With the passage of the $1.9 trillion Covid relief bill, Washington is not only providing help to families, schools, states, and local government; it is throwing a lifeline to the imperiled local news business as well.
The legislation provides economically disrupted industries from transportation to manufacturing much-needed pension relief to help keep their retirement plans solvent. Millions of workers and retirees are covered by such plans, some of which would soon run out of money without this federal support.
No industry or retirees need help more urgently than America’s community newspapers, weighed down by underfunded pension liabilities. Pension relief will allow titles from The San Diego Union Tribune and the Pittsburgh Post-Gazette to the Amherst (MA) Bulletin and The (Schenectady, NY) Daily Gazette crucial breathing room to pursue a sustainable digital business model, as they evolve toward a future beyond print.
By more than doubling the runway to make defined-benefit contributions and enhancing predicted investment yields, the legislation aims to keep these plans funded and away from federal takeover. If they succeed, this pension relief will be seen as a national investment in local democracy that may actually cost taxpayers nothing.
Had this law been in place just 13 months ago, the McClatchy Co., America’s second-largest national chain, which I then ran as CEO, would likely have been able to avoid the painful Chapter 11 restructuring that resulted in its nearly 25,000 pensions being absorbed by the Pension Benefit Guarantee Corporation. These pension rules would have provided McClatchy, having paid down all but 16% of the multibillion-dollar debt from its 2006 Knight Ridder purchase, 15 additional years to add to the $1.3 billion it had already contributed to its pension plan.
In the absence of the law, McClatchy’s next $124 million in pension contributions, which exceeded the prior year’s entire operating profit, became due just as the Covid-19 crisis hit. That ‘perfect storm’ brought to an abrupt end 164 years of control by a family dedicated to independent journalism in the public interest in 30 cities around America, from the Miami Herald to The Kansas City Star to The Sacramento Bee.
McClatchy is now owned by one of four private-equity and hedge funds that control more than half of America’s daily newspaper circulation. These owners, whether motivated by fiduciary duties to maximize investor returns or more self-interested balance-sheet maneuvering, have a track record of slashing local reporting and editing, and draining cash from operations, which makes innovation and transformation even harder.
While pension relief didn’t arrive in time for McClatchy, the rescue bill is a lifeline to surviving newsrooms, and the breathing room should be used to invest in them. But this is just a first step towards ameliorating the local news crisis.
Pension relief will not succeed if it fails to provide an impetus to accelerate the pace and cadence of digital transformation in local news.
Annual newspaper revenues are $35 billion lower than their 2006 peak — a decline accelerated by the Covid-19 pandemic. That decrease has led to waves of news layoffs, and the closure of more than 2,000 local newspapers in the United States.
The result has been a devastating impact on reported, verified local news and information in towns and cities across America. The stakes are high and growing. Data show that when the local newspaper closes, communities suffer — there is increased polarization and less political engagement, and even borrowing costs soar for local governments in the absence of independent-press oversight. The vacuum leaves an opening for the rapid growth of so-called ‘pink slime’ local websites that look as if they are journalism but whose business model is media and propaganda paid by political partisans.
The challenges facing local news pose tremendous questions for our communities and our way of life. While in some places, news deserts are being replanted by promising ‘green shoots’ of digital-only printless local start-ups, these are still small, and none has achieved a sustainable model at national scale. And even those high-flying digital-only entities with scale aren’t immune to the economic cycle headwinds, as dozens of recent layoffs at BuzzFeed’s HuffPost underscore.
Encouraging conversions to nonprofits of metro ownership with unique local resonance such as The Philadelphia Inquirer or The Salt Lake Tribune, for example, and the current potential purchase of The Baltimore Sun and Annapolis Capital Gazette by a nonprofit led by entrepreneur Stewart Bainum Jr. are an encouraging start. But they remain exceptions, not the rule.
What more needs to be done? Digital transformation at such national players as The Washington Post and The New York Times shows that by focusing on fearless journalism, creative customer engagement, standout digital products and a sensible prioritization of sustainable cash flow publishers can build a strong digital news businesses.
Strengthening America’s battered local news landscape will require multidisciplinary thinking that goes beyond what we have seen to date. Continued business transformation in news includes technology, product-management, data science and capital-structure and even tax expertise that are beyond the capabilities of many local news providers, whether legacy titles or entrepreneurial startups. A new cohort of digital-native leadership increasingly must take the helm, reflecting the diversity of our communities and organized by functional product, technology, and digital news expertise, in the manner of a Silicon Valley start-up, not blinkered by geographical siloes.
That is why it is time to consider convening a national commission to explore solutions to the crisis in local news, similar in ambitions to the Carnegie Commission that was a national catalyst for public broadcasting, or the prior Hutchins Commission on media freedom and responsibility. Among agenda items: possible tax and regulatory changes to help buyers, sellers, and communities trying to deepen community ties with news providers as well as other measures to accelerate hopeful signs of ‘green shoots’ from startups, nonprofits, local owners, and even legacy businesses trying to increase the pace of their transition to digital.
New attention on the crisis in local news comes through Congressional hearings and proposed Safe Harbor legislation to provide the news industry a legal avenue to negotiate content-access fees from Silicon Valley’s largest platform companies.
In Australia and Europe, similar public debate has led to new revenue for hard-pressed news organizations. Last month, News Corp. announced a global content-licensing deal with Google covering such titles as The Wall Street Journal and The Times of London. Similar deals for local outlets could provide urgently needed income.
It is possible that perhaps in years ahead, community newspaper pension relief – too late for some in the American newspaper industry but not for others — may be seen as an important turning point in transformation of local news in America.
Craig Forman, a former Wall Street Journal Tokyo bureau chief, is a San Francisco-based venture capitalist and past CEO of McClatchy Co. He is a nonresident fellow at Harvard Kennedy School’s Shorenstein Center on Media, Politics and Public Policy.