Early Thoughts on the New York News Subsidy

Big questions remain to be resolved by regulations not yet crafted

Welcome to Second Rough Draft, a newsletter about journalism in our time, how it (often its business) is evolving, and the challenges it faces. This unexpected edition is being co-published with Vital City.

New York State’s new $90 million, three-year subsidy for the struggling news industry is a big step forward for those who have advocated for government aid to newsrooms at a time when the business of news remains in sustained crisis, with most newspaper staffs shrinking drastically and many newer digital entrants failing. But the landmark legislation, included in the massive budget agreement that moved through the legislature last week, leaves a great deal to be hashed out in regulations that will be issued later this year by Empire State Development before the subsidy begins in 2025. Devilish details that are TBD — or, in journalism-speak, TK — could well prove the difference between a meaningful step forward and a squandered opportunity.

The stakes are high here: A press that’s flat on its back is bad for civic health, while one that’s robust enough to keep readers informed can help bring communities together and make government more effective, accountable and responsive. So a lot’s riding on whether or not this experiment works. 

How the subsidy is structured

The basic outlines of the new law are as follows: Government is set to offer $30 million a year in funding for three years, with the intention of protecting current journalism jobs in print and broadcast media and perhaps digital as well, and creating new ones. Outlets that are eligible will get a refundable tax credit against the first 50% of a journalist’s salary, up to $25,000 per employee. There’s $13 million annually set aside for media enterprises with fewer than 100 employees and another $13 million set aside for larger ones. The balance of funds, $4 million, will incentivize outlets of any size to bring on additional staff.

The mechanism employed is referred to in the statute as a “tax credit,” but it is actually a subsidy for companies that pay employees, and is not limited to a credit against taxes actually paid. In this sense, it is analogous to the federal Earned Income Tax Credit and not to various credits for favored expenditures such as those for energy efficiency. Annual subsidies are capped at $300,000 per newsroom, a meaningful figure for smaller publishers, but not so much for larger ones.

The measure is “content neutral,” which means that aid will flow to newsrooms in a manner that should minimize the chances for political interference with journalistic independence. That’s a critical, salutary component of any public funding of news. The support will be heavily concentrated on smaller newsrooms, which may make the new law more politically palatable as a model in other jurisdictions, where the more local the news, the less it seems caught up in polarization.

This time it is the newspapers themselves that are on line— and the Depression for them may never end.

So far, perhaps, so good. But it’s hard to judge the overall merits of the new scheme until questions the Legislature deferred to regulators have been addressed. Among the surprising number of critical issues that will only be decided once the regulations are issued (and perhaps survive court challenges) are the following: whether digital news organizations will be included within what the law refers to as “newspapers”; whether the subsidy is limited to news employees, or extends to business staff; whether eligible employees must be engaged in local news as opposed to, for instance, national or international news; and whether opinion journalism is included along with news reporting. The law itself makes no distinction between for-profits and non-profits.

The regs will matter

If the focus is kept on support for news positions, limited to local news and extended to digital providers, the subsidy will be tightly targeted and could make a substantial difference for smaller operations. But if, for instance, the regulatory definition of “newspapers” excludes digital entrants and isn’t targeted at local news jobs, the bill will have amounted to a belated incumbency protection act for a failing field. So, the widespread celebrations from industry advocates, while understandable, seem a bit premature.

The statutory tilt toward smaller news organizations has two essential components. First, it ostensibly excludes New York newsrooms operated by publicly traded companies such as the New York Times, the New York Post (owned by News Corp.), the local newspapers in Binghamton, Ithaca, Middletown, Poughkeepsie, Rochester, Utica and White Plains (all of which are owned by Gannett), the broadcast TV networks and their owned-and-operated stations in New York City (channels 2, 4, 5, 7 and 11), as well as CNN, Univision and the Reuters newswire. But then, a separate provision makes all of the newspapers eligible, despite being owned by public companies, because their print circulation has declined by more than 20% in the last five years — as has that of almost every print publication in the country.

Next, the $300,000 cap per newsroom, at the maximum annual subsidy per employee of $25,000, works out to helping pay the salaries of 12 people per newsroom, with larger entities receiving no additional support. 

One important exception to the bill’s focus on small newsrooms is how the available funds are allotted. Of the $90 million, $12 million ($4 million annually) is set aside for $5,000 subsidies for the creation of each new job. That would cover 800 new jobs per year, but it’s not at all clear, at least in the current environment, that so many net new jobs will be created in eligible entities.

How things may play out

Given the way the pots of money are divided, it’s easy to imagine that the large-employer pool will be significantly under-subscribed; even with the public company newspapers included, there simply won’t be many companies in the state eligible, very likely not the 43 the statute would fund given the $300,000 maximum subsidy

The smaller-company pool, on the other hand, could well be over-subscribed, which would raise another important issue for the forthcoming regulations: Whether limited funds would be distributed on a first-come-first-served basis, or would be allocated pro rata to any entity that filed within a specified time period. This could turn out to be an important point, as applying for the subsidy might require gathering much of the information for an entity’s full tax return, at least with respect to for-profit firms.

If, in fact, one or two pools have money left over while a third is over-subscribed, one further issue for the regulations will be whether the leftover money can be re-allocated.

In all, the new subsidies will do no harm, and provide some significant assistance, especially to beleaguered smaller publishers throughout New York. But it is critical to recognize that nothing about this initiative addresses the long-term problems affecting the news business. 

Thus, this is not counter-cyclical, but instead what we might call counter-secular funding. There is no reason to believe the need for it will have lessened after three years, and significant reason to believe it may actually increase — and that growing amounts of aid will be required indefinitely to preserve local news even at current levels. New York has embarked on a major experiment in the funding of news. It may also have taken the first steps toward what will soon be regarded as a new entitlement.