Government Offers Local Media Support, Not A Lifeline

The Cairncross Review is out, and its findings are not a huge surprise to anyone who has looked on with horror as local paper after local paper has closed down over the past couple of years.

Dame Frances Cairncross does lay some of the blame at the door of the media owners. Many are cutting back on investment and laying off journalists in a bid to keep some semblance of a profitable business going. She likens the local news industry to another Blockbuster or Kodak that has found itself unable to make the leap into digital.

The crosshairs fall mainly on the duopoly of Google and Facebook, whose dominance of the UK digital advertising industry should be officially investigated, in her opinion.

In addition to an official review, a new regulator should be put in charge of the relationship between the duopoly and the local media to ensure local outlets are treated more fairly. 

Quite how this relationship would work is unclear. BBC's Newsnight programme featured an interview with Dame Frances last night in which she agreed the duopoly wouldn't pay for local news stories, and they would just not run them.

Then we had the head of Reach, formerly Trinity Mirror, pointing out that they need Google and Facebook for what is effectively free distribution.

If anyone can unravel that relationship and come out with the tech giants paying for local media, I would suggest they are a genius.

The problem is not distribution. Local media wants to be found in search results for free traffic -- it wants people sharing headlines on Facebook and other social media sites to ensure free links back to its content.

So, I can't really see the point of addressing distribution when there really isn't a problem there. It's in tackling the duopoly's dominance of advertising that there would appear to be more scope to help local media.

But then again, how do you stop advertisers from placing their budget where they choose? Newspaper groups are banding together to offer alternatives, such as 1XL in local media and the combination of News UK, The Telegraph and The Guardian in a joint national sales team.

Surely the only way to tackle Google and Facebook's popularity is to offer spots against top-quality journalism with a massive reach and scale that can rival the tech giants, and one has to conclude, the industry is already taking steps to achieve this.

The main point of interest, then, has to be scrapping VAT on digital subscriptions. It's nonsense that such a sales tax exists on digital subscriptions but not in print. Cairncross can say publishers haven't kept up with the digital times, and I would say the need to remove VAT from online subscriptions says exactly the same thing about successive governments.

Take a subscription to a paper for around GBP5 to GBP10 per week. That would mean saving GBP1 or GBP2 a week -- say around GBP50 to GBP100 per year. For a paper with a million subscribers, that would be up to GBP100m saved per year.

The trouble is, local papers don't usually charge subscriptions. They dare not put up a paywall and risk losing traffic. Instead, they crowd free pages with surveys, pop-ups and intrusive advertising that will put many off from visiting -- particularly on mobile.

So maybe this is a decision time for local media. If VAT were taken off subscriptions, would they drop the intrusive ads and rely on subscriptions instead?

There is also a suggestion that papers should be given tax credit if they invest in quality, public interest local journalism. Again, it would be a simple thing to do. Companies already get credit for investing in R&D, so there is a precedent.

The Government can act on this quickly. With the rate of local paper closures, and what Cairncross calls the accompanying "threat to democracy," it needs to. A stroke of the Chancellor's pen could save local media from its perilous state.

If you want me two pennies worth of thought, it will be tax where we see a breakthrough. Tax credits for investment could truly make a difference, although it's hard to see dropping VAT on subscriptions could help local papers that don't currently charge for access. For the nationals with pay walls, it would be a huge boon.

And therein lies the rub. There's no point tackling the duopoly for the free distribution they give local media, and it's hard to see how their dominance of digital advertising can be curtailed by Government -- only by media organisations banding together themselves to offer reach and scale in quality inventory. 

Is it just me? Can anyone out there see how any of this is going to help local media? The nationals will be rubbing their hands in glee, but unless local media outlets take VAT free subscriptions (if they are on offer) and go for a paywall approach, they will be of no use.

Tax credits on investment in local journalism will surely be welcomed, but nothing else in this review seems to offer hope. It seems to be more about support and someone saying "more should be done" without actually solving the problem.

The  Cairncross Review has given it a good go, but it's hard to see how the commercial pressures of people not supporting the local press in the numbers they used to can be turned around by an official review or any follow-up investigations, or a VAT tax break that wouldn't apply to them.


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