3.1
Historically, newspapers derived a majority of their revenue from advertising. The rise of the digital world has meant that this business model has been disrupted and become less viable, and many regional newspapers have closed or are struggling to stay afloat.
3.2
This chapter will consider how revenue sources for regional newspapers have changed due to the growth of the digital world and the impacts of the COVID-19 pandemic, and whether there are more suitable revenue models for contemporary Australia.
3.3
The chapter also examines current Australian Government initiatives to support regional newspapers, such as grants, programs and advertising, and the role of philanthropy in supporting small and independent regional newspapers.
Revenue sources for regional newspapers
3.4
Almost two decades ago, classified advertising for products and services such as employment, real estate and motor vehicles accounted for approximately 48 per cent of advertising revenue for newspapers. However, the rapid growth of digital platforms in the past decade has resulted in much of this advertising moving to dedicated websites such as Seek, Gumtree and Realestate.com.au and social media. This has in turn led to a significant fall in revenue for newspapers. Australian Community Media (ACM) explained that this shift ‘decimated’ its classified revenues.
3.5
The Australian Competition and Consumer Commission (ACCC), in its Digital platforms inquiry – final report stated that classified advertising revenue declined from $2 billion in 2001 to $200 million in 2016. In addition, AlphaBeta Australia, in its 2020 report commissioned by Google, stated that ‘the loss of classifieds accounts for 92% of the overall newspaper revenue decline’ between 2002 and 2018.
3.6
The Committee heard from a number of inquiry participants that, as a consequence of declining revenue, regional newspapers have had to adapt their revenue structure, cease operation or discontinue their print edition, even before the onset of the COVID-19 pandemic, which has also significantly impacted regional newspapers. These issues are discussed below.
Advertising
3.7
In its submission, Meta (Facebook) submitted that ‘digital platforms have increased competition in the advertising sector’, adding that ‘the Australian advertising market now has a larger number of players, better quality (more effective) ad placement opportunities and lower prices’.
3.8
ACM told the Committee that its traditional revenue mix was ‘approximately 80 per cent from advertising (driven by once-healthy classified categories such as jobs and cars) and 20 per cent from circulation (cover prices)’ but this revenue is now ‘drying up fast’. Mr Tony Kendall from ACM described that the three top sectors in advertising for newspapers is retail, government and real estate.
3.9
West Australian Newspapers explained that from 2016 to 2021, its regional newspaper annual revenue declined by 52 per cent (from $32 million to $15 million) per annum because of the shift ‘from traditional media and into digital platforms’. It stated that:
…the sad reality is that these regional newspapers are far less profitable than they once were and without assistance we will have to raise cover prices, reduce the level of content provided and eventually close mastheads.
3.10
The Public Interest Journalism Initiative (PIJI) also stated that:
Where advertising traditionally subsidised the high costs of producing public interest news, these dollars have now shifted to digital platforms (81c in every $1 of advertising).
3.11
Some small and independent regional publishers told the Committee that they solely rely on advertising revenue to run their papers. For example, Freemantle Herald said that all its revenue is ‘derived solely from advertising’ as it does not charge a cover price, ‘believing instead in the right to free access to news’. It added that advertising revenue covers all its costs: ‘wages, superannuation, taxes, rent, bills, equipment, printing, and distribution’. It explained that about 10 per cent of its advertising comes from the Australian and state governments, while the remainder are received from small businesses, sitting MPs and local councils.
3.12
Similarly, the Public Interest Publishers Alliance (PIPA) submitted that some of its small publishers, such as the Hills to Hawkesbury Community News, covers all its costs for staff, production, printing and distribution from advertising income as its ‘printed newspapers and online news are provided free of charge’. The Hills to Hawkesbury Community News stated that ‘this model has worked very well for many years, but as we all know with the ever-increasing presence of Facebook and Google, our advertising income has been reducing’.
3.13
The Condobolin Argus also explained that its advertising revenues have declined over the last 10 years:
This was exacerbated in 17 -19 due to the extreme drought conditions across regional Australia which saw very limited advertising and then the advent of Covid in 20 and 21 has seen events cancelled that would normally advertise.
3.14
Some submitters said that advertising revenue will grow once again, due to locals preferring to read regional newspapers locally in print rather than going online. For example, The Bugle, a free fortnightly newspaper servicing the Kiama Local Government Area (LGA) in NSW, told the Committee that although there ‘are more challenges to selling advertising, with the lure of social media’, its print advertising ‘continues to grow as businesses know people love reading the local news’.
3.15
In addition, Today News Group said that:
…as awareness grows about our unique ability to reach regional Australians with a trusted and independent source of news, newspaper sales and advertising revenue will continue to grow.
Regional newspapers reach many Australians with regulated and trusted news that digital news does not.
Cover sales and online subscriptions
3.16
As a result of falling advertising revenue, newspapers have increasingly turned to reader revenue models such as cover sales, subscriptions and memberships for both print and online newspapers. However, some inquiry participants expressed concern that locals can be reluctant to pay for a newspaper that they are accustomed to being free and that locals are unwilling or unable to go online to find their local news.
3.17
For example, in the Committee’s online survey—which sought views on how Australians living in regional, rural or remote areas accessed news—4.93 per cent of the respondents stated that they were reluctant to pay for a subscription to view online news as their newspapers are usually delivered for free.
3.18
Data provided by the News and Media Research Centre at the University of Canberra also showed that Australians are among the least likely to pay for online news, stating that ‘this has consistently been the case for the last five years’.
3.19
The North Western Courier Pty Ltd, an independent, family owned newspaper company located in Narrabri NSW, emphasised that country communities want printed newspapers, explaining that ‘for many, the internet is unreliable and there are still many people in regional and remote Australia without computers, tablets or mobile phones’.
3.20
Similarly, the Barcoo Independent highlighted that:
…we're still in those two areas where you've got to appeal to young people and you've got to appeal to the elderly. And we don't have good connectivity out here.
3.21
The Freemantle Herald commented that ‘local independent newspapers implementing cover prices and pay-walls erodes relationships with readers’.
3.22
The Barcoo Independent and the Collie River Valley Bulletin said that smaller newspapers are reluctant to move their news online because the bulk of their revenue comes from traditional methods such as cover sales.
3.23
Mr Joe Italiano, Publisher at the Collie River Valley Bulletin told the Committee that while he sees a requirement to increase the online presence of the Bulletin, their business model ‘relies very, very heavily on cover price and newspaper sales’ and stated that ‘there's not a lot of money to be made out of online publishing’.
3.24
Larger newspapers, such as West Australian Newspapers, also reported that the revenue created from printed newspapers ‘far outstrips what we can make off digital subscriptions and digital page views’, telling the Committee that ‘it's still the newspapers that are paying for the vast majority of the journalists that we hire’.
3.25
Elliott Newspaper Group explained that ‘digital revenue is still very challenging. We'd be lucky if it's five to 10 per cent of our overall gross revenue, compared to selling our newspapers’. As such, it has provided options for its readers to be both online and in print.
3.26
Elliott Newspaper Group also emphasised that smaller publications cannot be as successful in having a large online readership as bigger papers:
…the people who have been successful in the digital sphere as far as subscribers go would seem to be the New York Times, the Washington Post, the Financial Review—the bigger papers that cover a wide range of issues outside their circulation area—whereas smaller publications like ourselves … we really only have the sphere of our local area plus a few people who either live there or have interest in a specific area—it might be sport; it might be births, deaths and marriages. … It's difficult for us to grow. Even the people at Swan Hill aren't particularly interested in what's happening in Mildura, apart from the area you're in with federal politics. But, outside those areas, football results in Mildura don't mean much to the people that are reading the digital paper in Swan Hill.
Impact of COVID-19 on regional newspaper revenue
3.27
The COVID-19 pandemic has had a significant impact on many regional newspapers. The Committee heard accounts of closures, restrictions on trade and moves from print to digital news due to declines in revenue.
3.28
In August and November 2021, the Victorian Country Press Association, a regional news media industry body for 95 Victorian members, conducted two surveys of its members to assess the impact of the pandemic. It found that ‘members experienced a sharp reduction in turnover in 2021 when compared to a more normal year in 2019’:
It also highlights that members maintained levels of public interest journalism and news page numbers despite the dramatic decrease in advertising revenue. This is not a sustainable news media business model but VCPA member publishers clearly made the decision to invest in their communities during this time.
The November 2021 results show an improvement in revenue but it is still 17.60% down on 2019 levels and in a low margin industry this deficit could see many publications cease if current trading conditions continue.
3.29
The Victorian Country Press Association added that:
COVID not only shut the doors and restricted the trade of many of the local businesses who previously advertised in our member publications, it has also had other long-term flow on effects. Stock supply shortages in the areas of new and used motor vehicles, motorcycles, farm machinery, building products including steel and timber, regional residential established homes and land for domestic building, furniture and electrical goods have left many businesses unable to advertise as demand exceeds supply.
3.30
Country Press Australia (CPA), an industry body representing more than 190 independent regional and local newspapers across Australia, similarly highlighted this issue and said that:
Advertising clients, particularly in the commercial space, are reluctant to commit to medium to long term campaigns due to a lack of confidence and uncertainties around COVID.
3.31
CPA said that ‘continued decline in advertising revenue for newspapers due to COVID has not been confined to local businesses; it extends to national advertisers’. This has led to large national advertisers such as Harvey Norman withdrawing press advertising from regional and local newspapers.
3.32
Freemantle Herald also submitted that in response to the pandemic in 2020 with a ‘struggling small business advertising base’ it had to cut its advertising prices ‘by 50 per cent’ while continuing to print ‘close to 50,000 newspapers every week’.
3.33
The Committee also heard that COVID-19 has had negative impacts on the costs of producing journalism. The Victorian Country Press Association, among others, submitted that:
…newsprint price increases of up to 30%, press plate price increases of 15% and black ink price increases of up to 60% have seen printing prices increase by, on average, 15% overnight which adds a further challenge to the industry. The price of freight, driven by high fuel prices, is also increasing overheads in our member publications. There has also been a rationalisation of newspaper printers in recent years meaning many papers are printed large distances from their distribution/circulation area resulting in higher freight costs.
Is revenue recovering from the impact of COVID-19?
3.34
Some smaller newspapers have not recovered from the initial impact of the COVID-19 pandemic, with some submitters stating that revenue continues to be impacted when local events are cancelled due to restrictions in place or the spread of the virus.
3.35
Today News Group stated that the local agricultural shows which ‘usually bring good revenue to our early papers each year when things are a [sic] typically quiet’ were cancelled due to a new variant of COVID-19, meaning that it has seen lower revenue in January 2022 than in 2021.
3.36
Similarly, Locolee Pty Ltd, a small independent publisher based in regional New South Wales, stated that:
…full recovery is still far off due to the ongoing cancellations of local events and the continued business downturn in some key sectors ([especially] retail and hospitality) as residents and visitors stay home to protect their families and businesses continue to struggle with an ongoing workforce shortage made worse by covid.
3.37
Monaro Media Group, an independently owned media company covering the Snowy Monaro and South Coast areas of NSW, also said that due to regional events being cancelled, ‘there has been limited recovery’ from the impacts of COVID-19. It added that its ‘advertising revenue is still at least 35 per cent down on the last “normal” year, while our fixed costs are increasing’.
3.38
ACM reported that it is ‘not optimistic’ around ‘any likely recovery of the advertising market’:
Local advertising has been worst-affected, and specifically the retail and hospitality sectors which are struggling for stock and staff respectively. We are seeing some uplift from COVID-related federal government spending but not enough to give us any confidence about a future recovery.
3.39
The Committee received some evidence that advertising and cover sale revenues had improved. For example, The Bugle stated that it has seen advertising increase over the last couple of years:
While different sectors, particularly hospitality, had to drop [advertising] back, others replaced them. In talking to other small publishers, they largely had the same experience as we did.
Government support to regional newspapers
3.40
In addition to commercial advertising, government public notice expenditure, public awareness campaigns, election spending and grants are major sources of revenue for regional newspapers.
3.41
The Committee received a range of evidence about how the withdrawal of government advertising from regional newspapers has affected small, independent publishers. Inquiry participants also provided feedback on some of the Australian Government’s support packages in this space, with some submitters suggesting that a more targeted program specifically for regional newspapers should be considered.
Federal and state government advertising
3.42
As discussed earlier in this chapter, there has been a significant fall in advertising revenue for newspapers. Contributing to this fall has been a reduction in government advertising and public notices in regional newspapers, with these moving either online or to larger, metropolitan papers. Representatives of a number of small and independent newspapers expressed their concern with this, and in their submissions called for greater and more targeted government funding through advertisements.
3.43
Deakin University stated that its research has found that government advertising spend has ‘fallen dramatically in the past five years across country newspapers’ and that government advertising funds are ‘often redirected to social media’.
3.44
The North Western Courier and Cape York Weekly (an independent newspaper in Far North Queensland) both warned the Committee that the biggest threat to independent local newspapers is the lack of government support through advertising.
3.45
Similarly, CPA submitted that ongoing government support in print ‘is critical to the economic recovery, post-covid’:
…online-generated advertising is not profitable enough to sustain the business model, and likely never will be on its own. Put simply, the audience in regional and rural Australia is not sufficient to grow online returns, as it is in metropolitan Australia.
Without Federal, and indeed State, Government advertising support in the long-term, regional media will continue to struggle to survive, and to provide the critical need for community interest journalism, and through it, a contribution to community health and well-being.
3.46
The Condobolin Argus also shared that its advertising revenues have declined over the last 10 years due to federal, state and local governments pulling their advertising from local papers.
3.47
Mr Ross Lanyon the Managing Director of the Elliott Newspaper Group in regional Victoria told the Committee that local, state and federal governments advertising combined makes up 20 per cent of its paid advertising revenues.
3.48
On the other hand, Ms Ann Kirby Editor of the Barcoo Independent in regional QLD said that the newspaper gets ‘one page a week’ from local government, ‘one ad a month’ from the federal government member but has not seen a federal government advertisement in her newspaper since she began with the Barcoo Independent in September 2020.
3.49
Some submitters provided the Committee with suggestions to assist regional newspapers in this regard. ACM recommended that the federal government should ‘guarantee a minimum annual advertising spend across Australia’s regional newspapers’:
…ensuring equitable access to essential public information for the 36 per cent of Australians who live outside metropolitan cities.
3.50
Anthony De Ceglie, Editor-in-Chief of West Australian Newspapers said that ‘mandated advertising in regional publications is a very good idea’:
This not only ensures wide distribution in a trusted local news source but maintains an important revenue stream for these local publications.
3.51
The Small Newspaper Company, a newspaper publisher in Warwick, Queensland stated that ‘there is relatively poor discrimination’ in how federal and state government advertising funding is spent. As such, it suggested the development of a ‘register of newspapers that conform to minimum standards of news delivery’.
3.52
In April 2020, in response to the COVID-19 pandemic, the Victorian Government announced a $4.7 million advertising support package ‘to help regional print media survive’. The Victorian Government stated that it will:
…book one page of print advertising and digital advertising in more than 100 regional outlets each week for six months.
The immediate and reliable source of income will help these businesses – which are the public record of towns and regions throughout Victoria – get through the worst of the crisis and rebuild.
3.53
In its survey of local newspaper audiences, Deakin University heard that this package by the Victorian Government ‘was a key factor’ for the survival of regional newspapers during COVID-19, ‘with one describing it as a “lifesaver” for his newspaper’. It added that ‘think-tanks and PhD research, conducted as part of our research, indicate that government advertising revenue is vital to sustainability’.
Funding grants
3.54
The Committee received some evidence on the Australian Government’s funding grant packages for newspapers, with some submitters expressing concerns that the packages were not sufficiently targeted to smaller, regional newspapers which needed the funding more than larger media companies such as ACM and the Australian Associated Press (AAP) which received a majority of the funding.
Regional and Small Publishers Jobs and Innovation Package
3.55
Established in 2017, the Regional and Small Publishers Jobs and Innovation Package consisted of three programs worth $60.4 million over three years designed to ‘assist small newspaper publishers adapt to the challenges of the contemporary media environment, generate new employment opportunities for cadet journalists, and support regional students to gain an education in journalism’.
3.56
Two of the programs were administered by the Department of Infrastructure, Transport, Regional Development and Communications (the Department)—the Regional Journalism Scholarships Program and the Regional and Small Publishers Cadetship Program—and one was administered by the Australian Communications and Media Authority—the Regional and Small Publishers Innovation Fund.
3.57
The Department submitted that across three years the Regional and Small Publishers Jobs and Innovation Package ‘allocated $21.5 million of its $60.4 million allocation’.
3.58
The Bugle suggested an investigation was required into why the dedicated $60.4 million were not completely distributed, stating that ‘the system for distributing the money seems to have been flawed’.
3.59
In its Digital platforms inquiry – final report, the ACCC stated that it had also received concerns from publishers that ‘the application and assessment process was too complex and not suitably targeted to small and regional publishers without the organisational expertise and resources to successfully apply’; and that the grants did not focus on ‘securing the sustainability of struggling small and regional publishers’.
3.60
CPA, among other submitters, encouraged the consideration of recommendation 10 of the Digital platforms inquiry – final report which provided that:
The Regional and Small Publishers Jobs and Innovation Package should be replaced with a targeted grants program that supports the production of original local and regional journalism, including that related to local government and local courts.
The program should be platform-neutral and administered at arm’s length from Government, with eligibility criteria designed by an independent expert advisory panel. Due to its broader scope than the Regional and Small Publishers Jobs and Innovation Package, which provided AU$20 million per year, the program should provide a greater amount of funding – totalling in the order of AU$50 million a year.
The Government should review this program after three years of operation to assess its effectiveness and to determine whether it should be expanded to other areas of public interest journalism at risk of under-provision by the Australian commercial media market.
3.61
The Department explained that grantees in all 3 rounds of the Innovation Fund reported a range of benefits including:
new revenue streams through the introduction of a subscription model
increased digital presence and an expansion of service offerings such as videos, podcasts, increased reader engagement
new employment opportunities within the businesses
expansion of public interest journalism into new markets and audiences including younger audiences.
3.62
It added that it will conduct a formal evaluation of the Regional and Small Publishers Jobs and Innovation package and the Public Interest News Gathering (PING) program (discussed below) in 2022:
This will commence in March and is expected to be completed by the end of June 2022. This evaluation will inform future policy and program development in public interest journalism.
Public Interest News Gathering Program
3.63
During the COVID-19 pandemic, the government announced a $50 million Public Interest News Gathering (PING) program to ‘support public interest journalism delivered by commercial television, newspaper, and radio businesses in regional Australia’.
3.64
The Department submitted that the PING Program ‘consisted of $13.4 million of new money as well as $36.6 million in unallocated funds from the Regional and Small Publishers Jobs and Innovation Package’.
3.65
On 29 June 2020, the Minister for Communications, Urban Infrastructure, Cities and the Arts, the Hon. Paul Fletcher MP announced that 107 regional publishers and broadcasters who applied under the PING program would receive a share of the funding.
3.66
Evidence to the Committee suggested that while the PING program was helpful, the funding was not targeted specifically for smaller, independent publishers and should have been directed to local publications that maintain local offices and employ local journalists.
3.67
For example, the Victorian Press Association told the Committee that the PING program was ‘efficiently organised and distributed and assisted local news media businesses greatly’, however:
…a large component of the funding went to large media businesses including ACM who subsequently abandoned some of the communities they previously served and AAP, a producer of syndicated news, received two significant payments.
3.68
It recommended that any future fund ‘should be targeted only at smaller local community news media businesses in regional and metro regions who publish non-syndicated news.’ CPA similarly stated that ‘funding should be based on the resources applied to produce public interest journalism and not revenue based criteria’.
3.69
Mr Ross Lanyon from the Elliott Newspaper Group said that ‘we were very disappointed with how PING happened … we were disappointed with what we received’.
3.70
The Department stated that it determined funding amounts by assessing organisations’ revenue as it was the ‘fastest and most efficient way to determine funding amounts for eligible applicants’. It added that ‘higher reach results in higher revenue but also higher production and distribution costs associated with public interest journalism’.
3.71
Accordingly, the Department provided that ACM received $10.48 million (almost two-thirds of the funding granted to regional publishers) from the PING program. The AAP received $5 million, while many regional publishers received $10,000 or missed out completely. Table 3.1 displays the top 10 recipients of PING grants—amounting to approximately 87 per cent of the total package.
Table 3.1: Top 10 PING grant recipients
|
|
|
|
Rural Press Pty Limited trading as ACM
|
$10.48 million
|
|
Southern Cross Austereo Pty Ltd
|
$10.27 million
|
|
The AAP
|
$5.0 million
|
|
Prime Media Group Limited
|
$4.7 million
|
|
WIN Corporation Pty Ltd
|
$4.2 million
|
|
Nine Entertainment Co. Pty Ltd
|
$4.03 million
|
|
Grant Broadcasters Pty Limited
|
$3.32 million
|
|
Channel Seven Queensland Pty Limited
|
$1.87 million
|
|
Ace Radio Broadcasters Pty Limited
|
$1.01 million
|
|
Broadcast Operations Pty Ltd
|
$1.03 million
|
Source: Department of Infrastructure, Transport, Regional Development and Communications, Supplementary Submission 29.1 Answer to questions on notice, pp. 5-8.
3.72
Cape York Weekly suggested that the PING program should provide newspapers with freight subsidies, stating that ‘Cape York Weekly flies its newspapers to all corners of the Far North at a significant annual cost. Road transport simply is not an option’. It added that:
The federal and state governments should be looking at options to support regional newspapers in small ways that will make a difference. A $5000 grant for equipment upgrades would make a big difference in most newsrooms.
3.73
The Collie River Valley Bulletin explained that it struggled to receive any funding as it had only just launched its business. It highlighted that:
I think that the government's funding endeavours have been commendable, but we found it very ironic that, at a time when we were endeavouring to start a business and to employ people, there was just no money available to us …
We did contact Minister Fletcher's office and were told at the time that only registered publications with an ABN at that stage would be considered. Unfortunately, we were just launching so we didn't have a track record. Effectively, it was a recipe to keep people out of the market as much as to keep people in the market, if you know what I mean. Perhaps that's something which could be looked at: where there's no local publication and someone endeavours to start one they could be looked at a little more favourably …
3.74
Deakin University similarly stated that new independent start-ups were put at an ‘immediate disadvantage’ as the PING program was ‘only available for existing and established media outlets such as ACM (which shuttered many of its mastheads during COVID)’. It recommended that ‘more targeted and ongoing support for new independent newspapers should be considered’.
3.75
Ms Anna Draffin from PIJI told the Committee that ‘grants in any industry provide valuable revenue injection’ and funding grants programs should have a ‘central trust to enable arm's length funding’:
For example, the digital platforms at the minute are very much determining direction of their commercial deals to a certain extent. So, a central trust would help alleviate some of those concerns and, equally, putting strong governance in and around the public reporting of the direction of the funds, the conditions under which the funds have been granted and the reporting of the public interest outcomes that result. It is probably that latter part at the moment that we're still in the early stages of waiting on the outcomes, for example, on the PING Trust and the former innovation fund which will be made available, I gather, later this year.
Other programs to support regional newspapers
3.76
Meta submitted that it has made ‘investments in the Australian news ecosystem to support innovation by local publishers’ through its ANZ Local News Accelerator program. Meta stated that in 2019, it:
…invested more than $1.5 million to bring 11 regional and smaller publishers together with industry experts from around the globe to help them develop strategies encouraging revenue growth, including encouraging readers to subscribe and donate. As part of this investment we provided funding of $100,000 to participating publishers to support reader revenue projects. This first cohort included News Corp, Australian Community Media, The Guardian, The Conversation, Crikey, The West Australian, Solstice Media, Schwartz Media.
3.77
In 2020, all participating publishers in the Accelerator program were paid ‘an unencumbered top-up fee of $80,000 as part of the COVID-19 relief fund’.
The role of philanthropy in regional newspapers
3.78
The Committee heard that philanthropy is an increasingly important source of funding for journalism in Australia and that philanthropists have notably stepped up at critical moments, such as the rescue of the AAP in 2020. Some submitters to the inquiry called for the Australian Government to increase incentives for philanthropic giving to the sector.
3.79
The University of Technology Sydney (UTS) Centre for Media Transition (CMT) submitted that ‘as a result of philanthropic interventions, some long-established publications that were experiencing serious financial difficulty have been spurred on to continue publishing’. However, it stated that philanthropic support is ‘usually designed as a short-term boost’ as it ‘rarely offers a sustainable or even short-term reliable revenue stream’.
3.80
In 2021, PIJI considered the ‘mechanical barriers for funders and news organisations, and the motivational factors that may affect the philanthropic sector’s appetite to fund public interest journalism’. Its key findings included that:
Philanthropy can contribute key, but limited, investment, and there is already a small but growing philanthropic market supporting news in its role as a public good, as important community infrastructure, or to further another cause they care about
Current charity and taxation laws are a key constraint
By addressing regulatory constraints, there is potential to grow philanthropic support for a not-for-profit journalism sector.
3.81
Mr Italiano from the Collie River Valley Bulletin told the Committee that the newspaper had been ‘very fortunate’ to receive support from local businesses:
If it hadn't been for the local community, we certainly wouldn't have started, and we wouldn't be here today. But we've been very fortunate to get the support of the local community bank, who tipped a few dollars in early on to cover our printing costs and the likes for a while. And that was greatly appreciated. We received support from service clubs, and moral support from all over the place. But we haven't received any government money.
Deductible gift recipient (DGR) status
3.82
Another key recommendation from the ACCC’s Digital platforms inquiry – final report was that ‘tax settings should be amended to establish new categories of charitable purpose and deductible gift recipient (DGR) status for not-for-profit organisations’ (recommendation 11). Organisations with DGR status are able to receive donations that are tax deductible, which can provide an important incentive for donors.
3.83
In its response to the final report, the Australian Government did not support this recommendation, stating that its ‘current focus is implementing previously announced DGR reforms before considering further changes, including changes to eligibility’.
3.84
Ms Emma Cowdroy from the AAP told the Committee that DGR status is ‘really critical to be able to attract philanthropy’ as ‘a number of foundations … can't give unless there's DGR’. She stated that the AAP was granted DGR status for the next five years. The AAP’s philanthropic support for the 2021 financial year was 21 per cent of total revenue.
3.85
PIJI however told the Committee that DGR status ‘is more burdensome and usually beyond the reach of very small organisations’.
3.86
Submitters to the inquiry advocated for DGR status, with Peninsula News suggesting that it would like the ‘eligibility to register as a charity … and for DGR status to encourage donations’.
3.87
Croakey Health Media, a not-for-profit public interest journalism organisation, also expressed concerns that there is ‘not a clear, equitable, transparent pathway for setting up as a non profit public interest journalism organisation’ and that it has been unable to obtain DGR status, stating that it would ‘greatly help our precarious financial situation’. It suggests the development of a ‘peak body representing the sector’ to assist smaller public interest journalism organisations to obtain DGR status.
Future funding models to support regional news
3.88
Evidence to the inquiry has highlighted that there is no ‘one size fits all’ solution to support regional newspapers, and in particular to fill the classified advertising gap that newspapers are now seeing. The Committee received a range of suggestions, and academics in the field are recommending that future funding models are designed to contain a mix of different funding solutions and policy responses.
3.89
Professor Sora Park from the News & Media Research Centre at the University of Canberra (NMRC, UC) highlighted that ‘news companies must now shift to experimenting with different business models and subsidy models to make it viable’:
…small publishers are especially vulnerable because they don't have a big package of different products to offer. I think this is a very critical moment in news history where we need to really think about how we can sustain news businesses, because it was always a packaged product. Standalone news can never be a product on its own. So what do we package it with? We're still figuring it out. There have been lots of successful models, like crowdfunding, donations, philanthropy and sponsorship, and we're still in the early stages.
3.90
The Journalism Education & Research Association of Australia (JERAA) also noted the different types of business models:
…ownership models range from a community “hybrid” form of journalism, with both not-for-profit and sponsored approaches, to those fitting the traditions of regional media related to business models and staffing. The hybrid models have tended to focus on elements such as community cohesion, positive news, and social news, in contrast to the traditional end of the newspaper spectrum with its breaking news and watchdog-style reporting. One of the issues associated with hybrid and non-standard news production models is that audiences with limited information literacy might not be able to critically consider the information that is being provided, and the business or political agendas that may inform it.
3.91
The Committee heard from the Community Broadcasting Association of Australia (CBAA) and the Judith Neilson Institute for Journalism and Ideas (JNI) about the launch of their collaboration—the Local & Independent News Association (LINA), which was established to find ways to ‘build business models that are sustainable’. Mr Jon Bisset, Chief Executive Officer of CBAA told the Committee that:
We're very much focused on capability building, helping hyperlocal publishers build their business models and become sustainable and not reliant on philanthropic or government money just to operate day to day.
3.92
JNI found that although direct grants are helpful to small local and hyper‑local publishers, ‘it became clear that this was not a long-term strategy to remedy the wider issues with the market’. JNI identified the following common issues and challenges faced by hyper-local news organisations:
Sourcing varied skills and capabilities required to perform the governance, administrative and editorial functions of the news organisation, and staff with the flexible, entrepreneurial mindset needed to continually experiment and adapt to keep the organisation growing.
Implementing a sustainable business model, achieved through a diverse range of revenue streams that might include advertising, audience generated income, services and e-commerce.
Implementation of effective technology to reach their target audience and monetise outputs.
3.93
As such, JNI and CBAA considered that an association that is ‘focused on capacity building and shared services’ such as LINA, ‘will respond to these challenges as well as other opportunities to support a healthy local news ecosystem in Australia’.
3.94
CBAA also told the Committee that LINA will be identifying ‘news deserts’ in Australia and ‘help facilitate the growth of a hyper-local publication or help a community radio station that's already in those areas evolve their business model’ to fill the gap. In its submission, CBAA called for an increase in its funding to ‘increase station operational ability and increase the amount of local news reaching regional communities’.
3.95
Inquiry participants also considered that the News Media and Digital Platforms Mandatory Bargaining Code (the Code) (discussed further in Chapter 4) is a valuable first step to address the bargaining imbalance, but more needs to be done to sustain regional newspapers. The Committee received some evidence advocating for tax rebates for small news organisations that are engaged in news gathering for public interest journalism.
3.96
For example, PIJI suggested a research and development (R&D)-style tax rebate, specific to public interest journalism as a ‘complementary solution’ to the Code. It stated that a rebate of this kind is:
…an attractive, public policy response as it incentivises news media businesses of all sizes – including new entrants - to invest while providing direct public outcomes.
3.97
PIJI added that a tax rebate ‘creates an elegant policy solution in terms of driving more investment, not just doing remedial handouts as a response or reaction’.
3.98
ACM also advocated for a tax rebate for regional small business operators that advertise in their local newspaper. It highlighted that:
The added incentive of a full tax break for a business supporting their local newspaper through a minimum advertising spend would contribute to the provision of public interest journalism in that community, help the small businesses tell their local community who they are and what they do and encourage the community to in turn support the business and the newspaper.
3.99
Refundable tax rebates were also considered by the ACCC in its Digital Platforms Inquiry specifically for expenditure incurred in employing journalists. It concluded, however that ‘the introduction of a tax rebate would not be a preferred policy to stimulate production of public interest journalism either on a continuing basis or as a transitional measure’.
3.100
Some inquiry participants reflected on international models that have addressed regional news funding needs. For example, the AAP advocated for the Canadian model that provides tax rebates to Canadian publishers as ‘one mechanism that could be helpful, particularly to smaller media organisations’.
3.101
Known as the ‘Canadian journalism labour tax credit’, the AAP stated that:
…it has been done quite carefully so that it only provides a tax rebate if you can establish that it is for somebody who is specifically engaged in news gathering, so it benefits, often, smaller publishers. They don't have the large overheads and sales teams and other corporate expenses that some of the larger media companies have.
3.102
The Government of Canada’s website explained that:
The Canadian journalism labour tax credit is a refundable tax credit that is available at a rate of 25% of the total qualifying labour expenditures for a taxation year, in respect of eligible newsroom employees of a qualifying journalism organisation …
3.103
Some submitters observed that news media organisations in the United States have increasingly shifted their business models into not-for-profit status to rely on donations and grants to sustain their business.
3.104
Croakey Health Media submitted that consideration should be taken of ‘the potential for supporting the development of non-profit journalism models’, like in the United States. It stated that it encourages engagement with the ‘literature around non-profit journalism and how it is supported in other countries’.
3.105
CBAA stated that it had looked at LION Publishers, a professional journalism association for independent news publishers in the United States and Canada, but emphasised that we ‘have to remember that we are in a unique environment’.
Committee comment
3.106
From evidence to the inquiry, it is clear to the Committee that newspapers in regional Australia have not been immune from the challenges of transitioning between print and online advertising. Indeed, many newspapers in regional and remote Australia, which have relied solely or primarily on revenue from advertising, have closed or are struggling to survive.
3.107
The Committee was concerned to hear that government advertising and public notices have also been largely withdrawn from regional newspapers in favour of online outlets or larger metropolitan newspapers, further exacerbating the decline in revenue.
3.108
The ongoing viability of regional newspapers, the ability of these newspapers to support vital public-interest journalism, and the wider implications of newspapers closing for the communities and towns in regional Australia are concerning.
3.109
The Committee appreciates, however, that there is no ‘one size fits all’ solution in providing support for regional newspapers, noting the breadth and diversity of the sector and the regions it serves.
3.110
As such, the Committee suggests a multipronged approach that reviews the specific issues facing the sector, while at the same time begins to address these issues.
3.111
To support the viability of regional newspapers, the Committee sees merit in the Australian Government conducting a review of its advertising expenditure and current legislation around public notice dissemination, with an aim to identify opportunities to support regional newspapers such as a guaranteed spend across Australia’s regional newspapers.
3.112
The Committee recommends the Australian Government review government advertising expenditure across all departments and agencies with a view to ensuring a minimum of 20 per cent of government print advertising is placed in regional newspapers.
This should be part of long term advertising contracts that provide certainty of income for regional publications.
The Committee expects this measure to be cost neutral and able to be implemented within 12 months.
An independent process should be established to select the newspaper outlets eligible to participate in the print advertising program.
3.113
The Committee notes that representatives from small and independent regional newspapers were not satisfied with the rollout of the Regional and Small Publishers Jobs and Innovation Package in 2017 and the PING program in 2020 as the packages were not targeted enough for smaller newspapers.
3.114
The Committee heard that almost 87 per cent of the funding from PING went to larger players such as ACM and Southern Cross Austereo (which received a fifth of the funding each), and the AAP (which received $5 million), rather than small newspapers that struggled the most during the pandemic. Most independent regional newspapers selected under PING received only $10,000 of funding or missed out completely.
3.115
While the Department reported some benefits from the packages such as new employment opportunities, new revenue streams and increased digital presence, small publishers expressed their disappointment that the funding was based on revenue (that is, the higher the revenue, the more funding received) and therefore new independent start-ups and small newspapers were immediately disadvantaged.
3.116
The Committee considers that the Australian Government should develop a targeted grants program for small, independent newspapers based in regional and remote Australian communities. In particular, the grants program should prioritise those newspapers that maintain local offices and employ local journalists, and should give consideration for supporting new independent newspapers.
3.117
The Committee recommends that the Australian Government develop a targeted grants program aimed at small, independent newspapers based in regional and remote Australian communities.
3.118
In addition to providing support through government advertising and grants, the Committee considers that there is an important role for the Australian Government to assist regional newspapers to identify alternative, sustainable funding models and approaches.
3.119
There are currently two organisations that provide support to hyper-local and regional media organisations to identify and build business models that are not reliant on philanthropic or government funding, expand their business models and innovate news production for both radio and newspapers — LINA and the CBAA.
3.120
The Committee is of the view that these models are a good way of assisting local publishers and recommends that funding should be allocated to research, programs and initiatives aimed at identifying and implementing alternative, sustainable business models.
3.121
The Committee recommends that the Australian Government provides funding for research, programs and initiatives to assist local publishers, including regional newspapers to:
identify and implement alternative, sustainable business models, achieved through a diverse range of revenue streams that might include advertising, audience generated income, services and e-commerce;
increase capabilities required to perform the governance, administrative and editorial functions of the news organisation; and
implement effective technology to reach their target audience and monetise outputs.
3.122
Some submitters to this inquiry advocated for tax rebates for regional businesses that support their local newspaper through a minimum advertising spend, and for regional newspapers that produce public interest journalism and employ local journalists. The Committee notes that the latter has been a model implemented internationally and would encourage philanthropy and support in the sector.
3.123
However, the Committee is cognisant that the ACCC in its Digital platforms inquiry – final report considered that a tax rebate would not be a preferred policy to stimulate production of public interest journalism.
3.124
While the Committee did not receive sufficient evidence to recommend one particular taxation model in its inquiry, the Committee considers there is merit in the Australian Government considering the viability of a tax rebate model as part of its review recommended at Recommendation 1.
3.125
The Committee recommends that, as part of the review recommended at Recommendation 1, the Australian Government also considers the viability of a tax rebate for regional businesses that support their local newspaper through a minimum advertising spend, and for regional newspapers that produce public interest journalism and employ local journalists.