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Hearing of The Courts And Competition Policy Subcommittee Of The House Judiciary Commitee - A New Age For Newspapers: Diversity Of Voices, Competition And The Internet

Chaired By: Rep. Henry Hank Johnson

Witnesses Pael I: Carl Shapiro, Deputy Assistant Attorney General For Electronics, Antitust Division, U.S. Department Of Justice, Washington D.C.; Panel II: Brian Tierney, Chief Executive Officer, Philadelphia Media Holdings, Philadelphia, Pennsylvania; John Nichols, American Journalist, Madison, Wisconsin; Bernie Lunzer, President, The Newspaper Guild, Washington D.C.; Den Scott, Policy Director, Free Press, Washington, D.C.; Edwin Baker, Nicholas F. Gallicchio Professor, University Of Pennsylvania, Philadelphia, Pennsylvania; Dan Gainor, Director, Business And Media Institute, Alexandria, Virginia

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REP. JOHNSON: This will -- this is the hearing on the Committee on the Judiciary, the Subcommittee on Courts and Competition Policy. And this meeting will now come to order.

Without objection, the chair will be authorized to declare a recess of the hearing and I will now recognize myself for a short statement.

The newspaper industry is facing hard times. Newspapers report losing millions of dollars a week and clearly this is an unsustainable situation. So as a result it is nearly impossible to open a newspaper, turn on cable news, or even go online without reading about another newspaper threatened with the closure of its doors forever.

A key contributor to this phenomenon is the ongoing reduction in advertising revenue. Advertising revenue, which was once the life blood of the newspaper industry, has decreased by 25 percent last year alone. And over the last 15 years, public preference for news consumption has dramatically shifted from print media to online sources.

And in that time, online readership has grown from essentially zero to 63.2 million people. This has contributed to a vicious cycle as readership declines and newspapers earn less in advertising revenue, which results in less content, which results in fewer reading -- excuse me, fewer readers, and on and on, no end -- it's infinite.

And so most would agree, however, that online news is not a complete substitution for print media. Because of the digital divide not everyone has access to the Internet or the news online. As print media disappears and content is moved online, the entire segments of our society are being cut out from their access to the news.

Thus, the elderly, the economically disadvantaged niche markets, and some physically challenged individuals are disproportionately harmed by the decline in print media. In this light, access to print media, particularly print media that covers the national news, from a local perspective, and also the local news, becomes increasingly important.

Another negative consequence of the decline of newspaper is the erosion of responsible journalism. Over the last decade, economic pressures have resulted in lay-offs of journalists and newspaper staff. The loss of jobs is bad enough, since every job must be protected in this economy.

Compounding the problem is the harm to the first amendment of the United States constitution, and I've always considered as many others have, the media -- the media to be our fourth branch of government. And it provides a check on government and private fraud and abuse that may be lost to local and regional newspapers close to Washington, D.C. and international bureaus.

Even the wire services, by the way, the UPI, Associated Press. I think UPI went out of business at one time, but it is back in operation unlike its former self. In addition, local news only of importance to small areas and niche markets may be lost forever if the smaller newspapers are unable to survive.

In fact, it is exactly this premise that the marketplace of ideas is harmed when there is not a wide dissemination of information from diverse sources that led Congress to allow newspapers to collaborate by joint operating agreement as long as editorial content was kept separate.

And you all, excuse me, my voice is leaving because of the pollen count. As more and more newspapers merge and ownership of papers is consolidated, the free flow of information in the marketplace of ideas is therefore restricted.

This poses an enormous risk to our democracy. And if Congress does not act or something does not change, it's certain that a major city in the United States will be without a major newspaper in the very near future, kind of, like global warming is upon us much sooner than anticipated.

And today we discuss remedies and whether the current business model of newspapers is sustainable. I look forward to hearing the suggested solutions to this problem from today's witnesses. I will now recognize my good friend and colleague Mr. Jason Chaffetz from the great state of Utah for his opening remarks.

REP. JASON CHAFFETZ (R-UT): Thank you, Mr. Chairman. I appreciate your calling this hearing on the Courts and Competition Policy Subcommittee. And I appreciate all of you for being here today.

About a month ago, the subcommittee considered the antitrust implications of the Troubled Assets Relief Program otherwise known as TARP. That program, of course, deals with the financial institutions that have received hundreds of billions of dollars in taxpayer support.

Today we consider the health or lack thereof of the newspaper industry. Like the banks, the newspaper industry is in dire straits. Unlike the banks, the newspaper industry is not seeking a government bailout. And I hope this continues to be the case as I could not support such a bailout.

Because of the protections of the freedom of the press any such bailout could be constitutionally problematic, especially if contained the types of restraints that were used with the TARP funds.

The newspapers' plight is largely the result of the newspapers' failure to adjust to the changes in the marketplace.

The biggest change has been the advent of the Internet. The Internet has facilitated the dissemination of news in a variety of forms from blogs, streaming videos, to online versions that were established -- with established news sources such as the Wall Street Journal and even the, yes, Twitter, in which I managed to send out that I was attending this event here today.

So, print newspapers must compete with this multitude of online sources for their readers' attention at the very moment that their main revenue source, advertising, is drying up. The question we need to ask ourselves is why is the advertising drying up?

It is moving to be more focused media, including cable television, and yes, of course, the Internet. Loss of this revenue threatens the ability of newspapers to use their strongest weapon, i.e., robust news departments full of eager reporters to compete against each other for cheaper new forms of news gathering.

Some entities, notably, the Wall Street Journal have been very successful in monetizing their contents. Others, like the New York Times have tried and subsequently abandoned efforts to try to charge for certain news stories.

However, with the rise of a la carte pricing for online music, it seems possible that there are a variety of pricing schemes that will ultimately prove successful. Even if a number of news outlets go out of the business in the meantime.

Which brings us to the crux of this hearing; I mentioned a few moments ago, the newspapers have not requested a bailout, they haven't. But that does not mean that they do not have powerful friends on Capitol Hill.

Last month, Speaker Pelosi sent a letter to Attorney General Holder requesting that the antitrust division take into account changes in the newspaper marketplace, including for advertising in the event of a merger of Bay Area newspapers.

While it is appropriate for the antitrust agencies to take into account changed circumstances in evaluating mergers of newspapers or any other industry, this committee should be wary of granting any new antitrust exemptions. This is particularly true given that the newspaper industry already has an antitrust exemption known as the Newspaper Preservation Act.

Since the 1970s the newspapers have been able to combine operations to save money without fear of antitrust enforcements. Yet, such joint operating agreements have failed to save the newspaper industry as a whole. Newspapers will only be profitable when they adjust to an ever-changing marketplace.

History has taught us that the marketplace is the best place to determine how to price goods and services. I am hopeful that this committee will take a hard look at any efforts to allow newspapers to discuss or make agreements regarding the pricing of their online content.

I would note specifically in -- where I represent the state of Utah ,we have the Deseret Morning News and the Salt Lake Tribune who thrive in their ability to contrast their editorial content and compete with various news reporting services at the same time share a department that consolidates the advertising functions and other issues.

So I have seen that in my own community, and with that I would like to yield back the balance of my time. I look forward to hearing from each of our witnesses today.

Thank you, Mr. Chairman.

REP. JOHNSON: Thank you and I appreciate your statement.

And now I recognize the renowned Mr. John Conyers, a distinguished member -- oh, okay, all right, we're going to go now directly to my colleague, the chair -- I mean, a ranking member of the Judiciary Committee, my good friend, Lamar Smith.

REP. LAMAR S. SMITH (R-TX): Thank you, Mr. Chairman.

Thomas Jefferson once said information is the currency of democracy. Without access to all the facts, Americans cannot make informed voting decisions and our democracy is threatened. Journalists have a responsibility to present information with fairness and objectivity. At their best, the news media help promote our democracy.

Unfortunately, too often the media has fallen short. For example, an analysis by Investors Business Daily shows that journalists contributed 15 times more money to Democrats than Republicans during the most recent election cycle. In the 2008 campaign, journalists who gave to Senator Obama outnumbered those who contributed to Senator McCain by a 20 to 1 margin.

A UCLA study rated 18 of 20 major news outlets as more liberal than the average American voter, just two scored as more conservative than the average voter. A Gallup poll found that only 9 percent of Americans say they have a great deal of trust and confidence in the mass media to report the news fully, accurately, and fairly.

The Gallup poll also found that more than twice as many Americans say that the news media are too liberal rather than too conservative. These studies reveal a troubling trend; unfair news reporting exists and can influence elections at the expense of qualified candidates.

In fact Newsweek editor, Evan Thomas, estimated that the media's influence in the 2004 presidential elections was worth maybe 15 points; that is a huge impact. And the media's influence was even greater in the 2008 presidential campaign. They may well have determined the outcome of the election. Not all members of the media contribute to this problem.

Many journalists with varied political views work hard to report the news fairly. But the media can and must do better. Recently as the ranking member just mentioned, Speaker Pelosi sent a letter to Attorney General Holder asking him to take into account current market realities when evaluating any newspaper mergers in the Bay Area.

Speaker Pelosi sent this letter in acknowledgement of the fundamentals of the newspapers' business have changed. Subscriptions are down and advertisers have new and different ways of targeting their sales. This economic reality has resulted in a number of newspapers filing for bankruptcy; cutting back on the days that they print papers, by going to an all-online format.

And continuing the consolidation of newspapers may contribute to increasingly biased coverage. We marry two or more papers in the city, there is an incentive to compete vigorously to provide the most accurate and pertinent news to readers. When one company, such as the New York Times or the Tribune Company owns papers in multiple cities, there is a risk that the editorial biases of the big city papers will find their way into other markets.

Our democracy is strongest when the American people make informed voting decisions based on accurate information about the major issues facing our country, such as homeland security, the cost of energy, immigration, education reforms, health care, and economic growth.

Journalists are aware of their responsibility and should be held to a high ethical standard because of their tremendous influence on public opinion and debate. When journalists strive for the truth the media are a tremendous asset to our society; when journalists falter, so too does our democracy. It's up to the American people to demand objectivity in the media, regardless of whether they get their views online, from television, or any newspaper.

Mr. Chairman, as we discuss the consolidation of newspapers, we must also address the larger issue of inaccurate and biased reporting that has become too common today. Before journalists can expect the American people to buy their reporting, they must first restore the American people's trust in the news.

Thank you, Mr. Chairman. I yield back.

REP. JOHNSON: Thank you for your comments also, Mr. Ranking Member.

And even though I've tried very hard to put it out of my mind, I must confess that I inadvertently left out the fact that Mr. Smith is the ranking of the subcommittee, of this subcommittee as well.

And without any further ado, ladies and gentlemen, we're going to hear from a man who needs no introduction. So I will yield to the great chairman, Mr. John Conyers from Michigan.

REP. JOHN CONYERS (D-MI): Thank you, Mr. Chairman. You have a lot of friends on this subcommittee that's all I can say.

This is a very complex hearing we are asked to come to the assistance of an economic institution that to quote Rupert Murdoch, which I -- who I have never quoted before in my life, says in his submitted statement, "Since the founding of our country newspapers have been a cornerstone of our democracy. And I submit this statement in the hope that the Congress will take all appropriate steps to help ensure that newspapers continue to be a vibrant and important part of our free society for the foreseeable future."

Now, this is the one person in the United States of America that owns more media than anybody I know of, and he is telling us how important it is that the media remains free and viable, because it's a historic predicate.

So this really gets us off to an interesting start. Now, in 1996, I think it was in October, in the spirit of full disclosure, I was arrested in front of one of the newspapers in Detroit. I think the offence was disturbing the peace.

There were other arrests made, one was the late Maryann Mahaffey, the president of the Detroit council, the other one was a labor organizer named John Sweeney. There were others arrested. I rather called into James Hoffa who was around there at the time and the peace activist, civil right advocate, Al Fishman.

And then what we were doing was protesting the merger of the two newspapers, the Detroit Free Press and the Detroit News. Now, for some reason, I don't have any idea why our arrests -- we were given a trial date too, but somewhere along the line, the case was dropped; I don't remember even if I had a lawyer.

So I don't come to this hearing with any bias or premeditated hard feelings or ill will toward the newspaper industry. As a matter of fact, we invited the Detroit News and the Detroit Free Press to come to the hearings, to be a witness. Did they ever respond?

MS. : We went to the newspaper association.

REP. JOHN CONYERS: You went to the newspaper association, okay. So they'll speak for them. But just to make sure, I purge myself of any bad memories, or ill will, or hard feelings, I'm going to ask the editors if I can meet with them, now that they are in bad shape. Maybe I should help them --

Now, there's another thing that puzzles me, Professor Robert McChesney for years has been one of the people complaining with me about the undemocratic practices commonplace in the newspaper industry. And now, I think he surfaced as one that's urging us that there are many grave and important reasons why we should rush in now and help them.

So I'll be calling my old friend Bob McChesney to help get me into the correct and fair alignment that will be required for us to determine what it is we do in the committee.

Now, newspapers remind me of automobile corporations. You never hear from them until they are on the verge of disaster. I mean, they are doing -- how are you doing, everything is fine, we're doing great. And then all of a sudden they need help and they need a lot of help and they need it fast. That's how -- that's how the Treasury -- the former secretary of treasure -- Treasury called the leaders of the House and Senate together.

You remember that evening; he called them together and he put three sheets of paper on the table, the leaders of the first branch of government, as far as I'm concerned. And he said, first of all I want extraordinary powers that no treasurer has ever had in history.

And then he said, second, I want $700 billion and I want it fast. And then, the third sheet of paper, he said, I don't want this to be reviewable by either the courts or the Congress. And so, you know, we are always put under the gun.

And I am anxious to let off my feelings before we go into this subject-matter not just for today's hearing but afterward to see if we can all be as friendly as our chairman who's -- everybody is his friend on this committee including me. And lets -- can we all be friends together, everybody on whatever position that develops as this hearing goes on.

So I thank you for your time, Mr. Chairman.

REP. JOHNSON: Thank you, Mr. Chairman. And I've always admired your even-tempered service on this committee. That evenness has been marked by a passion, and so I really appreciate the way that you run the full committee, and I myself aspire to be just like you, and so I'm proud to be serving on this committee, the subcommittee, with you.

And ladies and gentlemen, I have finally in fact become enlightened instantly, because I mentioned that Mr. Smith, my good friend is the ranking member of this subcommittee but I was trying to keep the great Howard Coble out of my mind, but I cant do that either. Mr. Coble is the ranking member and we appreciate his service. Now, if -- what I'll do now is I'll introduce the witnesses for today's hearing.

Actually we have Mr. Goodlatte, gentleman from Virginia who's next for a statement.

You may proceed, sir.

REP. BOB GOODLATTE (R-VA): Thank you, Mr. Chairman, but I don't have a statement at this time.

REP. JOHNSON: Well, now, that's rather untypical, Mr. Goodlatte, but I guess you're saving the ammo for a full assault later during this hearing. So, okay --

And also we have the very quiet warrior Mr. Gonzales from Texas is here. Did you wish to make an opening statement, sir?

REP. CHARLIE GONZALEZ (D-TX): Mr. Chairman, I'll be very, very brief. I wasn't going to make one, but I just want to put the witnesses' minds to ease. I don't believe that your testimony today -- that you would be prepared to address bailouts, or campaign contributions, and I don't believe those are the questions that will be coming from the members of this committee.

The issue at hand, and I truly believe this, and I think all my colleagues would join me is that laws have utility and meaning only when they are relevant to the society. The question today is whether antitrust laws as you relate to the printed media are relevant in what has transpired, and what has been a technological revolution which has been adopted by a majority of the Americans, which truly jeopardizes the very existence of the printed media.

So I am hoping that our witnesses will be able to shed light. Now, I am going to apologize to my colleagues and to the witnesses that I probably will be absent for much of the testimony, we have your written statements. There is a hearing going on in Energy and Commerce that will require that I be there as we prepare to mark up the energy bill.

But again I just want to thank my colleagues and hope that we have a fruitful afternoon. I yield back.

REP. JOHNSON: I thank the gentleman for his statement, and without objection other members' opening statements would be included in the record.

So now, I'm pleased to introduce the witnesses for today's hearing. We have two distinguished panels of witnesses to assist us today.

And our first panel features Carl Shapiro, the deputy assistant attorney general for economics at the antitrust division of the Department of Justice. Mr. Shapiro is also the Transamerica Professor of Business Strategy at the Haas School of Business, and also a Professor of Economics in the Economics Department at the University of California, Berkeley.

He previously served as deputy assistant attorney general for economics in the antitrust division of the U.S. Department of Justice from 1995 to 1996. He later founded the Tilden Group, which was also a senior consultant with Charles River Associates, an economic consulting company.

Welcome, Mr. Shapiro.

And if you would, I'm looking for our second group of panelists. They will testify after Mr. Shapiro has concluded.

Our second panel features Mr. Brian Tierney, chief executive officer of Philadelphia Media Holdings, LLC, and a publisher and CEO of the Philadelphia Inquirer. Mr. Tierney is a nationally recognized expert in branding, marketing, and advertising and he's also an accomplished entrepreneur in addition to being a lawyer. And nobody can really hold that against you, Mr. Tierney; at least not today anyway.

His leadership of Philadelphia Media Holdings marks the first time the papers are under private ownership. This is since 1969. Mr. Tierney has received numerous industry-related awards. And we want to welcome Mr. Tierney.

Next we have Mr. John Nichols. Mr. Nichols is a journalist and author and has written about politics for American newspapers and magazines since the 1970s. He's the editorial page director of the Capital Times newspaper in Madison, Wisconsin, and writes about politics as a correspondent for the Nation magazine.

Mr. Nichols is the author of many books on American politics and media issues, and he's also one of the co-founders of Free Press, the nation's media reform expert, and -- actually, media reform network. He's been honored by numerous journalistic organizations for his editorial and column writing as well as his investigative reporting.

Welcome Mr. Nichols.

Next, I'll introduce Mr. Bernard Lunzer who is the president of the Newspaper Guild-Communications Workers of America, which is affiliated with the AFL-CIO and the International Federation of Journalists. Mr. Lunzer was elected TNG/CWA president and CWA vice president in May of 2008.

From 1979 to 1989, he worked in the newsroom in advertising, circulation, and promotion, marketing at the Saint Paul, Minnesota, Pioneer Press. Mr. Lunzer is also an integral part of the newspaper field and we welcome him here today.

Our next witness would be Mr. Ben Scott. He's the policy director at the Free Press. And I thank Mr. Scott for service and regularly testifying before Congress and the FCC. Before joining Free Press, Mr. Scott was a legislative fellow with then-Representative Bernie Sanders out of Vermont.

He's been quoted in publications including the New York Times, Wall Street Journal, Los Angeles Times, and Salon (ph), and featured as a commentator on MSNBC, BBC, TBS, C-Span, NPR, and local stations across the country. He's the author of several scholarly articles on American journalism and is co-author -- excuse me, co-editor of the books Our Unfree Press, and also the Future Media.

Welcome Mr. Scott.

And then we have Professor C. Edwin Baker. Professor Baker is the Nicholas Gallicchio professor of law at the University of Pennsylvania and he teaches constitutional law, mass media law, and freedom of speech and is the author of Media Concentration and Democracy: Why Ownership Matters. Professor Baker is also the author of a pending article on viewpoint diversity and media ownership.

Welcome Professor Baker.

The last witness on today's panel is Mr. Dan Gainor who is the T. Boone Pickens Fellow and vice president of Business and Culture for the Media Research Center. Mr. Gainor has served as an editor at several newspapers including the Washington Times and the Baltimore News American.

Mr. Gainor also has extensive experience in online publishing holding the position of managing editor for CQ.Com, which website of Congressional Quarterly and he's also the executive director -- excuse me, executive editor for ChangeWave. Mr. Gainor has made many radio and television appearances and have published in a wide variety of publications including Investor's Business Daily, the Washington Times, the Chicago Sun-Times, the Orange County Register, the New York Post, and the Baltimore Examiner.

Welcome Mr. Gainor.

And we thank you all for joining us here today. I wanted to ensure that today's panel would be fair and balanced with equal representation from those on all sides of the issue. As part of that goal, we invited several entities to testify today that could emphasize the newspaper perspective along with Mr. Tierney.

And one such witness, Rupert Murdock, chairman and CEO of News Corporation was not able to appear personally, but he has submitted his written statement for the record. And without objection, that statement will be submitted for the record. And without objection the witnesses' statements will be made a part of the record in their entirety.

We'd ask each one of you to summarize your testimony in five minutes or less. To help us keep the time, there's a timing light at your table. When one minute remains, the light will switch from green to yellow, and then to red when the five minutes are up. If anybody is color blind, please raise your hand now. Mr. Joe.

Mr. Shapiro, will you now proceed with your testimony, sir?

MR. SHAPIRO: Yes, thank you very much, Mr. Chairman. I appreciate the opportunity to appear before the Subcommittee on Courts and Competition Policy. As somebody who has had some experience being an expert witness in court, I particularly appreciate Chairman Conyers' suggestion that we all be friends together.

As you noted, I've been a professor at UC Berkeley for about 20 years. During that time, I have been studying and practicing antitrust economics.

One particular area of interest to me has been how advances in information technology including the Internet have affected a wide range of business, markets, and competition and in fact wrote a book about these topics about 10 years ago. So the issues facing the newspaper to me are familiar to me and of interest to me as well as, of course, the antitrust division in the Department of Justice.

Newspapers play a unique and important role in our democracy. I myself very much enjoy sitting down in the morning with a cup of tea and reading the newspaper, and I count myself as a better citizen for what I learn while I sip my tea.

Today newspapers are facing substantial pressures, most notably from the current recession on top of the challenge posed by the Internet. As a result, newspapers are experiencing a painful and ongoing decline in circulation and advertising revenue.

Now, how does antitrust enter into this picture? Antitrust is the corner of our free enterprise system. Antitrust is critical to ensure that the public obtains the full benefits of competition. This is especially true in industries experiencing technological change where competition can and does often spurred innovation including innovative business strategies and business models. And I noticed that some of the other witnesses discuss some of the plan they have for such business models.

Today a wide ranging and healthy debate is taking place about the future of the newspaper industry with different participants adopting different strategies for survival and success. This is the essence of the competitive process that the antitrust division is dedicated to protecting.

Our antitrust laws are over 100 years old. They apply to declining industries as well as growing ones. They apply during tough economic time as well as good times. They are proven flexible and effective in addressing a wide range of economic settings and industries including the industries experiencing the pressures of new technologies.

And the antitrust division has experienced in a range of industries where these conditions hold.

Nonetheless, some have suggested that the antitrust laws are somehow unsuited for the newspaper industry. We at the Justice Department disagree. If anything, the interest Congress has expressed in preserving editorial and reportorial diversity makes antitrust enforcement in the newspaper industry all the more important. And Speaker Pelosi's letter to Attorney General Holder indicated as much.

Some have suggested that antitrust enforcement at the Justice Department in the newspaper industry is mired in the past failing to account for today's business reality. Our investigation in any given matter is highly fact intensive. I would like to assure the committee and the public that we are dedicated to conducting the legal and economic analysis to reflect the current reality and accounts for emerging trends in the newspaper industry. Thank you.

REP. CONYERS: Thank you, Mr. Shapiro. And we would now begin the questioning, and I will begin by recognizing myself for as much time as I may consume. So Mr. Shapiro, Attorney General Eric Holder has stated that he's open to reexamining government antitrust polices that limit mergers in the struggling newspaper industry. In your view, is a antitrust exemption for newspapers necessary.

MR. SHAPIRO: We do not believe any additional exemptions for the newspaper industry are necessary. We believe the antitrust laws have indicated it can work well in this industry reflecting as well the Newspaper Preservation Act.

REP. CONYERS: Well, tell me, do you believe that print media and online media are within the same product market and interchangeable?

MR. SHAPIRO: Print media and online media often do compete, for example, for advertiser's dollars. Whether -- the exact contours of the relevant antitrust market will depend on the specific facts and the specific matter, that will depend on the time period, the locale, and the products involved.

REP. CONYERS: And I'd like to know from you, is it prudent considering antitrust policy and economic deficiencies of acquiring businesses. And also considering the public good, is it prudent to remove impediments to further consolidation in the newspaper industry?

MR. SHAPIRO: Well, to the extent that antitrust can be an impediment, the goal is to prevent consolidation that will substantially lessen competitions and harm consumers. That I would not really call an impediment, I would call it protecting the public interest.

REP. CONYERS: Okay, thank you. I will now recognize ranking member of the full committee Lamar Smith for his questions.

REP. SMITH: Thank you, Mr. Chairman.

Mr. Shapiro, I just had a question or two for you. Could you give us an example of a merger between two newspapers or of two newspapers that you would question? What would the dynamics be that you would not necessarily approve of?

MR. SHAPIRO: The situation where we would -- tend to be most concerned would be two local daily newspapers in the same town, the only two, where our investigation revealed that they were substantial direct competitors for readers or for advertisers or both.

REP. SMITH: Would you consider in that case a city that had a morning and an afternoon newspaper, and you had one of the papers purchase the other, would you consider that to be questionable?

MR. SHAPIRO: That certainly could be. And those situations have arisen in the past.

REP. SMITH: And would you give me a real life example, I realize this is totally hypothetical, of two papers that currently exists in the United States, somewhere in some city, that you would question if one were to purchase the other?

MR. SHAPIRO: Well, there is -- I'm not sure whether you want real life or hypothetical, but we do have an ongoing litigation involving two newspapers in West Virginia where the acquisition took place and the antitrust division is challenging that.

REP. SMITH: Thanks. Well, that's the kind of the example I was looking for. Thank you, Mr. Shapiro. Thank you Mr. Chairman.


REP. CONYERS: Thank you, Mr. Smith. And I'll now turn to our distinguished medium -- excuse me, our distinguished member from Texas, Mr. Gonzalez.

REP. GONZALEZ: Thanks very much, Mr. Chairman. Let me ask you, Mr. Shapiro, what -- how would you describe the purpose of antitrust trust laws?

MR. SHAPIRO: To protect competition, in particular by preventing abuses by monopoly, by preventing mergers that substantially reduce competition, and by policing cartels.

REP. GONZALEZ: And its competition within -- this is obvious, in the industry itself? What I'm saying is, like -- I'm trying to describe it, and I apologize, newspapers to newspaper, TV stations to TV stations, certain type of enterprises to that certain type of enterprise, right?

Let me ask you, where is the competition to the newspapers in America today? It is among, between themselves or is it something totally different, a whole different medium is out there? Isn't that the real competition?

And what we're discussing here is the old laws may not accommodate the flexibility given to newspaper enterprises to compete with basically an information service that is a different platform. I mean, that's what we really have. So I guess if I'm hearing you right, you're saying we can remain with the same antitrust model, and the newspapers will still have the flexibility to adopt business practices that will allow them to compete with these other delivery systems.

MR. SHAPIRO: The antitrust laws will not, should not, stand in the way of creative business practices and models that are part of the competitive process and create efficiencies and serve consumers. I know some of the later panelists want to pursue new business strategies and there's no reason the antitrust laws would stop that as long as they in fact are pro-competitive.

REP. GONZALEZ: This is interesting, and I think the witnesses -- and I'm going to be gone for part of their testimony, won't be here for their testimony, but I hope to be back -- will share some light on that. I think they are going to look at it as -- from their business experience.

And I understand where you're coming from, and I agree with you. I think if you listen to Chairman Conyers, we're all -- we're so rooted in the antitrust velocity and the tremendous benefits that we have derived from it. But the world has changed.

And the question then comes, we may not have a certain enterprise or a certain industry because we are worshipping at this altar of what once was sacrosanct, which was the antitrust laws, and what they attempted to accomplish. They won't be anyone to protect. They won't be any survival. That's where I'm getting.

And I'm really worried that the printing media is really faced with a do or die situation that may encompass what we may have found objectionable in different setting years ago. That's all I'm saying. And I still don't think they were going to lose the integrity of the process in the enterprise and the professionalism because the truth is that is what distinguishes the printing medium from so many of the others.

Now, I know what you -- I believe that you're saying they can just transport that quality product and have it delivered by this different platform of delivery system. I don't think it's going to be that easy. I just don't think. And even if it is, then you still have lost the traditional printing medium.

You won't have a newspaper to sit there with your morning coffee or tea.

And maybe it's generational. I just got to have it. I don't like looking at this at the coffee shop in the morning to be honest with you. But it -- if that is -- and I understand that this is the sincere belief that you hold, and I will just wait and reserve my opinion until we hear the witnesses and I read their testimony. But thank you for the benefit of your knowledge and study.

MR. SHAPIRO: Well, let me just say thank you for that. I also can't do without my newspaper in the morning, that's why I mentioned it. The fear that newspapers will close, or the industry will be in grave trouble, the -- we are here to protect competition, and of course, that -- if -- means if a company is in sufficiently bad shape, we have a failing firm doctrine.

And so greater antitrust flexibility is allowed in certain circumstances, and that document's been in place for 40 years in the newspaper industry following the Supreme Court decision. So it's not in anybody's interest to have there be no newspaper in any of our towns. Antitrust would not lead to that result.

REP. GONZALEZ: Again, I -- and I don't know the various opinions that are going to be expressed after your testimony. There may be some that would disagree with you, and maybe it is not necessary. And I don't want to have to rework, modify, or alternate something that is so basic and that we depended on for so long, that it appears to me that there may be some adjustments that may have to be made. I do not know.

But again, just thank you for your testimony this afternoon.

MR. SHAPIRO: You're welcome.

REP. JOHNSON: Thank you, Mr. Gonzalez.

I'll now turn to Mr. Bob Goodlatte, our very cerebral member of the Judiciary Committee as well as this subcommittee. You may proceed, sir.

REP. GOODLATTE: Well, thank you, Mr. Chairman.

And Mr. Shapiro, welcome. Does the Justice Department have any role in approving the joint operating agreement under the Newspaper Preservation Act?


REP. GOODLATTE: And if so how many JOAs has it approved in the last five years?

MR. SHAPIRO: I'm not sure of the number.

REP. GOODLATTE: Can you get that for us and submit it to the chairman of the committee?

MR. SHAPIRO: That would be fine, yes.

REP. GOODLATTE: Thank you. What factors do you consider in reviewing the JOA?

MR. SHAPIRO: Well, let me just clarify. The antitrust division looks at these, but it's the attorney general's decision about whether to approve them. Well, we follow the language of the Newspaper Preservation Act, which requires that the JOA include not more than one newspaper that is not failing, and that the operating agreement be in the public interest.

REP. GOODLATTE: To follow up on Mr. Smith's question, you stated that the antitrust division takes into account both the readers and the advertisers when it considers the impact of proposed merger in the newspaper industry, which didn't really tell us how you balance that? Do you place more weight on readers or more weight on advertising? What -- how do you arrive at a conclusion that is appropriate?

MR. SHAPIRO: I would say both groups, we view as consumers or customers of the newspapers. They are both sources of revenue typically. I believe, in most matters, it's -- a balancing really isn't needed. When we've seen a loss of competition, we believe that both readers and advertisers wouldn't be harmed by an anticompetitive merger.

REP. GOODLATTE: It's clear that online advertising has changed the economics of the newspaper industry. Last Congress, this committee took a look at the proposed deal between Google and Yahoo for search advertising dollars.

At that hearing it was alleged that Google already had a dominant position in search advertising. How does Google's dominance in search advertising affect the department's review of newspaper mergers, particularly as to how such a merger would impact advertisers?

MR. SHAPIRO: When we look at a proposed newspaper merger, we are looking at the choices that advertisers would have, and the extent to which the newspapers compete directly for each other -- excuse me, for advertisers. Alternative choices for those advertisers be it search advertising, be it --

REP. GOODLATTE: Television, radio.

MR. SHAPIRO: -- television -- (cross talk) -- yeah, would all be considered in our analysis. And we would typically -- we would see a problem with the merger if the extent of -- (audio break) -- some of their money.

REP. GOODLATTE: In his written testimony, Mr. Tierney of the Philadelphia Inquirer calls for expedited Department of Justice review of these joint operating agreements. He also calls for a limited antitrust exemption for newspapers to discuss new business models. How would the department view such an exemption?

MR. SHAPIRO: Well, we are -- generally, don't believe exemptions are the way to go. We feel the antitrust laws are flexible and have proven that flexibility over many years. In terms of specific discussions among newspapers to pursue a new business model, those could easily be handled without running into antitrust problems, obviously not price fixing discussions, but discussions about a legitimate new business enterprise.

And if there are concerns about that on occasion, we can issue a business review letter to give assurance to companies who are doing something that's not -- or it is not clear to them how that would be treated by the antitrust division.

REP. GOODLATTE: Are these joint operating agreements always entered into by newspapers in the same market, same -- SMSA if you will. I mean, are they always newspapers within the same city?

MR. SHAPIRO: To the best of my knowledge, yes, that is --

REP. GOODLATTE: How many cities still have more than one daily newspaper?

MR. SHAPIRO: I could not give you a number on that. It has declined to be sure.

REP. GOODLATTE: All right. Mr. Chairman -- thank you very much, Mr. Shapiro.

Mr. Chairman, I'd ask that a statement by Rupert Murdoch, the chairman and CEO of News Corporation be made a part of the record.

REP. JOHNSON: Yes, thank you, Mr. Goodlatte. And so it would be done, without objection.

REP. GOODLATTE: Thank you, Mr. Chairman.

REP. JOHNSON: All right. You're welcome.

Mr. Shapiro, I thank you for your testimony here today and the time spent today.

And we'll now move to our second panel. Hear ye, hear ye, hear ye, the next panel comes forward and assume the position.

By the way, while we are going through this exercise, all members of the press covering this hearing, would you please stand.

You won't have to assume the position, but please stand so we can know that you're here.

All right, I see one, two, three; anyone else? Four, okay, I'm sorry. That means there are some folks in the back who are coming forward. Okay, all right. Okay, all right, thank you and thank you all.

We'll now begin with opening statements from Mr. Tierney.

Proceed, sir.

MR. TIERNEY: Good afternoon, Chairman Johnson, members of the subcommittee. I'm Brian Tierney, the chief executive officer of Philadelphia Newspapers. We own the Philadelphia Inquirer, the Philadelphia Daily News and about 30 weekly newspapers in southeastern Pennsylvania and southern New Jersey.

In 2006, I joined forces with a diverse group of local investors, men and women, black and white, entrepreneurs, CEOs, and the union pension fund, to purchase these publications, and we're the largest locally owned news organization in America.

Philadelphia Newspapers, like virtually all of our nation's newspaper publishers, have recently faced a severe revenue decline. Consequently, we've had to make some very difficult choices in order to continue serving as the top-quality news source in the Pennsylvania and New Jersey area we serve.

In order for our newspapers and other newspapers to succeed in the Internet age, in order for us to continue to serve as our country's preeminent source of local news, newspaper publishers and journalists need greater flexibility from lawmakers and regulators to discuss and implement new and sustainable business models.

Newspapers serve as the vital source of local, national, and international information, and as such we provide high quality public service journalism that's critical to the functioning of a vibrant democracy.

The newsgathering resources and investigative arsenals commanded by our daily newspapers typically dwarf those of any other local media. In Philadelphia, for instance, we spend more than $51 million in newsgathering operations, and we have more reporters on the street everyday than all other local media combined.

In addition to serving as an effective watchdog of business and local government, newspapers play another role; we connect our communities to themselves. Newspapers serve as a primary source of information for other news outlets as well. Most local television stations in Philadelphia begin their news meetings by leafing through the newspaper and doling out assignments based on what we've reported that morning.

In addition, while online news sources and citizen journalists certainly add a perspective to the news, they seldom provide original reporting and even fewer ascribe to the same professional journalism standards. In short, many new sources of news are actually free riding on the investments in journalism made by newspapers.

By all accounts, the industry is in a real crisis. The problem, ironically, is not a readership or an audience problem. In fact, more people read a newspaper the Monday after the Super Bowl than watched the Super Bowl. In fact, in Philadelphia, more people read the Inquirer today than they did 10 years ago when you add our print and online readership together.

The problem is the business model we have today and the fact that advertising revenues which account for 80 percent of our earnings, of our revenues have dropped by 23 percent in two years. Recent news reports predict a 30 percent decline this quarter alone.

Classified advertising's been hit the hardest -- dropped $4 billion just last year, and most of that money is not coming back even when the economy returns. Online advertising, which was often hailed as the industry savior, declined in 2008 and accounted for less than 10 percent of revenue.

Our online traffic in Philadelphia is up over 300 percent. You can add up every other source of news or information in the marketplace, it doesn't compete with it; but our revenue is flat. In fact, it's interesting here in town, which is a very successful -- you know, has about 30 reporters or so, maybe a little bit more.

Almost all of their revenue comes from the printed newspaper product that's distributed free. The result of these seismic shifts in advertising has been devastating. In February, our company announced that it was voluntarily restructuring under Chapter 11.

The factors that led us to this difficult choice are similar to those facing publishers across the country, but even in these trying times, our commitment to the communities we serve has remained steadfast. And I'm incredibly proud that the relationship we've also built with our unions who are working hard to find efficiencies, cut cost, and preserve jobs -- good jobs, that a man or woman can raise their family on.

Other newspaper companies such -- Tribune Company, Lee Enterprise, the Minneapolis Star Tribune, to name a few, have had to file for bankruptcy in recent months. The Seattle Post-Intelligencer is all online, but they've had to lay off 130 of their 150 journalists. So it's hardly going to be able to serve the same function at Seattle. And of course, the Rocky Mountain News closed in February.

Some analysts are predicting that major cities may be left without a single daily newspaper soon unless we act. While we may've once hoped that we could merely shift our operations online and continue operating as usual, the much smaller revenue generated from Internet advertising has shown that we must look for another answer and we need the freedom now to experiment with new business models.

With the critical role of daily newspapers, we at Philadelphia Newspapers believe strongly that we have the possibility to evolve. But in order to do so, however, newspaper publishers need the flexibility to explore new approaches and innovative business models without the delay, burdens, and uncertainty created by the competition laws we have now.

When it comes to daily newspapers, the enforcement of antitrust laws has not yet caught up with market realities. As the enforcement actions have been premised on the now outdated view, the daily newspapers compete exclusively with one another, and that they dominate their local -- in advertising markets.

And in fact, newspapers' share of overall advertising has declined so much that it's less than 15 percent today. In today's precarious and ever-changing environment, antitrust enforcers must be vigilant to ensure that they're not frustrating the possibility of a reinvigorated newspaper industry.

Since for many newspapers, time is of the essence, Congress, I respectfully request, should act quickly on legislation that would, one, provide for expedited Department of Justice review of newspaper transactions that can reduce costs and achieve other efficiencies.

And two, provide limited antitrust relief for newspapers and journalists to discuss and experiment with new and more sustainable business models.

REP. JOHNSON: Mr. Tierney, if you could go ahead and close out now. The light is green.

MR. TIERNEY: Okay. Great. From my own experience, antitrust concerns are preventing the industry from even the most rudimentary discussions, which could potentially lead to the next big idea.

Thank you for the opportunity to appear at this hearing today. The publishing industry remains one of our nation's foremost providers of in-depth and locally oriented news, and it's my hope today that we begin the road back. Thank you.

REP. JOHNSON: Thank you, Mr. Tierney.

We'll now hear from Mr. John Nichols.

MR. NICHOLS: Thank you, Chairman Johnson, Chairman Conyers, Ranking Member.

My name is John Nichols. I grew up in Union Grove, Wisconsin, population 970. When I was 11 years old, I rode my bike down Main Street and walked into the office of our weekly newspaper the Union Grove Sun.

I explained that I had read the Bill of Rights, Tom Paine and I.F. Stone. I knew a free press was the essential underpinning of the American experiment, and that journalists were frontline soldiers in the struggle for democracy.

I snapped to attention and announced that I was "reporting to duty." It will give you a sense of the Sun's circumstance that the editor responded, "I'll give you $5 a story and $1 for every picture that turns out." I was a journalist.

I have practiced the craft of journalism ever since, as a reporter, columnist, and editor of metropolitan daily, part owner of a weekly newspaper, editorial page editor of a state capital daily; the Madison Capital Times and political writer for the Nation magazine.

Along the way, I have written and co-written seven books on the state of American politics and media. So what is the state of the print press? Our country's first great journalist, Tom Paine, would surely describe it as, "The Crisis."

A daily newspaper industry that still employs roughly 50,000 journalists, the vast majority of the remaining practitioners of this craft, teeters on the brink. Media corporations, after running journalism into the ground, have determined that news gathering and reporting are no longer profit-making propositions. So they're jumping ship.

The Denver Rocky Mountain News recently closed, ending daily newspaper competition in that city. The San Francisco Chronicle may soon close, along with the Boston Globe. The Chicago Tribune, LA Times, Minneapolis Star Tribune, and Philadelphia Inquirer are in bankruptcy.

The Christian Science Monitor has folded its daily print edition, as has the Seattle Post-Intelligencer. Old newspaper chains struggle as the value of stock shares fall below the price of a daily newspaper.

Those are the headlines. Arguably uglier is the death-by-small- cuts of newspapers that are still functioning. Layoffs of reporters and closings of bureaus mean that even if newspapers survive, they have few resources for journalism.

Job cuts during the first months of the year -- 300 at the LA Times, 205 at the Miami Herald, 156 at the Atlanta Journal- Constitution, and on and on, suggest that this year will see more positions eliminated than in 2008, when almost 16,000 newspaper jobs were lost.

Even Doonesbury's Rick Redfern has been laid off by the Washington Post. Whole sectors of our civic life are going dark. Newspapers that long ago closed foreign bureaus and eliminated investigative operations are now shuttering Washington bureaus.

The Cox chain, publisher of the Journal-Constitution, padlocked its DC bureau April 1, a move that follows closures of the bureaus of Advance Publications, Copley Newspapers, and great dailies in Des Moines, Houston, Pittsburgh, Salt Lake City, and Toledo.

Newspapers as we know them are dying, and there is little evidence that broadcast or digital media is prepared to fill the void. The digital day may come, but it is not here. Thus, those of us who believe in the essential role of an informed citizenry fear that we are facing not a journalism crisis, not a media crisis, but a democracy crisis.

So it is appropriate to consider the steps the federal government, which has historically aided publishers with favorable postal rates and broadcasters with free access to the airwaves, might now take to protect the public's right to know.

The congressional response to the crisis, must however, recognize the importance of maintaining and expanding the practice of journalism as a tool of informing and engaging citizens.

The emphasis should be on fostering competition, diversity, and localism -- not on protecting the bottom lines of media companies and speculators who balance their books by dismissing reporters and shuttering newsrooms.

A crisis for journalism and democracy must not become an excuse for eliminating existing rules that promote competition and diversity, especially antitrust, and cross-ownership restrictions that present -- prevent consolidation of print, broadcast, and digital newsrooms into one-size-fits-all "content provider" services.

Congress should recognize that the existing ownership model has proven in this crisis to be anti-journalistic. Government policies and spending should be tailored to support the development of new ownership models not-for-profits, cooperatives, employee-owned publications, and/or allowing citizens, unions, foundations, and inviting local owners to purchase financially-troubled daily newspapers.

We should encourage the consumption of journalism, perhaps by providing tax breaks for newspaper and magazine subscriptions. Postal rates should be structured to help journals of inquiry and dissent to stay afloat.

I am a journalist. I love my craft and hope to continue practicing it for a long time. But I love our democratic discourse, and our diverse -- and the diverse society it fosters more.

I would ask my Congress to recognize, as did the founders, that journalism and democracy are closely linked. James Madison was right when he said, "A popular government without popular information or the means of acquiring it is but a prologue to a farce or a tragedy or perhaps both."

We are deep in the prologue moment. It is essential now to act wisely and responsibly to avert tragedy and farce. Thank you.

REP. JOHNSON: Thank you, Mr. Nichols.

And if someone would call the physician's office and have them to come forward, because we have several people who have developed a certain case of color blindness. And so our next witness would be Mr. Lunzer.

Mr. Lunzer, please proceed.

MR. LUNZER: Chairman Johnson, I want to thank you, the Ranking Member, and other members of the committee for this chance to testify.

I'm Bernie Lunzer, president of the Newspaper Guild the Communications Workers of America, representing media workers throughout the U.S.

I've worked in the industry for 30 years, 10 of those at the St. Paul Pioneer Press in the newsroom in advertising and in circulation. I welcome this opportunity to talk about the current crisis within American journalism.

This crisis affects all members of this committee, all your colleagues, and all Americans. American journalism is, and will continue to change radically in the next five years.

The policies you promote will decide whether we have a strong and fair press or a limited opinion press regardless of the media. The underlying premise of this hearing is that Hearst Corporation and MediaNews wants Congress to relax antitrust law.

The Newspaper Guild is not convinced that such a remedy will be good for journalism in California or in the United States. History has demonstrated that relaxing antitrust law may actually do more harm than good.

MediaNews purchased over 20 publications in Northern California, some unionized, some not, to create a new entity called the BANG-East Bay. Once completed, the company withdrew recognition of the Newspaper Guild-CWA.

We lost the legal challenge, but later won representation of the full group through a hard-fought organizing campaign. Despite this, almost two years later, our members still don't have a contract.

If this exemption is granted in Northern California, others will demand the same ability to create monopoly markets, resulting in other workers throughout the country becoming targets for similar actions.

There is now one combined copy desk for all the publications within BANG-East Bay. MediaNews has laid off roughly one-third of the original journalists. The result is a homogenized mix of publications, with readers complaining that their local newspapers have little local content and are increasingly irrelevant to their communities.

Unhindered by antitrust law, a newspaper monopoly across Northern California will lead to job loss and to diminished products. This is contrary to the notion advanced by Hearst, which argues that its proposal would save something vital to the community.

The Hearst-owned Chronicle now has fewer than half of its original workers, and coverage in large sections of the community has already been diminished. History shows us that such a monopoly will not benefit the local market and will further marginalize underserved, minority communities within the market.

Currently, publishers have recourse to an antitrust exemption through the Newspaper Preservation Act, which maintains separate newsroom but combines business operations. The sole purpose of the exemption was to help preserve the diversity of journalistic voices, but these joint operating agreements, or JOAs, often resulted in inflated advertising prices. So they have not proved to be a panacea for newspapers' problems.

Furthermore, out of over two dozen JOAs, only 10 exist today. President Obama campaigned in favor of more antitrust enforcement, stating in Gresham, Oregon, May 18, 2008, quote, "There are going to be areas, in the media, for example, where we're seeing more and more consolidation that I think, it is legitimate to ask, is the consumer being served?" Unquote. The fundamental question of what is gained through such consolidation remains very relevant.

The largest concern we have about such a monopoly in Northern California is that, is it an answer to the very real problems that exist in our industry. We think they will remain unanswered and that real innovation will be stifled. The two large corporations behind this initiative will only have forestalled the inevitable reckoning. The result would be underserved communities.

If there is to be serious considerations of the problems facing newspapers, Congress needs to look at alternative ownership ideas, like employee stock ownership, nonprofit approaches, and the new L3C concept. The L3C approach would allow publications to serve a stated social purpose in exchange for the ability to accept nonprofit money.

Smaller, more committed news operations will be more successful in providing real coverage to communities. Figure is not better. The current financial crisis is evidence of this.

An antitrust exemption for such large corporations could create real barriers to entry for others. Without oversight, congressional and local oversight, this exemption may not work, while these companies become a single voice for over half of our most populous state. Similar consolidations elsewhere would create incredible power for a select few.

A commitment must be made to local coverage and local job creation. These same entities that are promoting this current proposal have been the loudest in supporting the outsourcing of jobs, causing one to truly question any commitment to local communities.

Agreements amongst competitors to shut down or reduce capacity or output are normally illegal per se, under the Sherman Act. Any effort to assist the newspapers in this regard will have far-reaching consequences. Newspaper workers have made great sacrifices to invest in the future of their publications. We have given up a lot, pay increases, vacations, and other benefits to preserve quality local media coverage and of a diversity of voices.

We've accepted these concessions with an understanding that we are investing in a long-term recovery plan. There must be a focus on new ways to generate revenue and on creating new business models that recognize the deep changes we are experiencing.

We look forward to working with your community to address the long-term problems of the newspaper industry in an equitable and progressive manner. Thank you.

REP. JOHNSON: Thank you, Mr. Lunzer, and now we will hear from Mr. Ben Scott.

MR. SCOTT: Thank you, Mr. Chairman, Chairman Conyers, and members of the committee. Thank you for the opportunity to testify today. I am the policy director for Free Press, which is the largest public interest organization in the country working on media policy issues.

As the name of the organization implies, Free Press has a strong interest in the future of journalism and the vibrancy of the news marketplace. I would like to begin by addressing the nature of the problem that we face. Since the crisis in the newspaper business is often seen as monolithic, when in reality there are several major problems hitting different parts of the news industry in different ways.

The most immediate problem of course is the debt load carried by major news companies that are pushing them into bankruptcy. But a more general problem is the decline in print circulation, and advertising revenue as the readers shift to the Internet. And online papers are up against more national and international news competition.

Some newspaper companies have made things worse and accelerated their demise by pursuing flawed business models of consolidation. The short-term benefit of mergers, of course there is an increase in revenue and market share, but the long-term consequence is a mounting debt, a debt that now threatens to sink the ship.

Revenue declines and share holder demands and forced budget cuts. Budget cuts force layoffs, layoffs mean fewer journalists, fewer journalists, fewer stories, and a lower quality product for the American public. But that doesn't necessarily mean that the core business of news production isn't profitable anywhere, at least for now.

Many papers actually have profitable newsrooms complete with double-digit margins and executive bonuses. The demand for text-based news is at an all-time high, but the readership no longer translates into big dollars because of the Internet. And that's the fundamental problem.

The historical alignment of technology, market demand, and public goods that made monopoly newspapers a revenue engine for decades is coming to an end. But the outlook is not all dark. There are new journalism experiments cropping up all over the Internet.

However, none has the clear financial base to scale up, to replace the quantity and scope of news production that is disappearing around them. So we are left with a conundrum. As the news shifts online and advertising dollars dry up, will the remaining revenue base be sufficient to pay for the journalism that a democratic society needs. If it won't, then that's the policy problem that you have to solve.

A decline of print newspapers doesn't necessarily mean the decline of journalism. Journalism just needs journalists and lots of them, and the risk that we face today is that market failure will result in the departure of tens of thousands of experienced reporters.

So what is to be done? Combining the best elements of traditional and new media, we need to create and sustain journalism models where it is possible to earn a living writing the news. And we need the resources to cover expensive, international, and long-term reporting alongside the local daily news.

We also have to recognize that the Internet can't solve all the journalism's problems. More than a third of the country is not yet connected to high-speed Internet. So solutions that rely on technology will have to deal with the digital divide.

Quite rightly, people are alarmed when they hear that their daily newspaper is about to stop publishing. But we should avoid the temptation to turn to policies that resemble bailouts.

Relaxing the antitrust standards to permit further consolidation won't solve the problem. Uniting failing business models will not produce a success any more than tying two rocks together will make them float.

While expanding scale may pay short-term dividends, in the long run, it will deepen debt, shed jobs, and reduce the amount of local coverage. That's the exact opposite of what we should be doing. We should be expanding the diversity of ownership and with a special focus on minority ownership. There are no easy answers here.

And that's why we need a comprehensive policy approach. Just as we have created national strategies to address crisis in health care, energy independence, and education, it is time to craft a national journalism strategy, to get out ahead of this problem and take advantages of the opportunities it creates.

It will begin by understanding how this happened and recognizing that journalism and journalists are essential for democracy. It will begin by showing why the Internet is a powerful force for positive change, but not a substitute for everything of value that has come before. And it will begin when we recognize that the future of journalism is a policy issue.

Policy makers should seek to join the robust discussion happening already about the future of the newsroom. The answer is certainly not to relax antitrust standards and double down on the bad decisions of the past. The most likely answer both based on the evidence available today is that there will be many, many answers, and that's good news.

I thank you for your time, and I look forward to your questions.

REP. JOHNSON: Thank you Mr. Scott.

And now hear -- we will now hear from Mister, actually Professor Edwin Baker, please commence your testimony, sir.

MR. BAKER: Thank you. I wish to make six points. First, the market cannot be expected to adequately support professional quality in journalism. Much of the value produced by newspaper journalism goes to people other than the media company's customers.

We all, including non-readers, benefit from the work of journalists in exposing corruption. We all benefit when corruption and negligence do not occur due to news media's reputation for watchfulness. We all benefit from the wiser voting of those informed by journalism.

Newspaper companies cannot turn benefits to non-readers into revenue. The gap between benefits provided and revenue obtainable results in inadequate incentives to put resources into producing news.

Second, this inadequacy has been understood since the country's founding. Recognizing both the vital role of newspapers in holding the fledgling country together and the inadequate support provided by the market, Congress beginning in the first years of the Republic provided huge subsidies on which the newspapers were highly dependent.

By the early twentieth century, the annual postal subsidy to newspapers was $80 million, which on a per person basis, equals roughly $6 billion in today's dollars.

Third, the highly publicized decline in newspaper circulation does not indicate any decline in public interest in newspaper journalism. Rather it mostly arises from two factors. Primarily, it represents a shift to online readership of newspaper stories with little or no real decline in actual readership, only a change in people's method of access.

In addition, huge layoffs of journalists degrades the newspaper product. Circulation predictably declines from the level more reporters and editors could achieve.

Fourth, bankruptcies, newspaper closures, and huge layoffs, over 30 percent, up to 50 or more percent at some papers, together represent the daunting nature of the crisis. But the key concern should be the last, layoffs.

Bankruptcies primarily reflect paper's inability to generate sufficient operating profits to make huge interest payments, usually from debt taken on to finance recent unwise purchases.

Unduly lax laws exacerbate this problem by failing to restrict these sales of newspapers. Still, these papers will continue after reorganization. Losses to the unwise purchasers merit no public concern.

Next, closures of a second paper in two newspaper towns illustrated by the Rocky Mountain News or the Seattle P-I, merely continue a hundred-year trend of towns being unable to support more than one English-language daily paper.

In contrast, huge layoffs of journalists and threatened closure of the towns' only daily paper are major threats to democracy. As ad revenue declines, so does the value to the paper of journalism in attracting readers to sell to advertisers. The paper consequentially lays off journalists despite knowing that these layoffs cause a decline in circulation and in paper quality.

Temporary declines in ad revenue always occur during recessions. More worrisome now is a major long-term shift of advertisers' budgets to online sites, especially to support search engines and the migration of previously highly profitable classified ads, to online specialty sites.

Unless public policy can create replacements for these lost revenue streams, we may lose much of the professional journalism on which, as our country's founders knew, any robust democracy depends.

Fifth, corporate consolidation is a problem for a democratic press not a solution. Relaxing antitrust laws can increase the problem. A primary rationale for mergers is to save money, often through laying-off journalists, thereby endangering the democratic contributions of the media.

In contrast, the widest possible dispersal of media ownership serves to democratize voice within the public sphere, serves to increase the number of watchdogs, provides a safeguard against demagogic abuse of media power, and places ownership in the hands of people most likely to be committed to quality journalism.

Sixth, the crisis justifies a public policy response. The central problem, the decimation of employed journalists, follows from the inability of media companies to obtain revenue that even approaches the real value that journalists' efforts produce for the community. The government would serve the public interest by giving media entities a tax credit for half the journalists' salary.

This tax credit would reverse newspapers' incentive to layoff journalists. More journalists would in turn increase the quality of newspaper and cause circulation to rebound. For the roughly 48,000 journalists now employed by the nation's newspapers, this tax credit would cost about $1.25 billion dollars, a fraction of the amount in today's dollars per person that the country provided newspapers and postal subsidies a hundred years ago. This targeted subsidy would duplicate the financial commitment that the country's founders to the news media of their time.

Thank you.

REP. JOHNSON: Thank you professor, and it has always been my dream to be able to gavel into submission one of my or any law school professor, and I was really at the 3-minute mark thinking that I would. It was just so tempting, but I was able to restrain myself.

Next, we shall hear from Mr. Dan Gainor. Mr. Gainor, please.

MR. GAINOR: Thank you. Mr. Chairman, members of the committee, ladies and gentlemen, I'm Dan Gainor, vice president of Business and Culture for the Media Research Center. It's an honor and a privilege to come here and speak about one of my favorite topics, newspapers.

From the first time I ever read on my own, newspapers have been a part of my life. I've worked at three different dailies and several weeklies and online news operations following that calling. You don't have to tell me that the newspaper business in changing.

Three of those organizations I have worked for are now out of business. Until recently, I wrote a column for the Baltimore Examiner, but it closed, putting dozens of friends and fellow journalists out of work.

The news media are going through a time of epic changes and that is never easy. In a few short years, evening dailies have all but died out. The rise of the Internet changed even more. Newspapers first lost employment advertising to firms like and since have lost classified ad revenue to Craigslist. Other sources of revenue, from personal ads to real estate, have met with smarter, more nimble competition.

While it is fair to blame much of this decline in newspapers to technology, it is not the only factor. The newspaper industry has changed too, for the worse. Standards have slipped or all but disappeared. The concept of a journalist as a neutral party has become a punch line for a joke, not a guideline for an industry.

We all saw how poorly the mainstream press covered the last election. According to the Pew Research Center for the People and the Press, voters believed that the media wanted Barack Obama to win the presidential election.

There is a quote from them, "By a margin of 70 percent to 9 percent, Americans say most journalists want to see Obama, not John McCain, win," Pew reported. Other surveys confirmed it. According to Rasmussen, "Over half of U.S. voters, 51 percent, think reporters are trying to hurt Sarah Palin."

It wasn't just the surveys, it was journalists themselves. According to Washington Post ombudsman Deborah Howell, in a column headlined, "An Obama Tilt in Campaign Coverage," the paper's election coverage consistently supported Obama in everything from positive stories to flattering photos.

That same slant reappeared last week during the Tax Day Tea Party protests. The Post didn't write a story about more than 750 events nationwide until the day they happened, far different from how they handled other protests. Their own media critic Howard Kurtz even knocked such minimal coverage.

While The New York Times did preview the events six times, five of those were negative. Such one-sided reporting has destroyed the credibility of the print press. Among newspapers, the most trusted name in news is the Wall Street Journal and just 25 percent of readers "believe all or most of what that organization says," according to Pew.

For the New York Times, the number is 18 percent and USA Today, 16 percent. The only publications lower are People magazine and the National Enquirer. In fact, for the New York Times, the number who believe "almost nothing" in the newspaper is nearly identical to those who do believe.

And while newspaper credibility has taken a hit among both Democrats and Republicans, it is lowest among Republicans with the Times having just 10 percent credibility rating with that group, one person in 10. You could write graffiti on a wall and have more people believe you.

But the Times still has widespread influence, and a story on the front page could be picked up and appear in some form in countless media outlets. The Times' former Public Editor, Daniel Okrent answered the question, is the Times a liberal newspaper by saying, quote, "Of course it is. These are the social issues, gay rights, gun control, abortion, and environmental regulation, among others. And if you think the Times plays it down the middle on any of them, you've been reading the paper with your eyes closed.

For decades many in the media have been working with their eyes closed, convinced of their own neutrality when all around them feel otherwise. In study after study, journalists consistently admit they support liberal causes and vote for Democratic candidates.

In 2004, Pew found journalists identified themselves Liberal over Conservative by a five-to-one ratio. Were journalists the only ones voting for president, they would have elected a Democrat every time since 1972.

The Society of Professional Journalists, to which I proudly belong, has a detailed code of ethics. At its heart, it says journalists should provide, quote, "A fair and comprehensive account of events and issues." They do neither.

It's fitting, then, a hearing to discuss the "diversity of voices," that everyone here grasp a key point, the diversity of voices in print isn't about news, it's fiction.

Thank you.

REP. JOHNSON: Thank you, Mr. Gainor, and before we commence with my questioning, I would like to recognize a group of -- large group of students who are here today to observe democracy in progress. I appreciate you all for attendance and who -- do we know whether or not there are any spies or anything amongst you? If anyone is -- yes, I see one hand, and thank you sir for being honest.

More shall be revealed later with you all. Don't forget that torture was once ruled legal. And so -- but now, I would like to, at this point recognize the fact that I have heard through the grapevine a couple of times that there is a secret relationship that exists between some members of Congress, who predominantly are of Republican heritage.

I understand that there is -- this is from folks that I talked to -- some folks believe strongly that there is an unhealthy connection between Fox News and the Republicans. Would, Mr. Gainor, I would like to hear your take on that, and also Mr. Lunzer.

MR. LUNZER: Okay. We are spinning a little out of newspaper territory, but I think Fox News does what a lot of publications do in journalism. They have a target market. They identified a market that is clearly underserved by the main stream media, because the main stream media, by all reports don't pay attention to the concerns of Conservatives which represent a fairly sizeable portion of the American public.

So Fox decided, and clearly, records show, they are right that they found a target market that was very viable. So since we had Rupert Murdoch's comments read into the record, I'm not about to dispute Rupert Murdoch's business acumen.

REP. JOHNSON: Thank you very much. But I have further been told that the -- as I call it, the Tea Party, which was held last week was a result of an organized effort by politicians. And in conjunction or in conspiracy with the Fox Network, TV network, that you know that was an unholy alliance, if you will, between those two as opposed to just a spontaneous outburst from uninformed people. Can you -- can someone comment on that? Mr. Nichols, please.

MR. NICHOLS: I attended one of the Tea Parties and the people I saw at the Tea Party were grass roots Americans who were deeply concerned about the bailout of the banks and about the Patriot Act, and a host of other matters, many of which this committee has dealt with.

I think we should be cautious about being too worried about media outlet, be they Fox or the New York Times having a connection with their readers that might inspire them to go and do something, to go and turn out and act.

See this is really the core of what of we are talking about here. The core of what we are talking about is that we need a diverse media with many different voices. We need a media that will speak to those folks who would go to a tea party. We need a media that will speak to the folks that wouldn't go to the tea party. We need -- what we desperately, desperately need, and what is dying, and I want to emphasize "dying" in this country today is that competition of strong media outlets coming from many, many different perspectives.

And I -- what troubles me the most is the notion that we have a liberal media or a conservative media. The fact is by and large we have a lousy media in this country.

And I want to tell you how lousy it is. The fact of the matter is George Bush shouldn't have been surprised that there were weapons of mass destruction in Iraq.

We should have had a media that was on top of that story and did a good job. It didn't, and you know there's all these people -- many people blamed George Bush or criticized him. I would be very blunt with you, I blame the media.

Our media didn't do its job. It didn't do investigative, challenging, aggressive journalism. And the way you get investigative challenging aggressive journalism is to have a lot of media outlets that employ a lot of journalists and send them out from different perspectives to go do their job.

REP. JOHNSON: Thank you, and Mr. Ben Scott, would you like to respond to that vicious rumor that is going around?

MR. SCOTT: Well, I can't comment on the veracity of that rumor, although it would surprise me. I think what the key issue here, that I'm hearing is a widespread agreement at this table that what we need is a diversity of viewpoints in the media.

It strikes me that at the moment of crisis in the newspaper industry, the print newspaper industry and largely the daily newspapers is also a moment of opportunity for us to take advantage of new technologies, to create new business models, to see the market and the government work together to figure out how we can support more journalists, not to replicate the status quo on the Internet that once had on the newspaper pages but to create a better media system.

To create a media system that employs more journalists, to create a media system that can aspire both to the goals of objectivity and to the goals of partisanship, so that for the first time since the ninetieth century when every major city had a dozen newspapers we can see a robust marketplace of ideas in this country.

REP. JOHNSON: Thank you, and unfortunately I wish I could hear from the other members on this point, but I will at this time note that my time has expired, and it took a while for me to see that red light life and --

REP. CONYERS: Mr. Chairman?


REP. CONYERS: I would ask unanimous consent that the chairman be given one additional minute.

REP. JOHNSON: Does anyone have the courage to disagree with the chairman?

REP. : Not me.

REP. JOHNSON: All right. Without objection, we shall do so. Thank you.

Mr. Gainor, if you would respond to that?

MR. GAINOR: Well, if I just might remind people a little bit about the history of the Tea Party. Tea Parties were spawned by comments made by Rick Santelli on CNBC, which is part of NBC and ultimately GE. Santelli had what's called "the rant" heard around the world complaining about spending in government. Soon after that, there was an event in February that, yes, did not get much media coverage but it included 50 different Tea Parties on February 27th.

REP. JOHNSON: Did it get covered on Fox like this one did?

MR. GAINOR: Actually it didn't get very much coverage -- I mean, it didn't get very much coverage; you know, it did get coverage on Fox some. Fox saw, again, I think, an opportunity that people were not covering it much.

But again the cause of this and the Tea Party people themselves proclaim on their website that this was spawned by comments, inspired by comments made by Rick Santelli. So to say it's a Fox conspiracy is not one that I would have any credence for.

REP. JOHNSON: All right, thank you, sir.

Next, I turn to Mr. Goodlatte for his questions.

REP. GOODLATTE: Thank you, Mr. Chairman.

Mr. Gainor, to follow up on that, according to a Gallup poll, only 9 percent of the Americans say they have a great deal of trust and confidence in the mass media to report the news fully, accurately, and fairly. That's even lower than Congress' approval rating.

The same poll found that more than twice as many Americans say, the news -- I mean, now, we're not talking about just Fox News here by the way. We are talking about all sources of information through the media.

That same poll showed that more than twice as many Americans say the news media are too liberal rather than too conservative. How has Americans' lack of trust in the media exacerbated the news industry crisis? What can be done to restore that?

MR. GAINOR: Well, I mean, what can be done to restore it first of all, is to do a better job. I think that's something maybe all -- everybody in the committee, you know, the panel can at least agree on. Before we get too lost, you know, we were just talking about Fox and a newspaper discussion, I want to remind everybody the scale of media out in this country.

If you talk about Fox and the Tea Party day, when they had 3.9 million people watching their one program, their highest rated program, they did it very well, they are one-sixth of what ABC, NBC, and CBS get on a typical evening news show.

So and then they roughly equaled that night and what MSNBC, CNN, and CNN Headline News. So you are talking about a drop in a bucket by comparison, so it's not an apples and oranges comparison. What can the media do? They need to do a better job, they need to recognize. We talk about diversity of voices; they need to recognize that there aren't diversity of voices in the newsroom.

In a typical newsroom, you will see a diversity plan that talks about gender, talks about race, some of the more advanced gender -- diversity plan will talk about religion. They won't talk about opinion.

So you will find a newsroom where there are forced, in one case where they did a story on religion where they had to go to a graphic artist, who actually was more actively religious, because they didn't have enough people in the newsroom who went to church. You need to have a newsroom -- if we are going to have a newsroom that reflects America, it certainly hasn't been doing so for long now.

REP. GOODLATTE: Thank you. Let me turn to Professor Baker. In your testimony, you stated that huge layoffs of journalists have resulted in a degraded newspaper product. Can you tell us more about what that degraded product is? Has it led to more one-sided or biased news coverage? Or is it possible that degraded products have caused news consumers to switch to alternative news sources?

MR. BAKER: Actually, when they switch, they usually switch to the online newspaper product for the most part. When --

REP. GOODLATTE: Is the online newspaper product a degraded product too?

MR. BAKER: But -- both of them. What any editor will tell you that with more newspaper resources they can do a better job covering the various things that the newspapers ought to do. Now, they may do it from a particular slant (ph). Fox might do it from one slant. Another media entity might do it from a different slant.

Under the First Amendment, that's not really our concern. But for a democracy, our concern is that they do it in a quality way with resources. So when newspapers have invested by -- in hiring more journalists, they've actually increased their circulation.

The trouble is that circulation isn't as valuable to the paper as it costs the paper in newspaper salaries. So they layoff the journalists. Those journalists are providing a public service by providing a better paper. So when the paper fires the journalists, the data tends to show that they lose some of the readers. That's what I mean by a degraded product.

If something -- (cross talk) -- if you use a lot of money to produce something and sell it for that price, it's going to be a better deal than it --

REP. GOODLATTE: Let me follow up on that point. I think it's a good point. But by the same token, newspapers have got to be able to raise the money necessary to be able to afford that quality of reporting for us. So why has the newspaper industry been unable to monetize its content in recent times?

Is it strictly the fact that they are competing with free, on the Internet, oftentimes on the Internet they may be competing with -- I mean anybody can be a publisher, anybody can be a reporter on the Internet. The quality of that is often subject to considerable question, but nonetheless, they are having to compete with that.

Is there a model that the newspaper industry could follow that they haven't. Is it -- I mean, iTunes for example has changed pretty dramatically how you buy music by selling it one song at a time. Are we headed toward that? Or are you going to pay for your story?

MR. BAKER: Most every --

REP. GOODLATTE: Story by story?

MR. BAKER: Most everybody in the industry is looking for those models. And some of those people are pretty good business people and they'll probably find what's available. What they won't find is enough to support the type of journalism that the country historically supported, like -- basically the government subsidies. As long as the benefits are going to people beyond the readers, there is no way to monetize those benefits.

If you're talking about readers, there is at least the possibility of monetizing it and they are trying to find how to do that as a way of capturing more money from their online readers. They are not going to be entirely successful. They are going to do somewhat better than they are doing now. That's going to help a little, it's not going to deal where the real price is a problem.

REP. GOODLATTE: Well, I take it that the subsidy that --

Mr. Chairman, if I might -- I see my red light is on as well. I might have a need to--

REP. JOHNSON: Well, you --

REP. GOODLATTE: -- ask a solid question to Mr. Baker.

REP. JOHNSON: Mr. Goodlatte, if there is no objection, I'll give you 30 seconds extra.


REP. JOHNSON: No, it could be further with a minute. Is that fine?

REP. GOODLATTE: Okay, thank you. That should do it.

Professor Baker, to follow up on that point. You referenced government subsidy. Is that in terms of the postal cost of sending newspaper? What subsidy are you talking about?

MR. BAKER: At this time -- and today, the newspaper industry is not being subsidized. A 100 years ago or 200 years ago, it was being hugely subsidized. A 100 years ago, the $80 million would be in today's dollars per person $6 billion that they were getting from the government 100 years ago. Today, it's not there.

REP. GOODLATTE: You're saying the newspaper industry was subsidized 100 years ago?

MR. BAKER: A 100 years ago the news -- the postal subsidy to the newspaper was worth 80 --


MR. BAKER: A Supreme Court case was --

REP. GOODLATTE: But the reality is that now, the problem is that subsidy on almost any price would be very difficult to compete with getting information online. So are you proposing a subsidy for online journalism or -- because that's where this is all headed.

MR. BAKER: What democracy requires is journalists. I think it also requires newspapers, but I'm not as much concerned about newspapers as I am about journalists. If you gave a tax credit to newspaper companies for half the salary of their journalists, they would certainly find it valuable, desirable, to hire more journalists.

REP. GOODLATTE: But who would be eligible for that though?

In an online world wouldn't anybody be able to say, well I have -- I have got an online newspaper. I want to have a one half subsidy of my journal.

MR. BAKER: Most of the journalists today, most of the news being produced today is by the print newspapers sometimes also operating online sites. If you went forward with this notion, one of the questions would be whether or not it should be made available to various types of online publications which have paid staff, paid journalists working for them.

There is nothing in principle that would say that you shouldn't, but we would be dealing with the problem even if we didn't extend it that far.

REP. GOODLATTE: Well, the chairman has been very generous with my time, so I will yield it back. But I would be interested in any other -- if any of you want to submit, in writing, any thoughts about how such a subsidy could be sustained in a world where anybody can define himself as a journalist.

REP. JOHNSON: Thank you Mr. Goodlatte. Now, we will have questions from Chairman John Conyers.

REP. CONYERS: Thank you, Mr. Chairman.

This is very important and what we will begin to look at as this examination of the -- of what to do with newspapers and the crisis continues, the exact nature of the crisis -- I've had, I think, a pretty good examples, but we need to know precisely what it is we are going to fix. But I was moved by the Scott recommendation that we come up with a national strategy for dealing with papers.

And I would like to have you and Nichols and others expand on that if you would.

MR. BAKER: Certainly. I think the first thing to do is look at the different dimensions of the problem. The problem that is happening for a major daily newspaper is not the same problem that is happening for a rural weekly, it is not the same problem that is happening for a new experiment in online journalism, it is not the same problem that is happening for a hybrid that does specialization like investigative journalism or government reporting.

So I think we need to understand that the different kinds of problems. And I think we need to begin to design solutions. And I take the main problem that we are trying to get out here is, if the historical accident of advertising supported newspapers no longer works, and there is no longer a revenue model in the marketplace that produces the news that we need for our democracy, how do you fill that hole?

First, there is a reduction of costs with the distribution model provided by the Internet.

There is production -- there is -- but there is always going to be a core expense for production of news and I think we need to get at that through --

REP. CONYERS: But how do we go about putting together a national strategy -- I mean, would this committee be a place to begin or would we call in all the newspaper leaders in the country or invite them to start a conference themselves to come up with a strategy?

MR. BAKER: I think you can begin by taking the leadership of those who have begun such as the Knight Commission has a panel on this subject. A number of university professors have written extensively on this subject. I think that we need to begin to look at solutions that range again from tax policy, bankruptcy policy, direct investments in education and public media.

Those are all areas in which, I think, potential solutions lie. And it would be a combination of those things which produces the desired results.

REP. CONYERS: Which would include the subsidies that they are already enjoying. You know when you raise the cost of a postage stamp, you know what we are paying for?

MR. BAKER: We are paying for the news media and the periodicals, in fact.

REP. CONYERS: Exactly.

John Nichols.

MR. NICHOLS: If I can just come off that I -- and actually, Congressman Goodlatte, very, very good questioning in this area. The notion of a subsidy from the government to a newspaper is, I think, abhorrent to most journalists. What you really want to do is --

REP. CONYERS: That's capitalism at its worst.

MR. NICHOLS: Well, we did it with banks and I'm a little troubled by that.

REP. CONYERS: That was the same and yeah, it applies to whomever --

MR. NICHOLS: Now, what we're talking about here is democracy. And we want -- we want the people to be able to get information involved in that in some way or another. And so, the way that you might look at Congressional action, one piece of Congressional action, is to do what some European countries have done, which is to allow people to take the costs of their subscriptions off their taxes. You can deduct your subscriptions from your taxes.

As a journalist today, professionally, I can deduct my subscription from my tax but a citizen cannot. I would just say -- suggest to you that this is a way, where we democratize a support of journalism, we come in and Dr. Baker has offered some other very wise proposals. But imagine this, where we democratize journalism by saying to people, yeah, if you want to subscribe to a conservative Internet site that charges or a liberal newspaper that charges that's great.

And you can -- you pay your money in and then attach that -- staple it to your taxes like a lot of us did on April 15th. And it's a way to support media that you approve of without sending the money -- and this is my personal -- (inaudible) -- without sending it down the rat hole of these existing companies because the existing companies have done a horrible, horrible job of running newspapers.

Newspapers, I mean imagine we are all talking about how much we love newspapers and yet somehow they've managed them into extreme crisis. And this crisis did not begin when somebody flipped the switch on the Internet. If you monitor the declining advertising revenues of newspapers, it started before the Internet hit its stride.

And frankly, the bottom line is also on circulation. We've had basically stagnant circulation since the 1950s. And so, the reality is newspapering has had a long-term problem, it's come to a head in the current economic crisis. But the -- what we need to do is realize that a lot of these companies that have been running newspapers haven't been doing a particularly good job.

And I'll close with one of the explanations for why they are in so much trouble right now that we have not talked to enough about. They, the big companies went on buying sprees. They spent too much money to buy daily newspapers in communities, took on huge debts, and now they are laying off working journalists so that they can pay their debts and at the end of the day what they will end up with is perhaps a paid-off debt but no newspaper that is worthy of reading.

REP. CONYERS: Mr. Chairman, may I ask unanimous consent for one additional minute.

REP. JOHNSON: In the absence of any objections, please, sir.

REP. CONYERS: I just wanted to ask Mr. Gainor if he is familiar with an organization called FreedomWorks.

MR. GAINOR: Yes, sir.

REP. CONYERS: Okay. And I wanted to ask you further, are you familiar with an organization called Americans for Prosperity?

MR. GAINOR: Yes, sir.

REP. CONYERS: And are you familiar with an organization called The Heartland Institute?

MR. GAINOR: Yes, I am.

REP. CONYERS: Okay. I'm glad to know that. I am not, but I think I'm going to get more familiar with --

MR. GAINOR: They are conservatives you should check them out.


REP. CONYERS: Well, thank you for -- maybe that's why I had never heard of them before -- (laughs) -- but I understand they are pretty effective that they influence the business of getting news out to the people in their own way quite effectively.

MR. GAINOR: I think they are probably policy organizations that's like -- probably, you've got 1000 of public policy organizations in Washington who try to do their best to get their word out. They are probably -- really get at it.

REP. CONYERS: Can you recommend them to my attention?

MR. GAINOR: I -- absolutely.

REP. CONYERS: And to everybody else in the country as well?

MR. GAINOR: Certainly.

REP. CONYERS: Okay. Thank you very much.

MR. GAINOR: Thank you.

REP. JOHNSON: Thank you, Mr. Chairman. There being no others from the other side of the aisle who are present at this time I will now turn to Representative Gonzalez.

REP. GONZALEZ: Thanks very much Mr. Chairman. I'm not sure that I would even have agreement among all the witnesses if I said, do we all agree that the newspapers provide us something that's very unique, different from any other media source. And we can complain about the bias, the prejudice, and the competence and so on in the newspapers. The real question is as opposed to what? TV, radio, the Internet.

Suddenly newspapers truly become essential and vital in the professional product that they provide more often than not and that you will find in the newspaper setting that you will not find as often in any other delivery system. That's my premise.

If we don't agree with that then we can all pack it up and go home and say let nature takes its course, survival of the fittest, the wonders of free market and then it's over.

The question is, are the laws antiquated? Do we need to do something about it? Maybe, maybe not. I suggest the matter of the application of the laws in a manner that will take into account all relevant factors. Your competition, not necessarily within the same similarly situated industry but rather who are your competitors.

Now, I'm going to say -- I saw everybody kind of shaking their head that we all agree that the newspapers provide something that's very unique and valuable that cannot be replicated elsewhere or presently is not being replicated. So how did we get to where we are today? And now, I'm going to -- I'm going to quote from newspaper articles.

June 5, 2008, whenever I find something interesting, you know, I mean this is the wonders of technology. Isn't it, we used to just highlight and cut it out and put it in a file? Now it's in your Blackberry, your iPhone -- June 5, 2008, Peter Whoriskey from the Post quoting Steve Ballmer, CEO of Microsoft. Here are the premises I have -- quote, "Here are the premises I have. Number one, there will be no media consumption left in 10 years that is not delivered over an Internet protocol network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in electronic form."

And if that's what we need to prepare ourselves for, that's fine. But what happened is that businesses adopted certain business models and revenue streams. And maybe it is irreversible. And it's an irrevocable future out there, I mean we've set something in motion.

June 6, 2008, New York Times Paul Krugman column quote, "In 1994, one of those gurus, Esther Dyson, made a striking prediction that the ease with which digital content can be copied and disseminated would eventually force businesses to sell the results of creative activity cheaply or even give it away. Whatever the products -- software, books, music, movies -- the cost of creation would have to be recouped indirectly, businesses would have to distribute intellectual property free in order to sell services and relationships. And we'll have to find business and economic models that take this reality into account."

That's where we find ourselves, the question is, is there a role for us? I think Mr. Scott, you said the future of journalism is really dependent on policy. And I assume you mean policymakers in Washington and elsewhere, which I think is what Steve Kay said about the Internet, the future of the Internet is not dependent on technology but on regulation. I think there is a role for us.

So what is it that newspapers bring that is so valuable that we all have to work together to salvage the survival of the printed media in America. And I will start to my left, and that's the only question I have.

MR. : Thank you very much, Congressman, I have -- I think it's an advantage. Sometimes it seems like a disadvantage actually running a newspaper. And I'm not a theorist. And I'm not somebody who testifies here and it seems like the good ones can hit that five minute mark right to the second. So anyway, I actually have 10,000 men and women fulltime, part-time and independent contractors that are depending upon me in this organization.

We are probably as close to a -- the ideal kind of an ownership group as you can want, four Republicans, four Democrats, and four Independents. All self-made folks who really cared about it who put up 30 percent, so it wasn't highly leveraged at that time, were willing to put more money into it, the idea that somehow it's because that they -- the news media is too liberal or too conservative, Rupert Murdoch is a really smart guy, right.

The New York Post is struggling. I hear it loses money. The New York Times is struggling and the Boston Globe. So Republican, Democrat, Liberal, Conservative, the business model is not working. And part of that is as simple as classified advertising. You know, I came in -- I've only been in the industry three years. And I have found since coming in here, that there were some mid-level business people in the industry that weren't up to snuff.

I know when I was at Penn there were people who wanted to go into -- be reporters at the Philadelphia Inquirer, but nobody said -- (inaudible) -- want to go into circulation at Knight Ridder. I understand that that's the case. But at the top of these companies there are some really smart people who are really successful in -- Rupert Murdoch in television and he's struggling in newspapers.

Don Graham a very, very bright guy. The Washington Post -- 50 percent of their revenue comes from the Stanley Kaplan learning center. And so these -- they're not all dummies and there's a real systemic problem here. And part of the problem that I've noticed repeatedly, most recently with a group of publishers in Santiago at a meeting, is everybody is afraid to talk to each other. We had an antitrust lawyer in the room.

I've been in advertising for 20 years that requires large cooperation. And I've never seen an industry that everybody is so afraid to even begin to have a discussion. Now, perhaps they're more conservative by nature, but it was shocking about issues about, well, could we kind of cooperate on some kind of a free classified thing, could we cooperate -- listen, nobody is trying to decide should they buy the Philadelphia Inquirer or the Dallas Morning News tomorrow morning. They don't.

And there is opportunities, but every -- to find a new business model, because you know what, nobody does what we do. The bloggers comment on what we do or they rip it off and copy it and put a sentence in front of it. Eric Schmidt said the average blog is read -- in America -- is read by one person, which is the person who created it. So the idea that somehow, you know -- I mean, I'm all for other things, if there could be subsidies for subscriptions, et cetera, we have to look at the impact of some of those things.

But fundamentally, you know, if I thought the answer was to hire more journalists to fix the problem, we would do that. The question is I mean -- and forget our debt. We have a lot of debt; it's going to be restructured. Even if I have zero debt -- and we are the number three in advertising sales among top newspapers so far this year. Number three among the top 25 papers, one of the most efficient newspapers in the country according to a industry report as well.

So number three in advertising, one of the most efficient, at the same times our profitability has gone from 70 to 49 to 36 last year to 11 this year. And that's with making a lot of savings. So to somehow think that even if we had no debt -- even if we had no debt, we have no -- our investors haven't gotten -- are so committed to this that they haven't gotten -- received a dividend. The model doesn't work.

Conservative paper, Liberal paper, however you want to do it -- and I think most people just try to -- you know, over the course of the whole baseball season it's pretty fair most papers. But the fact of the matter is -- and we have to look at that, because there won't be anybody here. Look, I had a great situation where the Toys for Tots was struggling in Philadelphia. We wrote about it. They got 50,000 toys kids --.

Or somebody who wrote to me and said I never thought of taking my children to the Philadelphia Orchestra. I'm a construction worker. I happened to see something and how neat it was for the first time at 52 years of age to walk in to hear the Philadelphia Orchestra -- or vice versa. I mean nobody does what we do.

And over a million people to everyday read our paper in Philadelphia physically and another half million people go online. We have to figure how to charge them. All of us are afraid to talk to each other about how to create a one-pass system for that. I mean we really need some help. We don't need a subsidy.

We just need a little bit of room and things that will come before the Justice Department again to be approved before they're done. And I'm -- we're not -- we just want to be in Philadelphia. We're not trying to create a media empire. That's not -- none of us would be interested in buying a paper in Chicago and Los Angeles.

We're Philadelphians, this is the only reason that we're here. But we do need -- I'm telling you as a relative newcomer to the industry, this industry is in extreme situation. Once it goes, democracy will suffer.

REP. JOHNSON: So why don't you create a new model?

MR. TIERNEY: Well, we're struggling to some extent to do that, Mr. Chairman, in terms of what we've done. I mean we've come up and now we're willing to, you know, we're -- negotiations with the banks to put in more equity, et cetera. But even if we have -- there is -- when we're competing, to some extent with the Google. I mean think about that -- 80 percent of the search.

And they -- I mean the -- and they are, in many ways, a competitor to us. I mean, you know, we don't control the advertising in -- all the newspapers in the Philadelphia market together aren't that powerful as an advertising vehicle compared to a Google. That's where -- I won't get into that. But anyway -- that's probably for another hearing.

But anyway, the -- but you know -- so there are -- and I guess what I'm suggesting is that I've never seen a more fearful industry about talking about cooperation, honestly. And I've advised people in the electric utility business -- you name the business. And it's an industry that -- and there's so little concentration.

I think the largest chain of newspapers has less than 10 percent, and then it drops off after that. We're probably the most deconsolidated industry in comparison to cable or any other business. I'm sorry. I know I've run over that 5-minute mark. But I appreciate the opportunity. Thank you, sir.

REP. JOHNSON: Thank you, Mr. Tierney --

REP. CONYERS: Chairman, can I ask unanimous consent so that Mr. Gonzalez' question can be gone down the row here?

REP. JOHNSON: Without objection, so ordered. Proceed.

MR. NICHOLS: I'm very honored to be on a panel with Brian Tierney because he stepped in at a time when we had a major chain breaking up, and put together one of the few situations where local people actually bought their paper. And this is something we should be about. We should be about local ownership of newspapers. I can't tell you how much damage has been done.

I know it's a relatively unconsolidated industry. But let me tell you, chain ownership by and large has been a nightmarish situation for the daily newspaper business. And when you have distant owners who are taking profits out but not putting much back in, you see the dumbing down and the destruction of the daily newspaper.

And so at the end of the day, when we start to deal in these consolidation antitrust cross-ownership issues, all central to this discussion, we have to be very, very careful. If we simply make it easy for our distant owners to consolidate more and do less, we will end up in the newspaper business with something much like what happened in radio. In 1996 --

REP. CONYERS: But isn't that the nature of capitalism?

MR. NICHOLS: The nature of capitalism, frankly as I understand it, has something to do with free markets. And when you have a monopoly owner --

REP. CONYERS: But free markets -- that means global.

MR. NICHOLS: Yeah. Well, when you have a monopoly owner in one place I'm not sure if that is a free market operating here. And so what I would hope is that Congress would be in the business of trying to promote a real free market of ideas where you set the situation where it is possible for competing newspapers, competing media outlets in the same town to have -- employ journalists and do something of quality.

But I just -- to close off that thought, I think it is -- the great danger in saying, well, let's just throw off the antitrust rules, let's just throw off the cross-ownership rules, let's just throw off the consolidation rules, is that we then begin to end up in a situation where people who have already shown attention -- not Mr. Tierney by and large -- but the people who have shown attention for taking freedom, more freedom as an opportunity to dumb down, downsize newspapers and newsrooms and to take more profits out.

We saw this happen in radio. When Congress passed the Telecommunications Act of 1996 allowing one company to own as many as eight radio stations in a market, these companies -- Clear Channel is the first example -- came in, bought a station, shut down seven or eight competing newsrooms, and put one kid running from microphone to microphone, and we ended up as Senator Dorgan has revealed in his hearing, with situations in some communities, substantial communities where there was not a single broadcast journalist on the job.

Now, that's the danger of throwing off some of these controls, throwing off some of these rules in a irresponsible manner. You could well end up not helping newspapers, but actually hastening the decline of newspapers, and more importantly -- because this isn't really about newspapers -- more importantly, the decline of journalism. And a democracy cannot function without journalism.

MR. LUNZER: If I may -- in Chairman Conyers' town just this last week, two very enterprising journalists as part of a team won a Pulitzer Prize for the work they did investigating an ethically challenged mayor. They didn't ask what party he came from. They had heard the rumors, they did the work. There was something that ultimately was very tragic, but also very important for that community.

When people say what do newspapers represent, what will be lost, that kind of work isn't being done by MSNBC or Fox News. You know, this is the kind of work that good journalists do every day in organizations that are big enough to support this kind of information. They're hardworking. They really don't pick sides.

I reject all this talk of bias. I think that's more about the polarization of politics. But what I would say is this -- in terms of policy you want to encourage journalism, you don't want to try to pick winners. And that's the direction you need to go in. Thank you.

MR. SCOTT: Mr. Conyers, you asked me earlier how Congress could go about constructing a national journalism strategy and I did a poor job of answering that question. But it occurs to me that the answer to your question is the same answer to Mr. Gonzalez' question.

And I think he's actually right, which is, what we need to do is we need to bring people together in a spirit of cooperation -- which Mr. Tierney rightly points out has been absent in this space, and bring together the industry and the unions and their leaders and the new Internet journalists and the academics who've all been thinking about these questions.

And we need to identify what is the essential thing about print journalism that we need to preserve in this transitional technological environment. And how do we support those things in a business model where advertising revenues have been decoupled from the value of news. And third, what are the policies that we can put in place to facilitate that transition so that those essential elements are preserved.

That is the challenge, I think, that sits before this body, and the one that would be the first objective of the national journalism strategy.

MR. BAKER: Thank you. Mr. Gonzalez' question about what's unique about newspapers, I think it has to be the journalistic unit. If that survives, whether the paper edition survives or not, is a somewhat marginal question. But to have those employed journalists -- and most of the journalism done in this country today is done by newspaper journalists, not all of it, and we should be supporting it wherever it's a success.

But newspapers do most of it, and if we do something that sacrifices that, democracy suffers. Evidence is from around the world and also within this country from state to state, that the biggest correlator with less government corruption is newspaper readership. When people are reading newspapers, corruption goes down. That happened place after place.

My suspicion -- these days for mostly free movement of all the readers to online -- I suspect it's not just the readership of the paper and newspaper that's been crucial for this reduction of corruption, but it's the fact that there is journalists out there making reports on what people and government are doing.

It's been suggested by somebody that in the related stimulus bill we would get much better use of that money if a small fraction of it was used to support investigative journalism; then the money that was spent would be used much more wisely.

As for how we keep these journalistic units together, the history has been that when you allow the exemptions from antitrust law, the general result is, as has been mentioned in the radio example, is that they'd lay off the journalists, that that's the part that's hit the first and the hardest.

The Newspaper Preservation Act, which I think was a wonderful idea in terms of keeping competing newspapers alive, keeping journalistic units alive, has as a practical matter turned out -- once you've allowed them to join forces as a monopoly business enterprise, then they discover that's really not all that valuable to still have to produce two products when we could have our monopoly with one product.

So the JOAs have largely been hospice care. They keep one paper alive for a while and eventually put that one out of its misery, and then the monopolist can split up the profits of a single newspaper in a town. The exemptions from antitrust laws have never been a good method of making sure that these journalistic units stay alive.

Other policies of a variety of sorts are offered, a subsidy scheme. The notion of new ownership forms as been mentioned by other panelists. There's a variety of different things that could be usually done is these journalistic units -- that's the crucial thing that newspapers have offered us. And it's been something vital for our democratic societies.

MR. GAINOR: First of all I want to thank Congressman Conyers for giving us all a chance to answer this question; it's very important. Yes, what newspapers or what news organizations do is unique, but it's not always going to be in print. You can ask any of the people who work on your staff or any of your family; they are getting their news from other venues, they're getting their news on their BlackBerry, online, in some form or another.

Times are changing, have changed very rapidly. But I get very concerned -- people are thinking that there is no strategy. There are strategies that are working. People are paying for content. You can find financial news. People will pay. Readers pay for financial news online. They'll pay for health news online. They even pay for sports news online.

There are models that work for these -- for the news industry where these are working. And so I reject the contention that there are no business models. I think the problem is -- I think we all agree that the industry is not very well run to having found them yet. But nothing scares me more in the middle of a congressional hearing than three words that say "national journalism strategy."

For Congress to be mandating a national journalism strategy results in what you -- to some extent have here in this hearing right now -- journalists lobbying government and then in turn being beholden to the decision, and whatever moves you make to then aid them in protecting their career and their employees. It's natural, it's human, we all have friends in the industry, we all want industry to survive.

If Congress bails amount, how hard are they going to be then treating those Congressmen who voted for that the next day? So I want to close just with -- Editor and Publisher actually addressed the issue of bailout in September. This is an industry publication, and it came out against them.

And it ended in its editorial by saying, "There is no reason to believe bureaucrats would do any better picking winners and losers among newspapers, and plenty of reason to fear turning the financial future of newspapers over to a federal government all too enamored of secrecy and surveillance." I second that opinion. Thank you.

REP. JOHNSON: Thank you, Mr. Gainor.

I will now ask this very simple question. Mr. Chairman -- Chairman Conyers is about the only one who actually ran with the dinosaurs and he regrets that he can't run with them today. But -- because of course they went extinct, and we were not able to, as a government, save them.

And I'm not talking about the polar bears getting ready to leave; the famous seals whom our Navy is so fond of, are threatened with imminent demise due to this alleged global warming phenomena. And -- you know, so that indicates things change, dinosaurs come and go, newspaper industries come and go.

Why shouldn't -- why is it so necessary for government to get into the pockets of the people and save this dinosaur? Why should we move towards socialism?

MR. TIERNEY: I'll take -- let me just say from the perspective of somebody again who actually is running a newspaper. We're not -- I can say our industry is not looking for a bailout, not looking for a dime, we're not looking for a dollar, we're just looking for the ability to have discussions which may or may not bear fruit.

But our -- you know, the industry is still -- you know, when I hear about the monopoly, if it's such a great monopoly, there wouldn't be hundreds of newspapers for sale right now with no buyers. I mean if this was the biggest monopoly in the world, you would think that somebody would want to buy a newspaper in town after town.

The value of stocks like Gannett is down about 85, 90 percent in two years. The McClatchy Company, second largest newspaper chain, has dropped 99 percent from $60 to $0.60 in two years, two-and-a-half years. The New York Times Company -- these -- this is not -- and what we do -- and again, we're not looking for a subsidy at all unlike other industries that have come before you.

We're just looking for the ability to, I believe, have a chance to -- because you would be surprised, Congressman, if you were there as an attorney. The fear of these publishers to have any discussion at all even with a lawyer present, I think stymies the ability to begin to kind of say how can we find some ways to save some money, or can find some ways to compete with, you know, one of the big Internet sites, et cetera.

REP. CONYERS: Mr. Tierney, you're confusing cause with effect. The reason these big monopolistic newspapers may be going into the toilet isn't because of the system. It's because the way they've run it and the poor quality and the fact that there are competing technologies that weren't there when the Founding Fathers started off bragging about newspapers. So to tell me what their stock is worth now may be a direct result of their causation, not anybody else' or the government's.

MR. TIERNEY: Respectfully, Mr. Congressman, they're not all rotten operators and they're all down. And they're not -- and that's kind of what's going on. And what's going on now --

REP. CONYERS: Well -- wait a minute. You say they're not all rotten operators. How do I know that?

MR. TIERNEY: Well, it would be a, you know, a pretty -- like again, I'd look at Rupert Murdoch, we think he's a good businessman --

REP. CONYERS: Well, you know, I suppose there are people that think he's a good businessman.

MR. TIERNEY: Maybe I should find another example.


You know, it is interesting too, because people say I can get it, I can get that information online.

If you get that information online and it's about Philadelphia news, 9 out of 10 times it's going to be coming from the Philadelphia Inquirer and the Philadelphia Daily News.

It's just -- you know, what we're now -- and that's a whole issue of copyright and rights, because people can basically get it, paste it in, and what's fair use is what's -- I mean when people say information wants to be free, they're not in the business of paying people to create information, you know. I mean I think that -- you know, I've heard people from -- related to Google saying, well, it all should be free.

Well, the ads aren't free, you know. I mean it's kind of, like, somebody who has the, you know, the right -- you'll excuse this analogy, but the right to sell -- you know, the exclusive right to sell beer at a dance club, let's just say. So you think the dancers shouldn't be paid but the beers are $10 each. Well, the dancers have to be paid too in this situation, not just the guy selling the beer.

And we have too many situations where people are selling the ads around our content, the content that we create. And that's -- you just can't create something for free. I can't -- we can't have great journalists that we have -- such as we have in our two papers from the guild and not pay them.

REP. CONYERS: Was that example in reference to a gentleman's club?

MR. TIERNEY: I think that's the kind of club I meant, sir, yes, sir -- (laughs) -- is that a first for Congress, I don't know, for me to reference that? I'm sorry, sir.

REP. JOHNSON: Ladies and gentlemen, we've been -- I think I would be remiss not to recognize the imposter who has just entered the room. And though she is very low profile, you know, folks like me nerds and that kind of thing definitely know what she looks like.

And -- but the individual on stage, the panel with us, I guess we've checked our ID and everything. And I personally have -- I want to see the real Sheila Jackson Lee. I missed her over the last couple of weeks when Congress has been on district work periods. And so I want to recognize that we have been joined by my good friend Congresswoman Sheila Jackson Lee from Texas.

Welcome. Thank you. And we'll ask you to proceed with your questions on this issue as soon as we can -- I think it sort of answered my questions. I'm going to just yield to -- instead of you all doing that -- I'm going to yield again to Mr. Goodlatte.

REP. GOODLATTE: Well, thank you, Mr. Chairman. But I'm going to go back to my first statement. I don't have any additional questions. So if Jackson Lee has any questions, we should go right to her.

REP. JOHNSON: I'm sure -- Ms. Sheila Jackson Lee, how do you feel about that, and if it's okay with you, please proceed.

REP. JACKSON LEE: Mr. Chairman, thank you. I notice the hearing is winding down. I want to thank the chairman of the full committee, Mr. Conyers, and I want to thank you for your leadership. This is a vital continuation of this committee's assessment in this economic arena of the various entities and bastions of business.

But in this instance we're talking about the very vital aspect of the First Amendment, something that we treasure here in the United States. So my question in light of the fact -- and I apologize for just arriving back into town. And I want to have an opportunity to at least comment very briefly on this question that I think has to be a studied question.

And we have to come up with some answers, because on one hand we are losing the nation's very vital source of information. One reason, of course, is the fact that everyone believes that they are tied to the Internet. I think there's something good about the morning paper and the afternoon paper and being able to have that.

I also think that communities suffer, frankly, when -- though I respect small papers -- when papers close. And there is only one source of information -- explanation if you will, in the arena that is necessary. So I guess -- let me just try to go straight to Mr. Nichols who is the man on the ground and has got his hands in the mist because he's a journalist.

Let me tell you the respect we have for you and this committee. I know that you know that we have passed legislation to protect the rights of journalists as regards to sources. And chairman of this full committee has been a leader on those issues, and I've been glad to join him along with the leadership of Mr. Johnson -- Chairman Johnson.

What is the -- what are we looking at here, from your perspective, in essence should be considered not only as journalist but an employee if you were working for a major newspaper? What's the economic impact that we're talking about? And I would appreciate if you would mix the economic impact question with the whole issue of the First Amendment.

Antitrust -- obviously, we're dealing with the economic impact, the business of newspapers which I think is very important, as well deals with advertising, but economic impact, what it does to the First Amendment if we begin to see either mergers or closing. We're looking at whether we should intervene governmentally. What is your assessment? And forgive me for asking a redundant question that you may have already answered.

MR. NICHOLS: It's not so redundant. And it's also -- I would be remiss if I did not thank the committee for -- and Republicans and Democrats, Conservatives and Liberals for their commitment to protecting reporters and the pursuit of information in the society. We have just had so many examples in the last week -- have stories that have come out that relate to this committee and -- on surveillance, torture, and other issues that were driven by journalists who felt free to do their job.

And so it's very important what you do. I would just suggest to you that -- I keep looking over at Chairman Rudino and remembering that Chairman Conyers was on this committee when a newspaper revealed the wrongdoing of a president and empowered much more than any congressional investigator, any judge, any lawyer, the Congress of the United States to make the Constitution real. And the Constitution is real when we use it.

When you held those impeachment hearings in the 1974, the Constitution became real. Similarly, free speech and freedom of the press is only real when it can be practiced in a meaningful way. And so if we lose newspapers and if we lose journalism, we begin to lose freedom of the press as something meaningful. And we've had this question bounce around somewhat before you came, Congresswoman, about the role of government, how government might step in.

And I just want to remind you -- I'm a historian of these issues. I write books about it. And, in effect, this government has always been involved in trying to assure that freedom of the press is real. This country was founded by journalists. Tom Paine was a journalist. Ben Franklin was a journalist. Jefferson and Madison were contributors to newspapers.

And so what we need to do at this point is figure out how the government can engage with these issues without becoming a big brother, a heavy hand, the institution that's giving you your resources so you have to be kind to it. We don't want to recreate the king supporting his favorite newspaper, we want a free press.

And I do think government has a role there. I think that role, though, is mainly in empowering the subscribers and the users of media, of journalism. And one of the ways that you can do this is to consider this notion that's been put forward of allowing subscribers to deduct or get a rebate for their subscriptions and their taxes. They get to choose what they read, what publications, what Internet sites they support, not the government. And hopefully, this provides some resources coming in and maybe even an increase in readership and things of that nature. And I would suggest that it's worked rather well with churches.

We do allow people to take a bit of a deduction when they give money to their chosen house of worship. And I don't say that I worship at the altar of journalism, but I come pretty close. And I would appreciate very much if Congress looked at all the creative ways in which it could involve itself in making sure that freedom of the press is real. And that the constitution is real.

We will -- this democracy will not survive without newspapers and journalism. It won't.

And so you are at a very critical moment here. If you fail to take this task seriously, look at all the options, look at all the possible actions, and make sure that you do it in the right way, you will be a part of watching those dinosaurs pass away. And I don't want -- I'm young enough that I would like the dinosaur to last for a little longer.

REP. JACKSON LEE: Thank you for your eloquence. Let me ask Mr. Tierney and as well as Lunzer -- let me -- other than Mr. Nichols, answer this question on the antitrust exemptions.

One would think that the legislation, the Newspaper Preservation Act, which allowed, I think, the merger of newspapers, would have helped preserve some of these entities. And however, it certainly merged newspapers and I think lost a lot in the political thought, the independence of political thought.

Since we are at the end of the hearing, why I don't I ask each of you just to give me your perception of the kind of intervention now that we should have with respect to saving newspapers?

Why don't we begin with you, Mr. Tierney.

MR. TIERNEY: Thank you. The -- it's interesting -- this is my own perspective, the Newspaper Preservation Act of 1970 -- you know, if your roof lasted for 40 years, you'd think that was pretty good. So I don't it's a failure in that it did help in the '70s, '80s and '90s. They don't seem to be working as well as now.

And the issue now isn't so much preserving two newspapers in most towns, but it's preserving the one. Not -- so I think that's -- I -- what we need is a period of time; we don't need any subsidies or anything like that although that's wonderful to have them, but I think it is problematic in this spot and then you will have a lot of people saying me too, me too.

But then we provide something unique to our community we are the source of all journalism -- television journalism everything else springs from what we do in our community. And what we are asking for is the ability -- and we all agree that journalism should be saved and we play a unique role.

So what we are just asking for is a period of time, perhaps it's 18 months, and I'm not an expert in this, so I'm probably speaking out of line in terms of the industry, but we are -- there could be discussions, which would then be reviewed with the Justice Department on some basis. So it's not as if anything can be done unless it's approved, so that we could begin discussions among newspaper publishers.

And again, I said earlier, Madame before you were in the room, that here in Philadelphia we are a locally owned, diverse group, we are not looking to build the next empire of newspapers, but I think if we could work with the folks in Dallas or Los Angles or Chicago, we could come up with new products that would be national in scope which we don't have now, the online classified advertising, all the rest of it to compete against some other players.

And we are afraid to even begin to have those discussions. And I said before you got here, it's amazing. I've been in advertising for 20 years before this, last three years. I've never seen an industry where people are paralyzed even with lawyers in the room, to begin to scratch at the surface.

REP. JACKSON LEE: Are you -- is that because of the regulatory structure that the newspapers are operating in?

MR. TIERNEY: Exactly yes, yes, Congresswoman. And it -- you know, and I don't have a history of it, but I feel like some people must have really been spanked some time in the past, because it is amazing how afraid people are to talk.

So if we could have a period of time where we could have some of these discussions, and again subject to DOJ review, and a final approval, I just think that would be one step without a subsidy or anything like this where the industry could begin to --

Because we need to come up with our version of a Craigslist. And when it's Philadelphia for free rentals, and then it's Dallas for free rentals, it's not a national brand. And I just offer that as one example. And that's how we can compete and in our own way. But the people are really afraid to do that right now.


MR. LUNZER: It's very difficult to answer because, before this hearing took place, there really has not been much specificity about what people believe the current barriers are. I frankly don't see them. I do know that in the San Francisco Bay Area, where there was talk of a need for a relaxation of antitrust, the only reason why they could have been requesting it is because they wanted to share journalists.

And the fundamental theory that we have is the union that represents the vast majority of journalists, newspaper journalists in this country, is that if the solution is to further diminish these products by having fewer and fewer journalists and now use them across more publications and perhaps with broadcast, you know, we are going to have a dozen journalists working in one town chasing stories, and you are not going to get the story.

You're going to lose voice, you're going to lose diversity, you're going to lose a lot of things that matter. So it is -- you need to encourage journalism, the crisis is real. And we want these people to be successful. But you have to be cautious about the way you go about encouraging them. We need the discussion and I applaud you for having this discussion.

REP. JACKSON LEE: Mr. Chairman, if I might -- I know we are concluding. Can I get a quick answer from these remaining witnesses on that just same question?

REP. JOHNSON: If there is no objections. So ordered.

REP. JACKSON LEE: If they remember the question which is -- the NPA and the structure that we have now. And thank you, that's important Mr. Lunzer for -- with respect to the concept of what you do with the talent of journalists.

Yes, Mr. Scott.

MR. SCOTT: I think that we have to evaluate a recommendation of relaxing antitrust standards in the context of policies, you addressed the crisis of journalism. But before you came in, I suggested that we ought to convene a national journalism strategy. Mr. Gainor objected because he fears that as a sort of a big brother intervention from the government in the business of the news. And I hear that concern and I share it.

However, I think it is -- it is a historical, because the government has always been involved in the news business to some extent. And though the constitution says, do not abridge the freedom of the press, it does not say do not promote the freedom of the press. And in fact, many laws have been made in the history of this great country to promote the freedom of the press, including the Newspaper Preservation Act.

REP. JACKSON LEE: But we are looking for answers and you think we should be meeting to get that.

MR. SCOTT: So I think just to conclude that thought, convening a national journalism strategy and bringing together experts from all camps, allows you to evaluate different proposals.

One proposal is to relax the antitrust standards. Now, we have to evaluate against that proposal against others and against the facts of what caused this crisis and what we are trying to achieve with a solution. So far, what we are trying to achieve with a solution is more journalists and healthier business models and a diversity of business models to produce more and better news in the marketplace of ideas. We need to see whether that proposal meets that standard.

And my view -- on my analysis, it does not meet that standard and should not be one of the solutions on the table. But I think, having a forum in which to evaluate multiple policy options is a good idea. Thank you.


MR. BAKER: I went into law teaching primarily because of my commitment to the First Amendment and wanting to write about it. And I've been one of the strongest advocates of First Amendment protections in the academy.

The First Amendment in the area of the --let me refer to both your question about the First Amendment and about the antitrust in Newspaper Preservation Act. The First Amendment in the press area mandates some things, allows a lot of things, and has been used perniciously for a lot of irrelevant claims.

It mandates that the government not engage in any type of censorship. When we earlier discussed whether or not Fox News was too connected to the Republican Party, I thought that whatever your view on that subject is, that should be irrelevant under the First Amendment. What we want out of the government is policies about how we can promote the media industry, not make judgments about the goodness or badness of particular publications.

It's been irrelevant but when used perniciously to claim lots of things. Newspaper publishers claim that the First Amendment was the reason why they didn't have to pay their workers minimum wage. The Supreme Court slapped them down unanimously when they made that type of claim.

It has also been used to claim that antitrust laws couldn't be applied to newspapers. The Supreme Court rejected that claim in a stirring opinion by Justice Black that said that the First Amendment doesn't disable the government from protecting freedom of press from private combinations that suppress it.

The First -- the history of the country has been involved with the government being involved with the media. What the First Amendment should do is make sure that the forms of those involvements, not be of an objectionable sort. And so what we want to see is the objectionable forms of involvement and particularly censorship not be allowed. But that the role of the government from the country's founding has been intensely involved.

REP. JACKSON LEE: So we can't intervene on the antitrust if we are trying to save newspapers. We have a legitimate standing in that.

MR. BAKER: You clearly have a legitimate standing to try to save the newspapers. Then the question becomes would relaxation of the antitrust laws be an effective way to do that. If it -- you certainly would have the power to relax them for that purpose.

However, the evidence seems to me and this is what Mr. Lunzer suggested is that the main result of relaxing that antitrust laws historically and most likely would be to reduce the key value of newspapers mainly to fire or to get by with less journalists.

When I hear Mr. Tierney, who is an analyst of the industry, he seems dead right. Everything he says about the industry situation is right. But when he says this is an industry that is more scared to talk than people in any other industry, well why would they be scared to talk? They live for instance under the same antitrust laws that everybody else lives.

In the first panel, Carl Shapiro, suggested that they think that the antitrust laws are interfering with them talking. They could just go to the Justice Department and ask for permission to talk. But there hasn't been any suggestion that he has made of anything they would talk about that would in fact do anything that would save journalists.

What it might do is that some alleviation to the antitrust laws would make money for the companies, as they engage in their firing journalists. So I see antitrust law reduction in this area as not accomplishing anything for the key value in the news industry, which is provision of news. It may do something to help some owners of businesses to make some more money, but not in a way that serves the public interests. Thank you.

MR. GAINOR: Professor Baker makes the point that raising the issue that you can intervene, the real question is a better one, should you? Should Congress get involved in trying to save newspapers? It's like we are trying to catch lightning, the situation is moving so fast. Almost every newspaper, major newspaper of the country has already switched from just print to now providing video on their website.

They are -- the escalation of technology is so rapid. We are all sitting here, we love newspapers. With the exception of the Congresswoman, I would say we all love newspapers because we are old.

REP. JACKSON LEE: Thank you.

MR. GAINOR: I grew up with newspapers. Genuinely the first thing I've ever read was a newspaper.

MR. : Mr. Gainor, speak for yourself, sir.


MR. GAINOR: Okay, allow me to speak for myself Congressman on that point. But we like the technology, but news is not a delivery mechanism. News is the people providing it, how they provide it, and we now have more news sources, more opportunity for people to read than ever before. Newspapers are now competing, instead of their national coverage is actually competing with global national coverage.

And so, the news -- the situation is still being sorted out. To try to overreact, and get involved, to something that is in a rapid technological change, I think would be a big mistake. So when you ask, what should Congress do? I would say nothing. Thank you.

REP. JACKSON LEE: Mr. Chairman, thank you for your indulgence. I think that, it's just being sort of a mountain being built. And I think we've got to find a way to overcome it, and answer a lot of questions.

Thank you very much for this hearing. I yield back.

REP. JOHNSON: Thank you, Congresswoman Jackson Lee. And I will say that there is no way that we can stop this "too big to fail" phenomenon as it relates to the media and our press' First Amendment right. There is simply no way that I know of.

But at any rate I want to thank the witnesses for your testimony today. And without objection members will have five legislative days to submit any additional written questions, which we will forward to the witnesses and ask that they give answers promptly as you can. And then those responses will also be made a copy of the -- a part of the record.

And without objection, the record will remain open for five legislative days for the submission of any other additional material.

Again I want to thank everyone for their time and patience. And this hearing of the Subcommittee of Courts and Competition Policy though long and complicated -- it has now come to an end.

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