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March 27, 2020, 10:42 a.m.

The Newsonomics of the Mnuchin money and the bailout’s impact on America’s press

The multi-trillion-dollar CARES Act should extend a lifeline to many small local publishers. But for bigger companies and chains, the help they’ll receive is still up in the air — “It’s very unformed.”

Is that a light at the end of the tunnel? Or just the Mnuchin Express coming for the newspaper industry?

The $2.2 trillion CARES Act will likely become law at some point today. It’s a bailout that has got local news publishers and their trade groups scurrying; they’re eyeing two big pieces of it. As details continue to emerge and regulations await writing, we can begin to understand what in this legislation might make a difference to the beleaguered news industry.

(It’s important to understand, though, that much of the information about the bill, not to mention its future implementation, is still fragmentary.)

Publishing companies with fewer than 1,000 employees will turn to the $300-billion-plus allocation for the Small Business Administration. (Estimates for the total range from $349 billion to $377 billion at the moment. Yes, could be a $30 billion rounding error.) SBA will now be able to approve “loans” of up to a million dollars, up from the current limit of $300,000. Even better, these low-interest loans (4% interest max) can be turned into grants so long as payrolls are maintained. (What does “maintained” mean, exactly? That’s detail still to come; SBA is supposed to aim to have its new regulations in place within 15 days.)

Much of America’s daily and weekly press can benefit from the new SBA program. The main idea: Keep payroll in place for the current workforce. It is a program aimed squarely at the onrushing second quarter.

Publishers will be able to apply the money to rent and utilities as well, says Danielle Coffey, senior vice president and general counsel for the News Media Alliance, who has been poring through the legislation.

Already, publishers and their trade groups — notably News Media Alliance and America’s Newspapers (the result of the recent merger of Inland Press Association and the Southern Newspaper Publisher Association) — are combing through the legislation, determining the key points that will inform publisher decision making.

Those publishers, along with many other small business owners, will soon visit (physically or digitally) the SBA-approved banks that will review and distribute the funds. Those banks themselves are sure to be overwhelmed.

Those loans will be a lifeline for some publishers, as society’s great disappearance has taken as much as half of advertising revenue (maybe more!) from the press in shockingly short time. Will this SBA lifeline be enough to make a difference? Certainly, the size of a local news enterprise determines how far hundreds of thousands of dollars can go. Certainly, though, no one can be sure. Barring a major Easter surprise, no one expects this lost ad business to come back big or come back strong. But a million dollars buys one important thing for smaller companies: time.

Between SBA loans and a paycheck protection provision, it’s believed that the most a sub-1,000-employees company could receive would be 2.5 times its average monthly payroll, not to exceed $10 million.

These smaller companies provide vital news across the vast reaches of the country. But the reality is that most of the country’s newspaper readers are now served by dailies owned by larger companies.

Companies with between 1,000 and 10,000 employees graduate into a larger and wildly competitively pool, already dubbed the Mnuchin Fund by some. Treasury Secretary Steven Mnuchin has been given a checkbook of around $454 billion to help these employers.

Who can qualify? Basically, other than airlines, air cargo, and security companies — all of which are covered under other parts of wider bailout — it’s everyone into the big pool. Hoteliers, big restaurant companies, retailers of every kind…and newspaper chains. “It’s very unformed,” says David Chavern, CEO of the News Media Alliance, which represents the largest newspapers, mainly metros and chains, in the daily newspaper industry.

What will the Mnuchin rules be? No one yet knows, as the press raises comparisons to the last crisis’ TARP legislation. That’s the bailout that, some pundits believe, both saved the country from a depression and spawned a political revolt that determined much of the politics of the next decade. (Well described in brief on The New York Times’ The Daily’s Thursday podcast.)

“There are a lot of unknowns, and there will be more restrictions,” sums up NMA’s Coffey succinctly. Among the questions: How much money goes to which companies, on what terms, and with which requirements?

Such decisions are always knotty, contentious, and inevitably political. The financially driven consolidation of the newspaper industry (amply covered here since January 2019 as The Consolidation Games) should complicate what will already be complicated decision making.

(And hey, at least we know The Consolidation Games won’t be postponed a year because of COVID-19.)

New Gannett, the largest newspaper player by far, has been in the process of achieving $300 million in “synergies” between its former GateHouse and Old Gannett halves — largely by reducing headcount. Almost all daily newspaper companies have been laying off employees for years, as their revenues have dwindled. How will regulations take into account declining companies in a distressed industry — whose work still produces the bulk of local news that Americans get?

All these companies still supply vital journalism, but how much will a bailout support that journalism as compared to the maintenance of sometimes significant profit margins? Will it distinguish between a family-held daily that’s reduced its profit substantially to maintain a larger newsroom and a private-equity-owned daily that’s done the opposite?

Is this money for the owners, for the journalists, or for the communities they serve? That’s a major question to watch closely.

Both at the trade groups and in executive offices, newspaper people begin to try to divine what’s likely to happen with the Mnuchin money and beyond.

NMA has been in full swing on these issues ever since the severity of this crisis became clear. Why didn’t NMA try to get a specific piece of dedicated bailout money, as the airlines ($60 billion) did?

“Our lobbying was limited,” says Chavern. They were told they couldn’t, along with all other beleaguered industries. There’s “essential” and then there’s essential. (And then there’s “essential,” like germ-spreaders Michael’s and the Guitar Center.)

Instead, the trade associations began work in several areas:

  • Making sure news publishing was defined as “essential.” The lockdown quickly prompted on-the-fly definitions of which businesses were sufficiently “essential” to be allowed to stay open. With the federal government taking its on-again, off-again position of leadership in this crisis, NMA worked with various jurisdictions and state publisher associations to ensure that journalists could continue working — and delivery people could throw papers.
  • Outlining a “public service ad” initiative that could serve dual purposes. As the federal government communicates policy, such as the evolving CDC guidelines, it could place a steady stream of ads in newspapers — as well as other media — to get the word out. It’s a proposed twofer: (1) offer factual information more widely and (2) provide support for news media as they endure unprecedented ad revenue loss.

It’s more than an abstract idea. On Wednesday, Justin Trudeau’s administration announced that Canada would spend $30 million on such ads. “To ensure that journalists can continue to do this vital work, our government is announcing new measures to support them,” he said. (Publishers quickly cried too little, too late, pointing to the coronavirus-driven loss of as much as two-thirds of their ad revenue.) “They’ve done that in Europe, too,” says Chavern. Expect the NMA and America’s Newspapers to push for a sum in the nine-digital range.

How much should anyone be concerned about the tried-and-true American line between government and press?

“There’s a lot of apprehension about the independent press and the government getting too close,” Chavern acknowledges, but notes this would be an ad buy — not unlike the still-significant “legal ad” business that’s been in place for hundreds of years. Importantly, newsrooms themselves wouldn’t be involved in the program.

“We’re focused on the next piece of legislation,” says Dean Ridings, CEO of America’s Newspapers, which represents hundreds of newspaper companies, with more emphasis on small and medium titles. Even as the ink isn’t even dry on this bailout, business generally expects another one — and is laying plans to get a piece of that pie.

Photo of Treasury Secretary Steven Mnuchin addressing the press outside the White House March 13, 2020 by Keegan Barber/The White House.

POSTED     March 27, 2020, 10:42 a.m.
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