The ailing news media industry needs to do more than just survive (Part 5)
In a previous column addressing the funding issues facing the media industry, I looked at how we might structure media companies and create investment incentives through structured tax breaks. I looked at how arguments have been made to create a new hybrid class of company and how tax incentives could entice investors seeking social impact returns. But there is another source of funding that remains the best a media person can get: revenue.
Fixing the media means shoring up all the weak points of the ecosystem and getting the various stakeholders involved in the cause. Big business is often a big winner of the work of independent and investigative journalism, cheering from the sidelines but conspicuously light on financial support when things get “too political”, which in South Africa, is all the bloody time. All the while when these large corporates are happy to spend with big foreign companies like Google and Facebook, where the revenue leaves the country untaxed and between this two behemoths, struggle to account for 50 permanent jobs in South Africa.
At the same time, in South Africa, we have a failing Enterprise Development (“ED”) programme, where these same corporates apply billions in Corporate Social Investment (“CSI”) spend to develop small businesses. According to a 2013 New York University & Impact Amplifier study, “Enterprise Development did not have a successful impact on socio-economic transformation.”
What if we could add Press Council accredited media, to the list of qualifying enterprises for CSI purposes and incentivise corporates to support through advertising spend. This would create a macroeconomic benefit to the country (assuming a less corrupt and compromised government), subsidised advertising spend to corporates and a healthier and more diverse media ecosystem. Whether it be under ED or any other programme, there are ways we could make it more attractive through tax-breaks or CSI points for big corporations to support media houses.
As someone who has had to sell media, I can attest to the pain of trying to convince a young media buyer that supporting independent media is an investment in their future.
Unfortunately, there are no KPIs “Getting rid of corrupt politicians and businessmen” for media buyers, just the lowest cost per acquisition and impression. The only way we can align interests is to move through the regulatory system where forced CSI spend isn’t doing too well on an ROI basis anyway.
Another entity in the media ecosystem are members of the public. The people, we as media, aim to serve (or at least claim to, in some cases). Again, as major beneficiaries of the work media do, we are only seeing the beginning of the move to reader revenue as a business model, especially in developing countries South Africa. These models come in all guises, some having opted for hard paywalls (Financial Times), metered paywalls, (New York Times), a freemium model (News24), donations/contributions (The Guardian) and membership (Daily Maverick). The one they all have in common is you, the reader, dipping into your wallet.
While reader revenue models have had a positive impact on levels of journalism, it does raise the spectre of accessibility, especially in a country like South Africa where so many, have so little. We are left in a situation where only 7 million taxpayers out of 30 million adults are the addressable market, and then only a fraction of those inclined to pay for or support news media.
To make the public support of media more palatable, let’s make all contributions whether it be paywall, contribution or membership (again to Press Council members in good standing), tax-deductible for readers. In this way, we lessen the burden of cost on readers and make it more appealing and affordable to a greater portion of the public. At the same time, we could also make these contributions by members of the public, zero-rated for Value-Added Tax purposes that would create an additional 15% uplift in impact.
As with most of the tax-incentive suggestions in this series we are looking at measures that will ultimately have a hugely positive return for the industry through entity and job creation, while at the same time playing the watchdog role at national and community level. In South Africa, President Ramaphosa estimated corruption to have cost the country close to a trillion Rand in the last decade before the opportunity cost of the exodus of talent and significant erosion of the tax base is included. It's against this cost that the investment of tax breaks for independent media support should be measured.
These tax subsidies would show appreciable returns in a short space of time. Or we could just fund it all by tagging an extra 10% premium to South African Airways or the SABC’s next government bailout.
