Monday Note

Tons of cash for publishers, little in  return. That’s the Sarkozy prescription to “save” the press. For €600m ($767m) to be spent over three years, the French president is buying if not influence, the French media barons’ ear and goodwill. This is not a stimulus package. This is a band-aid to an ailing industry that has a shown a tremendous resistance to change, at every level.

The package outlined Friday at the Elysée Palace involves new tax-breaks to support newspaper delivery and newsagents; a huge but still undisclosed aid for printing restructuration; and a moratorium for the planned increase in postal charges. On the direct subsidies part, the amount spent by the government for its own communication will double and be channeled to the print press. Young people reaching 18 are now entitled to a free subscription of the paper of their choice, the publisher providing the paper, and the government paying for the delivery. And, from a tax perspective, when you pour money into a newspaper this is treated as investing in a foundation.  In the past, industrialists used the press as an ego booster, it has now become a charity business.  Online publications will be granted a specific status that will lead to the same tax advantages and subsidies as the print press. Sarkozy will pitch the EU Commission for a low VAT at 2.1% instead of 19% for online publishers recognized as such.
.
This bounty is the result of the large consultation hosted by the government in the last four months, 150 professionals where involved (I was one of them embedded in the Internet committee). See the special page on Mondaynote.com for details.
.
Helping an ailing sector is not a problem in itself. Banks are helped, so does the auto industry.  It is OK as long as:
a) It is not an open-ended system
b) It is a stimulus for change
c) Reciprocity is part of the formula
.
France is spending altogether €1.2bn ($1.56bn) in various subsidies, from tax-breaks, to postal aid, or government sponsored subscription to the Agence France-Presse. That’s about 10% of the sector’revenue.
Now let’s compare the French situation with the Swedish one for instance:
-  Between 2003 and 2007, the amount of direct subsidies has increased by 71% in France as compared to 21% in Sweden.
-  In its adult population, France has 2.9 times less readers of newspapers than Sweden does, but each such reader gets 4.7 times more direct subsidies.
.
Yep, we are talking of a ratio of almost 1 to 5 between the two countries in terms of money given by the state to the press. And that was before Nicolas Sarkozy’s announcement. (I couldn’t do a comparison between France vs. the US, UK or Germany, because direct subsidies figures don’t show up the 2008  report of the World Association of Newspapers I’m using. I suspect there is no such aid).
.
Subsidies are part of France’s culture. But for the press, it is a dope-like addiction that the media barons were eager to preserve. They lobbied very hard and they won.
.
What about something in return, you might ask? Well, the government called for a new “social contract” with the printing union workers. There is room for improvement: according to the official report of the consultation I mentioned earlier, printing the Herald Tribune in France is 65% more expensive than in London; the cost ratio is 1 to 5 between a French non-unionized plant and an closed shop, union-controlled one. The goal is therefore to reduce the production costs of newspapers by 30% to 40%. This is within easy reach of natural productivity gains.  But there is no talk of giving up obsolete cathedral-like printing press plants for high speed decentralized digital presses that will continue to spread in the next five to ten years.
.
Distribution of newspapers, you said? A huge problem. Just one figure: in Norway, there is 1 point of sale for 360 inhabitants; in France, for its national papers, the number is 1 for 2100, almost six times less, and the Norwegian press choose to compete on products, but to cooperate on logistics making the distribution system remarkably efficient. In France, the idea then would be to make the great distribution network of the regional press available for the national press. That’s the government’s wish. “The big regional’s won’t do it , said an insider.
- Why?
-  Because we know our newspapers sucks, he said, we won’t want side-by-side comparisons with national papers that are much better than us at covering politics, society, or business…
- Even if it means sharing the financial burden of your distribution network?
-  Yep. We don’t want such competition”.
That was the flavor of conversations you could hear last Friday in the Elysée ballroom.
.
Nicolas Sarkozy made the following calculation. $200m per year to please the newspaper barons is small change compared to €21bn to save the French banking system or €6bn for the car industry. In normal times, fiscal responsibility would not allow such profligacy (especially within the constraining EU guidelines). Today, $200m is nothing compared to the upside: the French media groups are satisfied and relieved. Tax-breaks will have almost immediate effects on balance sheets and there is no doubt that all financial locks are thrown open: Friday after Sarkozy’speech, a government official told me some news outlets were, as usual, already negotiating subsidies payments in advance. He was implicitly confirming that one paper was even asking for a two-year upfront payment from the government!
.
Heavy subsidies for the media are not innocuous. Even if I sound pathetically out of date, I believe media are democracy’s watchdogs. With 10% (and sometimes more) of its living coming from the government, the watchdog begins to feel the leash. During his speech, Nicolas Sarkozy didn’t spare the audience with thick jokes about the adaptive notion of the French press’ independence, whether in its editorial pages or its lobbying activities.
.
His remarks were founded. But I didn’t feel like laughing. —FF
.

Be Sociable, Share!

• 

Related columns:

1. The French press if officially a charity business TweetIs this a new sign of the ultimate decrepitude of the press sector in France ? The five professional organizations representing all categories of print media has received the the permission by the French government to launch the Association Presse & Pluralisme. Its main characteristics is to offer tax deductibles to its generous contributors. What [...]...
2. The French Edgar Hoover and “his” media dependents TweetPicture this in today’s American media: an Edgar Hoover-like chief of a major police agency cozying up to veteran reporters of Newsweek, The Washington Post, The New York Times, The New Yorker. To these cronies, the chief feeds dirty information, unverified gossip, unproven suspicion of corruption of X or Z, all of it “dug up” [...]...
3. TV — Sarkozy’s dream of the French BBC TweetDuring his Guinness Book press conference last Wednesday – 600 journalists attending -, Nicolas Sarkozy outlined his new dream of a French BBC, by proposingto remove advertising on public television, and replacing this money by a new tax (cheer-up!)on private TV and radio, and also on internet providers and mobile phone carriers. Problem is figures [...]...
4. The Other French Paradox (2) – Jobs TweetTwo weeks ago, I discussed what I called The Other French Paradox, that is how French taxpayers and French companies are at a (curable) disadvantage in Silicon Valley. Last week, I “shared” (we’re in California) my own plans to deal with the twin problems: a venture fund whose profits reverse the flow of money back [...]...
5. The Other French Paradox Tweetby Jean-Louis Gassée Foie gras, crême fraîche, butter, red wine — and lots of it! All these excesses leading to a higher life expectancy, to say nothing of the joys of sinning. That’s the legendary now official French Paradox. Scientists strain to explain the phenomenon: ‘It’s the phenolic compounds in the red wine’, they say. [...]...