SEN. JOHN F. KERRY (D-MA): This hearing will come to order. I apologize to all for the fact that we are running a little bit behind schedule. But hopefully, the fact that the Senate got four votes out of the way will give us a little bit of a breather here so that we can have some uninterrupted moments here, which we want to try to have.
Welcome all to a brave new world. This hearing is genuinely geared to examine, to understand what we don't know, to try to figure out from various people in these fields of expertise of new media and the existing media of where we're going. Some people might ask why the committee? Why is the government interested in this; and what are we looking at? Well, the fact is that we do have a responsibility for the licensing of broadcast. We have a responsibility for the regulatory oversight of ownership of cable, satellite, other issues with respect to communications.
And needless to say, how the American people get their information, what the structure of ownership is, is of enormous interest to all of us because it is the foundation of our democracy. A brass plaque on the wall at Columbia University's School of Journalism bears the words of the legendary newspaper publisher Joseph Pulitzer: "Our republic and its press will rise or fall together." If we take seriously this notion that the press is the fourth estate or the fourth branch of government, then we need to examine the future of journalism in the digital information age, what it means to our republic and to our democracy.
Americans once counted on newspapers to be the rock on which journalism, the best sense of the word journalism, was based. As Princeton University Communications Director Paul Starr notes in his most recent issue of Columbia Journalism Review, more than any other medium, newspapers have been our eyes on the state, our check on private abuses, our civic alarm systems. Most of us in this room probably begin our day still with a newspaper, maybe two or three.
Newspapers have been a part of our daily lives since we were old enough to read. And we learned about our neighborhoods, about our country, our world from newspapers. They entertained us. Sometimes they enraged us, but always they informed us. But today, it is fair to say that newspapers look like an endangered species. And many people in the industry and outside of it are so writing.
The latest circulation figures released just last week show that the largest metro newspapers are continuing to lose daily and Sunday readers -- a long time trend. I might add a trend that began before the economic downturn in the country. But it is a trend that is accelerating to record rates. In the sixth-month period ending March 31, major metro dailies in great cities like Boston, San Francisco, Houston, Miami and Atlanta all saw double-digit percentage decreases in daily circulation.
The 150-year-old Rocky Mountain News ceased publishing altogether this year. The 146-year-old Seattle Post-Intelligencer and the 100- year-old Christian Science Monitor shifted completely to The Web. And the Detroit Free Press cut home delivery to only three days. It took a week of negotiations before a tentative deal between The New York Times Company and the Boston Newspaper Guild could be reached to prevent The Boston Globe from shutting its doors.
Let me emphasize that this hearing is not and never was intended to be a hearing about Boston newspapers. It is about our nation's newspapers; and the concept and timing of this hearing was set well before we even knew about the issues with respect to Boston. If you look at the stock market, the fortunes of the newspaper industry are tough.
Earlier this year, a share of The New York Times sold for less than the $4 it cost for a Sunday edition of The Times; though I've seen that those prices now will probably go up. In 2008, newspaper stock prices fell an astounding 83 percent. The New York Times bought The Boston Globe for $1.1 billion in 1993, but the value of all of The Times stock today is less than $800 million now. And this past weekend, the oracle of Omaha himself Warren Buffett gave newspapers a vote of no confidence when he said that he wouldn't invest in newspapers at any price. These are stark numbers that the newspapers face. The numbers for broadcast journalism are not much better.
So we're here today to talk not only about the conditions that have led to these jolting statistics, but about what they mean to us; what they may mean to a country that appears to be reading less, or that finds information in snippets rather than whole pieces. We need to understand what it means about news delivery during a time of great creative turmoil and transition within the market for news delivery; and how we might preserve the core societal function that is served by an independent and diverse news media.
We saw a sign of the times just this morning when Amazon introduced a new larger version of its e-book reader Kindle as an alternative to the newspaper in an effort to salvage the challenged print media. As a means of conveying news in a timely way, paper and ink are less in vogue, eclipsed by the power, efficiency and technological elegance of the Internet. But just looking at the erosion of newspapers is not the full picture. It's just one casualty of a completely shifting and churning information landscape.
Most experts believe that what we are seeing happen in newspapers is just the beginning. Soon, perhaps in a matter of a few years, some predict that television and radio will experience what newspapers are experiencing now. One of the reasons I think we find this important is I can remember sitting right here in this room in 1996 when under the stewardship of Senator Inouye and Senator Hollings and others, we rewrote the Telecommunications Act of the country. We had long debates all through 1996 about telephony.
Little did we know that almost within five months or six months of the signing of the bill and the passage of the reordering of telephony in America -- telephony was almost obsolete, eclipsed by data. And we had barely had a discussion of data during that time. It's really based partly on that lesson that we're having this hearing today. So that we try to figure out ahead of time what may be occurring and think rationally, carefully, and obviously, with some sensitivity to all of the issues which we'll get into today about what the future will look like.
The rise of newspapers as broadcast news was made possible by the fact that they served as market intermediaries. That is, they connected buyers and sellers through advertising. But the Internet makes it possible for buyers and sellers to connect at virtually no costs; and with no need to attract either to that effort with a general interest news presentation. It's no surprise then that with advertising dollars going elsewhere, these are hard times for what is now being called the legacy media.
That these are times of great innovation as journalists both inside and outside of the mainstream media, are collectively searching for an economic support system for good, solid reporting. Journalists layed-off or bought out by the old media, are fast becoming entrepreneurs, building up Web-only news sites in cities throughout the country to make up for the shrinking newsrooms of local newspapers, or to reach specialized audiences. Obviously, one of the questions is, is this just a natural transformation where that is going to be replaced in a natural way?
As the economic model continues to shift, important questions require answers. As advertising revenues continue to vanish, will there be room in the budget for the great investigative journalism that marked the last half of the 20th century? Will the emerging news media be more fragmented by interests, financial interests, other interests, political partisanship? There also is the important question of whether online journalism will sustain the values of professional journalism, the way the newspaper industry has?
The new digital environment certainly is more open to citizen journalism, bloggers and the free expression of opinions. In the last eight years, we've gone from zero bloggers to more than 70 million. And news is broken over Twitter feeds and cell phones instead of on local broadcast networks. Just look at the way that Janis Crums, a New York City ferry passenger, broke the news that flight 1549 out of LaGuardia had landed in the Hudson River. He took a picture of himself; and tweeted the feed to an audience of thousands.
Consider this -- Google topped $21.7 billion in advertising revenue in 2008, but the news it provides is an aggregate from free news services. Craigslist which provides free classified ads online gets about one billion visits a month, costing newspapers billions of dollars a year. YouTube has more than 100 million viewers each day and about 65,000 new items, videos uploaded daily. Its ad revenue reportedly totals somewhere between $120 million and $500 million a year. Facebook, the free-access social-networking website now has 200 million users; and is adding 700,000 new users a day. It reportedly had $300 million in revenue last year.
Ironically, The New York Times has a paid circulation of 1.45 million; but on Facebook the newspaper has 447,926 friends. Mobile subscribers total some 250 million in the United States and send more than a billion text messages each day. This two-way interactive media is getting more and more attention from advertisers. It's estimated that the mobile-advertising industry already exceeds $2 billion annually.
The words of Joseph Pulitzer are still true, I believe. "Our republic and its press will rise or fall together." Certainly, the quality of the dialogue in the republic will. We are just talking about a new kind of press, a new media, one that Pulitzer and all the other newspaper barons of this country never envisioned. This new kind of press, this new media is going to require a new economic model. And that is something that everyone is still trying to figure out.
That's why I wanted us all to sit down and talk about it and try to figure it out together. Is there even any government role at all? I don't know the answer to that, but we want to try to understand it. Is this simply a normal transition in the marketplace; and will everything turn out just fine? We're going to hear from some very, very interesting people who are on the vanguard in the middle of this transformation in various ways.
Let me just mention one quick thing before we begin. While we're searching for answers to these questions, one thing we can do today is recognize this transition somewhat in our own lives. And that is, to understand the contributions of online journalists who shoulder the responsibility that comes with covering Congress. And we ought to make sure that the rules for credentializing congressional reporters are modernized.
I intend to work with the Senate Rules Committee Chairman Chuck Schumer and the standing Committee of Correspondence to make sure that we do that. The standing Committee of Correspondence was created in 1877 as a way to organize and regulate media access to the halls of Congress. It was created to rid the press galleries of lobbyists. I guess things haven't changed.
Or claims agents, as they were once called; and it was created to replace a system of questionable journalism practices. Before the committee was created, in fact, Mark Twain worked as a secretary to Senator William Stewart of Nevada; at the same time, he was also a letter writer to two newspapers, the Alta Californian (sic) of San Francisco and the Chicago Republican.
The congressional credentializing system has actually worked well for more than 130 years. So we want to be careful on how we change it, but the rules have undergone some changes over the years. In the last three years, the committee has struggled with how to address the digital information age. Now is the time to make sure we treat online reporters fairly. And we're going to work to try to do that.
SEN. DANIEL K. INOUYE (D-HI): Mr. Chairman, I wanted to be here personally to commend you for scheduling this hearing. Without question, it is a very important matter before us. The Constitution guarantees it, our democracy cries for it. Your statement has covered the landscape. I have a statement; but I don't wish to be redundant so --
SEN. KERRY: I'll put it in the record without any objection.
SEN. INOUYE: But congratulations and thank you very much for all you're doing.
SEN. KERRY: Well thank you, Senator Inouye for your leadership so many years in this role. And I failed to comment, this is the first meeting actually of the Subcommittee on Communications, Technology and the Internet. And we're going to -- we have a lot of work to do, actually, in terms of privacy, Internet neutrality and other issues. And we look forward to doing it.
Senator Thune, excuse me, I'm sorry. I think Senator Udall was here.
SEN. TOM UDALL (D-NM): Thank you, Mr. Chairman. And thank you for that excellent statement. I, like Senator Inouye, I would put my opening statement in the record and just say that the crisis, Mr. Chairman that you talked about is hitting New Mexico. We've had a large newspaper in Albuquerque, The Albuquerque Tribune, has folded in the last couple of years. The largest newspaper in our second largest city has had to lay people off.
And so, what Senator Cardin is trying to do -- look at solutions, I think all of us feel that we are being pressed to the limits in terms of what we're doing on good, strong, investigative journalism. And so, I would like to see some progress and I know my friend Ben Cardin is here to testify. And he has one proposal and I hope our witnesses will come up with many more and we can proceed down the road on this.
So I put my statement in the record with your consent, Mr. Chairman. And proceed to the witnesses as quickly as possible.
SEN. KERRY: Thank you very much, Senator Udall.
SEN. JOHN THUNE (R-SD): Thank you, Mr. Chairman. I too want to thank our witnesses and our colleague from Maryland for presenting his legislation today. We all know the important role that newspapers and the press have played in the development of our nation and our democracy. And I think wherever you live in the country, whether you read The Washington Post or my hometown newspaper The Myrtle Coyote (ph).
All of those newspapers make an invaluable contribution to their communities. But I think what we're seeing today is that they're looking at dramatically different forms of delivering news than they ever have before. I think that is something that is with us and is with us permanently.
I have two teenage daughters both of -- I should say one is not a teenager and they both are in college. Neither of whom reads the newspaper, but they all live on The Web. And between Internet blogs and mobile, hand-held devices, 24-hour, cable-news coverage, satellite-news programs; and there are so many other ways that people are getting now their information.
And fewer and fewer even adults, I think, are reading newspapers these days. So it does present some very distressing challenges for newspapers in the form of decreasing subscribership and falling revenue from advertisements and classifieds. So as you see more and more of the larger newspapers that are having to go out of business and declare bankruptcy or look for buyers, it's a great concern, I think, to all of us. And I'm not sure I have any -- know what the answers are either, but I'm anxious to hear from some of our panelists today about what their views are on the state of the industry, and what might be done to preserve this important part of our heritage and our democracy.
So with that, Mr. Chairman, I would yield back.
SEN. KERRY: Thank you very much, Senator Thune.
Senator Cantwell, did you have anything you wanted to say before we start?
SEN. MARIA CANTWELL (D-WA): Mr. Chairman, I will enter my statement for the record because I'm anxious to hear the witnesses as well. And I'd like to, if I could, enter some testimony from The Seattle Times.
SEN. KERRY: Absolutely. We'll receive that in full as a - (inaudible).
Senator McCaskill, I'm sorry I passed by. Did you have anything you wanted to add?
SEN. CLAIRE MCCASKILL (D-MO): No, I want to wait and --
SEN. KERRY: Thanks, appreciate it. We look forward to that.
Senator Cardin, thanks very much for taking time to be here with us today. You've had some interesting thoughts on this and we really look forward to hearing your testimony.
SEN. BEN CARDIN (D-MD): Chairman Kerry, thank you very much.
SEN. KERRY: Is that working?
SEN. CARDIN: The light is on.
SEN. KERRY: There you go, pull that a little closer. Thanks.
SEN. CARDIN: Thank you very much for conducting this hearing. I do have a statement that I'll make available for the record. I share your concern about the future of journalism. Our metropolitan newspapers are our prime source of journalism, of investigative reporting, of new sources for radio, TV and the Internet. And they're going out of business, they're closing their operations; they're slashing their staffs, you gave a list of those newspapers that either have terminated their traditional operations or are in bankruptcy. If I could just add one more to that list; and that's The Baltimore Sun, my hometown paper that's in bankruptcy and is in danger of whether it can stay in business or not.
It's clear to me that our newspapers are a check on not just local government, and the federal government, but on corporations, on businesses, on community activity. It's a prime part of our democratic system. And yes, I do think that Google and Yahoo and blogs are important, I do. But when it comes to in-depth reporting, and the source for much of our news, that we see echoed in blogs and on the Internet, we rely upon the news bureaus of our newspapers. It's important to have timely video, as you point out, of a particular news event. And analytical journalism is important, but investigative journalism where we get most of our breaking news comes from our local newspaper bureaus; and we're in danger of losing them.
Newspaper reporters forge relationships with people; they build a network which creates avenues to information. It's essential to a free and democratic society. A 2003 study published by Raw (ph) Economics, an organization, found a direct relationship between the free circulation of the daily newspaper per person and corruption. The lower the circulation, the higher the corruption.
Princeton University reported on the closure of The Cincinnati Post, that local elections were less competitive. And I quote from that report. "The greater turnout, a broad choice of candidates and accountability for incumbents are important democracy we side with those who lament newspapers decline."
Simply put, the current model doesn't work. Advertising, as you pointed out Mr. Chairman, is not the type of financial support that papers traditionally could rely upon. Subscriptions are significantly reduced because people are getting their news off of the Internet or from the radio or TV.
By early 2008, this is before the current recession really started, 59 percent of our newspapers had reduced their staffs; 61 percent had less space devoted to news. And over half of our states did not have the news coverage of what was happening directly in Congress. They had to rely on third-party sources.
So I introduced the Newspaper Revitalization Act to find a different way, as you point out, we need to explore different economic models. It was filed in an effort to create a national debate as to how we can preserve our local news operations. My legislation uses the 501 (c) (3) model similar to what a church would use, or what an educational institution would use, a public broadcasting and other non-profits.
Now this may be an advantage for some papers to be able to continue. Why? Because it gives an avenue for local supporters whether they be individuals, whether they be foundations, whether they be educational institutions, to be able to come together under a 501 (c) (3) model and preserve the tradition of their local newspaper.
Let me say what it doesn't do. What it does do is allow communities to come together to save a local newspaper. What it doesn't do and what I do not support is government interference with the free press. Government does not interfere with our churches. They are non-profits. I do not want to see us do anything that could compromise the independence of the newspaper. That's critically important.
I also would oppose any government direct bailout to our newspapers. I don't think that's an appropriate way for us to move forward. This bill -- my recommendation would not do that. There are no federal funds. And I might say, most newspapers aren't paying any federal taxes. So by making them a non-profit, we're not going to be giving up any government revenues. The only restriction would be that they could not endorse specific candidates. They still could editorialize, as I think they should.
It gives a choice to a community to preserve their local paper. And I do encourage the other suggestions that have been made. Thomas Jefferson, a man who was vilified by newspapers daily, once said: "If I had a choice between government without newspapers and newspapers without government, I wouldn't hesitate to choose the latter." Like Jefferson, I believe that a well-informed public is essential to our democratic society.
We need to save our community newspapers and the investigative journalism that they provide. And I believe this hearing is an important step forward in exploring how to do that. Thank you very much, Mr. Chairman.
SEN. KERRY: Well thank you, senator for a clear, concise and brief summary of both your position and of the predicament. We appreciate that input very much. It's a thoughtful, obviously provocative concept; and it's one that we'll think about and talk about. And obviously, we will engage with our panel on. So we're very grateful to you for coming today. Thank you.
SEN. CARDIN: Thank you.
SEN. KERRY: If I could invite the members of the second panel to come up. Let me introduce them as they do. We have Ms. Marissa Mayer, the vice president, Search Products and User Experience, Google, who has come here today from California to testify. Mr. Steve Coll, former managing editor of The Washington Post. Mr. David Simon, author, television producer and former newspaperman, from Baltimore, Maryland. Mr. Alberto Ibarguen, the president and chief executive officer, John S. and James Knight Foundation from Florida. Mr. James Moroney, publisher and CEO of The Dallas Morning News. And Ms. Arianna Huffington, co-founder and editor-in-chief of The Huffington Post from California.
Thank you, each and every one of you for taking time to come here. We're really delighted to see you here.
Ms. Mayer, can I ask you to lead off; and we'll just run right down the line. And if you want to turn the mike on and pull it up very close to you so everybody can hear, that will be helpful.
MS. MAYER: Chairman Kerry, members of the committee, thank you for inviting me to contribute to this discussion. As vice president of Search and User Experience at Google, I am co-chair --
SEN. KERRY: Pull the mike a little closer, if you can.
MS. MAYER: And as co-chairman of the Knight Commission on the information needs of communities in a democracy, I'd like to speak to the intersection of democracy and technology. In my testimony today, I would like to cover three main points. First, how Web search acts as a conduit for journalism by connecting individuals to the news stories they are seeking. Second, how Google creates economic opportunity for publishers; and provides tools to create more engaging online experiences. And finally, I'll talk about the very structure of The Web and how it represents some of the challenges and opportunities for the future of journalism.
Let's first look at Search as a conduit for journalism. Every day millions of people search The Web for relevant answers to their questions. Those answers can come in a variety of forms such as Web pages, an image, a video or a news story. Search engines like Google play the role of connecting users with high-quality content; ultimately, sending traffic to the publisher's Web site. In addition to Web Search, Google News is our service that is designed for users who are looking for news articles.
Together Google News and Google Search provide a valuable, free service to online newspapers; specifically, by sending interested readers to their sites at a rate of more than one billion clicks per month. Newspapers use that Web traffic to increase their readership and generate additional revenue. Just as importantly, Google's policy is to respect the rights of content owners. Publications have the right and ability to control whether or not their content appears in Google Web Search or Google News.
Now, let's turn to the economic opportunities that Google creates for publishers. Because our mission is to organize the world's information and make it universally accessible and useful, high- quality content is incredibly important to Google and to our users. From an economic perspective, the Google AdSense platform helps publishers generate revenue from their content by providing relevant ads on the publisher's site. Google AdSense creates billions of dollars in annual revenues for publishers.
In fact, in 2008 that figure exceeded $5 billion in revenue for publishers using AdSense. Users get more useful ads and these more relevant ads generate higher returns for advertisers and publishers. Google also offers many tools for sharing information - that are being used by newspapers. For example, the Los Angeles Times Web site last year followed the path of the southern California wildfires through Google Maps. Our Web technologies are powerful information tools; and we hope to continue to empower content creation through them.
Finally, I'd like to offer some observations on how the presentation of news online should be fundamentally different than it is in print. Let's start with a look at the basic unit of consumption, the atom of sorts. The atom for existing media is often disrupted by emerging media. For example, digital music caused consumers to think about their purchases as individual songs rather than full albums. Similarly, the structure of The Web has caused the basic unit, the atom of consumption for news to migrate from the full newspaper to the individual article.
With online news, a reader is much more likely to arrive at a specific article rather than say the home page. That means the publisher must assume that a reader may be viewing an article on its own, independent of the rest of the publication. To make a stand-a- lone article effective requires providing sufficient context for first time readers while clearly calling out the latest information for those following a story over time. It also requires a different approach to monetization. Each individual article must be self- sustaining.
These types of changes will require innovation and experimentation in how news is delivered online and how advertising can support it. Because of The Web's ability to operate in real time, it offers an opportunity for journalists to publish and update changing and evolving stories as they happen to create living stories. Today in online news, journalists frequently publish several static articles on the same topic -- sometimes with identical or closely- related content. The result is parallel web pages that compete against each other in terms of authority and in terms of placement in links and search results.
Considering then the authoritativeness of a news article and how it might grow if the evolving story were published as a single, living, changing, and updating entity, we see this practice today in Wikipedia's entries and in the topic pages of The New York Times. The result is a single authoritative page with a consistent reference point that gains clout and the following of users over time.
Chairman Kerry and members of the committee, let me conclude by thanking you for having me here to participate in this important discussion today. Presenting robust and independent journalism at the national and local levels is an important goal for the United States. Google is doing our part by driving significant traffic to online publishers by helping them generate revenue through advertising and by providing two different platforms, enabling them to reach millions of people.
There certainly are many challenges in adapting the long tradition of journalism to the online world. I am hopeful, though, that innovation and experimentation will preserve journalism. Thank you.
SEN. KERRY: Thank you very much, Ms. Mayer. Let me just say that I mistakenly gave the order early. What we'd like to do would be to begin with online and we're going to end with online. I'd like to go to Mr. Coll and then to Mr. Simon, Mr. Ibargüen, Mr. Moroney, and we'll end with you, Arianna Huffington, okay? Thanks.
So, Mr. Coll, you're next.
MR. STEVE COLL: Thank you, Chairman Kerry, for the opportunity to testify. I've prepared a written statement which I'll offer for the record. In that, I've tried to assess what I think is at stake in the crisis facing American newspapers and where the public interest is located in that crisis -- and I'll try to summarize that here and offer a few policy suggestions.
American journalism has entered a phase of what the economist Joseph Schumpeter called "creative destruction" and it's an apt framework in this case because both creative and destructive forces are at work on American journalism simultaneously and at a stunning pace. On the creative side, there is much to celebrate. The worldwide web has collapsed the barriers to entry in publishing and broadcasting and, by doing so, opened American public discourse to countless new voices.
In journalism since the late 1990s, we've witnessed the advent of skilled new public-minded wed publishers and entrepreneurial journalists across the United States -- some working in for-profit setting and others in nonprofit settings. No doubt, these and other new iterations of journalism and its consumption ushered in by the digital revolution will continue to expand and will make many important contributions to our public culture and constitutional system.
Unfortunately, at present, the rate of destruction of professional journalism, by which I refer to the independent reporting on government, corporations, and international affairs produced mainly by newspapers during the last four decades, is far outpacing the ability of new institutions to reproduce what is being lost. This independent reporting, complex investigations using public records, the identification and vetting of whistleblowers, the tracking of legislative debates, and lobbying at the local, state, and national level; and independent, transparent witness reports of important events here and overseas, has played a very important role in shaping American governance and foreign policy since the 1960s -- at least. It's sudden diminishment seems, to me, an urgent matter of public interest.
In time, perhaps new journalistic institutions and practices will make up the current losses of independent reporting. But even the most optimistic practitioners of the new models tend to accept that a world in which web-based publishers are aggregators could afford, for example, to simultaneously fund and operate professional journalism bureaus in Baghdad, Kabul, Islamabad, Europe, and Asia is simply not foreseeable at present.
These new practitioners do hope to fill some of the gap at the local and state levels but, even there, it's clear that their replacement reporting, as it were, will be, at best, a small fraction of what is now being destroyed for the foreseeable future.
So where do solutions lie? It's uncomfortable and even counterintuitive for a journalist to suggest even loosely that Congress might consider a crisis in journalism is a venue for legislative action. The independence of journalism from government is an obvious strength of our constitutional system and one in which I believe deeply.
But, nonetheless, Chairman Kerry, as you said at the outset -- in limited but important and appropriate ways, Congress already shapes the environment in which American journalism is practiced. For example, in authorizing the licensing of scarce broadcasting spectrum, Congress has correctly insisted that the public interest be considered in those processes alongside private interest.
Also, for four decades, year in and year out through the Corporation for Public Broadcasting and through the National Endowment for the Humanities, Congress has overseen arms-length systems of federal funding that touch upon journalistic institutions and activity -- albeit with mixed results. And the tax code governing public charitable activity Congress and the Internal Revenue Service have appropriately designated as charitable: the activities of some educational and nonprofit journalistic institutions -- although they have done so without an adequate degree of clarity. I think Senator Cardin's bill is an excellent step to clarify those rules.
So an old order is dying in journalism and a new one is rising. I think the question is: are there ways to reinforce a stronger bridge between these eras -- a bridge that's constructed in the public interest?
So what are some specific suggestions? I would offer these really as just a framework. I haven't thought about all of the possible ideas that might be responsive in this way but I think I can offer a few to complement Senator Cardin's legislation.
First, I do believe in his legislation clarifying Section 501-C3 of the Internal Revenue Code so as to ease the potential conversion of for-profit newspapers and newspaper divisions of corporations to charitable status is a very constructive step. It's not a panacea, but even if a handful of newspapers find the vision and community support of the kind Senator Cardin described, to adapt their newsrooms in this manner, their survival and more gradual evolution into the new media world could preserve important independent reporting -- especially at the local level.
I think there's room to reform and strength in the Corporation for Public Broadcasting so that its investments in public broadcasting stations more fully and successfully address the losses in independent reporting on public institutions and even international affairs experienced by for-profit newspapers and broadcasters -- particularly by promoting investments and reporting distributed through new media.
A third idea is to reform and strengthen the National Endowment of the Humanities so that its arms-length competitive peer-reviewed grant-making helps to incubate the skills, careers, and new media forums necessary to fill the reporting gaps created by retreating old media. The Knight Foundation's News Challenge grants is an example of what I consider a successful program of this kind that a reformed and expanded NEH might try to support or replicate.
Finally, I would suggest considering instructing the Federal Communications Commission to strengthen the public service requirement for broadcasters operating with licensed spectrum -- perhaps allowing this requirement to be satisfied by contributions to a fund that would be used to finance reporting on public institutions and public issues perhaps through the CPB or by other means.
In conclusion, obviously the federal government cannot and should not try to solve the crisis in newspapers or the transition of journalism that I've tried to summarize. Ultimately the next era of journalism, like the last one, will be shaped first and foremost by private investment; secondly, by philanthropic and educational institutions; and only in a tertiary way by federal policy.
Nonetheless, the public interest that is located in the current crisis should move Congress to creatively reconsider the role that it already plays. I think this can make a significant difference -- thank you.
SEN. KERRY: Thank you very much, Mr. Coll, that's very helpful. Mr. Simon?
MR. DAVID SIMON: Thank you, Senator. I would also like to say that I'm proud to be following Mr. Coll, who has worked with the Post and The New Yorker, and in his own books represents the highest standards of craft. I endorse the last seven minutes of testimony (laughs).
My name is David Simon and I used to be a newspaperman in Baltimore. What I say will likely conflict with what representatives of the newspaper industry will claim and I can imagine little agreement with those who speak for new media.
From the captains of the newspaper industry, you may hear a certain martyr-ology -- a claim that they were heroically serving democracy, only to be undone by a cataclysmic shift in technology. From those speaking on behalf of new media, weblogs and that which goes Twitter, you will be treated to assurances that American journalism has a perfectly fine future online and that a great democratization is taking place.
Well, a plague on both their houses. (laughs) High-end journalism is dying in America. Unless a new economic model is achieved, it will not be reborn on the web or anywhere else. The Internet is a marvelous tool and clearly it is the information delivery system of our future -- but thus far it does not deliver much first generation reporting. Instead, it leeches that reporting from mainstream news publications, whereupon aggregating web sites and bloggers contribute little more than repetition, commentary, and froth.
Meanwhile, readers acquire news from aggregators and abandon its point of origin -- namely the newspapers themselves. In short, the parasite is slowly killing the host.
It's nice to get stuff for free, of course, and it's nice that more people can have their say in new media. And while some of our Internet community is rampantly ideological, ridiculously inaccurate, and occasionally juvenile, some of it is also quite good, even original.
Understand I'm not making a Luddite argument against the Internet and all that it offers, but you do not in my city run into bloggers, or so-called citizen journalists, at city hall or in the courthouse hallways, or at the bars where police officers gather. You don't see them consistently nurturing and then pressing sources.
You don't see them holding institutions accountable on a daily basis -- why? Because high-end journalism is a profession; it requires daily full-time commitment by trained men and women who return to the same beats day in and day out.
Reporting is the hardest and, in some ways, the most gratifying job I ever had. I'm offended to think that anyone, anywhere believes American monoliths as insulated, self-preserving, and self-justifying as police departments, school systems, legislatures, and chief executives can be held to gather facts by amateurs pursuing the task without compensation, training, or, for that matter, sufficient standing to make public officials even care who it is they're lying to or who they're withholding information from.
Indeed, the very phrase, "citizen journalists," strikes my ears Orwellian. A neighbor who is a good listener and cares about people is a good neighbor; he is not in any sense a citizen social worker -- just as a neighbor with a garden hose and good intentions is not a citizen firefighter. To say so is a heedless insult to trained social workers and firefighters.
Well, so much for new media. What about old media?
Anyone listening carefully may have noted that I was brought out of my reporting position in 1995; that's well before the Internet began to threaten the industry, before Craig's List and department store consolidation gutted the ad base; before any of the current economic conditions applied. In fact, when newspaper chains began cutting personnel and content, the industry was one of the most profitable yet discovered by Wall Street.
We know now, because bankruptcy has opened the books, that the Baltimore Sun was eliminating its afternoon edition and trimming nearly 100 reporters and editors in an era when the paper was achieving 37 percent profits. Such short-sighted arrogance rivals that of Detroit in the 1970s when automakers offered up Chevy Vegas and Pacers and Gremlins without the slightest worry that mediocrity would be challenged by better made cars from Germany or Japan.
In short, my industry butchered itself and we did so at the behest of Wall Street in the same unfettered, free market logic that has proven so disastrous for so many American industries. Indeed, the original sin of American newspapering lies in going to Wall Street in the first place. When locally based, family-owned newspapers like the Sun were consolidated into publicly-owned newspaper chains, an essential dynamic and an essential trust between journalism and the community served by that journalism was betrayed.
Economically, the disconnect is now obvious. What did newspaper executives in los Angeles or Chicago care whether readers in Baltimore have a better newspaper -- especially when you can make more money putting out a mediocre paper than a worthy one? Where family ownership might have been content with 10 percent or 15 percent profit, the chains demanded double that and more -- and the cutting began long before the threat of new technology was ever sensed.
Editorially, the newspaper chains also brought an ugly disconnect into the newsroom and, by extension, to the community. A few years after the A.S. Abell family sold the Sun to Times Mirror, fresh editors arrived from out of town to take over the reins of the paper. They looked upon Baltimore not as a central terrain to be covered with consistency and to be explained in all of its complexity year in and year out for readers who had and would live their whole lives in Baltimore, why would they? They had arrived from somewhere else and if they won a prize or two, they would be moving on to bigger and better opportunities within the chain.
So well before the arrival of the Internet, as veteran reporters and homegrown editors took buyouts, news beats were dropped and less and less was covered with rigor or complexity. In a city in which half of the adult black males are without consistent work, the poverty and social services beat was abandoned. In a region where unions are imploding and the working class eviscerated, where the bankruptcy of a huge steel manufacturer meant thousands lost medical benefits and pensions, there is no longer a labor reporter.
And though it's one of the most violent cities in America, the Baltimore criminal courts went uncovered for more than a year. Meanwhile, the out of town editors used manpower to pursue a handful of special projects -- Pulitzer-sniffing as one does. The self- gratification in my profession does not come, you see, from covering a city and covering it well; from explaining an increasingly complex and interconnected world to citizens; or from holding basic institutions accountable, it comes from someone handing you a plaque and taking your picture.
And so buyout after buyout, from the first staff reduction in 1992 to the latest round last week in which nearly a third of the remaining newsroom was fired, a newspaper that might have mattered enough to charge online for content -- simply disappeared. Where 500 men and women once covered central Maryland, there are now 140.
I don't know if it's not too late already for American newspapering. But if there is to be a renewal of the industry, a few things are certain and obvious. First, the industry is going to have to find a way to charge for online content. Yes, I've heard the postmodern rallying cry that information wants to be free -- but information isn't. It costs money to send reporters to London, to Fallujah, to Capitol Hill, and to send photographers with them to keep them there day after day. It costs money to hire the best investigators and writers and then back them up with the best editors. How anyone can believe that the industry can fund this kind of expense by giving its product away online to aggregators and bloggers is a source of endless fascination to me. A freshman marketing major at any community college can tell you that if you don't have a product for which you can charge people, you don't actually have a product.
Second, Wall Street and free market logic, having been a destructive force in journalism over the last few decades, is now not suddenly the answer. Raw, unencumbered capitalism is never the answer when a public trust or public mission is at issue. Similarly, there can be no serious consideration of public funding for newspapers. High-end journalism can, and should, bite any hand that tries to feed it; and it should bite a governing hand most viciously.
Moreover, it's the right of every American to despise his local newspaper for being too liberal or too conservative; for covering X and not covering Y; for spelling your name wrong when you do something notable; and for spelling it correctly when you do something dishonorable. As love-hate relationships go, it's a pretty intricate one and an exchange of public money would prove unacceptable to all.
But a nonprofit model intrigues, especially if that model allows for locally-based ownership and control of news organizations. Anything the government can do in the way of creating nonprofit status for newspapers should be seriously pursued and, further, anything that can be done to create financial or tax-based incentives for bankrupt or near-bankrupt newspaper chains to transfer or donate unprofitable publications to locally-based nonprofits, should also be considered.
Lastly, I would urge Congress to consider relaxing certain antitrust prohibitions so that The Washington Post, The New York Times, and various other newspapers can openly discuss protecting copyright from aggregators and plan an industry-wide transition to a paid, online subscriber base. Wherever money comes will prove essential to the task of hiring back some of the talent, commitment, and institutional memory that has been squandered.
Absent this basic and belated acknowledgement that content matters -- in fact, content is all -- I don't think anything can be done to save high-end professional journalism.
Thanks for your time and your kind invitation.
SEN. KERRY: Thanks for your terrific testimony; we appreciate it very, very much.
MR. ALBERTO IBARGUEN: Thank you, Mr. Chairman and members of the committee, for inviting me to testify.
For the first time in the history of the Republic, it's easier for a high school student to learn about the crisis in Darfur online than corruption in local government in many local papers.
Until recently, the circulation area of a newspaper, or the reach of a local television or radio signal, roughly coincided with the physical boundaries of cities and counties from which we elected mayors and school boards and members of Congress.
Even if we didn't know what was happening halfway around the world, for us, all politics was local and so was daily news coverage. And it was news coverage that was shared generally, connecting buyers and sellers -- as you pointed out, Senator -- but also citizens to other citizens. Our information systems help define American communities and help give them individuality and character; those systems have changed. The new systems are digital and mobile and not bound by geography. The citizen is a user of information more than a passive consumer.
I'm not here to lament that past, that past which excluded many Americans -- especially women and minorities -- from the main pages of newspapers or the evening television broadcast. On the contrary, I welcome the democratization of media and its possibilities. The question in my mind is not how to save the traditional news industry, but how to meet the information needs of communities in a democracy so that the people might, as Jack Knight used to put it, determine their own true and trusts.
The stunning clarity of the First Amendment, that Congress shall make no law abridging the basic freedoms, including free speech and free press, should inform every action you take. Nevertheless, there seems at least four areas where Congressional action might properly and significantly support our national transition to digital.
Number one, I believe nothing Congress can do is as important as providing universal, affordable digital access and adoption. If the future of democracy's news and information is online, then we must ensure that everyone is online -- and brining technology training, digital literacy, and higher quality networks to our local communities. Three great divides block that goal and they are: economic, generational, and geographic.
In an age where entry-level jobs at McDonald's or Wal Mart require online applications, access must be general and available and affordable. Rural areas are notoriously underserved and should be the focus of your concern to provide equal access to the whole nation.
Age is the third great divide. Groups like AARP are already focusing on this issue and might be willing partners in training and outreach.
Federal stimulus money for universal digital access is a smart initial investment. Support should also be given to media literacy programs that already have trained thousands of students to be more sophisticated media users.
Number two, this is a time for experimentation and government should support that. The examples of experiments the Knight Foundation has funded that I cited in my written testimony were offered as illustrations of what one organization -- small by comparison to government -- can do to support the imagination of people who will eventually figure out what will work. Through funding of universities and other not-for-profit groups, I believe there is a role for government in spurring innovation in news delivery.
Number three, newspapers and broadcasts are not dead and there may be ways to support their extended usefulness. There are implications in the decline of newspapers, separate from the delivery of information of course, in many communities -- including my own hometown of Miami -- newspapers mean good jobs, not just for the writers but for truck drivers, press operators, and a large sales force.
Congress might seek to encourage the creation of not-for-profits or L3Cs. Local news organizations -- I agree with Mr. Simon -- might perhaps encourage the conversion of for-profit news businesses into not-for-profit, community-based, mission-driven organizations. These measures will, unfortunately, not solve the revenue shortfalls of traditional media, nor turn around current economic conditions. But by relieving profit pressures, this might help them extend their useful life until we figure out what's next and what online model can afford professional journalists.
Number four, I believe there's a role for public media. Public media reaches the entire nation; that has enormous educational, news and security implications, contemplating new technologies to distribute information. The Obama transition team discussed a concept they called, "Public Media 2.0," an approach that would make PBS and NPR more inclusive and engaging of their audiences -- I believe that should be encouraged.
We're living in the moment of extraordinary creativity. We will be a nation of media users, not consumers. We're going from the information model of one to many; of I broadcast, you listen; to many -- to many -- all made possible by technology. Before Guttenberg, the monks copied illustrated manuscripts and were the keepers of information. Long after Guttenberg, there was the Renaissance, when society had, more or less, figured out how to handle information. But those uncertain years in between, when Guttenberg's technology broke the old rules and allowed something new called literacy, are like the years we live in today.
Congressional action to determine what news and information gets to our citizens is certainly not your intent -- and I agree with you. But I hope this is the beginning of great and serious action by Congress, leading to the encouragement of experimentation to enable markets to find their way; to promote the evolution of Public Media 2.0; and, most urgent of all, to provide affordable digital access to every American.
Thank you for this opportunity.
SEN. KERRY: Thank you for that thoughtful statement, I appreciate it. Mr. Moroney.
MR. JAMES MORONEY: Good afternoon, Chairman Kerry and members of the subcommittee. I want to thank you for holding this hearing today on the future of journalism.
I'm appearing today in my role as publisher and CEO of The Dallas Morning News and also as a member of the executive committee of the Newspaper Association of America.
In communities of all sizes throughout our country, daily newspapers play an indispensable role in informing our citizens about local issues and newsworthy events, which is critical to the functioning of a vibrant democracy. The reason newspapers are so essential to a well-informed public is simple. In most markets, newspapers have, far and away, the most expensive news-gathering resources of any local media.
At The Dallas Morning News, for example, we spend more than $30 million per year in our news-gathering operation and we have more reporters on the street than the ABC, NBC, CBS, and Fox affiliates in our market combined. It's been well-documented that the newspaper is in a very real crisis. In the past several months alone, one major market daily has folded, another is surviving only as a scaled-down online news service, and a handful of others have cut back their printing operations.
Since December, five major newspaper companies have declared bankruptcy. Virtually all publishers in every market, large and small, have been forced to lay off highly-valued journalists and other employees and take other drastic cost-saving measures. Unfortunately, we have not been immune to these trends at The Dallas Morning News.
The problem, ironically, is not really a loss of audience. Newspaper readership remains very strong; in fact, more people read a newspaper the Monday after this year's Super Bowl than actually watched the big game on Sunday -- and that doesn't include all the people who go online to read what newspapers publish. The problem is that because of the intense competition for advertising -- particularly from Internet-based companies -- the newspaper share of the overall advertising market has dropped dramatically.
If the current downward trend continues -- and we have seen it this way for the first four months of this year -- newspapers will have experienced as much as a 50-percent drop in advertising revenues over a three-year period -- revenues that represent 80 percent of newspapers' total revenue.
Even online advertising, which has often been hailed as the industry's most promising future growth engine, declined in 2008 and accounted for less than 10 percent of overall newspaper revenues. The end of the recession -- and there will be one -- will not necessarily mean that these advertising revenues will return to newspapers.
Newspapers are in the midst of a secular shift that is posing a serious, long-term threat to the revenues that make it possible for the public service journalism that is done by newspapers across this country each and every day.
So what can Congress do to help newspapers? Here are three things: first, as a means of providing newspaper publishers with a critical and immediate infusion of capital, Congress should pass the Baucus-Snow bill that would extend the carry-back period for net operating losses from two to five years for all businesses, not just newspapers. A similar provision was included in the economic stimulus package but, unfortunately, this relief was limited to only small businesses.
Second, Congress should act quickly on legislation providing a limited antitrust exemption that will allow newspapers some breathing room to share ideas and jointly explore innovative business models. This relief, with proper but expedited review at the Justice Department, would help newspapers transition to the future.
Third, Congress should ensure that newspaper publishers have the means to obtain reasonable compensation from Internet companies that reproduce their content for their own commercial gain. Some Internet operators routinely free-ride on the investments that newspapers are making in local journalism by copying or summarizing newspaper content in order to drive audiences to their web sites and then gain revenue through the selling of advertising.
Congress could consider the establishment of a consent-for- content principle that would apply to breaking news. This principle bears an interesting similarity to the system of retransmission consent adopted by this committee and the Congress in the 1992 Cable Act.
Again, I want to thank you for the opportunity to appear at this hearing today and I hope that these discussions will lead to practical actions that will help maintain the type of journalism that our local communities deserve, expect, and need.
SEN. KERRY: Thanks, Mr. Moroney, and thanks for referencing the retransmission concept, which I think does have some relevance in the conversation, so we'll talk about it, the component.
Ms. Huffington, thank you.
MS. ARIANNA HUFFINGTON: Thank you, Chairman Kerry and members of the committee, for inviting me to be a part of today's discussion on the future of journalism.
Like any good news story, let me start with a headline: Journalism Will Not Only Survive, It Will Thrive. But the discussion needs to move from how do we save newspapers to how do we save and strengthen journalism -- however it is delivered? Despite all the dire news about the state of the newspaper industry, we are actually in the middle of the golden age for news consumers -- who can surf the Net, use search engines, access the best stories from around the world, and be able to comment, interact, and form communities.
Journalism plays an indispensable role in our democracy, but it's important to remember that the future of journalism is not dependent on the future of newspapers. The great upheaval the news industry is going through is a result of a perfect storm of transformative technology, the advent of Craig's List, dramatic changes in consumer habits, and the dire impact the economic crisis has had on advertising.
There is no question that as the industry moves forward, we will need to have an enormous amount of experimentation with new revenue models and new devices -- like the cases that you, Senator, mentioned at the beginning.
But what won't work? And what can't work, is to pretend that the last 15 years never happened, that we're still operating in the old content economy, as opposed to what Jeff Javits has called the new linked economy, and that the survival of the industry will be found by protecting content behind walled gardens. We've seen that movie and consumers have given it lousy reviews.
As the Greek philosopher Herodotus said 25-hundred years ago, we cannot enter into the same river twice, despite Mr. Simon's wishes.
No the future is to be found elsewhere. It's a linked economy. It's search engines. It's online advertising. It's citizen journalism and foundation-supported investigative funds. That's where the future is. And if you can't find your way to that, then you just can't find your way.
Many online video providers are showing us how. Instead of sticking their finger in the dike trying to hold back the flow of information by hoarding their content, smart companies begin providing embeddable players that allowed that content to be posted all over the world, accompanied by links and ads that helped generate additional traffic and revenue. Which is why many, many more people, millions more, saw Tina Fey impersonate Sarah Palin elsewhere and not on Saturday Night Live.
As advertising executive Linda Kaplan Thaler put it, you never know who the consumer is going to be at any point in time. So we have to find a way to be everywhere. Ubiquity is the new exclusivity. When I hear the heads of media companies talking about restricting content, I can't help feeling the same way I did in 2001 when I was one of the co-founders of the Detroit project and watched as the heads of the auto industry decided that instead of embracing the future they would rather spend considerable energy and considerable amounts of money lobbying the government for tax loopholes for gas-guzzling SUVs and fighting back fuel-efficiency standards. And we saw, Mr. Chairman, how well that turned out.
So instead of singularly trying to hold back the future, I suggest that media executives read The Innovator's Dilemma by Harvard professor, Clayton Christensen, and see what he has to say about disruptive innovation and the futility of resisting it instead of seizing the opportunities it provides. And that's why it's imperative, Mr. Chairman, that Congress and the FCC make sure they have in place smart policies that bridge the digital divide and protect innovators and consumers from attempts to undermine net neutrality or impose, as we've recently seen, unjustified charges like metering Internet users.
And why results are very important to update the press gallery credentialing rules. Digital news is a classic case of disruptive innovation. Even so, I think all the obituaries for newspapers are premature. Many papers are belatedly but successfully adapting to the new news environment. Plus, until those of us who came of age before the Internet all die off, there will be a market for print versions of newspapers because it appears to be in our collective DNA.
That's why I firmly believe in a hybrid future where all the media players embrace the ways of new media, especially transparency, interactivity, and immediacy, and new media companies adapt the best practices of old media, especially fairness, accuracy, and high impact investigative journalism.
So to conclude. This hybrid future will include on-profit, for- profit models, like the investigative fund that the Huffington Post recently launched, which is backed by non-profit foundations and provides both staff reporters and freelance journalists who have lost their jobs, the opportunity to pursue important stories.
There are many other models like that. ProPublica, the Center for Public Integrity, the Center for Investigative Reporting, and I'm sure there will be many more to follow. And let's not forget that our current media culture failed to serve the public interest by missing, with many honorable exceptions, the two biggest stories of our time, the run-up to the war in Iraq and the financial meltdown.
We've heard far too many autopsies and not enough biopsies, and online news is particularly well-suited to obsessively follow a story until it breaks through the static. So we need to remind ourselves that the mission of journalism has always been truth-seeking, not, as it has too often become, striking some fictitious balance between two sides.
So we stand on the threshold of a very challenging but very exciting future. Indeed, I'm convinced that the best days of journalism lie ahead, just as so long as we embrace innovation and don't try to pretend that we can somehow hop into a journalistic way back machine and return to a past that no longer exists and can no longer be resurrected.
SEN. KERRY: Thank you very much, Ms. Huffington. Very important testimony and we engage an interesting conversation, I think.
² Mr. Simon, you said, in the course of your testimony, you interestingly noted that some of these newspapers stripped away their capacity prior to, you know, over a number of years, and as a consequence of that they didn't have an entity that was fundamentally able to deliver and compete.
But is that in fact really true? I mean, the Wall Street Journal and others have tried the model for a subscription product that's been a pretty good product by all accounts, competitive and still up to a high standard, yet they weren't able to make it. So what is it about the current business structure that prohibits a quality operation with a known reputation, with top-level reporters and columnists, from being able to make it online?
MR. SIMON: Well, I argue that the newspapers hit a critical moment when the money was there, traded away their birthright, tragically so. When I was in journalism school n the '70s, they told us that in the immediate that it was television and the loss of immediacy in our news coverage. We were going to have to cede the ambulance chasing in the overnight news to television. They told us we were going to become more sophisticated, more like magazines, that specialized beat reporting was going to become more important, that we were going to become more essential by explaining things in greater detail and with greater sophistication.
That didn't happen. Because when the money was there, when chains like the Tribune company were earning 37 and a half percent profit, the money went to CEO salaries and big money investors, and it went right out of the profession. And, Wall Street called the tune. And if you look at that 37 percent as the R&D money that any healthy industry might have applied looking forward contemplating the Internet, I mean the naiveté with which newspaper management perceived the Internet in the '90s as merely advertising for the product when it was the product, is incredible.
SEN. KERRY: But those who did go online and tried to sell the product that they had, were able to succeed.
MR. SIMON: Right. If they don't do it industry-wide, it can't work. Because ultimately, if everyone's an AP member or Reuter's member, and if the aggregators have membership in AP or Reuter's, you know, for a paper like the Baltimore Sun or the Boston Globe, or any individual to try to swim against the tide and maintain copyright when, you know, at that point, it's not even a leaky glass, there's no glass at all, ultimately the industry as a whole had to look this square in the eye and say, wait a sec. If we don't have control over our product, if it's going to go elsewhere, if we can't bring people to our tent, what are we doing?
SEN. KERRY: And that is the nub of it. I think that's really a major place of focus here. I'm interested in this concept of limited anti-trust exemption, and I wonder if those of you who are online, particularly what you think about what that does in terms of creating some equilibrium here.
I mean, I think that if you are the aggregator, if you are out there, excuse me, not the aggregator. If you are out there doing the footwork and you've got a top level reporter and a bureau somewhere in the world or you're doing a major investigative story and you put the pieces together, that takes money, it takes time, it takes skill. And once they've put it together and they've put their story up, if somebody comes to Google, for instance, and hits the subject matter and they get various outsources, places where they can go, it's completely dissipated. They are not going to get remunerated for the level that they put into that, but everybody is going to have access to it.
So, is there a fairer way to try to spread the cost here?
MS. MAYER: Well I think it's important to recognize that snippets alone, and what we show on Google, either in Google News or in web search, aren't a complete picture. And users do need to click through to actually read the story, and in fact they do. They click through of at least one billion clicks per month. And I do think that the benefit of the aggregator --
SEN. KERRY: Once they click through -- let me just go through this with you -- they find it through you, they click through, through you, they come up with the story, which is currently free. So they're still not getting paid for it.
MS. MAYER: Well, there's usually advertisements on the page when they land there. So in a free model usually the page the story is on will have advertisements, and in fact do pay for the viewing of that article.
SEN. KERRY: But they have not been able to find that that provides -- they're not getting it. In many cases, I don't think they're getting that advertising revenue, and it certainly isn't covering the cost of doing business. ² MS. MAYER: My view is that it's still very early, and that if you look at many mature business models, they often end up in a hybrid approach. But it's more either a subscription or a direct payment, in addition to advertising: cable television, magazines, newspapers all operate on that model, where there's direct payment from the consumer and advertising.
SEN. KERRY: Well when you say it's early, it's not early for the Denver Post or the Seattle Intelligencer or a bunch of folks who are facing bankruptcy today.
MS. MAYER: But I do think it's early in terms of the situation reach an equilibrium and us having a product on line that fills the needs of both the users and the monetization needs of the reporting.
SEN. KERRY: Ms. Huffington, you've been perhaps the most single successful person on the Internet in terms of presenting an entirely new product in almost newspaper form, which has become its own destination site. Is you view that first of all, how many people put that together, at this point? How many people are on staff are working, would you say, part of your --
MS. HUFFINGTON: Right now, the Huffington Post employs 60 people, and the Investigative Fund that we launched last month will employ ten full-time people, and then hundreds of freelancers who will be assigned specific stories. But to follow on Ms. Mayer's point, first of all there are already laws in place, Mr. Chairman, fair use laws. So, no aggregator can actually just take a story. They have to take a small part of the story to give a taste to the consumer of what the story is about, but in order to read the full story, they would have to go to the content creator.
And monetizing that is really the future. As video producers, as many networks have done, cable companies have done, through these embeddable players, where they put advertising, they put links to other stories on their network or their cable company.
SEN. KERRY: But what you've done essentially is create a non- profit entity under the umbrella of your for-profit entity, and the non-profit entity will go out and do the investigative piece. Is that correct?
MS. HUFFINGTON: But the not-for-profit entity will be open source, which means that the content that the not-for-profit entity produces will be available to anybody at the same time as it is available to Huffington Post. So the New York Times could take it at the same time, anybody could.
And the way we would all monetize that is again through advertising, and in a way, it is actually true that advertising has not moved online as eyeballs have moved online. But that's the period of transition that we are at, at the moment.
SEN. KERRY: Let me, this will be my last question, and then I want to turn it, if we can -- clearly the folks who are in what has been dubbed the legacy side of the industry, are struggling because they are not getting the revenue that they used to get to pay for the overhead for their type of operation. Now, admittedly, things are changing and things change in the business world, and they may have to change their business model.
But even assuming they adjust and change the business model and move, there is still a certain level of skill and quality and experience and standard and so forth that Mr. Simon and others have referred to, and deployment. I mean, putting people into Kabul, putting people into Islamabad. Having people on the ground. Building relationships.
There's not evidence yet, at least, of a -- I mean this parasite issue is real to the degree that people feel that the Internet is providing their work without an adequate level of compensation for what it costs them to produce it.
MS. HUFFINGTON: And that's why, Mr. Chairman, I talked about a hybrid model. At the Huffington Post, for example, you have a licensing agreement with AP. We pay for that. We pay for the AP stories that we post on the Huffington Post. We also have over a thousand original blogs on the side. And you have kindly blogged on the Huffington Post. There's a lot of original content on the site.
SEN. KERRY: In my case, it's very original. S
MS. HUFFINGTON: Which is available to others, to link to and use, again, without charge.
SEN. KERRY: Well I'm sure we are going to pursue this more. I want to let my colleagues have a chance.
Senator Kay Bailey Hutchinson is the ranking member of entire committee. So in deference to her, if you don't mind, I want to allow her an opportunity to have her opening statement, questions, and then I'll come back to you.
SEN. KAY BAILEY HUTCHINSON (R-TX): Well thank you very much, Mr. Chairman. This is such an appropriate and timely subject for us to discuss, especially after the newspaper of your state has just made an agreement, at the very, 4:00 this morning, I understand, to try to stay in business. But the fact of the matter is, that we're looking all over the country at newspapers that are going under, struggling, or making drastic cuts in order to continue service, and I asked that Jim Moroney be one of the witnesses, and I appreciate that you have him here, and I was chairing another hearing and that's why I am late.
But I would just like to take your line of questioning and go forward and fast forward the newspaper response because I still have the same skepticism that you are exhibiting about how you can really do the in-depth necessary reporting and pay for that in any kind of a business model and continue to have that service, whether it is from a legacy newspaper or Associated Press, or any other entity.
But, let me say that I think what has happened in the Internet world and the Huffington Post and Google and all of the new things that have exploded in the news business, are fabulous. They are fabulous for so many different types of news gathering and also the different types of people who are getting their news in different ways. But, I would like to also make sure there's a level playing field so that the investments that are made for the in-depth reporting and all of the costs of bureaus have the capability to succeed so that we continue to have that main outlet that we have had through the years of newspapers.
So I would like to ask Mr. Moroney if he would take the argument about how you can with a business model, do the in-depth reporting when you are not able to get what I assume is a sufficient revenue for your online versions, which you also have, and also how you would be able to get, let's say a fair return for the investment that you are making so that a newspaper has a fair chance.
MR. MORONEY: Well, as I mentioned in my oral testimony, the Dallas Morning News invests over $30 million each year in its news gathering operations. The idea that there may be a non-profit model to support that is a little difficult for me to come to quantitatively. I think about most charitable organizations that give out 5 percent of their income a year to support $30 million of annual investment, that it would take a corpus of $600 million dedicated to nothing but to supporting the scale of news resources we employ in the Dallas Fort Worth area.
So there may be some limited opportunities for non-profit help and I believe there are. But at the scale or news resources, which is what I believe this is, really about, not about saving newspapers per se, but saving the scale of the newsrooms that newspapers employed across this country is what we're trying to do, and the online model -- the Dallas News dot com attracts over 50 million page views a month and 6 million unique visitors a month, and it can't pay for two-thirds of the cost of the newsroom that the newspaper supports. The financial facts are just that, that he newspaper model today, the print on, the ink on paper print model is the one that can support the scale of these newsrooms we employ. So finding a way for us to be able to get a fair return on the investment we're making on the content that we publish digitally, I think, is very important.
I would agree with Ms. Mayer, there has been a different atomization of news. And she said it was down to the article level. I believe it's down to the first four lines of the article level, and that's why what she calls a fair use of our content I don't believe is a fair use. They are making plenty of money off of those first four lines. And we have, as established in the hot news case that was done in the early part of the 1900's, and reaffirmed in the New York state courts in the last year, that there is a quasi property right to breaking news. And I believe we need to look at that standard, as for what it is that newspaper companies, and how they can get a fair return for the investment they are making and the journalism we're publishing digitally.
SEN. HUTCHINSON: Let me just ask either, anyone else on the panel who would respond, that, if there is a property right and some proprietary right for all of this investment, if there are other ideas about how there could be a fair compensation. Because you can't say that the advertising on line would pay for that kind of investment. That just can't be said with a straight face, I don't think. So what would be the fair way to compensate then for what would be used online but what would be obtained from either cheaply or free so that you could keep that level playing field and continue to have the full array of news sources?
Ms. Huffington? Ms. Mayer?
MS. HUFFINGTON: Well, already we see that advertising, because of this drop that everybody has mentioned here today, at the print level cannot support the print newspapers. So what we're seeing is that what needs to happen is to monetize traffic. And anytime Google or the Huffington Post or any news aggregator or news curator links to a story, it does drive traffic. I mean that can be documented.
You know, hundreds of millions of page views are generated because of linking. So what all the different content creators need to experiment with, and it's absolutely true that this is a transitional period, is monetizing that traffic. And those who are using embeddable players have found a lot of ways to do that. Because they are actually following where the consumers are.
You know, already we had Senator Kerry talk about how many hundreds of thousands of friends the New York Times has on Facebook. These are real consumers of news. So that content is free on Facebook, but it can be monetized through advertising.
MS. MAYER: I also wanted to chime in. Back in 2008 more than $5 billion was run through Google ads alone, on publisher sites. That's not Google revenue. That's revenue that the publishers earned on their site. There's a lot of revenue that can be earned through online advertising. I mean you couple that with a hybrid model where consumers may pay directly or subscribe online, I think that monetarily we can get there.
I mean, it's also important to point out that I really need to push back on the notion that with the first 200 characters of a story you get the complete information. And in fact the 1 billion clicks per month that we send on to newspapers show that people need to click through to really get the full context.
It's also important to point out that there are industry standard opt-outs. It's very easy to opt out of a search engine, opt out of Google News, with a robot dot txt file that simply says you don't want the contents to be displayed there.
MR. MORONEY: It would be helpful if Ms. Mayer could come back and tell us what percent of that $5 billion is going to newspaper publishers. I believe when she used the term publishers she means anybody who is publishing any kind of content on the Internet, including bloggers, and so forth. I don't think very much of it is coming back to newspaper publishers.
SEN. KERRY: Senator McCaskill.
SEN. CLAIRE MCCASKILL (D-MO): Well I want to home in. First of all I am going to try not to gush, Mr. Simon. I am a huge fan of The Wire. My son, I used to, I'm a former prosecutor and I've always looked down my nose at crime drama on the television, and my son said, Mom, you've got to watch this because I think you might appreciate it. I had to in fact translate most of it for my husband. He kept saying, now, what's a package?
I had to --
MR. SIMON: It can mean different things.
SEN. MCCASKILL: Yeah, it can mean different things, sure, but -- (laughter) -- that's an understatement. You know, two things I think we are missing in this discussion so far that I think Mr. Simon is very pained about, and I'm pained about, and that is, the investigative journalist that is local.
I understand Ms. Huffington that you are working on an investigative model, but for your audience, there's not going to be a lot of stories about the cop that has been running the dice game on the side or the cop who has, you know, taken a hit of money from various people. The way you get those stories is by investing in people because it's very labor intensive and it's about building relationships at a local level. I -- it's like naming the good teachers that I had in my life. I can sit here right now and name the good journalists that I respect and that I fear and that I know they'll continue asking the questions and building the relationships and hanging out in the places where the people that know the facts will ultimately give them to them, and you know it is incredibly important to our democracy.
It is incredibly important to our local communities and to our states, and right now, where the journalists are fleeing, it's in courthouses and it's in police departments, and it's in state capitals. We still have a bunch around here, and that's great. We don't have as many as we used to, but that's where there really are endangered species, the investigative journalists.
And the other thing, and Mr. Simon, or Ms. Huffington, or Mr. Moroney -- the editor. I mean, I know you hate them, journalists, good journalists, and I know also that there's good ones you love, and I just had something happen to me while we were sitting here, where someone published a story online in St. Louis, and they called me at 1:00, called my press shop at 1:00. We hadn't called back in an hour. They called again at 2:30, and they had already put it up online ten minutes earlier, without a response from me.
Now that wouldn't have happened in a newspaper because an editor would have said, you got to try again to get a hold of them before we print it. It wouldn't have happened, but it happened because -- and you know obviously, we think they got the story wrong that they put up online. And we've yelled at them. And this all happened on my Blackberry while I'm sitting here. And I'm approving quotes as I sit here trying to correct a story.
And so that there's two things I'm worried about. The local investigative reporter and the editor. And how does this new model, how do we deal with that?
MR. SIMON: Exactly. I'd like to affirm that in every possible way. There's been an equivocation up here between people philosophizing about what's going to happen to journalism at the high end covering Washington --
SEN. MCCASKILL: Right.
MR. SIMON: -- covering national and international issues. There's already an economy of scale that allows for a Politico online. What is dying and what is not being addressed up here by the people supporting new media, is the fact that at the state and local level, it's America's regional newspapers that are collapsing.
They're imploding faster, and you know in some ways the industry itself has been oblivious to it because it's sort of like the shark who is eating everybody from the bottom and the New York Times and the Washington Post felt it last. When they have a buy-out of a hundred, two hundred people, and they have a newsroom of 13-hundred people, it doesn't feel the same as 200 people walking out of a newsroom of 400 in a regional area.
That means that all of a sudden there's nobody covering the cop shop, nobody covering the zoning board. The day I run into a Huffington Post reporter at a Baltimore zoning board hearing is the day that I will be confident that we've actually reached some sort of equilibrium, you now. There's no glory in that kind of journalism, but that is the bedrock of what keeps, you know -- God, the next ten or 15 years in this country are going to be a halcyon era for state and local political corruption. It is going to be one of the great times to be a corrupt politician.
You know, I really envy them. I really do.
SEN. MCCASKILL: You know, I know we giggle about it, but I think it's very serious, and I, you know, Mr. Chairman, I'm glad you are having this hearing, and, you know, it's not that these reporters are expensive in terms of what they make a year, it's just that it takes a long time for them to produce something. And if we could come to a not-for-profit model that was focused on that, the investigative journalism at the state and local level, I think that might be way more important than a not-for-profit model that's going to make sure we've got somebody else following presidential politics.
MS. HUFFINGTON: Well, Senator McCaskill, actually if you look at, for example, Voices of San Diego, which is a not-for-profit site that is exposing precisely what you and Mr. Simon are talking about, local corruption, and actually having real impacted investigative journalism, that is happening around the country and that is happening precisely the way that you would like it to happen. The Huffington Post is expanding to 12 cities and we're going to make sure that Baltimore is included, Mr. Simon, for your sake.
MR. SIMON: Can't wait.
MS. HUFFINGTON: And in these cities, cities and journalists are incredibly important. I'm sorry to hear Mr. Simon dismiss them because I'm sure you're familiar with the Attorney General scandal. That was revealed because of citizens and journalists working together all around the country.
Josh Marshall and Talking Points Memo have put it together, provided the platform, but the work was done by citizen journalists. They love that work. I mean, we can get any document damper (ph) you are calling it and putting it out to the thousands of community journalists on The Huffington Post and we get amazing stuff back. For some reason people want to participate in exposing what is happening. That's happening, for example, on the Dan De Loud (ph) every day. The tape (ph) that we put out on The Huffington Post of the Morgan Stanley executive who talked about bonuses being called retention awards, that came from a citizen journalist and the Mathew Fowler story about President Obama's comment at a fundraiser came from a citizen journalist, so the importance of the citizen journalist cannot be underestimated.
SEN. MC CASKILL: Are there editors in that model?
MS. HUFFINGTON: Absolutely, they're edited.
SEN. MC CASKILL: And who is paying the editors?
MS. HUFFINGTON: We are paying the editors, the online providers, the newspapers, we're all paying editors, but it's really what is being called pro-am model, professional and amateur model, working together.
MR. : But, if I may, Senator, there are a number of similar kinds of local and mission-driven organizations that are set up as non-profits.
The Voice of San Diego is one of them. MinnPost in Minneapolis is another, Chi-Town Daily News in Chicago, Gotham Gazette in New York, Village Soup in Maine. Those are just a handful that our foundation happens to support. We also have offered to community foundations to match whatever, dollar for dollar, whatever contributions they make to this sort of organization.
These are not, though, and this is a sense in which I really do agree with Marissa saying that this is early. You're right, Senator, it's late for a newspaper that's going into bankruptcy, but it's early in the evolution of this technology and early in our figuring out how this is going to work at the local level, where most journalism in America actually happens, not at the New York Times or at the Washington Post, it seems to me. So I think we need to look for ways to encourage innovation locally if it's enhancing the capacity or the ability of having a chain unload one of its papers and turn it over to a community group as a non-profit. If there are ways of encouraging that sort of thing, I think you ought to look at it. I think there are already lots of people who are innovating and surviving.
The five that I just mentioned have been around, each of them, for a couple of years. Is that as long as my old paper, at the Miami Herald, 110 years, no, of course not. But I think they're serious and I think they will get more serious. They will get better. They will develop their practices and I think eventually will answer something.
I just have a terrible feeling that what we mustn't do, it seems to me, is to try to figure out the opposite of what Yogi Berra said, "If the fans don't want to come to the ball park, nobody can stop 'em." And if people are going to give each other information digitally, by going mobile, I think our efforts ought to be on figuring out how you deliver that kind of information, how you facilitate that kind of information and, as I said in my remarks, how you make sure that you don't leave the 40 percent of Americans who are divided on the other side because they live in a rural area, because they're poor, or because they're elderly.
SEN. KERRY: Thank you very much. Senator Cantwell.
SEN. CANTWELL: Thank you, Mr. Chairman. Thank you for having this important hearing and I have to say that, having listened to the many witnesses, I'm not sure that there's much actually I disagree with in the sense of I'd like to see some of the things that maybe I could have witnesses answer where I can understand whether you are in disagreement. I guess that is to say, you know, it seems to me that there was probably in the early days of radio a proclamation that maybe the newspaper industry was going to go under and I'm sure there was with television, that the newspaper industry was going to go under and now, I'm sure, with the Internet. But as much as the chairman, I know is, I think, in your comments said that newspapers are an endangered species, I actually like going to The Huffington Post on my mobile BlackBerry and seeing that headline and seeing the chairman there and reading that story and having the ability to have access to that.
So, to me, this is about having the best of both worlds and I can't wait till somebody offers me a subscription to a newspaper that gives me full access to their Internet site without jumping through a bunch of different hoops and probably also gives me a discount on something else, either the coffee I drink or the airline ticket I buy or gives me something, you know, for being a good customer.
I mean, I think that really this is about new business models and how long it's going to take for those new business models to develop and what are we willing to do to help in the meantime the industry as those new business models develop. Now I, for one, am willing to do something. I certainly support the carry-back provisions for net operating costs for a longer period of time. I need to know a little more about the anti-trust provisions to understand that exactly, but I'm for supporting them, so I guess I wanted to start with you, Ms. Huffington, about what do you think about the anti-trust provisions and whether you would support those and would be favorable for some of the tax breaks that have been talked about, as well.
MS. HUFFINGTON: I would not, Senator Cantwell. It seems to me that anti-trust provisions could create more organizations that got too big to fail. And, again, we've seen how that has not worked in other areas of our lives, so let's not create any more behemoths because then we become too big to fail. I would suggest that if we allow this force of innovation to unfold and support the non-profit investigative efforts and also support the hybrid that we've been discussing here, we will get there, and we will get there in a way that has been better than what we've had because I don't think we can underestimate these big stories that we have missed.
You know, if journalism was working out so well, how come so many financial journalists missed the economic meltdown? There is a way in which many journalists who are working the same beat begin to actually basically sell their journalistic credentials for access, and we see that happening every day, including now in the way that the bailout and the banking crisis are being covered.
SEN. CANTWELL: I agree. There could be much more attention to that. As somebody who suffered through the Enron crisis and now the credit default sub-crisis I guarantee you there would have been, with better coverage of those issues, more knowledge for the public. Everybody maybe would have avoided some of that, but what's wrong with Mr. Moroney or Mr. Simon getting the ability to become better aggregators and if they need the ability to talk to other news organizations to become those aggregators? What's wrong with that?
MS. HUFFINGTON: Well, of course they can already talk to each other. What we are discussing is whether you can give them anti-trust protection so that they can actually implement policies that would make it impossible for others to aggregate content online.
SEN. CANTWELL: Mr. Simon or Mr. Moroney, do you want to address that?
MR. SIMON: Listen, this comes down to a very fundamental thing, which is: does intellectual property have value? Does content have value? Everything else that is dealing with the ongoing digital world has had to fight this battle. You know, publishers, and I'm an author so I know or have been contending with Google and other aggregators as to how much of their work can be online. I mean, I'm getting a settlement from some lawsuit that was over this very issue. The recording industry has had to struggle with Napster and other things.
Ultimately, it's a leaky cup and that's inevitable, but there has to be some kind of cup. If it has no value, then explain to me why the Little Rock paper and the Albuquerque paper, which are two of the few in this country that do not allow their Websites to be public without subscription, why their circulation is actually up and the rest of the newspaper world is down.
SEN. CANTWELL: Well, because I want to get to the specific here and make sure I understand because I think what Ms. Huffington is arguing is that fair use laws cover that. She's only using that content within the confines of fair use and so--
MR. SIMON: Right.
SEN. CANTWELL: So how does--
MR. SIMON: Right now the newspapers, and I believe they butchered this going back ten years, right now they have signed off on fair use and they are hurling their stuff out onto the Internet for free. It's insane, and I think it's been proven insane and it's heralded this incredible implosion of journalism. If I felt they had the chance to do it over again, I think they would look hard at that decision and they would say you know what? It's a lot better if we say, if you want to subscribe to the Baltimore Sun and get it at home and have us cut down a tree and bring it to your doorstep and do it the old anachronistic way, it's $17, $18 a month. If you want to get the Baltimore Sun online, we'll only charge you $8 a month, but we get the $8. We get the $8 for--
SEN. CANTWELL: I'm willing to pay $12 and I want the choice of picking the newspaper up on any stand that I want and I want to give them--
MR. SIMON: Exactly. That's what really should happen.
SEN. CANTWELL: I want to get it online when I want it. Right.
So I'm saying there is a combination--
MR. SIMON: But right now the horse is out of the barn door, and it's been out of the barn door for ten years and there are people who say, "Oh, you can't get back what you made free. It's never going to happen." I don't believe that because I work in television now and no American, for the first 30 years of television, paid anything for their rabbit ears. Now they pay $60, $70 a month for better content.
SEN. CANTWELL: But that's my point about the business model. I mean, technology shows over and over and over again the technology can be there one day, but sometimes it takes 25 to 30 years before the business models develop. That's how long sometimes the system--
MR. SIMON: Let me just say -- I'll end with this. In that window, the talent pool and the institutional memory that was, the journalism that we saw over the last 50 years, the modern American newspaper, is reaching out its palm.
SEN. CANTWELL: -- which is why I'm supportive of things to help it in the meantime. Mr. Moroney, on the anti-trust issue--
MR. MORONEY: Mr. Simon's exactly right. This horse is out of the barn for ten years. To try to bring it back one Website at a time, one daily newspaper Website at a time will not work. If the Dallas Morning News today put up a paid wall over its content, people would go to the Fort Worth Star Telegram to get a lot of information about what goes on in Dallas-Forth Worth, and if they put up a paid wall, they'd go to the AP and so forth and so on.
If we could have a limited anti-trust exemption to have conversations, and some of those conversations are not permitted even within the context of anti-trust today. If we start talking about pricing and so forth, we are in violation of laws. You can't even have that discussion. We need to be able to have that discussion with a limited exemption and then be able to take action and do it as quickly as possible because, differently than many of my colleagues here, time is not on our side with this, from the newspaper standpoint.
Yes, there's going to be a long evolution of how content gets consumed and how journalism gets done over time, but for those news rooms and those employees in those newsrooms of newspapers, time is not on our side. We need help in this way today.
SEN. CANTWELL: I know my time has expired, Mr. Chairman, so --
SEN. KERRY: That's all right. Go ahead. Take a little if you want to.
SEN. CANTWELL: Well, so you're saying about the specific information, like this example I just came up with of saying, you know, offering to your readership that you could have both an online and print.
MR. MORONEY: Sure, we could.
SEN. CANTWELL: But you're saying right now the competition--
MR. MORONEY: Because so much of our information is already out there for free. Because we are part of the AP, for instance, because there's a competitor in the marketplace, because there are other papers in Texas covering the state house, there's a lot of places to go today for free. If the newspaper industry acted in concert, there might be an opportunity then for all of us to have sort of our own intra-industry level playing field and then be able to go en masse as an industry to the Googles and so forth and say we want to be paid for consent to take our information, again not unlike what the broadcast television stations did with cable, to have retransmission consent.
If we do that as an industry, we have some clout. We have some leverage. If we do it a newspaper at a time, it just won't work.
SEN. CANTWELL: I'm not sure. I think brand counts for a lot. I think it's something you have. I think it's something Ms. Huffington is building and I think it's about, again, leaving an amount of time, but perhaps we can go to the --
SEN. KERRY: We'll come back to it. I want to continue this conversation because it's very important and one of the obvious questions is: how do you, if you did that, prevent an abuse of that conglomerated clout so that you don't squeeze out what massive numbers of people have come to believe is also their right, which is this ready access to what they want, where they want it, and how they get it, and there could be a very anachronistic consequence, which is you sort of go backwards and create a status quo that actually prevents our technologies and the open architecture and all the virtues of this in taking off.
We need to talk about that. Let me recognize Senator Pryor first.
SEN. PRYOR: Thank you, Mr. Chairman. Let me follow up, if I may, with Senator Cantwell and the chairman's questions and comments with you, Mr. Moroney, and if we're talking about an anti-trust exemption, I think you said it should be limited. Do you think it should be limited in scope and duration?
MR. MORONEY: I think both.
SEN. PRYOR: And tell me the limits on the scope. If you can articulate those today, that'd be great.
MR. MORONEY: Well, I wish I could tell you that I have had enough time to think this through and have a perfect solution, but I don't. I just know that if we could get together as an industry and have this conversation and if there were some limits around what that conversation or where it could go or what actual business model we could come up with, it would be better than what we have today, and something will definitely, in this case, be better than the nothing we have today, so I don't have an answer for you, but I'm confident there is one if we were given the opportunity to work together.
SEN. PRYOR: Mr. Coll, do you have any comments on that, on an anti-trust exemption?
MR. COLL: I don't really, Senator. Thank you for asking, though.
SEN. PRYOR: Let me ask if I can with you, Mr. Moroney, again staying with the issue of anti-trust and the Department of Justice and, you know, that legal realm that you have to deal with. As I understand it one of the questions that the journalists are asking about the industry is should we change the definition, have a more modern day definition about the advertising market. In other words, maybe back in the old days your newspaper basically just competed against other newspapers in advertising but in today's world you do have a lot of other entities out there on the Internet and otherwise that you are competing with, even maybe radio and TV.
I mean, we could talk about that as well, but tell me about if you think we should have a new definition for, you know, the advertising market.
MR. MORONEY: I do believe there should be one. Today newspapers are competing with all kinds of other media in the local market, more impression-based advertising. There's impression-based advertising with television, there's impression-based advertising with outdoor boards.
SEN. PRYOR: What do you mean by impression-based?
MR. MORONEY: Meaning someone is paying me a certain amount of money in order to put somebody's eyeballs in front of an ad that appears on some kind of media. Cost per thousand, cost per points, it's all the same idea, that for the number of people that are watching that commercial or that ad, there is a formula for paying them, and that's the basis today of most of the advertising revenue in traditional media. It's impression-based and that is the model that we initially took to the Internet to be paid on a CPM cost per thousand impressions basis, and then when you take local media and you put them online the technological distinctions, the technology that at one time distinguished television from newspapers from radio station has disappeared.
We're all playing with exactly the same technology and so now that marketplace is not only not just newspaper against newspaper; it's newspaper against all other local media and then 40 percent of the traffic to Dallas News. com comes from outside of the, you know, 26-county Dallas-Forth Worth DMA, so we are having audiences come in from, you know, not only all over the United States but all over the world, so this idea that there is a defined market for newspapers that is really geographic and newspaper against newspaper, I just don't believe holds in the world we live in today.
SEN. PRYOR: Let me ask this. If you know, in terms of changing that definition, does that require statute or who does that? Department of Justice do that -- (crosstalk) -- that issue?
SEN. MORONEY: Today I guess the FCC has defined at least in some ways--well, the Department of Justice, number one, and then there's, of course, FCC issues around cross-ownership, which I think all come out of that, DOJ statutes.
SEN. PRYOR: Okay. Mr. Chairman, that's really all I have. Thank you.
SEN. KERRY: Thank you very much, Senator. Senator Klobuchar.
SEN. KLOBUCHAR: Thank you very much.
SEN. KERRY: Newspaper stock.
SEN. KLOBUCHAR: Thank you very much, Mr. Chairman. It is true, to the panelists that my dad, well, he first was a reporter and then he was a columnist and now, at age 82, he's a blogger, so I've kind of seen the whole world and the distances in the world. He doesn't get paid as a blogger. And I will say he came up in sort of the golden times of journalism. He actually was writing for the AP and Minnesota was still out on the Kennedy presidential race and he wrote the story because he knew that the iron wrench of Minnesota would go for Kennedy and he called it for Kennedy and Kennedy won, and he came up at a different time.
And so, growing up I knew that he had a lot of exciting things he did, from interviewing Ronald Reagan to Ginger Rogers to Mike Ditka, and I saw that he was a witness to history and that he did a good job of it. And I also see that we still need that role in our society and I am still, despite I do read your blog, Ms. Huffington. I read it, in fact, two days ago, but I still don't see that we're going to get that and maybe -- you say we're in transition, Ms. Mayer, but I don't think we're going to get that quite yet from some of the blogs, and that's why I'm very concerned about what's going on in terms of the society.
I know that Senator McCaskill covered the issue that I was focused on, local coverage, and how important that is, the local courthouses, the local mayors and making sure that we have watchdogs over the activities of local government and I know we can set up these non-profits and do these things, but I am afraid we're going to lose that watchdog and that check if we don't figure this out. And so, I wanted to ask some questions just to follow up on what's going on. We know we're having an advertising decline, is that correct, Mr. Moroney?
MR. MORONEY: That's correct.
SEN. KLOBUCHAR: Of great proportions and do you see any hope for that, with the economy improving, for our newspapers?
MR. MORONEY: There is a cyclical dimension to it, but there is also a very secular dimension to it, so as this economy improves, which it will, there will be some rebounding back for that cyclical part of this downturn, but the secular issues, particularly in the classified advertising space, aren't going to turn around. They are secular and permanent.
SEN. KLOBUCHAR: And then many of the newspapers are in bankruptcy, the Star Tribune in Minnesota is in bankruptcy even though it's, I think, the tenth biggest newspaper for daily circulation, similar to what you've been talking about. The readers are there and do you think there's anything that can be done with bankruptcy proceedings? Anyone have any thoughts on that? I'm trying to look at every angle here.
MR. MORONEY: Well, I would say that there are some newspapers whose parent companies are in bankruptcy, but those newspapers themselves are still, as operating companies, profitable and it is the amount of debt that was taken on, the interest that has to be paid that has forced these companies into bankruptcy. And so if the creditors, which is not the purview of Congress, but if the creditors of these companies would be willing to reduce the debt, take a haircut on the debt that they have, these companies could come out and continue to operate at least for some period of time profitably, but, again, if advertising revenues are down 25, 30 percent this year, even those companies that were operating profitably in '08 may find it very difficult to be operating profitably in '09.
SEN. KLOBUCHAR: And then --
SEN. KERRY: I won't take this out of your time, but I just want to--what was the debt taken on for? Does that vary according to --
MR. MORONEY: Every different company has a different reason. Some were for consolidation purposes, some were for other reasons. That really would vary by company.
SEN. KERRY: Any sense of how much of it was taken on for the sort of bad judgments that Mr. Simon referred to earlier?
SEN. KLOBUCHAR: Oh, there's a good question.
MR. MORONEY: Senator, I don't. I can't speak to that.
SEN. KERRY: But you claim to be immune from that?
MR. MORONEY: Well, we have very, very little debt at the company that I work for and I'm grateful for that because it makes it easier for us to weather this storm, but as we reported first quarter earnings for our company, which has three newspapers, one not far from you, the Providence Journal and the Press Enterprise in Riverside, we lost money as a company, including all expenses, the operation of -- the Ibitda of the three newspapers -- had a margin of one percent in the first quarter, so just virtually break-even.
SEN. KERRY. Thanks, Senator. Appreciate it.
SEN. KLOBUCHAR: Good. Thank you. That almost was, Senator Kerry, was the question I decided not to ask Ms. Huffington that someone had gave me of what percentage of your blog is opinion and what percentage is factual? I think those are tough questions. Maybe you'd want to get at that.
MS. HUFFINGTON: I would love to answer it because, first of all, opinion is to be fact-based.
SEN. KLOBUCHAR: Mm-hmm.
MS. HUFFINGTON: So at The Huffington Post we put a tremendous premium on that. Our rule is that if there is any mistake that a blogger makes, they have 24 hours in which to withdraw it and correct it or their password is removed. We also have hired 30 common moderators who are working around the clock to make sure that we maintain a civil atmosphere on the site so that we don't have autonomy attacks, we don't have trials, and last month alone we had a million comments. So there is a lot we are doing to adopt what I said in my testimony, as the best parts of traditional journalism--accuracy, fact checking, fairness and making sure that there is a civil environment in the debate that ensues.
SEN. KLOBUCHAR: I just still think, and I think Mr. Ibargüen--did I say your name right? Maybe you can get at this with some other work. I know you've helped with MinnPost, which is a fairly successful. I think we have 1,300 subscribers. It's a Internet-based news in our state. But I just still don't understand how that is, on a national level, going to get to the kind of investigative reporting, and when my dad went undercover as a prison inmate for a week or when we have these intricate issues in our police department that people want to report on, I just don't know how that model can be brought down city by city, and if I could ask you that, please.
MR. IBARGUEN: Well, I suppose if I had the exact answer to that I'd be home clipping coupons, so I really don't, but it seems to me that MinnPost is very small compared to the Star Tribune at this point, but if you look at the trends and if you look at media usage and look at the increasing use of media, the younger the person the higher the likelihood is of using digital mobile media. I think you're kind of whistling past the graveyard to expect that that's not going to be the way of the future.
I think the focus ought to be on ensuring universal access. I think the focus ought to be on experimenting with things with organizations like MinnPost so that, I don't know, a year, five years, ten years from now those organizations will have developed the expertise to do the kind of reporting that you so want.
SEN. KLOBUCHAR: Senator Kerry, I'm going to come back if you could--this is what happens when you're the single senator. I have a call with our governor, but I will return. You're literally doing two things all the time. All right? Thank you.
SEN. KERRY: Amy Klobuchar never misses an opportunity to say we need Al Franken here. Let me if I can, first of all, you all have been terrific, but I want to get you to dig in a little more if you can, so I enjoy doing these as roundtables, to be honest with you, and I've done that a lot on the Foreign Relations Committee lately, so I'd love you to think if you want to interact a little bit and ask each other a question and sort of rebut and come back, I think it would engage us a little bit in some of the real issues here that are on your mind because I'm confident, when you get into a little private conversation outside of here you're going to be a little more adamant about your side, what you need, what's missing, and I'd like to have a little of that take place here if we can so we can, you know, to that end, let me just sort of ask something that I think is at the center of this.
Google's relationship with the content providers, sort of what I'm hearing, obviously from you, Ms. Huffington, is that this is exciting and that this is the new frontier of journalism, and I agree with you. I think it is. This is an enormous transformation taking place and actually you are correct. I mean, I wanted to signal that when you say it's early, obviously it's not for those who are really feeling the pressure right now, but in terms of the evolution of what we're going through right now, I understand that. I don't think any of us can sit here today and absolutely predict what shape this is going to take completely, but part of that is going to depend, folks, on how this intellectual property right is either respected or not and how we sort of do wind up fairly sharing the cost of providing this news content that people are getting.
Let me give you an example. It's my understanding that you, as an aggregator, you pull together, let's say for today's hearing, somebody went in and they pulled in senate newspaper hearing. I think some 134 different articles came up. If we chose to go to those articles, each hit that we go to you're going to get something like 40 cents, as I understand it. You can correct me if I'm wrong or you get something out of that, but for the single hit for the article that we go to, the provider of that article, the people who put together the intellectual content of that, wind up getting only for the one time that it went to their particular article or not, so you might get ten to their one for something that they have produced. Is that accurate? Is that fair?
MS. MAYER: That's not quite right, so since I'm handling a few of the different products that are in play here. There's Google Web search which is our general search where you might get blogs, red pages, news stories, videos. There's Google News where people go to search for and view news stories and then there's the actual publisher's site where Google Ad Sense can run and there's other competitive alternatives there.
And the purposes that users have when they go to those sites is different. So, for example, someone, say, typing in "Portuguese Water Dog" on Google's main search may want to see a video of it; they may want to buy one; or they might want to read the news. On Google News, we know they want to go and read the news. It's possible that after reading several stories, that they keep coming back, clicking on a result and coming back; they may ultimately click on an ad for a Portuguese water dog. Then the argument can easily be made that same advertisement on the publisher's site, where you see the full story, you see the full picture, that the ads tend to perform better there.
SEN. KERRY: Help us to understand who gets paid where, how?
MS. MAYER: Sure. So on the publisher's site, the publisher gets paid. On our site, if you click on, say, an ad on news or an ad on Google Web Search, we get paid. There are many searches that are done, though, where there is not a click on an advertisement because the user intent is different.
SEN. KERRY: Is it only on the click-on of the ad that there's any kind of registration on payment?
MS. MAYER: That's right.
SEN. KERRY: Only on the click-on of the ads? So if you simply go through you as the aggregator, they have simply been directed to the site of the host.
MS. MAYER: That's right.
SEN. KERRY: And, in effect, they're then using the host content. Now what would happen to you if there was this limited antitrust exemption, limited in time, scope, duration, but which allowed them to at least get to the table to have some kind of negotiation to see if you could get the horse into a barn without becoming restrictive?
Arianna, I'm particularly interested in your reaction to this. I mean, I don't want to see us do anything that hurts the openness and innovation and sort of the creativity which has taken place. I think in many ways people have greater access because they can go anywhere and choose and there's a freedom in that and so forth. We can make a lot of arguments about that.
But the folks putting together -- Mr. Simon is correct and Mr. Moroney is correct -- the folks who have got this huge newsroom investment which provides a lot of local accountability -- which we don't want to lose -- is being driven out of it because they're losing their revenue base from forces out of their control.
Help us with that.
MS. HUFFINGTON: Well, but first of all, Senator Kerry, they are not losing their revenue base because of the Internet. They are losing their revenue base because of Craig's List, because the advertising is down, because of the economic crisis, and because of the changes in consumer habits. They are not losing it because of other aggregators.
In fact, we are getting hundreds of requests every week from newspapers to link to them and I'm sure they love being linked to from Google because it drives a lot of traffic.
SEN. KERRY: Is there a greater synergy that could be found between you in this? I mean, I agree with that. I don't think they are losing -- yeah, any number of things, EBay, Internet Yellow Pages. I mean, there are other ways in which people are losing them but it's mostly because there are quicker, easier, simpler ways people are choosing to get information. We don't want to do anything to tamp that down -- that's healthy.
But with respect to their content, you're dependent, in effect, on some of their content. Won't you do better in the long run if you help keep that content capacity alive?
MS. HUFFINGTON: Well, absolutely. We want to see the content capacity expanded in multiple ways. We don't want to just survive; we want it to expand.
It is my understanding that Rupert Murdoch is already taking the lead in having a lot of these conversations among different content providers about how to be able to make agreements of the kind that Mr. Moroney was talking about. Nobody at the moment is prohibiting content providers to have these conversations -- which are ongoing.
SEN. KERRY: Would you find it onerous, Google and Huffington Post or anybody else, would you find it onerous to be in a position where you have to sit down with them as an aggregate and negotiate out something where they're more able to provide this content on a sustained basis -- or would you find that would be an interruption in the marketplace that sort of disrupts where this ought to go on its own?
MS. MAYER: We think that journalism is very important and that we need to find business models that can sustain it -- because it is very important to our users. So we would welcome something that makes the business model more robust.
I think the real issue that I see is that in the print newspapers, the advertisements weren't' intrinsic to the product. The classifieds could be segmented off. When you look at online, advertisements tend to be much more integrated; they're much more relevant; they're targeted; they're measurable. That ultimately holds a great potential to increase the value of those advertisements because people can tell exactly what they're getting from it.
I think the other piece that's been missing in this discussion is around fair use. All newspapers and all publishers right now tend to opt out of aggregation. There are standard industry practices; fields that you can put into place to say, please don't collect my content. It is true, though, that most newspapers, in fact, prefer the distribution. The distribution is better for them; it's also better for users. I would argue that it's much more powerful to read the article from a paper in Texas, where in the actual community where someone died of the swine flu, than actually reading one of the duplicate articles down the line.
So that amazing distribution that comes through the Internet and through inclusion in aggregators is very powerful and I think we need to find a way to sustain that as well.
SEN. KERRY: Yes, Mr. Simon?
MR. SIMON: There's an equivocation here in terms of what the existing revenue stream is for newspapers and why it's diminishing and what the potential revenue stream is -- and that's the problem in some of these discussions. Yes, advertising is gong down and it may not come back to the degree it ever did. Craig's List certainly seems to have a permanence that's dramatic and fundamental.
What was the problem for newspapers perceiving the Internet at the key moment was that you have to understand the culture of newspapers. Circulation for the entire modern run of the American newspaper was a cost center. It cost money -- it cost more than they got from your circulation dollars to get the paper to your doorstep. So with every new circulation, they were making no money -- all the revenue stream is in advertising.
That might have stayed the same and that might have made newspapers indifferent to the idea of content an pricing content and receiving remuneration for content -- except we've entered this brave new world. Now the only chance, I would argue, that newspapers have is to retain their content -- and I will give you what I imagine to be the only viable solution for a regional news product in my town. And when I say newspaper, by the way, I mean online. I don't think we're going to be cutting down trees very much longer.
But if the Baltimore Sun were able to charge $10 a month and you could only know what happens in the region in Baltimore by subscribing for $10 a month, that's $10 a month of pure profit -- no trucks, no newsprint, no delivery cost. That is a new revenue stream that might be able to support a metro desk of 40 reporters, 50 reporters and give them benefits and let their families live in houses with mortgages.
I mean, the wanton destruction of the source of all this news that the aggregators are enjoying is, in a way, self-defeating. But I think for the last 20 years we've seen that people -- if there's a short term profit to be made, somebody will figure out how to make it at the expense of the actual industry.
SEN. KERRY: What do you say to that, Ms. Huffington?
MS. HUFFINGTON: Senator Kerry, yeah, I was not around when the printing press was invented, but if I were around, I would imagine that the people dealing with stone tablets would be making a similar argument -- saying, if you just left us alone and just forgot about that printing press, we could really charge you for that.
I think the argument that the Baltimore Sun could charge for content that would only be available to those paying subscriptions to the Baltimore Sun seems to me so antiquated; it seems to fly in the face of all the consumer habits.
As Eric Schmidt, the CEO of Google, said during a recent speech --
SEN. KERRY: Let me interrupt you there for one minute. It's a product.
MR. SIMON: Yes.
SEN. KERRY: It's created by somebody. It's an intellectual property, which we recognize as having a value, correct?
MS. HUFFINGTON: Absolutely.
SEN. KERRY: Why do they not have a right -- why is it antiquated to believe they have a right to be paid for their product?
MS. HUFFINGTON: No, no, no. The fact that they wish that was the case is not antiquated; the fact that this cannot happen is antiquated because that's not how people are consuming news.
SEN. KERRY: No, is it that it cannot happen because they have decided to provide it free and you can't put the horse back into the barn or is it because it can't happen anyway, no matter what our rules were? For instance, if you sat down -- you said a moment ago, Ms. Mayer, that you were prepared. I think you were saying that it's important to have these folks capable of doing this. They're not going to be capable of doing this if they can't have a revenue stream that comes to them directly for doing it.
Do you agree with that or not?
MS. MAYER: No, because I think it's a false dichotomy. I think you could say, well, with the product we have today it's not working. But you could try and preserve the business model as it exists today or you could attempt to change the product in a way that maintains the core of what's wonderful about journalism -- but ultimately becomes more engaged and adapt online, generating more demand.
SEN. KERRY: Look, I'm an old prosecutor too, as Claire McCaskill was. I remember those reporters sniffing around the DA's office and the courthouse and, man, they held people accountable and they got stories and they did everything else. Is that going to happen?
MS. MAYER: I think it can but it does mean -- and actually some of what's going on I think right now in the newspaper industry isn't about the actual act of journalism, it's about in the structure of the product and the way that it's delivered, right?
For example, when a new update comes into play, do you publish a whole new web page with one new sentence and five paragraphs that someone read yesterday, where they're going to look at the article and say, "well, I've already read that?" When you get to the bottom of an article -- it's interesting. In the print version, when you finish an article, there's 10 other articles in view, any one of which you could begin. When you get to the bottom of an article online, often it's the static version of what's printed in the paper and there's nowhere else to do things.
That's not the way online works, right? When you buy something on Amazon, there's products you can buy. When you watch a video on YouTube, there's other videos you can watch. When you finish reading an article online, what should you do next? A lot of the web sites will just say, well, you can leave a comment. And there's really no other link in view; there's no concept of what to do next if you want to engage and inform.
If we can come up with a product that can increase engagement, increase engagement the way social networks have, for example, ultimately there will be a lot of demand for the product.
SEN. KERRY: I think everybody's all for doing that, but you still have the initial question -- I mean, that's after you've read their product. You've still got to get their product in order to get there.
MR. MORONEY: Senator, DallasNews.com doesn't put up PDF pages and attract 50 million page views a month from six million unique users who are web savvy. I think Ms. Mayer may have an antiquated view of what newspaper web sites are doing -- we're doing very many of the things that she's talking about. We want to link in; we want to link out. We want to provide more context and analysis from other sources. We're not against that whatsoever.
The problem is with that model today, for about 60 percent of the inventory we generate is monetized at 40 cents a thousand. I can't make a living 40 cents a thousand; it's a million dollars a year to The Dallas Morning News -- that's 1/30th of the cost of my newsroom. So what I would--
SEN. KERRY: What would you need to be able to do that?
MR. MORONEY: Well, I mean, multiply the number up. I guess I have to have 30 times 50, so about, I don't know, what is that, 1.5 billion page views a month and that isn't going to happen for DallasNews.com. We don't want to pull out of the digital ecosystem. We're not against what Ms. Huffington does and we're certainly not against what Google does -- we just simply want to have a fair compensation for the content that we publish that becomes available digitally for other people to use in what ways they want to use it.
We're not getting paid fairly for that across our industry. I think you're exactly right, Senator, I agree with you and I think they're going to argue they should want my $30 million worth of investment in news resources to continue to be at $30 million or more because I provide the kind of content that helps drive traffic to Google for Google Ad Sense to monetize or to Ms. Huffington's web site and so forth.
In one way, I do believe we have a mutual interest in this; we may just have a different way of how we need to go about it.
MS. HUFFINGTON: Absolutely we have a mutual interest. What I had begun to say is that Eric Schmidt, the CEO of Google -- and, Marissa, you can talk to that more -- has already begun to speak about an application that Google is developing which will actually help newspapers because it will be able to identify subscribers and what they want and what their tastes are in a much more granular, directed way -- which will be easier and more effective to monetize.
Marissa, I don't know if you want to address that any further; I know that it's not available yet but I understand it will be available pretty soon.
One more thing, which is there is really two different ways to approach that, Senator Kerry; one is the way Times Select did, which did not work, when they put specific content behind walls and they had to acknowledge that it did not work and they put the walls down. Or, what The New York Times is considering doing now with the new Kindle, that, as you mentioned, was announced today. They're considering getting new subscribers to buy at a much reduced rate a new Kindle on which they can read the newspaper and then, in exchange, also get a long-term subscription to the newspaper.
So there are a lot of mainly innovative ideas like that, that newspapers need to experiment with instead of coming here and asking for antitrust legislation in order to protect their legacy business.
MR. MORONEY: Senator, the Kindle, which I think is a marvelous device, the best deal that Amazon will give The Dallas Morning News -- and we've negotiated this up to the last two weeks -- they want 70 percent of the subscription revenue -- I get 30 percent, they get 70 percent. On top of that, they have said, "we get the right to republish your intellectual property, anything you do, to any portable device." Now is that a business model that's going to work for newspapers? I get 30 percent of the subscription price and they get the right to license my content to any portable device -- not just ones made by Amazon?
That, to me, is not a model. Now maybe what Plastic Logic comes up with or what Hearst comes up with E Inc., might provide a good model. But, today, Kindle's are less than one percent penetration in the U.S. market; they're not a platform that's going to save newspapers in the near term.
MR. SIMON: I would also like to speak to the Times Select experiment. I think that actually points out the need for the entire industry to have an open discussion about content and copyright. What it showed was that the Times, acting alone without The Washington Post, without other competitors, could not go it alone. Furthermore --
SEN. KERRY: People simply went elsewhere for the --
MR. SIMON: Right. Unless everybody looks upon this as -- unless the news has value; unless it is a product and unless it's treated as a product and unless it's treated as an intellectual property, it's over -- this thing is over, this is all over but the shouting.
SEN. KERRY: Senator Klobuchar, we interrupted your session there for a moment and then we'll go to Senator Nelson.
SEN. KLOBUCHAR: Thank you very much, Mr. Chairman, thank you again.
Before I left, we were talking about at least the steps that we can take. We have the ad issue, which maybe could improve some as the economy improves; the bankruptcy issue, it didn't seem like anyone thought there was much to do there. Senator Kerry has been exploring this idea of how the newspapers get paid for content.
I just wanted to go back to the antitrust one just for one minute because I know that Speaker Pelosi has written a letter urging the Attorney General to take a broader view of newspaper competition.
Again, I know we went over this a little but there's this issue of the competitors and viewing that differently obviously.
But I want to get a sense of how this would help you vis-a-vis if you talk about your negotiations, Mr. Moroney, for The Dallas News as you're trying to negotiate something where you're getting paid for your work of your reporters.
How would that change this if there was some change in the antitrust exemption?
MR. MORONEY: Well, again, there's two things: one, if the industry can come together, there's a whole different discussion that is had with aggregators as large as Google and even smaller. For instance, I'm quite confident that somehow we can go to Kindle and strike a deal. I could strike a deal better than 70 percent of the revenue going to kindle if we all acted together. But as a single newspaper in a single town in the United States, I don't have any leverage of a company as large as Amazon. So those--
SEN. KLOBUCHAR: Right now you're prohibited from talking to newspapers in what way?
MR. MORONEY: Well, I mean, we can't come together and talk about pricing, for instance. I couldn't get together with other newspapers and say, "let's go to Kindle and talk about what kind of price we want from them -- what kind of share we would like to have together." We're prohibited from doing that, understandably, the way markets have been regulated over time.
But I think some limited exemption for the industry to come together for a period of time could allow us to really find out what Mr. Simon has been talking about, which is: what is the value of this content that we did, let out of the barn, it's out there for free? Could we get back control of it as an industry and determine what the value of our intellectual property is?
SEN. KLOBUCHAR: And, Ms. Huffington, you talked about, oh; you don't want to go back in the way-back machine. It sounds like Mr. Moroney is struggling to go forward; he wants to try to do something differently by working with the other newspapers to get some leverage.
Do you have a problem with that?
MS. HUFFINGTON: No, but it is my understanding that newspapers are already having these conversations. I mean, that's what I've been told by Rupert Murdoch himself, that these conversations are ongoing and that--
SEN. KLOBURCHAR: Do you want to finish? Mr. Simon was nodding his head, no, and I'm curious.
MS. HUFFINGTON: There are definitely ongoing conversations and nothing prevents or should prevent that.
MR. MORONEY: Those conversations are so limited in scope, we really can't come to some sort of business model, describe it, and then go forward with trying to enact it. So--
MR. SIMON: My understanding is Mr. Murdoch is talking to his own people within his own institutions and he has been floating a few balloons over to the other side -- but there can be no conversation. The problem is the industry has been unable to protect the sanctity of its copyright admits product by talking to each other and by deciding what to do about new media.
SEN. KLOBUCHAR: So the trial balloons get out there but you can't actually have the leverage of--
MR. SIMON: He already says, when you negotiate individually, as the Dallas paper, as the Des Moines papers, as the Minnesota papers--
SEN. KERRY: How many aggregators would you have to negotiate with?
MR. MORONEY: Well, I assume you'd start with Google and AOL and Yahoo! to begin with and you would probably go to Amazon and some of the other e-reader developers. I have to think more through it but that would be a good start.
SEN. KLOBUCHAR: Mr. Coll, do you want to comment? You've been kind of quiet over there -- on this idea of negotiation and the antitrust exemption that--
MR. COLL: I honestly don't have a view about the antitrust exemption but I would offer a little bit of historical perspective about the newspaper industry's collective efforts to deal with the rise of the Internet. I was present at some of that when I was managing editor of The Washington Post between 1998 and 2005.
The industry did attempt to collaborate to defend classified advertising through classified ventures online; it did, through the AP cooperative, wrestle with the challenge of the rise of online news and it failed. It failed again and again to anticipate and to manage the challenge of the Worldwide Web.
It was very frustrating in those early years to argue that the AP, for example, should be careful about selling proprietary content by its cooperative members for subscription to rising online publishers without considering what this might do to the business model.
So I have no objection if the newspaper industry is finally able to corral the intellectual property that it managed so poorly, in my opinion, during those years. But I'm not optimistic that this is going to provide the solution to the question that you've been asking and Senator McCaskill and Senator Kerry earlier which I think is critical -- which is, where is the public interest in this crisis? The public interest is not located in the business competition between big well-funded corporations. The public interest is located in the reporting on public matters -- on government, on private power, on public institutions, on international affairs, particularly at the local level.
And we're in a period of transition. While I don't share Ms. Huffington's optimism about citizen journalism and fact-based opinion, I applaud her innovation and I hope that she proves me wrong. We're in a period of experimentation, a period of transition.
The question is: how do you protect the public interest during this transition? I think you've surfaced a lot of possibilities. I think there is a kind of civic marketplace function, as well as an actual marketplace function, that will sort out some of the answers over the next five to 10 years.
But I just wanted to add one element to the discussion about how you get those reporters into the police stations and how you get them into the zoning hearings and watching the mayors and the governments that are administering public trust over the next five, 10, to 15 years.
We have an infrastructure in this country in public broadcasting that is embedded in every one of these communities. Now, no single solution is the answer, but in the mix of solutions that include small experiments funded by foundations like MinnPost and Voice of San Diego, which are terrific and important and I hope they flourish -- and Huffington Post investments and investigative reporting, I applaud them, I hope they flourish. But we already have a nationally distributed public broadcasting infrastructure that could be revitalized and adapted to send reporters down to local and state government and sustain some of the civil service-modeled professional reporting -- that is what we all think we're in danger of losing, which is where public interest lies.
So I wanted just to add that thought in. It complements, in my view, all of these other approaches but its absence in the discourse worries me because I do think it's an opportunity where the wiring is already there. You just have to go to work on reform and revitalization.
SEN. KLOBUCHAR: Okay, last word for you, Mr. Simon.
MR. SIMON: I would also like to second that and this is where I'm going to have to part company with Mr. Moroney. I have no faith that if a new revenue stream were established and newspapers began to thrive again, that the chain journalism that was not locally-based, that was not committed within the communities that it was covering, that was basically a creature of Wall Street and of the profit margin -- I have no faith that new revenue stream would not be cannibalized into CEO salaries and the price per share. It would not be transformed into new reporters, new hires, and better coverage.
The reason we all pay $50 - $60 a month now for our television, which used to be free, is that the content expanded and became more complex and more sophisticated. We're willing to lay out money for something which was free for 30 years.
Newspapers actually shrunk prior to the arrival of the Internet and they did so because they were not nonprofit. The public interest, in their essence, was not the priority. So I am absolutely with Mr. Coll on this. To the extent that the nonprofit model can be brought to bear, that probably is the only future that's going to get you there.
SEN. KERRY: Senator Nelson.
SEN. BILL NELSON (D-FL): Thank you, Mr. Chairman, and thank you for having this hearing. I apologize for being late. I've been in a highly classified hearing which I had to chair and I apologize to the panel and thank you for your contributions.
Particularly I think that what is in the public interest is to have unfettered freedom of the press and all that brings to a democracy. Since I have here in front of us not only one of my personal friends but one of, I think, the most sage observers of America and its trends, I want to posit a situation where we will be in 10 years.
You tell me, Mr. Ibarguen, whether or not you think that the public interest will be served. We will have only a few newspapers that are actually printed in 10 years -- perhaps one like The New York Times. It will also be online and it will be charged online. Local newspapers printed will be a thing of the past and they will be online versions.
How they will be financed I can't say at this point. But in addition to the local newspaper, which may have gone out of business or may have a remnant of an online version, there will be other local venues that will come up online offering news.
This diminished capacity will lessen the number of students in journalism school. The entertainment kind of news will continue to proliferate on the cable television stations.
Is that where we're going to be in 10 years?
MR. IBARGUEN: Well, first of all, I'm flattered by your recognition of our friendship. I don't accept the mantle of wise man, however. I appreciate it.
I don't know, Senator, where we are in 10 years but in the scenario that you've described, I don't think we're better off. I'm not sure that's the scenario that we actually get to, though. The discussion that we've had today -- and I think Steve and I have not participated in it because it's been a discussion about the preservation of a business.
I think the thrust of our presentation here today was to suggest to the committee that an appropriate Congressional activity ought to be looking forward. And that's said with some pain because, as a former publisher, I lived through many of the things that have been described here.
But I go back to what I said before: if the fans don't want to come to the ballpark, nobody can stop them. I think there is inevitability about the use of digital media, that the kind of focus that we've had on the existing business of newspapers honestly doesn't seem to me to be very productive. I do agree that there should be inquiry into whether you can preserve the intellectual property. I think whatever you can do to extend the life of these organizations -- meaning, the newsroom -- I think is probably a good thing.
But I don't think that's where we're going and I think in 10 years I think this is going to feel like a reasonably anachronistic kind of conversation. I think we need to look at enabling all Americans to have access. I think we need to look at figuring out what the models are going to be on the new media that are going to be able to pay for the kind of journalism that we'll require. Maybe, as I listen to Mr. Moroney, maybe it is so that you need to allow newspapers to negotiate all together or at least to negotiate -- I guess, the first you'd have to do is to get the AP not to sell the content which they've been doing for quite a long time in representation of their members who are all newspapers.
But, I don't know even if you did something like that, how you then answer Mr. Simon's concern about local because in the end, maybe not Mr. Moroney's company, but certainly the other publicly-held companies are accountable to institutional shareholders. They're not accountable -- never mind to the original families that may have started them -- the pressure is from institutional shareholders who not only don't care but cannot care. They have a different kind of responsibility.
In a very local operation, you have a different view of your responsibility to the community and that's actually one of the reasons why I said in my statement I thought the idea -- I don't know that it's necessarily non-profit, maybe it should be some sort of hybrid -- but the idea of a local mission-driven organization that is community based, that is dedicated to that community first and to profits second has, it seems to me, a great deal of appeal. But, I don't think that's necessarily going to happen by some of the things that we've heard today. I wish I could tell you a quick answer to a 10 year scenario, but I don't think that a scenario based on watching cable reruns is a really good civic model.
SEN. BILL NELSON (D-FL): And if you had that local model dedicated to the news then presumably you would have the resources to do investigative journalism at the local level.
MR. IBARGUEN: Well, and that's the big presumption. I don't know that you can make that presumption. I don't know how you turn -- I remember telling when I was publisher of the Miami Herald asking the fellow who was the head of Comcast for South Florida and I told him I think what I need to figure out is how I become a utility just like you have. If you could figure that out -- I don't know if you have -- but if you could figure that out, then that would provide a way of paying for these things.
I mean, Macy's and classified advertisers didn't particularly care -- I shouldn't use any brand name -- but department stores and classified advertisers were not especially interested in our foreign bureaus and Latin America. They paid because they got value. When they stopped getting value or when they got better value or more efficient value someplace else, they moved someplace else. So, I don't think you can assume that they would necessarily continue with the paper. But, if you could make -- if you could combine it in some fashion so that there is the feeling of a utility, like a cable operation, then you'd have enough revenue in general to support it. The Washington Post is famously able to do a lot of what they do because of Kaplan educational services, a different kind of business that throws off a lot of money within the same company.
SEN. NELSON: May I say, Mr. Chairman, just in conclusion and thank you, again, for being visionary yourself and holding a hearing like this. I, as an observer, to see this thing fast-changing in front of our eyes on a daily basis, I get so concerned because I see local newspapers that are becoming thinner and thinner and thinner and as a result, to attract readers, get more sensationalistic in their reporting, as opposed to what we think of as gumshoe investigative reporting.
Likewise, you and I most often each night don't get home until quarter of 8:00, 8:00, and I want to turn on the TV --
SEN. KERRY: Why do you get home so early? (Laughter).
SEN. NELSON: -- and I want to get a quick summary of the news because we've been doing this all day and I turn it on and it's a bunch of shouting at each other on the cables and I literally have gotten a fit. I turn it off. And I don't think this is serving. If it's having a negative reaction in me, someone who absolutely lives on this stuff, then just think what it's doing to the casual observer. Thank you, Mr. Chairman.
SEN. KERRY: Well, thank you for that observation, Senator. I agree with you completely, I think. Before we wrap up here let me just ask a couple quick questions and then we will wrap up. You've all been very, very patient. It's been a long hearing.
Mr. Ibarguen and then Mr. Coll, I want to make sure you leave us with your sense of what the priorities are that you think the committee rightfully might consider here that would make a difference. What has come out to each of you in terms of looking to the future and preserving the larger interest that you've expressed? Mr. Coll?
MR. STEVE COLL: Well, I think the totality of the questions and the discussion has answered that important question by describing where the priorities lay. They lay in creating pathways to sustain independent, public-minded reporting, particularly at the local and municipal level, but also at the state level, and with, also, cognizance of the potential loss of American-generate reporting from abroad at a time that the United States is making large and risky investments around the world.
So, that's the mission and I think the other thing that's come out from the hearing in totality, is that there's no one way there. It's going to have to be all in, including trying to facilitate the kind of innovation in entrepreneurship that's represented at the table, including reviewing every instrument that's available to preserve the newsrooms that are contracting (ad ?) newspapers, primarily; creating support for philanthropic innovation of the sort that the Knight Foundation represents. But also, I think, taking a hard look at the infrastructure that already exists with the public service mission and not just accepting its role, but looking to reform and revitalize it purposefully with this set of priorities in mind. And I think that may take some time to get it right, but there is an opportunity that could have a lasting impact on a whole generation of American public life there, I believe.
SEN. KERRY: I would agree with that. Mr. Ibarguen?
MR. IBARGUEN: Well, I would second what Steve just said. This is a time for experimentation and to the extent that government through intermediaries -- because you don't want to be in the position of being the direct funder, I think, for first amendment kinds of reasons -- but government supporting innovation, government promoting the evolution of public media 2.0 and absolutely pushing as hard as possible for universal digital access -- affordable digital access for all Americans.
All that said, I think the discussion today, which is primarily about the newspaper businesses, shows how difficult it really is, but I think it's worthy of your attention.
I think if you could actually cause to hap -- I don't know whether the lunch that you seem to be setting up between Google and newspapers is actually where it's going to happen -- but I think if you could cause those two forces to come together in a way that allows for the preservation of the kind of journalism, I think, that we all respect, I think that would be a very good thing.
SEN. KERRY: Ms. Huffington.
MS. ARIANNA HUFFINGTON: Senator Kerry, first of all I would say that since there was so much emphasis today on local coverage and it's really urgently important to look at the facts that 27 states no longer have a reporter covering the Congressional delegation here and updating the credentialing process I would say is really important. And we heard here about a lot of good work being done by sites like Voice of Santiago and Meapul (ph), but under the current credentialing rules, would not be allowed to have someone here.
And one last thing. I really appreciated Mr. Coll's distinction between newspapers surviving as a business and the public good because these are two very different concerns. And I can completely empathize with newspapers wanting to survive as a business, but I don't think that's where the government needs to come in, especially since we -- if you look at, for example, the latest earnings report by the New York Times, you see that while they've asked the guild to take a five percent cut, while they demanded that columnists would not belong in the guild, take a five percent cut, which they've already taken, they have given bonuses to senior management of the kind that is very offensive to those who claim that it's all about reporters producing content.
And, that is related also to the other problem of contemporary journalism, which is how much has been driven by access, which is why I would love to provide you with a list of sites that are covering the economic meltdown in a way that is very important, very significant, which are not attached to newspapers, but which don't have to deal with the problems that come with access, which often means that business magazines and newspapers that cover Wall Street, have not been as good either at predicting the meltdown or at covering right now what is happening.
SEN. KERRY: Well said and I think it's a good segue into closing out the hearing in this way: I said at the opening of the hearing that we came here, you know, without a specific sort of legislative agenda, but with an agenda with respect to our responsibilities to the country in terms of our oversight of television, obviously, broadcast, but also print media and the rules we have made with respect to cross- ownership and other things.
And all of those things happen for the simple reason that we have always guarded the -- not just the first amendment rights which you alluded to earlier -- but the criticality, the importance of the free flow of information, people being able to hold us accountable, corporations, special interests, others -- processes accountable only to the degree that there's sunshine and sunlight on it. And, I quoted Paul Starr in his Columbia Journalism Review at the beginning, about how newspapers have always been the eyes on the state and the check into our lives.
Now that -- let me emphasize, and I think Ms. Huffington just said this, we certainly don't have a right to come here and have some vested interest in keeping a newspaper, per se, as a business alive because that's they way it's always been. And we have to not think about this locked into a pattern of thinking because that's the way it's always been.
Life changes and the market place changes. Business models change. And we're seeing that with enormous upheaval and green energy and alternative energy and different demands on automobiles. Detroit, what's taking place, not to mention what we've gone through in the last 25 years with globalization and the transformation of the market place.
I suspect this is probably no different, in a lot of ways, but I want to guarantee that it doesn't leave behind that precious difference that we have in our country from almost every other place on the planet and that is that unbelievable ability of a couple of beat reporters on Police Beat in Washington to hold the president of the United States accountable for a crime. That was local reporting that translated into something national.
Now, that is not to say that you're not going to fill this void and I think that we have to be very, very careful here not to get involved in a way that, you know, we've always had this winners and losers debate around here. We have to be very careful that whatever we decide to do, if anything, is strictly in keeping with this larger public interest. That's what brings us to the table.
Americans are increasingly -- have more information available, but it doesn't mean that they're processing it or that they actually access it all or that it becomes part of our national dialogue. And I think this is an increasing challenge to all of us. It is harder and harder to build consensus around any issue in this country. And it is harder and harder to separate fact from opinionated something and so forth. And there are less (entities ?) to create accountability nowadays for whatever reasons. Hopefully, this transformation is going to see that emerge and it may be that there'll be a (core ?), citizen reporters and other kinds of ways and means by which that's going to happen.
I don't see it yet, I will tell you. I see a cacophony without standards and a conglomeration of different sources, but I see more and more people operating in public life with snippets and I think that's dangerous. I don't have a complete answer to it, but I think it's dangerous, and we got to think about where and how this plays out.
Some of which appearing is very partisan and some of the sites attract people by virtue of their partisanship, not by virtue of their provision of neutral -- (inaudible) -- news or people. I suppose any entity has its biases and people draw their distinctions and they learn how to do that, but some of them are very clearly in one place or another and the only people that go to them are people who already have that affinity.
So, we need to encourage -- you know, we want to have a standard, we want the professionalism, we want experience, we want all those virtues to somehow rise to the surface in this process. It may well be that Ms. Huffington has created the new model and that as it grows, it's going to provide more of this standard and more of these professionals and more of a, sort of, structure as we've known it. I don't know the answer to that, but this is worth our sort of thinking through more.
This is a first conversation, the first brush with it all and I hope it elicits further commentary from people and input. We're going to keep the record of the committee open for a week for the purpose of other colleagues being able to submit questions if they want to and I think we will absolutely continue the conversation with the rules committee with respect to the accreditation. I think that's a very important way to augment this accountability, certainly in terms of national scene.
We still need to think about what's going to happen and how we're going to fund and how we're going to keep what happens in states and in localities, because I think it's going to take a while for this new model to fill that and in two, three, 10 years, who know what happens in that vacuum. I hope Mr. Simon isn't correct. I hope that it's an opportunity for various efforts, but we'll see what happens. Does anybody want to ask anybody here on the panel anything or say anything that was unsaid at this point? I think we've had a good discussion.
We thank you very much for joining us today and we stand adjourned.