Rebuild Local News President Steven Waldman testifies before the Senate Revenue and Taxation Committee in support of SB 1327


Testimony of Steven Waldman, president of Rebuild Local News, about SB 1327 before the Senate Revenue and Taxation Committee on May 8, 2024:

The point of this bill is not primarily to save journalism jobs.  The point is not really even to save newsrooms, though it will. 

The main goal is to help communities. They are the ones that are suffering as a result of the collapse of local news.

Study after study have shown that the loss of local news leads to…  more corruption, higher taxes, higher financing costs, more pollution.  Even more polarization. That’s because the vacuum that’s created by the contraction of local news is replaced by national news which is partisan and social media, which is so often full of misinformation and rage.  

As you’ve heard, there are 68 percent fewer reporters in California than there were in 2005. That’s one of the worst drops in the country.  Can you imagine if a study came out saying there’d been a 68% drop in the number of nurses or teachers in your state? There would surely be a move to address that.

California has offered some memorable illustrations of the crisis. There was the time that the city manager in Bell got paid $800,000 a year – because no journalists were there to cover the meetings. The residents of Salinas for a while had a daily local newspaper without a single local reporter – an example of a phenomenon called “ghost newspapers.”

We believe that this employment credit would transform the local news system in California – dramatically improving the capacity for newsrooms to serve their communities. Our coalition includes a very broad range of groups – publishers and labor unions, conservative rural weeklies and urban websites, for profits and nonprofits, print, digital and broadcast. This is the idea that unites everyone – the clearly preferred approach to help save local news. 

We like the incentive structure. It goes right to the core issue – a shortage of local reporters. It’s non bureaucratic. 

It’s future friendly. We need to keep developing new models to revive community journalism; this approach allows the innovators to plug in, as well as helping the established papers.  It helps both commercial media and nonprofits.

There’s no panel of government officials – or a foundation case officer — deciding who gets a grant. It’s nonpartisan.  If you qualify according the detailed definitions in the bill, you get support. Period.

In several ways, this bill is actually better than the similar federal legislation – because it prioritizes the needs of smaller publishers, including ethnic media.

First, it gives a higher benefit amount for newsrooms with fewer than 10 employees.  This is especially crucial for ethnic media and rural newspapers, most of which are small in size but incredibly important to their communities.    

Second, it allows for support for freelance writers and contractors. This was in direct response to requests from ethnic media organizations that pointed out that many of their publications have few full-time employees. We are grateful that Sen. Glazer heard those concerns.

The national organizations representing Black and Hispanic publications have also supported the employment credit on the federal level.  As the president of the National Newspaper Publishers Association, Dr. Ben Chavis put it, “it would be a tragedy of historical proportions if, having survived so many obstacles, [Black newspapers] were done in by the digital revolution or short-sighted public policies…With this kind of approach, Black-owned newspapers and media companies can rejuvenate local news.”

In terms of the “data extraction mitigation fee,” while I don’t have the expertise to pass judgment on some of the technical aspects of the fee, I do have a few general comments.

 It is totally fair and appropriate to ask the biggest technology companies to play an extra role in solving this crisis.  These companies are the big winners of the digital revolution.  

How big?

Alphabet (which, remember, owns not only Google but YouTube), Meta (which is Facebook  plus Instagram) and Amazon together in 2023 took in roughly $1 trillion in revenue.  That’s more than Proctor and Gamble, Lockheed Martin, Eli Lilly, McDonalds, ATT, Coca Cola, Citigroup,  Morgan Stanley, Nike and Netflix — combined.  Times two!  

They earned $240 billion in EBITDA (profit). That’s more than Walmart, Verizon, Exxon, Walt Disney and PepsiCo. Combined. Times three!

Having Alphabet, Meta and Amazon help solve this crisis would force them to reduce their profits from $240 billion all the way down to $239 billion. 

The idea that this fee is going to be a big burden on those companies or have to be passed on to small businesses is a bit unpersuasive.  

The main reason that local news declined so much is that the business model broke.  That happened not primarily because readers abandoned local news but because advertisers did.  Where have they mostly gone? Google, Facebook, Amazon and other tech companies.

Part of why their ad business is booming is that they collect the personal information of consumers and use that to provide precise targeting for their advertising products. Advertisers can now target consumers wherever they are on the internet rather than needing to be adjacent to content, such as that found in local newspapers. 

It is true that tech companies got big to some extent by creating outstanding products, but it’s also true that they then used their tremendous market power to undercut competition. The lawsuit filed by the US Department of Justice claims that Google, by buying up firms in the ad technology sector, was able to undermine competition, and thereby further reduce the revenue for publishers.

And there’s the matter of how their algorithms have harmed democracy and society. As is well known by now, some of the social platforms – especially YouTube, Instagram and Facebook – make money in part by stoking anger, fear, insecurity and suspicion.  

You know what would actually help counter those destructive trends? A lot more local reporters! A flood of new reporters is what’s needed to displace disinformation, rumor and partisan content.

I’ve been thinking about Senator Glazer’s mining metaphor. Here’s the thing we have to recognize. Mining actually produces all sorts of materials of great value. Gold, lithium, silicon or rubies.

So do tech companies. 

Yet at the same time, mining activity also creates collateral damage, what economists call “negative externalities.” Pollution, environmental degradation and worker injuries in the case of land mining; the collapse of local news and the erosion of democracy in the case of data mining.

Both things can be true at the same time. We can appreciate the benefits of mining – whether its gold or data – and at the same time see the urgent need to fix the problems that have been created as a result.  

Tech companies say that they already provide tremendous value to local news publishers by sending them traffic. There’s some truth to that – but the argument is dramatically overstated. Most consumers don’t read past the headline and snippet that appears on Google or Facebook, even though the news organization might have spent a lot of money to generate the journalism that was then summarized in that snippet.  

And with the growth of artificial intelligence, those click throughs will go down even more, further hurting publishers, as tech companies thrive. (By the way, AI is another reason we need more, not fewer local reporters). 

Google also argues that they shouldn’t be taxed because they provide philanthropic support to local news organizations through its Google News Initiative. I can vouch for that. A program I co-founded, Report for America, got support from them, and their approach to supporting innovation among local news outlets has been consistently thoughtful. Legislators should give them credit for that spending.

 But there are a few problems with the argument.  Amazon and Facebook do not currently provide any such philanthropic support (nor would they most likely be forced to pay under AB886). This is the first bill we’ve seen that would actually get Amazon and Meta to pay their fair share. 

Second, Google has made it clear that if legislators pass laws they don’t like, the company will terminate the Google News Initiative. This financial support is awesome but also opaque, insufficient and probably ephemeral.  

I’m not anti-tech. I left a career at legacy media companies to start a website in 1999 because I was so frustrated with the backward ways of the old media. I founded three other websites since then and in each case used Facebook and Google ads to help them grow. But we need not prove that tech companies are evil in order to justify taxing them.

Nor do I think the whole local news industry is full of angels.  The hedge fund ownership of newspapers has caused tremendous damage to communities too. Some of the industry’s wounds are self-inflicted.

But in some way the premise of this bill is simple. The local news crisis is a catastrophe for American communities and for democracy. You have proposed an excellent, First-Amendment-friendly, nonpartisan, future-friendly way of addressing it – an employment tax credit for news outlets to hire and retain local reporters. It would have a dramatic, positive impact – the most of any bill in the country right now. 

The practical question is: how do we pay for it? It’s fair and reasonable to ask the biggest tech companies – the ones that have benefited the most from this new reality — to spend a tiny, tiny, tiny portion of their revenue to solve the significant problem that they helped create. 

I want to close on a hopeful note – to show that these efforts are not some kind of foolish errand to temporarily prop up a failing system.  In fact, there is tremendous energy here in California.  The ethnic media system is among the most vibrant in the country. And on Tuesday, the Pulitzer Prize for breaking news was awarded to Outlook Santa Cruz – a small, digital outlet founded in 2020. It won for “its detailed and nimble community-focused coverage, over a holiday weekend, of catastrophic flooding and mudslides that displaced thousands of residents and destroyed more than 1,000 homes and businesses.”

Ken Doctor, the founder of that outfit, signed a letter to the committee advocating for this legislation.  “We believe the use of employment tax credits will be transformative.”   

The legislature has a choice. If nothing is done, the collapse of local news will continue apace.  Newspapers in general are shutting at a rate of about 2.5 a week (that’s an acceleration over 2022).  We will have more cases like Salinas and Bell.  Or we can turn this around – and have more situations like Santa Cruz.  This bill would make that happen. It would enable California to lead the way in creating a stronger, more representative system of local news that will better serve  communities around the state.

Watch the full hearing here.