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Favored tax status for family-owned newspapers? By Tom Littlewood

PUBLISHERS of remaining family-owned newspapers in Illinois are of two minds about the wisdom of asking Congress for special inheritance tax privileges. They know there are national chains and conglomerates waiting to offer up to 60 times annual earnings for local monopoly newspapers. And they know of newspaper estates of almost that much that have had to be sold by the heirs to pay the taxes. But they wonder what the people would think if the commercial holders of their First Amendment franchises were also the beneficiaries of favored tax status.

The Independent Local Newspaper Act, introduced again this year in Congress, would give preferential tax treatment to newspaper estates. U.S. Rep. Paul Simon (D., Carbondale), Sen. Charles H. Percy (R), and other sponsors contend that the public interest is served by extraordinary measures to preserve a diversity of editorial voices. Simon warns of a time when powerful corporations might try to corner the media market and thereby sway public opinion.

By allowing a newspaper owner to set aside future estate taxes in a trust so that the property can pass more easily to the succeeding generation, the leg islation would treat newspapers differently from other closely held businesses.

The same Washington lobbyist who steered through Congress another law, the Newspaper Preservation Act of 1970, is overseeing the new campaign. That act made an exception to the antitrust laws by permitting competing but ailing newspapers to combine their business and mechanical operations.

Recent acquisition of the far better than average Lindsay-Schaub newspapers (one of them the Southern Illinoisan in Simon's district) focused attention on the increasing concentration of absentee ownership in Illinois. Lee Newspapers, new owners of L-S, is a publicly held corporation best known for its technological cost-cutting zeal. More and more Illinois newspaper decisions are being made by financial managers in Oceanside, San Mateo, Southgate and La Jolla in California, in Rochester and New York City, and in other widely scattered places like Appleton and Galveston and Davenport (Lee's headquarters).

For all his faults (and he could be an arbitrary cuss) the old-fashioned local publisher had his roots in the community. He was homegrown. Many of today's itinerant group managers, on the other hand, are most concerned with a cost-efficient operation and rising profits that will lead to a promotion. John McConnell, general manager of the Peoria Journal Star, one of the largest of the downstate independents, put it this way: "It's a question of the dollar allocation to the editorial product. Most of [the groups] are bottom-line operators, and the easiest place to cut is the newsroom. It's natural for them to fire reporters and plug the holes with wire" -- the wire being the various syndicated services a newspaper can throw together.

But even the best "wires" can be dispensed with for cost-efficiency reasons. Gannett, the biggest of the national chains, with Illinois papers in Rockford and Danville, recently gave up its valuable supplemental service, the Los Angeles Times-Washington Post service, rather than pay a sharply increased fee. The service gave Rockford and Danville readers sprightly national and international interprelive news and analysis that is now missing. Gannett's announced plans to improve its own Washington bureau are not yet evident in Illinois. The Illinois specialist in the bureau prepared for his assignment by being managing editor of a Gannett paper in Guam, which is some distance from Winnebago County.

All the chains have variations of Gannett's "progress plans," a euphemism for profit quotas imposed by corporate headquarters. It doesn't follow that all independents are good papers and all chains bad. Not at all. Almost invariably though, anytime a chain pumps more money into the editorial budget, it is likely to be in a competitive market. Which is why chains aren't drawn to competitive markets The Belleville News-Democrat is a much better newspaper since being acquired by Capital Cities Communications, a conglomerate with a notorious union-busting reputation. But the reason is that the Belleville paper was locked in a circulation battle with the Metro East Journal, a Lindsay-Schaub publication in East St. Louis that Lee left to die.

As long as local editorial autonomy goes hand in hand with climbing profits, Gannett and most of the others are content not to exercise central control. But what is known in the news business as the "Panax Principle" is in the back of everyone's mind. That's another way of saying: "You take the king's shilling, you fight the king's war." Panax, which owns papers in several states including Illinois, ordered them to run two scurrilous articles about President Carter on the front page. Two editors in Michigan refused and were fired.

What is most distressing about all this is that Gannett's president, Allen Neuharth, can't understand why the public should care if all the newspapers in Illinois are controlled by a few absentee owners. At the spring meeting of the Illinois Press Association, Neuharth dismissed expressions of uneasiness about the concentration of media ownership as "political baloney."

June 1979 / Illinois Issues / 35