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July 18, 2022, 10:05 a.m.

Can a national nonprofit news “utility” — funded by taxing Big Tech — help save local news?

“Just as gas taxes go toward road maintenance, ad taxes should go toward journalism.”

One of the most meaningful changes in our economy in the past decade has been the astronomical growth in online advertising — and the corresponding destruction of newspaper advertising.

In the past decade, online advertising soared to $189 billion from $31 billion. During roughly the same time period, newspaper ad revenues collapsed, falling from about $20 billion in 2010 to $10 billion in 2020, as advertisers moved to cheaper, more-targeted online ads.

This dramatic shift has caused many to question whether the tech giants that dominate online advertising — namely Google and Facebook — have gained too much power. Policymakers around the world are considering everything from breaking up the tech giants to taxing digital transactions.

Meanwhile, various efforts to shore up funding for journalism, which is struggling to support itself on ad revenues alone, are just getting started. Australia recently passed novel legislation that forced Google and Facebook to negotiate directly with news publishers to pay for their news content — with mixed results, as aptly reported by Columbia Journalism School professor Bill Grueskin. Efforts to get Google to pay directly for news content have run aground in Spain and Germany.

And there is a growing sense of unease about having tech companies pay publishers directly. In a recent report “Making Big Tech Pay for the News They Use,” Courtney C. Radsch of the Center for International Media Assistance writes that “[d]irect unilateral support to media outlets by tech platforms should not be a replacement for legal regulatory frameworks that seek to create a level playing field and support independent media.”

One advocate has stepped forward with a way to level the playing field: Lucia Walinchus, executive director at Eye on Ohio, the Ohio Center for Journalism, a nonprofit that covers local news. Walinchus recently published a provocative proposal to tax digital ads to support journalism.

She is not the only one to propose taxing Big Tech, but I found her argument fascinating and asked her to talk with me more about it. Walinchus is also a reporter, a data journalist, and a lawyer.

Our conversation has been edited for brevity and clarity.

Angwin: The news industry is collapsing and ad revenues are plummeting. You have written that newspapers sell exposure and knowledge. Can you explain why no one is buying these things anymore?

Walinchus: Essentially, these two values have been bifurcated. Once upon a time, to reach you, sellers would have to put an ad in the newspaper to let you know about their new local products. The civic service provided by news stories in that paper were an externality or a bonus.

In other words, the newspaper would contain paid information (advertisements) and straight information (journalism), and so we had a public good that was subsidized by the business practice of selling advertisements. This is no longer the case. Today, corporations make money without supporting this public good, and therefore they have no incentive to invest in it.

Angwin: In her recent report, Courtney Radsch writes that “the rise of the digital AdTech system has resulted in a new advertising ecosystem that has effectively redirected ad revenue that in the past went directly to publishers.” Can you talk about what that means for society?

Walinchus: We’re in this conundrum where we have this huge public good — quality local journalism — and it’s disappearing. There is research that shows that when there is less local journalism there is more corruption, fewer registered voters, fewer political candidates, and politicians who are less responsive to community concerns.

There are millions of tax dollars being spent without any taxpayer oversight because no journalists are there to translate convoluted legalese into accessible stories for the average reader. There’s one particular study which looked at municipal borrowing costs and showed an increase of 5 to 11 basis points after a newspaper left an area. That’s an extra $650,000 or so the community paid per every lost issue because there was no one there to ask, “Why are we spending money on this or that? Why aren’t we expanding our education system, etc.?”

Now we’re having to think about how we can realign incentives so that people can know what’s going on in their community. And if they have an issue, they are actually able to call a local news outlet and have someone respond to them.

Angwin: You proposed that one way to realign these incentives is to establish a national nonprofit news utility, where a portion of digital advertising dollars goes to journalists. Can you talk about this proposal and how you would address concerns that government funding would lead to censorship?

Walinchus: This proposal would require that a portion of revenue from all digital ads would go to journalists and be administered through a national nonprofit news utility. This isn’t an unheard of idea, and similar structures already exist in many places. For example, a portion of your cable bill goes to C-SPAN because C-SPAN helps us keep track of Congress. Another similar example is the BBC. In the U.K., your TV “license” is a tax that goes to the BBC. This would function in a similar way; whenever you buy digital advertising, part of that money goes to journalists and local newsrooms.

There is a reason that this money should come from a national news utility that taxes digital ads rather than an allotted apportionment from the government. Despite the fact that direct funding from the government might be easier, it runs into the problem of censorship. For example, what if a senator doesn’t like the coverage of him or her in a news outlet and tries to pull funding? The type of structure I am proposing isn’t unheard of; for example, people pay directly for the Postal Service, and that funding is what helps us get our mail.

Angwin: Who would make these decisions about which outlets get funding and how much they get? It’s tricky since journalists don’t have membership cards, so who would actually qualify to receive these funds?

Walinchus: This is something that people could actually vote on, which would be a way to inject democracy back into the process. We could collectively decide on the standards for obtaining funding. For example, do the reporters have journalism degrees? Do they live and work in this community that they cover? Right now, we haven’t incentivized people who are better knowledge workers. There would have to be basic standards in order to qualify for funding just like there are basic standards to qualify for a National Science Foundation grant. Another hope is that this would actually introduce transparency, where people could look up funding and see who received what.

Angwin: There have been other proposals to tax Big Tech to fund journalism. In 2019, the advocacy group Free Press proposed a tax on targeted ads that would fund “diverse, local, independent and noncommercial journalism.” And last year, the National Federation of Journalists in Brazil called for taxes on digital platforms that would fund journalism. How does your proposal fit with those efforts?

Walinchus: There have been several proposals recently. For example, in the Build Back Better plan, they had a $25,000 tax credit for journalist salaries, which is awesome. It obviously incentivizes folks to hire journalists. But during COVID, Gannett, which is the largest newspaper chain in America, saw website traffic go up 89 percent while revenue fell 35 percent. This shows that if you’re still relying on this digital advertising business model, even with these tax incentives, it just delays the inevitable instead of actually solving the problem. There have to be a lot of structural changes to realign incentives to actually make this work.

The majority of Americans have in their pockets a device that can access the entirety of human knowledge. Yet never have Americans been less informed about important information that affects their lives. This is because every time they search for information relevant to them or their friends, those algorithms aren’t built to reward better journalism. And there are fewer and fewer people to perform this service.

The Free Press and the National Federation of Journalists in Brazil have great proposals. The big difference between theirs and mine is that they are coming from more of a social justice angle. And I understand and support that.

But I’m saying this makes business sense, too: Just as gas taxes go toward road maintenance, ad taxes should go toward journalism. Roads are a public good that provide us with the freedom to get where we need to be. Highways are logically related to the money people pay to power their cars over those highways. They benefit oil companies and average drivers alike.

Paid information (advertising) is logically related to straight information (journalism). It’s not just that Big Tech can afford this, but that it’s the most logical place to start rebuilding the internet. New up-to-date information written by highly trained journalists benefits tech companies and information consumers alike.

POSTED     July 18, 2022, 10:05 a.m.
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