The collapse of California’s news industry is so severe it’ll require taxpayer support to rebuild

Dr. Patrick Soon-Shiong is probably one of the more generous newspaper owners in the country – and he just announced devastating layoffs at the Los Angeles Times.

It’s a bewildering juxtaposition, and it should give pause to those of us who spend our time blaming bumbling billionaires, rapacious hedge funds and larcenous tech companies for the collapse of local news. 

The truth is, the crisis arose mostly because of tectonic shifts in American economic life that go way beyond one set of villains or bad decisions. It is time we accepted this basic fact: the collapse is so severe, the causes so complex and the consequences so catastrophic, that we also need First-Amendment-friendly taxpayer support and other public policies to rebuild local news.

Many players in this drama, including at the L.A. Times, have made mistakes. No doubt L.A. Times managers could have made some better business decisions, and the owner could have done buyouts instead of so many layoffs, as the News Guild has argued.

But the forces at work are sweeping. The amount of advertising to local newspapers declined 82% – a $40 billion drop – since 2000, according to the Pew Research Center. The causes include the rise of internet shopping sites, hedge fund behavior, the explosion in digital sources of national news, and the market power of tech companies.  

The good news is that California’s news industry is blessed with a vibrant innovation sector, including hundreds of outstanding ethnic media websites and publications; more than 40 new community websites;  and chain newspapers with talented reporters and editors. 

With some modest help, they can make it.

First, California should pass a state version of the refundable employment tax credit that the House of Representatives passed in 2021. It uses the payroll tax refund system to provide newsrooms with a subsidy for each local reporting slot. The incentive structure is good, and it’s only for local reporting.

If the L.A. Times increases staff size, for example, they get more. If they lay off more people, they get less.

Second, California leaders should pass a tax credit for small businesses that advertise in local news. Restaurants, bodegas, dry cleaners and other local businesses would decide where they think their marketing dollars would be most effective.

Third, Los Angeles should consider a local news coupon. Each local resident would get coupons to donate to their favorite local news source. 

In these three approaches, there’s no government body doling out funds to favored publications. These are content-neutral ideas. They would go to a wide variety of places, with different styles, ideologies and emphases. And they create incentives for local news organizations to better serve their readers and advertisers.

The state should also fix the balance of power between technology companies and local news publishers. 

Now I don’t think the only problem is that tech companies “stole” news content. Nonetheless, they should pay. I look at it like this: We had a digital revolution and the tech companies are the big (emphasis on big) winners. 

This revolution brought many wonderful things – and also tremendous collateral damage, including the decimation of local news, and with it, the unraveling of democracy. It is reasonable that the winners help pay for the damage that this new system caused.

There are two ways to “enlist” the tech companies in the cause. One is through the California Journalism Preservation Act, which would force Google and Facebook to compensate publishers. Unfortunately, despite great intentions, the current bill is highly flawed. Most of the money would go to national media companies, such as People Magazine and Brietbart, instead of publishers that cover California’s communities.

Fortunately, the bill can be fixed. Lawmakers should distribute the funds on the basis of editorial headcount among California-focused publishers and finalize a guaranteed minimum payment to ensure that small publishers – including those covering rural areas and communities of color – get their fair share.

The other path is more old fashioned: Tax the tech companies. Maryland is trying a tax on advertising on Google, Facebook and Amazon. A tax of about 1% would pay for all of the above and leave money left over to expand the excellent journalism fellowship program at UC Berkeley, for example.

Finally, the state should impose a 120-day waiting period for any newspaper to sell itself to an out-of-state company.  

Of course philanthropy still needs to dramatically increase its commitment to local news, and news outlets need to cover communities far better. But if they do that, and we taxpayers do our part, we can create a better, more inclusive local news system than we’ve ever had before.

For the record: A previous version of this commentary misstated the status of an amendment to the California Journalism Preservation Act bill.

CalMatters has been a Report for America grant recipient and is affiliated with some of the organizations involved with Rebuild Local News. CalMatters CEO Neil Chase formally opposed the California Journalism Preservation Act as it was introduced last year. His views do not necessarily reflect those of the organization, newsroom or its staff.