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Journalism, apparently, is in trouble. The once-dominant financiers of journalism -- newspapers -- are dying. And while some see hope in new media, the harsh reality is that journalism's woes have less to do with distribution mediums and more to do with business models.

That's because the kind of journalism that is threatened is expensive, and even online, there aren't too many business models that can support it. So what should we do?

The Federal Trade Commission, the U.S. government agency that, amongst other things, protects the world by making sure bloggers aren't being paid for their blog posts, has an idea: why not create new taxes?

In a "staff discussion draft" entitled "Potential Policy Recommendations to Support the Reinvention of Journalism" (PDF), the blog police consider a number of options, including:

  • Establishment of "a content license fee (perhaps $5.00 to $7.00) to be paid by every Internet Service Provider on each account it provides."
  • A broadcast spectrum tax.
  • A consumer electronics tax.
  • A spectrum auction tax.
  • Advertising taxes.

With one or more of these news taxes, the U.S. government, the FTC believes, could provide subsidies and tax credits to help news organizations survive. In addition, the FTC suggests other equally inspired options, including limits to fair use and federal hot news legislation. Both would specifically target aggregation services that many believe have caused the pain of newspapers and other traditional news organizations.

So is the FTC on to something with a "steal from Peter to pay Paul" business model for newspapers? Not quite.

The problem with the options the FTC seems to take seriously are that none of them will "reinvent" journalism, let alone 'save' it. Taxes on everything from internet access to consumer electronics will only hurt consumers, encourage them to consume less and reduce the market's ability to provide affordable access to the internet, technology and information, hitting middle and lower-income individuals particularly hard.

The net result: as we've seen with affiliate taxes, the estimated revenue would never materialize because taxes change behavior. For instance, the FTC's hypothetical 2% sales tax on broadcast advertising (and changes to the tax laws that would require these expenses be written off over five years), would simply make broadcast advertising less attractive, and advertisers would shift their budgets accordingly. Ironically, not only would the tax revenue projected never be raised, the government would soon have to find a way to save the broadcasters!

Moving on, new limits on fair use and federal hot news legislation might make it more difficult for aggregators to operate in the United States, but it isn't going to stop the free flow of information globally. More importantly, it's highly-questionable as to whether aggregators are really responsible for the failure of newspaper business models in the first place. There's a strong argument to be made that even if newspapers didn't have to grapple with aggregators, they would never see a return to the 'good times.' After all, print classifieds were one of the leading sources of revenue for most newspapers in the United States and print classifieds were decimated not by aggregators, but by innovative online competitors with better products.

At the end of the day, the FTC's suggestions for saving journalism would be amusing if there weren't bureaucrats who will certainly take seriously the notion that journalism can be saved by strangling consumers with taxes and changing copyright law in an effort to control how information is disseminated on the internet. Excessive taxation impedes innovation, access and consumption, and for better or worse, more restrictive laws will be extremely difficult to enforce on an internet that is global.

The good news is that, given the current economic environment, it's likely that the newspapers worth saving will be smart enough to recognize that a taxpayer-funded bailout is unlikely, and they wouldn't want one in the first place. Instead, these newspapers will have to look closely at their products, experiment with new business models that deliver value consumers and advertisers can truly believe in, and above all, accept that the way things were isn't always the way things will be.

Patricio Robles

Published 8 June, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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