said earlier, we don't believe direct government financial 
assistance to newspapers is appropriate or wise for an industry 
whose core mission is news gathering, analysis, and 
dissemination often involving that very same government. That 
was part of my original statement. And I went on to advocate 
the NOL bill provisions, carry-back provisions that I mentioned 
earlier that are cosponsored by two of the three folks here on 
the panel, as well as a better opportunity, a lot longer 
opportunity to fund pension plans as practical cash-generating 
steps that would indeed help retain jobs in the newspaper 
industry.
    Representative Burgess. Thank you, Chairwoman. I yield 
back.
    Chair Maloney. Thank you. Thank you very much. The 
newspaper industry is precluded by antitrust law from 
developing sector-wide solutions, and antitrust exemptions may 
allow newspapers to develop collective pricing policies for 
online subscriptions without fear of government or private 
industry antitrust suits. In your view, is this an exemption 
needed or warranted? Let's start with you, Mr. Sturm.
    Mr. Sturm. Dealing with the antitrust laws as currently 
interpreted is a difficult situation for the industry right 
now, principally because the Department of Justice has always 
held the relevant market for newspapers to be other newspapers. 
And that is a huge constraint. It is out of date. And indeed, 
if other newspapers were the only competitors we faced, we 
wouldn't be having this hearing today because we would be in 
fine shape. So I would suggest to you that the antitrust laws 
do need to be interpreted differently in order for industry-
wide solutions to emerge that would be pro-competitive and 
could really help the newspaper industry.
    Chair Maloney. Any other comments?
    Dr. Starr. Yeah. I don't disagree with Mr. Sturm about that 
point about reinterpreting the scope of the market. But I think 
the experience that we have had with antitrust exemptions for 
the newspaper industry should be a cautionary lesson. The 
Newspaper Preservation Act of 1970 gave the industry an 
antitrust exemption so more competition could be preserved. But 
it really has been pretty much a failure in doing that. And I 
would really be very concerned about giving the industry as a 
whole the authority to set prices for news, which would 
possibly lead to prices that would interfere with the 
distribution of news throughout the society. And again, what 
may look like a solution for the industry could actually be a 
problem for the country.
    Chair Maloney. Thank you. Mr. Rosenstiel, you mentioned 
that young people are not reading newspapers or news as much as 
others. And I recall in my eighth grade government class in a 
public school, U.S. News and World Report gave free magazines 
to every government student. And we were required to read it 
and report on it every week. To this day I cannot get through a 
week without reading the news magazines. My week is not 
complete until I have read them and thought about them, a habit 
that I got into in the eighth grade. Now in France, every 18-
year-old is offered a free one-year subscription to one of the 
country's major newspapers. And do you think that this would be 
an incentive? Would this work to get our young people reading? 
What ideas do you have to engage younger people in a habit of 
reading news magazines, newspapers, blogs, essential news to 
analyze what is happening in their country and the word?
    Mr. Rosenstiel. There is a growing movement in what people 
are beginning to call news literacy, which is somewhat 
different than media literacy in that it is focused 
specifically on the consumption of news. The University of 
Stony Brook, SUNY Stony Brook has developed a curriculum for 
this that they are expanding to all the students at Stony 
Brook. There are pilot projects to do it in high schools. And 
for years, the newspaper industry was sort of trying to do this 
on its own. There was a program called Newspapers in the 
Classroom. But as newspaper business became more difficult, the 
tendency was for newspapers to pull back on these. It was the 
first thing to go since it didn't generate any revenue, and the 
readers were, you know, not coming along for another 30 years 
or 20 years after the program. So the newspaper industry has 
pulled away from that and the educational industry has pulled 
away from that. Journalism programs in high schools are now, 
somewhat malnourished. I think that that is the area where it 
would go. I would like to touch on one thing that Paul and John 
just said, and that is that when it comes to antitrust 
exemptions, that they are both correct in what they have said.
    It is also worth noting that the players here that the news 
industry is going to increasingly deal with, aggregators, 
Internet access providers, and who they are going to consider 
either becoming partners with or battling with, that those are 
highly oligarchical industries. When we are talking about news 
aggregators, we are talking about two or three companies that 
control almost all of the market. And that is an issue on the 
horizon. You have got a very dispersed news industry, or 
relatively dispersed compared to an industry of 4 or 5 
companies.
    Chair Maloney. Any other comments?
    Mr. Sturm. For the record, whatever we might seek at the 
Department of Justice in terms of the antitrust laws will not 
include trying to set prices or rates or anything like that. We 
understand the antitrust laws. And that is not on the program.
    Chair Maloney. Thank you for your clarification. And my 
time is expired. Mr. Brady.
    Representative Brady. I enjoyed the discussion today. I 
think you are going to solve the distribution problem. I think 
you already are. Whether we are getting it from our BlackBerry, 
getting it from our Kindle, it is getting easier and easier, or 
our Internet, to access the information, and it is on a timely 
basis. I am not an expert, but it is the pricing issue that 
needs to be solved. And I still think--I know I have heard 
today sort of a thought that for the public, good pricing may 
not be the option that you desire, and that it will only be the 
elite that will pay for it. I disagree with that.
    Consumers are smart. They are even getting more 
knowledgeable every day on news sources, information, 
credibility. You know, there is a check and balances out in the 
Internet that is amazing today, almost immediate, real time. 
And I think that consumers in the end will always pay for 
value, at every level pay for it.
    So I was going to ask you is there, among the general news 
publications, any industry leaders or innovators that you look 
to as pushing the envelope in those areas that you are going to 
be watching as we move forward? Yes, sir.
    Mr. Sturm. Since you mentioned the devices at the beginning 
of your question, let me say that there are a lot of devices 
out there now. There will be more in the future. There is a lot 
of development going on both in the U.S. and in Europe. For 
example, several companies are working on a flexible tablet 
which would be very thin that would reload on a fairly quick 
basis. It would lay out both newspapers and magazines, and 
indeed books, in a manner that you are more familiar with that 
is more comfortable. It was described to me one time, I think 
accurately, that the devices you are talking about now tend to 
be a lean forward device. This would be more of a lean back 
device like you are used to with a newspaper or magazine or 
book.
    And so these things are coming. They will be in color. So 
there will be ways to distribute the news that will be more 
comfortable for everybody and provide better business 
opportunities for those who create the news.
    Representative Brady. Is there anyone out there pushing the 
envelope?
    Mr. Rosenstiel. Well, I would say, and I think this year is 
going to mark a change, but the real innovation in news in the 
last couple years has been on the content production side in 
news rooms exploring how to produce news that is more 
compelling online. In a newspaper you only have a limited 
number of options of how you can cover an event. You have a 
main narrative, a headline, graphic. Online, and I have a slide 
and a presentation I do, my slide currently has something like 
51 different ways that you could create content that would be 
appealing to a user to describe an event. The potential exists 
for a better journalism online. And that I think is where, if 
you look at The New York Times Web site, you see interesting 
use of the technology. That is where the energy has been. The 
efforts to try and innovate on the business side have been 
swamped to a significant degree, at least in the last year-and-
a-half, by the recession.
    Companies are, as John said, just trying to cope with how 
to deal with the next quarter and the next year. And that has 
certainly made it more difficult to try and innovate and 
experiment. You know, the pilot projects that you were going to 
try and give them a couple years to see how they worked, when 
your revenues are dropping 30 percent in a quarter it is very 
tough to do that.
    Representative Brady. Sure. By the way, just a 
parenthetical point, you don't really pay reporters worth a 
damn. I am amazed, and every profession has its numskulls, but 
you have got some amazingly bright people who, around here, 
back home, are so knowledgeable on the issues, institutional 
knowledge is amazing. I mean, they match any Members of 
Congress plus some, any local leader plus some. And when you 
finally figure out what their salary range is, it is hard to 
figure out how they are still in the profession. I don't know 
how that fits in the overall model. But boy, you got to pay 
people to keep good people. And in this day and age, with other 
options they can go to, I am sure that is a worry of the 
panelists, but it is sort of appalling what those salary levels 
are.
    Dr. Starr. And Representative Brady, they are going down. 
Because what has been happening with the change in the 
financial condition of newspapers is not only that newspapers 
have been cutting newsrooms, but they have been firing or 
buying out their oldest employees, their veteran reporters, and 
often replacing them with junior reporters, with interns in 
order to cut their labor costs. And there is a real question as 
to whether or not there is going to be a career in journalism 
of the kind that many people have had that will enable them to 
support a family.
    Representative Brady. Great. I just wanted to add that. 
Thank you.
    Chair Maloney. Mr. Burgess.
    Representative Burgess. Can anyone give me an idea, if we 
were to proceed with either the House or Senate bill on the 
creation of the nonprofits for the news industry, what sort of 
savings would the newspapers be looking at, or a contrasting 
way of looking at that, what would be the cost in revenue to 
the IRS? Does anyone have an idea about that?
    Mr. Rosenstiel. I don't think we were here to comment on 
the specific bills.
    Dr. Starr. We are not the CBO.
    Mr. Sturm. Most assuredly.
    Representative Burgess. Part of me wonders, although it is 
not a hearing on the legislation, the legislation is still a 
backdrop for this hearing, and would that in fact even be 
enough? Or like we faced with the automobile industry in 
December, when we were asked to pump some more money in that 
direction, is there enough money available in the taxing and 
regulatory environment to save the industry?
    Mr. Rosenstiel. I can tell you--I don't know if this is 
helpful or not--but the newspaper industry last year took in, 
if you take in subscription and advertising revenue, about $45 
billion in revenue, and made on average about 11 percent 
profit. So it costs, with current expenses, about $39 billion 
to operate the industry. If you go entirely online, you would 
lose 90 percent of your revenue, but you would also reduce your 
costs by roughly, we can debate it, but maybe 40, 45 percent by 
not having to print and deliver. Those are big numbers. And the 
industry is trying to figure out how can you have an industry 
that has improved over the last 50 years.
    I mean, we all complain about the press, with good reason. 
I am a press critic. I make my living doing that. But the 
reality is that in the last 50 years we began to have more 
journalism because we had more commercial advertising. And that 
is rapidly collapsing. But even now the size of news rooms, 
even diminished, are probably a little bigger than they were in 
the 1960s still, and when we saw journalism improving 
significantly at a rapid pace.
    Representative Burgess. Mr. Sturm, let me ask you from your 
trade association, clearly not everyone is in the same shape, 
and there are some news organizations that are doing better 
than others. And to the extent that you can tell us, are there 
any unique features to those that are doing better than others? 
Is there a best practice concept emerging from those that are 
remaining profitable in this harsher environment?
    Mr. Sturm. Well, I think even in this most difficult 
environment it is fair to say that individual properties have 
maintained at least some profitability. And that is 
particularly true with regard to medium-sized and small market 
daily newspapers and community newspapers have weathered the 
storm a lot better or easier, if that is a good word, I am not 
sure, as opposed to the major market dailies. And principally, 
it is because the major market papers did very, very well with 
classified advertising for a very, very long time.
    And it was low cost, and the revenue from classified 
advertising tended to drop pretty much to the bottom line, or 
an awful lot of it to the bottom line. And then along came the 
Internet, and particularly Craig Newmark, and suddenly you 
could get classified ads for nothing. And that really did 
attack the revenue base of classified advertising. So where, 
once upon a time, for example, not so long ago, newspapers sold 
classified advertising in print, and then for an extra little 
bit you could get the classified ad on your Web site, that is 
now turned around.
    Newspapers are selling on their Web sites classified ads 
and then, for an add-on, you get the print ad with it. So that 
is a demonstration of how the world has been flipped upside 
down by the Internet.
    Representative Burgess. You have mentioned, though, the 
smaller markets, the medium-sized market, but in a big market 
New York City you have two side by sides, the New York Times 
and the Wall Street Journal. Is one doing better than the other 
from a financial perspective?
    Mr. Sturm. Well, the two papers you cite are both really 
national papers. They have a broad audience across the country.
    Representative Burgess. I prefer to think of them as New 
York papers.
    Mr. Sturm. Interestingly enough, if you looked at their 
subscriptions and where the people buy those papers, you would 
be surprised what a large percentage of the New York Times 
audience is outside the City of New York.
    Representative Burgess. Sure.
    Mr. Sturm. Of course The New York Times covers New York 
local news; but the local papers in New York are probably the 
Daily News and the Post.
    Representative Burgess. Can you make a statement about the 
financial status of those two national New York papers, Wall 
Street Journal and New York Times? Are they comparable?
    Mr. Sturm. I think they are both public companies and they 
report their earnings, et cetera, as do other public companies. 
I don't have that data in front of me.
    Mr. Rosenstiel. They are notably different business models. 
Roughly--these numbers may be a little out of date, but roughly 
half the readers of The New York Times are around that 
metropolitan region of New York and half are dispersed around 
the country. So some of their revenue is national advertising 
and some is local. The Wall Street Journal is a national 
newspaper and has financial, a lot of financial advertising 
that wouldn't appear in any other newspaper, but that is 
relevant to investors all over the country. So it is very hard 
to compare them in terms of businesses. And then if you take 
any local newspaper, its business model is drastically 
different than that of The New York Times because their 
circulation and advertising base is almost always entirely 
local.
    The Internet is a challenge to that because if you are a 
local newspaper and you have got readers suddenly in Europe, 
your advertisers think, well, what do I care that you have got 
readers in Europe?
    Representative Burgess. But within that environment, 
clearly there are institutions that are doing okay and there 
are institutions that are not. And is there any sort of general 
observation that you have within the industry that leads you to 
believe that----
    Mr. Rosenstiel. In general, the big city metro papers that 
are not national and are not hyper-local are the most 
vulnerable because they are caught in between The New York 
Times and The Wall Street Journal on one end and a community 
newspaper on the other.
    Representative Burgess [continuing]. You have models of 
those that would be successful in this environment?
    Chair Maloney. Mr. Sturm, you wanted to comment?
    Mr. Sturm. No. Actually, I was sort of going to make the 
same point that Tom just did.
    Chair Maloney. The gentleman's time has expired. Mr. 
Rosenstiel, earlier you said that commercial advertising is 
collapsing in newspapers and television stations and so forth. 
And it is now tax-deductible as a business expense if a 
business is buying advertising they can deduct it. There have 
been a number of proposals before Congress to change that 
status, to have the advertising taxed. And I would like to ask 
what kind of impact would that have on the industry if business 
advertising was no longer tax-deductible? There are several 
bills before Congress now to change that status.
    Mr. Rosenstiel. We haven't studied to see what the 
financial impact of that would be. But obviously, anything that 
creates a further disincentive for advertisers to spend money 
on newspaper advertising would probably depress those revenues 
further. There are a lot of reasons that advertising is 
vanishing from newspapers, because there are many different 
sectors of advertising in newspapers. John talked about what 
happened with classified. Changes in retailing had a huge 
impact on newspapers. The department store and competitive 
grocery stores were major advertising sectors. They have been 
largely replaced by big box stores like Wal-Mart and others 
that don't advertise in newspapers because they discount all 
their prices every day, and people know that.
    So if you look at the advertising that was in a newspaper 
20 years ago, who those advertisers were, and you look at the 
same newspaper today and who is advertising there, you would be 
shocked at the difference of who is not there anymore and who 
has replaced them.
    Chair Maloney. Mr. Sturm, you had your hand up?
    Mr. Sturm. Yes. The answer, I think, to your question about 
denying the deductibility of advertising across all media: it 
would be devastating. It would be essentially the end of much 
of media. It would be a horrible thing. The only bills I have 
seen in the past, and I don't think there is anything live 
right now, have been to deny the deductibility of a certain 
category of advertising--prescription drug advertising was the 
one that has popped up.
    Chair Maloney. That is the beginning.
    Mr. Sturm. Right. But I think the Congress might want to go 
very carefully and view those ideas with some concern not only 
as to the effects on the media, but the fact that it would be 
favoring one kind of business deduction over another kind of 
business deduction. And I would suggest that that is probably 
not fair.
    Dr. Starr. Chairman Maloney, in my written testimony, I 
emphasized the unwritten precedent that developed right at the 
founding of the Republic as a result of the resistance to the 
British Stamp Act in 1765, the precedent that there would be no 
special taxes imposed on the press. And if you look through 
American history, that has actually been our practice. Very 
different from other countries. We have not singled out the 
press for particular taxes. And a tax on advertising would in 
effect be a tax on the media. And therefore, I think it really 
would run against what has been this unwritten precedent.
    Chair Maloney. Thank you. And I agree with all of your 
testimony in that respect. I was talking to a reporter earlier 
this week who works for a paper in a major city that is facing 
tremendous economic challenges. And he was telling me how 
expensive reporting is. They started on a story involving the 
e-mails of government officials at city hall, and that it was 
extremely expensive to get those e-mails, extremely time-
consuming, but resulted in a story that was important in some 
people's minds towards government reform and public policy that 
is important to the locality.
    And he was emphasizing how important independent, creative, 
original research is and how very, very expensive it is, and 
that a great deal of it comes from the media. Most of it comes 
from the media. All of it comes from the media. Most of it 
certainly in newspapers and televisions and magazines. And many 
people are concerned about keeping that independent, strong, 
vigorous activity going. It is part of our democracy. It is 
very important. And one proposal that has come to me to help 
news organizations is the establishment of a blind trust that 
would accept donations from foundations and other individuals, 
and the pooled funds collected by the trust would be shared 
among news organizations, profit or nonprofit, that meet 
certain criteria. And the government could also provide some 
funding or matching funding as they do for public television. 
In your view, would this work? What would be the pros and cons? 
And we will start with Mr. Sturm.
    Mr. Sturm. I think I, with all due respect, would like to 
take a close look at something like that and analyze it 
carefully. But I would make one comment in terms of scale. And 
this probably applies as well to the idea of funding and 
nonprofits. If you take a news room, and a gentleman on our 
board of directors from the Dallas Morning News testified 
before Senator Kerry's committee in the Senate in June along 
these lines, I recall his testimony: The Dallas Morning News 
spends about $30 million a year on their newsroom. And if you 
look at scale that is a lot of money.
    And that is an every year kind of thing. And it is probably 
not going to go down, it is probably going to go up. So if you 
are talking about foundation support and all of that, a typical 
foundation gives what, 5 percent of their corpus per year? They 
are required to. So if you looked at it from just a scale 
standpoint, that would require $600 million of foundation 
corpus to support--and all of that would be directed to one 
news room--to support on an annual basis a news room the size 
the Dallas Morning News has.
    So again, I think there might be some great ideas out 
there. We would like to take a look at them. But there is a 
scale issue here.
    Mr. Rosenstiel. I would add, because we have looked at 
this, even those estimates are low. Because you mentioned the 
news budget, but you didn't mention the H.R. department and all 
the other things that are required to support the news budget. 
So the numbers actually are even higher than most of the 
estimates.
    Dr. Starr. But I don't think anybody is suggesting, or 
perhaps shouldn't suggest that this would completely replace 
all other sources of revenue. I think what we are talking about 
is adding to revenue that hopefully will not totally disappear. 
And that might be the difference, enabling a news organization 
to undertake the kind of investigative projects that you 
mentioned. And I think there certainly is a role for nonprofit 
foundations, and I would say possibly also for some kind of 
government subsidy. We do already have a mechanism with public 
radio and public television. And maybe we should think about 
expanding the mandate for those organizations.
    Chair Maloney. And broadcast television is provided free 
access to the public airwaves. In exchange for licenses to use 
the public spectrum, broadcasters are expected to provide 
programming in the ``public interest.'' However, the 
requirements to meet the public interest standard are quite 
lax, and some people have suggested charging broadcasters for 
use of the public spectrum, and the fund could be used to 
support local journalism and independent news gathering. Do you 
think a fee system could support the industry? What is your 
response to that idea? Anyone?
    Mr. Rosenstiel. Well, the television industry is full of 
sort of vestigial rules and regulations also. To an 18-year-old 
news consumer of the future, the distinction between broadcast 
and cable doesn't really exist. They all come through the cable 
system, but they have drastically different business models. 
The broadcasters are getting no fee from the cable operator. 
There is no subscription for NBC and CBS. So all of their money 
has to be made from advertising. But every cable news channel 
generates roughly 50 percent of their revenue from subscription 
fees that are embedded in the cable fee. But they are now 
direct competitors in many ways, in many practical ways through 
a single delivery system. So, I mean, I think that business in 
many ways is looking at a landscape that strikes them as 
illogical in its design even more than the newspaper industry 
may be.
    Dr. Starr. In 1927, when Congress passed the first Radio 
Act, or 1934 when it passed the Communications Act, I think 
that idea would really have been an excellent idea. But we are 
near the end of the era of broadcasting. Already very few 
people who watch television are actually getting the signal 
over the air. They are getting the signal by cable or by 
satellite. And so the question has really arisen among a lot of 
the networks whether they need their local stations. Maybe they 
would be better off being a cable channel. I think the notion 
of charging for the spectrum, you know, may just be too late.
    Chair Maloney. Thank you.
    Mr. Sturm. My only comment is, having represented 
traditional media for 30-some years, both broadcast television 
and now newspapers, is I would respectfully suggest that the 
government, broadly speaking, be very careful about continuing 
regulation of traditional media, yet actually in some ways 
insulating new media from any kind of similar treatment. For 
example, the Congress has chosen to insulate the Internet from 
taxation. I don't disagree with that. But I do think that 
traditional media is still burdened with regulation that others 
don't encounter. And that makes life for the traditional media 
that much harder.
    Chair Maloney. Well, I want to thank the panelists for your 
time. You have certainly given us a great deal to think about. 
I would say that members on both sides of the aisle support an 
independent, strong, vigorous news-gathering organization that 
has been equally critical of Democratic presidencies and 
Administrations and Republican Administrations, and caused 
equal pain on both sides of the aisle, and raised very 
important issues that need to be considered and thought about. 
You play a vital part in our democracy, and we thank you. And 
this meeting is adjourned. Thank you very much.
    [Whereupon, at 12:17 p.m., the committee was adjourned.]

                       SUBMISSIONS FOR THE RECORD

 Prepared Statement of Carolyn Maloney, Chair, Joint Economic Committee
    I want to thank our witnesses for joining us today to discuss the 
future of newspapers and their impact on the economy and our democracy.
    The newspaper industry has experienced serious financial problems 
resulting from dwindling advertising revenues, falling print 
subscriptions, and a fundamental change in the way people get their 
news.
    Recently, the plight of the newspaper industry has been punctuated 
by substantial job losses, downsizing at various bureaus and the 
halting of either printed editions or business-wide operations.
    According to the Bureau of Labor Statistics, newspaper publishers 
cut nearly 50,000 jobs between June 2008 and June 2009, a record rate 
of job cuts representing 15 percent of its workforce.
    Regional outlets like the Seattle Post-Intelligencer and the 
Detroit Free Press have either scaled back or halted printed editions, 
while others like the Rocky Mountain News and the Cincinnati Post were 
closed entirely.
    Though a decline in printed newspaper readership is partly to blame 
for recent developments, there are multiple factors contributing to 
newspapers' declining quality and profitability.
    Technological change has created structural challenges for 
newspapers which were reliant on subscription and classified ad 
revenues to cover operating costs.
    On top of that, the current recession has eroded advertising 
revenues substantially. Between 2006 and 2008, ad revenues declined 23 
percent from $49.5 billion to $38 billion and are expected to fall 
further during 2009. The way information moves today can make even the 
tech-savviest New Yorker's head spin.
    Today's Kindle-clutching, iPhone toting subway rider who braves the 
rush hour commute spends every waking hour in a world of nonstop news 
and information which none of us could have ever imagined just a few 
years ago.
    Digital media, bloggers, news aggregators, and citizen journalists 
all on the Internet have forever altered the speed at which news and 
ideas are disseminated.
    And while there are many out there chronicling what ails our 
country's newspapers, community newspapers continue to shut down their 
presses, and not nearly enough is being done to find ways to preserve 
these institutions that are so critical to our democracy.
    Last week, I introduced H.R. 3602, a bill which will enable local 
newspapers to take advantage of non-profit status as a way to preserve 
their place in communities nationwide. Since the ratification of the 
Bill of Rights, the federal government has acknowledged that the press 
is an institution which is afforded special protections by name.
    In this spirit, I think that the government can help foster 
solutions for this industry in ways which protect the independence of 
newspapers and enables their objective reporting to thrive in a new 
economic and media climate.
    In so many ways, the change brought about by the digital media 
amplifies what is written in newspapers. The Internet and mobile 
devices extend news and information in a way that opens dialogues to 
more and more aspects of our life.
    The Internet has allowed anyone, regardless of background or world 
view to express themselves, connect with others, and access an entire 
world of electronic information.
    Journalists play a critical role in monitoring the activities of 
individuals and institutions that are supposed to be working in the 
public interest. As our witness Dr. Starr put it, they provide a 
``civic alarm system.'' The absence of a vigilant media may even allow 
corruption to flourish unchecked.
    In addition, studies show that journalism fosters civic engagement 
by the population at large.
    A recent study showed that when the Cincinnati Post shut its doors, 
voter turnout in local elections dropped precipitously. Without our 
newspapers, we lack a critical uniting feature which fosters broad 
participation in our democracy and community functions.
    Minority-owned publications are among the hardest hit by recent 
trends and more must be done in order to ensure that these institutions 
continue their important public service. The reporting done by 
minority-owned newspapers is a critical voice in communities across the 
nation that must be preserved.
    It's clear that we need to explore alternative business models to 
ensure an independent and vibrant press in the 21st century.
    I look forward to the testimony of our witnesses in helping this 
committee to do so.
                               __________
     Prepared Statement of Representative Michael C. Burgess, M.D.
    I was surprised to hear President Obama on Monday say he is not 
opposed to bailing out newspapers. We have two stimulus bills--both of 
which I have voted against--the first having cost the American taxpayer 
over $2.5 trillion dollars and the second having cost the American 
taxpayer $787 billion dollars of which less then 10% has been spent and 
none has been accounted for.
    Now, President Obama wants to bail out newspapers and/or turn them 
into non-profit entities so they are free of politics and partisanship. 
He stated that news today is all opinions and no serious fact-checking, 
and he would consider Senator Cardin's bill to give tax deals to 
newspapers if they become non-profits like broadcasting.
    But despite all the important contributions of our journalists--
without whom we would not have heard about Iran-Contra during President 
Carter's Administration--journalism as a business should not be given a 
bailout by the American taxpayer.
    Sure the industry is suffering. Craig's List, undoubtedly hurt the 
classified ad revenue, and the downturn in business has lead to less 
advertising buys as a whole. But marquee names like The Wall Street 
Journal are not only surviving, but thriving.
    Furthermore, there is nothing wrong with newspapers being political 
and partisan. Sure, we fight about the fairness in coverage and the 
rampant liberal bent of the opinion section, but to have the federal 
government interject and turn these organizations into 501(c)(3) 
entities like churches fails to realize the inherent value in 
conversation and discourse.
    Newspapers report the facts, but nothing in the language of either 
Senator Cardin's bill or our honorable chairwoman's bill H.R. 3602 
would allow the opinion section to continue, and without the ability 
for newspapers to be political, there isn't exactly a reason for us to 
rely on them just for the box-score after college football Saturday. 
This would only further decimate the industry--not make them better.
    Thank you.
                               __________
 Prepared Statement of Tom Rosenstiel, Director, Pew Research Center's 
                  Project for Excellence in Journalism
    Thank you, Madam Chairwoman, for the opportunity to testify today.
    In the next few minutes, I'd like to offer an overview of what's 
occurring in the newspaper industry and what it may mean to our civic 
life.
    There are a lot of misconceptions about where we get our news. Only 
about 54% of Americans say they regularly read print newspapers. But 
those surveys do not tell us much about where news comes from.
    Far more than that of what we know about our communities today 
still originates in newspaper newsrooms. A good deal of what is carried 
on radio, television, cable and wire services comes from newspaper 
newsrooms. These media then disseminate it to broader audiences. In 
every community in America I have studied in 26 years as a press 
critic, the newspaper in town has more boots on the ground--more 
reporters and editors--than anyone else--usually than all others 
combined.
    When we imagine the news ecosystem in the 21st century, the 
newspaper is still the largest originating, gathering source.
    The second misconception about newspapers is that their crisis is 
loss of audience. Not so. Weekday print circulation last year fell by 
4.6%, but the number of unique visitors to newspaper websites grew by 
15.8% to 65 million. When you combine print and online audiences of 
newspapers, the industry overall is faring better than other legacy 
media--and many newspapers are seeing audience grow. One study, by 
Scarborough suggests audience gains of 8.4% from online. What's more, 
the Internet offers the potential of a more compelling, more dynamic, 
more interactive journalism--a better journalism than print--coming 
from these newsrooms.
    The crisis facing newspapers is a revenue problem. Advertising, the 
economic foundation of journalism for the last century, is collapsing, 
particularly classified. Print newspaper ad revenue fell by roughly 25% 
in the last two years, and 2009 will likely be worse. Meanwhile, online 
display advertising for newspapers is now declining, too.
    Last year, the traffic to the top 50 news websites grew by 27%. But 
the price of an online ad fell by 48%.
    The consequence is that the amount of our civic life that occurs in 
the sunlight of observation by journalists is shrinking. The number of 
city councils and zoning commissions, utility boards and state houses, 
governor's mansions and world capitols being covered on a regular 
basis, even by a lone journalist, is diminishing. One out of every five 
people working in newspaper newsrooms in 2000 was gone at the beginning 
of 2009, and the number is doubtless higher now. My old newspaper, the 
Los Angeles Times, has half the reporters it did a decade ago. The 
problem is more acute at bigger papers than at smaller ones, but no one 
is immune--and I venture metropolitan suburban areas may be most 
vulnerable.
    Alternative news sites such as Voice of San Diego and MinnPost are 
exciting innovations, but the number of people working there does not 
yet come close to the lost numbers--and none of these sites has so far 
found a sustaining business model.
    More of American life now occurs in shadow. And we cannot know what 
we do not know.
    Newspapers are more than partly to blame. Like other legacy 
industries before them, newspapers let a generation of opportunities 
slip through their fingers--from E-Bay to Google, to Realtor.com to 
Monster.com. The industry is running out of options, though I believe 
some remain. Those include charging for content, getting tough with 
aggregators, creating online retail malls, and more. No one knows which 
will prevail. I am an analyst, not an advocate. The only thing close to 
a consensus is that most likely no one revenue source will be 
sufficient.
    So should we care whether newspapers survive? Perhaps not. 
Typewriters have come and gone. But I believe we do have a stake as 
citizens in having reporters who are independent, who work full time, 
and who go out and gather news, not just talk about it, and who try to 
get the facts and the context right. And its not just the high-lying 
investigative reporters I have in mind, but perhaps even more so the 
reporters who simply show up week after week, sit in the front row, and 
bears witness, and who, simply by their presence, say to those in power 
on behalf of all the rest of us, you are being watched.
                               __________
  Prepared Statement of Paul Starr, Woodrow Wilson School, Princeton 
                             University\1\
---------------------------------------------------------------------------
    \1\ For purposes of identification. This testimony represents only 
my own views, not those of Princeton University or any other 
organization.
---------------------------------------------------------------------------
    Madam Chairman, I appreciate the opportunity to discuss the crisis 
affecting the nation's newspapers and the implications for democracy 
and a broadly shared prosperity.
    Ever since the founding of this country, newspapers have been 
Americans' principal source of news. After broadcasting developed--and 
even as new media have emerged in recent years--newspapers have 
continued to do most of the original reporting in states and cities 
around the country. They have put most of the journalistic ``boots on 
the ground'' to find out the facts that citizens require to hold both 
government and business accountable.
    The Internet, to be sure, has many advantages as a medium of free 
and open public discussion. Among other things, it provides access to a 
wide variety of opinion, original data and documents, and distant 
sources of news that would otherwise be inaccessible. But chiefly 
because of its indirect effects on newspaper advertising revenue, the 
Internet is also undermining the financial basis of the press. The 
question that we now face is whether there ought to be changes in law 
and policy to provide support for journalism not as a special favor to 
the news media, but to advance the general interest in an informed 
public.
    Although some people may consider support for the press to be 
inconsistent with our national tradition, the Founding Fathers would 
have disagreed. Besides guaranteeing freedom of the press in the First 
Amendment, they used postal policy to subsidize newspapers and promote 
the circulation of news. As a result of legislation adopted in 1792, 
newspapers received two distinct subsidies in the early republic: 
cheap, below-cost rates for sending copies to subscribers and a 
franking privilege that allowed newspaper editors to exchange copies 
with one another through the mails at no postal charge. These subsidies 
encouraged the establishment of newspapers throughout the nation on a 
decentralized basis, and they created a national news network linking 
those newspapers together--all without censoring or controlling the 
content of the news itself.
    American policies stood in dramatic contrast to European practice 
at that time. European governments not only censored newspapers but 
also taxed them with the express aim of making them more expensive and 
thereby preventing the rise of a popular press that could make 
political trouble. The principal levy on newspapers in Britain was the 
stamp tax--its opponents called it a ``tax on knowledge''--and you will 
recall that it was Britain's attempt in 1765 to impose the stamp tax on 
the American colonies that the colonists denounced as ``taxation 
without representation.''
    The resistance to the Stamp Act helped to crystallize the sense 
among our forefathers in the era of the American Revolution that the 
press was a vital bulwark of liberty, and it left an important legacy--
an unwritten presumption in American tax policy against any special 
taxes on the press. And with only minor exceptions, both the federal 
and state governments have historically avoided imposing taxes 
specifically on the news media--indeed, many states have exempted 
newspapers from general sales taxes.
    So the press has not been regarded, and should not be regarded, as 
just another industry. Government has sought to advance it because a 
democratic political system cannot function without diverse, free, and 
independent sources of news.
    For a long time, however, we have been able to take newspapers and 
other news media more or less for granted because they were able to 
prosper commercially. During the nineteenth century, as advertising 
expanded, newspapers became increasingly self-sufficient and 
profitable. News is a ``public good'' in both the strict economic and 
ordinary-language meaning of that term, and public goods tend to be 
systematically underproduced in the market. But newspapers were able to 
thrive because of the strategic position they came to occupy between 
advertisers and their markets. For certain kinds of advertising, such 
as classifieds, newspapers were virtually irreplaceable, and as the 
industry consolidated during the 20th century, the surviving papers 
enjoyed an extraordinary degree of pricing power. Out of their profits 
from advertising, they were able to cross-subsidize the production of 
some kinds of news that probably could never have been justified as 
profitable in themselves.
    That system for cross-subsidizing news is now collapsing because 
newspapers have lost the strategic position they once enjoyed. In the 
online world, the lion's share of revenue from advertising goes to paid 
search, and newspapers cannot reproduce the advantages they have long 
enjoyed in print because Craigslist, eBay, and other sites provide 
efficient platforms for advertising without bearing the cost of news 
production. Moreover, it is difficult for any single news organization 
to capture the full returns from investing in a costly journalistic 
project. Even if newspapers begin to charge for content, they will not 
be able to prevent other news organizations or web sites from reporting 
the same information almost immediately after it is published. Neither 
would we want them to be able to exercise that kind of control.
    Increasingly, the production of news will require subsidy, and the 
question is really from where and under what conditions that subsidy 
will come. The problems that this challenge raises are difficult 
because of the legitimate concern that any subsidy, whether from 
government or private philanthropy, may induce subservience and 
dependency in the press. But we should take encouragement from three 
experiences.
    First, as I've mentioned, early in our history, the federal 
government aided newspapers through postal policy without impinging on 
their freedom.
    Second, in recent decades, government at both the federal and state 
level has supported public broadcasting, which has become an important 
source of news and public-affairs discussion. On radio, in particular, 
as commercial stations have abandoned news, the public stations have 
performed an especially valuable service by continuing to offer 
reported journalism of a high quality.
    And, third, besides supporting public-service broadcasting, 
democratic governments elsewhere, notably in northern Europe, have 
successfully used subsidies to maintain competition and diversity in 
the press without limiting its freedom. Indeed, the Scandinavian 
countries have preserved more newspaper competition through subsidies 
than we did by giving newspapers an antitrust exemption in the 
Newspaper Preservation Act of 1970--legislation whose failure ought to 
be a cautionary example against extending any new antitrust exemptions 
to the news media. Today those countries in northern Europe that have 
invested public funds in news have higher levels of newspaper 
readership and civic literacy than we do in the United States. Some 
other European countries today also provide tax advantages to the 
press--excluding newspapers, for example, from the value-added tax.
    Still, to avoid any loss of press freedom, any public support for 
journalism in the United States must be approached with great caution, 
and it seems to me at least three principles ought to be kept in mind.
    First, any subsidies must be viewpoint-neutral; they cannot favor 
one viewpoint over another.
    Second, they should be platform-neutral--they should not favor 
print media over online media, for example.
    And, third, they should be neutral or at least reasonably balanced 
as to organizational form. Taken as a whole, they should not favor for-
profit over nonprofit organizations, or vice versa. To be sure, some 
policies by their nature may benefit one type of organization, but the 
sum total of policy should be indifferent as to whether news is 
provided via a for-profit or nonprofit enterprise.
    Nonprofit support of journalism is already increasing, and many 
Americans would be more comfortable seeing support for journalism come 
from a great variety of private philanthropic sources than from the 
government. To facilitate that development, Congress should seek to 
remove any legal obstacles that may stand in the way of newspapers 
receiving tax-exempt support or becoming nonprofit, tax-exempt 
organizations themselves. But here we face a new question. From the 
founding of the republic, newspapers have played a central role in 
politics--endorsing political candidates, for example. It would be a 
real loss to freedom of the press if, in becoming nonprofit, newspapers 
had to restrict their political expression. I believe, therefore, 
Congress should consider creating a new category of nonprofit 
journalistic organizations that are freed from traditional limitations 
on 501(c)3 organizations. When Congress originally subsidized 
newspapers through the postal system, it did not require that they be 
nonpartisan; indeed, most of them were partisan. Neither should we 
require newspapers to limit their political expression in order to gain 
the advantages of nonprofit status.
    Financial support for journalism could take a number of different 
forms. Direct grants might allow for political manipulation of the flow 
of funds, unless there was some intervening, professionally run 
organization strongly insulated from political control. The public 
broadcasting system offers a model, and rather than create an entirely 
new structure, Congress might simply broaden the mandate of the one 
that exists. All the old distinctions among media--print, broadcast, 
and so on--are breaking down in the online world, and Congress should 
begin to consider the implication of that change for all manner of 
policies that were adopted when clear lines separated different types 
of media.
    Indirect forms of subsidy through the tax system also ought to 
receive consideration. As I mentioned, many other countries exempt the 
press from the value-added tax; the equivalent in the United States 
would be an exemption from the payroll tax, or at least the employers' 
share (with the idea of replacing those contributions to the Social 
Security trust funds with general revenue). To be platform-neutral, 
this tax exemption would have to apply not just to newspapers, but to 
journalistic organizations more generally. Defining eligible 
organizations and individuals would be difficult, but the same problem 
arises in many other areas, such as state ``shield'' laws that provide 
journalists with an exemption from some demands to testify under 
subpoena.
    Finally, we ought to bear in mind the implications of this 
development for American federalism. Unlike many other countries that 
have strong national news media but relatively weak media at the 
regional and local level, the United States has historically had a 
highly decentralized press, spread through every state and major city, 
as well as a multitude of smaller jurisdictions. My concern is not so 
much that there will be a shortage of national news coverage. The 
national news media will, I believe, be able to aggregate audiences of 
sufficient size to sustain competition and diversity. The situation at 
the state and local level is altogether different. According to a 
recent survey, the number of statehouse reporters has declined by one-
third in the past five years--and shows every sign of declining 
further. Some cities are losing their last daily paper, and many more 
are likely to do so. Resources for traditional journalism at this level 
are disappearing far more quickly than they are being created online, 
and some of those most closely involved with online news at the state 
and local level see no prospect of being able to generate sufficient 
revenue, either from advertising or charges to readers, to make state 
and local online news self-sustaining.
    The premise of federalism is that by devolving significant areas of 
public decision-making to government at the state and local level, we 
bring them closer to the people. But if there is no independent 
journalism at those levels, the people will be in the dark about much 
of what those governments are doing. This is not a liberal or a 
conservative issue. The Founders were right to see a robust, free press 
as a bulwark of liberty. And they were right in their time to provide 
concrete assistance to ensure the press developed throughout the 
country. We must figure out how to keep that tradition going in our 
time as well.
                               __________
    Prepared Statement of John Sturm, President and CEO, Newspaper 
                         Association of America
    Good morning. I am John Sturm, President and CEO of the Newspaper 
Association of America, a trade organization representing nearly 2,000 
newspapers with more than 90 percent daily circulation in the United 
States.
    I appreciate this opportunity to talk about the future of 
newspapers and how the industry can continue to provide high-quality 
public service journalism, which is critical to a functioning 
democracy. What we are really talking about here today is the 
preservation of local journalism. Newspapers have traditionally been 
the primary source and the fundamental support system for local 
journalism--providing the financial underpinning for local news and 
investigative journalism.
    Chair Maloney, you recently noted that ``newspapers are an 
essential component to our free democratic society.'' We couldn't agree 
more, and the reason newspapers are essential to a well-informed 
citizenry is relatively simple: Newspapers are the primary source of 
credible, professional journalism that has a positive impact on our 
communities and our nation. Indeed, in most markets, the local 
newspaper has more reporters on the street than all other local media 
combined. Newspapers have a continuing commitment to local news and 
information.
    The challenges facing the newspaper industry are well documented. 
As a result of the longest recession in our nation's history and 
intense competition for advertising, particularly from Internet-based 
services, newspapers have experienced a dramatic loss in advertising 
revenue--which is the lifeblood of our editorial content. Newspaper 
advertising revenue has decreased nearly 40 percent over the last two 
years, including a precipitous decline in classified advertising, which 
has had a severe impact on major-market newspapers. Overall, the 
newspaper share of the local advertising market has decreased to less 
than 15 percent from over 30 percent.
    Interestingly, while advertising revenue is down sharply, newspaper 
readership is actually growing. Newspapers' print editions, combined 
with their Web sites, have a larger audience than ever, and their 
content never has been more popular--even among young people. Although 
print circulation has fallen, the audiences for newspaper Web sites 
continue to grow at a rate that outpaces the losses in print. Nielsen 
Online recently reported that newspaper Web sites had over 70 million 
visitors in June alone--which accounts for nearly one-third of all 
Internet users.
    Unfortunately, the dramatic decline in advertising revenue has 
taken a severe toll on the industry. Seven major newspaper companies 
have declared bankruptcy. Publishers in virtually every market--large 
and small--have been forced to lay off highly valued, veteran 
journalists and other employees and to take other drastic cost-saving 
measures. Since 2007, nearly 30,000 jobs have been lost in the 
newspaper industry.
    If daily newspapers were unable to continue their in-depth 
reporting, analysis and investigative journalism, we see no other 
comparable news provider with the resources and commitment to provide 
truly professional journalism at the local level--certainly in the 
medium term. While online news sources and citizen journalists 
certainly add perspective to the news, very few provide original, in-
depth reporting and analysis, and even fewer ascribe to the same 
professional journalism standards.
    What can Congress do to help maintain the type of journalism that 
local communities deserve and expect?
    Let me attempt to be as clear as possible on this point:
    The newspaper industry is not seeking a financial ``bailout'' or 
any other kind of special subsidy. We don't believe direct government 
financial assistance is appropriate for an industry whose core mission 
is news gathering, analysis and dissemination. From a business 
perspective, we are happy to be treated no differently than other local 
businesses.
    However, there are certain steps that Congress can take, in the 
short term, that will assist all businesses--including ours--that are 
attempting to stabilize their financial situations.
    In his Fiscal Year 2010 Budget, President Obama proposed allowing 
businesses to carry back net operating losses for 5 years instead of 2 
years under existing law. This would allow businesses to apply current 
losses to prior year taxable income, providing a much needed infusion 
of cash at a critical time. While Congress included this provision in 
the economic stimulus package, it was significantly scaled back in 
conference and applied only to very small businesses. Most businesses, 
like many newspapers, do not qualify for this assistance.
    Legislation has been introduced in the House and Senate which would 
correct this problem and expand the net operating loss provision for 
the benefit of all businesses--large and small. Chair Maloney and Rep. 
Brady, we sincerely thank you for cosponsoring this legislation, H.R. 
2452, and we look forward to working with you and with other members of 
the Committee to see it enacted into law this year. The NOL proposal 
will provide businesses with an incentive to go from cutting to 
stabilizing and, eventually, to expanding operations--steps that are 
absolutely essential to a sustaining recovery.
    According to a recent paper by the ubiquitous Mark Zandi, chief 
economist and cofounder of Moody's Economy.com, ``extending and 
expanding the NOL carryback to benefit larger firms would provide a 
meaningful boost to the economy.'' And, for financially strapped 
companies, expanding the NOL provision ``may provide some more time to 
reduce their costs, raise sales and stabilize their financial 
situations.'' \1\
---------------------------------------------------------------------------
    \1\ Zandi, Mark. ``Assessing the Economic Benefit of Accelerated 
Depreciation and Net Operating Loss Carryback.'' September 17, 2009.
---------------------------------------------------------------------------
    Another step that Congress can take to provide short-term economic 
relief is to allow businesses to spread out future contributions to 
defined benefit plans. The decline in the stock market has caused 
valuations for defined benefit pension plan assets to fall below the 
funding requirements established under the Pension Protection Act (PPA) 
of 2006. As a consequence, newspapers and other businesses may not be 
able to meet the funding requirements of the PPA, which mandates 
minimum funding thresholds of 94 percent in 2009 and 96 percent in 
2010. Relief provided earlier this year by the Treasury Department was 
a nice ``patch,'' but it simply moves the pension funding problem out 
to 2010 and 2011. Businesses will be required to use cash reserves to 
fund pension plans to meet statutory requirements; cash that could be 
used now to preserve jobs and generate much needed business activity in 
this sluggish economy. We urge Congress to pass legislation that would 
spread out these obligations to give markets more time to recover and 
businesses more time to stabilize their finances.
    Chair Maloney, we appreciate the bill that you introduced last 
week--the Newspaper Revitalization Act--to allow newspapers to organize 
as non-profit entities while continuing to generate advertising 
revenue. While we believe this proposal has merit and could work in 
certain situations, it would require local citizens and civic leaders 
in a community to commit a significant volume of resources to fund 
newspapers' journalistic functions. This is a step in the right 
direction and could help in a few communities, but, candidly, we don't 
see it as a comprehensive solution to the problems in the industry at 
this time.
    In the near term, we recognize that newspapers--on their own--must 
adjust their business models to find a way to monetize online content 
in a way that contributes to local journalism. Newspaper companies have 
been aggressively examining new business models while also exploring 
new systems that would allow newspapers and other news content creators 
to track, detect and license online content which is being used by 
portals and aggregators for their own commercial gain.
    Simply put, some Internet operators routinely free-ride on the 
investments that newspapers are making in local journalism by copying 
or summarizing newspaper content in order to drive audiences to their 
Web sites--and gain revenue through the selling of their advertising 
around our content. The concern is not the personal use of newspaper-
generated content, but the use of newspaper-generated content for 
someone else's commercial benefit. The original reporting that is done 
by newspapers each and every day cannot be sustained over the long run 
if newspapers are not able to obtain fair and reasonable compensation 
for the content that they produce. The creators of valuable content 
cannot survive without direct compensation from those who use their 
creative works. It doesn't work for music, books or movies; in the long 
run, it will not work for newspaper-generated content either.
    As noted, the industry is working on a variety of solutions to 
address these issues, solutions that will make it quite convenient for 
the many unauthorized users of newspaper-generated content to license 
and pay reasonable fees for such use. We expect that these solutions 
will be in the marketplace within the next 6 months.
    Thank you for this opportunity to represent the newspaper 
industry's views. It is my hope that the discussions we have here today 
will lead to practical actions that will help support local, public 
service journalism now--and to sustain it in the future.
                               __________
 Prepared Statement of Denise Rolark Barnes, Publisher, The Washington 
                                Informer
    Thank you Madam chair and members of the Joint Economic Committee 
for the opportunity on ``The Future of Newspapers: The Impact on the 
Economy and Democracy.'' I salute you for your interest in hearing from 
a diverse group of newspaper publishers regarding our struggles and how 
this very unique piece of legislation might impact the future the of 
the newspaper industry.
    As you heard in my introduction, my name is Denise Rolark Barnes, 
and I succeeded my father, Dr. Calvin W. Rolark, as publisher of The 
Washington Informer when he died in 1994. He and his colleagues in the 
Black Press impressed upon me the role and responsibility of the Black 
Press which was founded by two freedmen, Samuel E. Cornish and John B. 
Russworm, publishers of the country's first black newspaper established 
in New York City in 1827.
    Freedom's Journal was published nearly 123 years after the nation's 
first continuously published newspaper was established in Boston, 
Massachusetts in 1707, and nearly 40 years before the U.S. Congress 
abolished slavery in America in 1865.
    The Wisconsin Historical Society describes Freedom's Journal as a 
newspaper that provided ``international, national, and regional 
information on current events and contained editorials declaiming 
slavery, lynching, and other injustices. Freedom's Journal circulated 
in 11 states, the District of Columbia, Haiti, Europe, and Canada.''
    Russworm and Cornish wrote in their very first editorial to their 
readers, ``We wish to plead our own cause. Too long have others spoken 
for us.'' The paper published for only two years due to a lack of 
advertising support, but it laid the foundation for thousands of 
newspapers who shared a mission and purpose that was no different than 
their white counterparts--to provide clear and truthful information 
about the actions of those who we put in charge and to provide a voice 
for those who are effected by their actions.
    Ten years ago, I could confidently say that the National Newspaper 
Publishers Association, the trade association serving the Black press, 
had a membership of more than 200 African American newspapers. Today, 
attendance at conventions indicates a drastic decline in the number of 
papers that currently exist, possibly half.
    The Washington Informer has also joined ranks with publishers of 
other community and metropolitan ethnic newspapers that serve a 
targeted audience who are also exploring ways to keep their papers 
alive and viable during these difficult economic times.
    The one thing we all share in common our dependence on advertising. 
As my dad use to say, ``Advertising is the lifeblood of every newspaper 
and circulation is the necessary evil.''
    Minority or ethnic newspapers have always experienced a recession 
when it comes to advertising. We are rarely top of mind when it comes 
to ad placements made by advertising agencies, nor are we treated 
equitably when it comes advertisers accepting and paying our rates.
    Our operations are small, our reporters cover a broad range of 
issues, often for little or no pay, and the quality of our publications 
suffers due to our inability to hire editors to fact-check and clean-up 
copy before it goes to print. Yet, the demand from our readers is 
growing. They remind us daily of how much we are needed to address 
their particular issues and concerns that are often ignored by the 
mainstream media, issues such as health disparities, housing and 
employment discrimination, racial profiling and immigration issues, to 
name a few.
    While I applaud Congresswoman Maloney, Senator Cardin and members 
of this committee's intentions to address the growing crisis that is 
affecting the entire newspaper industry, I view the legislation before 
us as just one step towards fixing a problem that is steadily getting 
worse. I would suggest, however, that since there are no daily African 
American newspapers, that you broaden the language in the bill to 
include weekly publications. Also, the term ``general circulation'' 
which is often used to exclude minority and ethnic newspapers, should 
be broadened to ensure greater opportunities for equal access to 
advertising revenue under the legislation.
    I appreciate the fact that you are considering a different kind of 
business model that is reportedly being pursued by some newspapers. It 
also suggests you may be open to consider other options that may prove 
effective, as well. What papers like ours need is legislation that will 
end discrimination on the part of advertising agencies as it relates to 
ad purchasing in minority-owned media, and that promotes diversity in 
advertising agency's hiring and promotion practices.
    We need to run our businesses on a level playing field. Whether we 
are a for-profit or non-profit entity, the decision-makers need to be 
incentivized to do business with minority and ethnic-owned media, or 
else, for us, there will be no end to this recession.
    This country must maintain a free and independent press that serves 
all of the people and as you consider the options, this must be 
foremost in your minds.
    I am open to taking your questions and sharing more of my 
experiences, thoughts and suggestions if needed.
    Once again, thank you for this opportunity to testify before you 
today.
  

                                  

```