Government Entities Want To Switch From High Cost Legal Notice Advertising In Paid-For Newspapers And Transfer That Spend To Free Newspapers And The Web For Much Lower Cost

Philip M. Stone May 1, 2008

General circulation newspapers have depended on legally mandated government advertising as a large revenue flow based on laws in many cases going back more than 100 years, but those newspapers are beginning to experience another Craigslist-type horror – laws are being changed to now include free papers and the Web into the mix and that means much more low-priced competition.

In many countries, from the central government down to local entities there are laws requiring government bodies to provide information to the populace via legal notices in “general circulation newspapers”   on subjects ranging from public meetings, what contracts are available for bid, and what decisions have been made, and so on.

And because general circulation newspapers have had a monopoly on that advertising it doesn’t come cheap. Depending on location and the size of government this can be really big bucks for newspapers – the city of Philadelphia, for instance, spent $3 million in newspaper legal ads last year and it is thought Pennsylvania local government bodies throughout the state may have spent some $26 million on such ads, according to the Philadelphia Inquirer.

And the Pennsylvania legislature is taking a close look at those costs and it is proposing less expensive alternatives. And it’s happening not only there. Some Caribbean countries have announced they are either stopping newspaper advertising for their legal notices or contemplating less expensive means, primarily the Internet. The government of Guernsey, an island in the English Channel, says it’s cheaper to publish such legal advertising news itself than to pay the local newspaper to run the ads. It’s an international trend that is not going to go away.

In Pennsylvania it looks like the legislature next week will vote on amending the current legal notice advertising law to include free newspapers. The newspaper industry has lobbied hard against the amendments, but then various government entities like city halls and school districts have lobbied hard to try and save some money and it seems the government entities may well get their way.

Pennsylvania’s current law, written well before anyone even thought of free newspapers or the Internet, is similar to the requirements found in most US states. Local governments have to place legal notices in “a newspaper of general circulation” but the proposed amendment would add, “Community newspapers of mass dissemination” that can be distributed to every household in a community free via mail or by a carrier.

There’s another bill in the Pennsylvania legislature still to be discussed in committee that would do away with any print requirement if the legal notice was issued on the web.

Groups like the Pennsylvania Newspaper Association are vehemently fighting the addition of free newspapers and it is somewhat apoplectic about the web bill. Local governments, schools and the like who must place the legal notices support the legislation since they are desperate to find ways to save money.

As one might expect Pennsylvania newspapers are editorializing hard against the changes. The Reading Eagle, for instance, wrote, “The best way to inform the public is to maintain the requirement for notices to be placed in newspapers of general circulation. Call it enlightened self-interest on the part of the newspaper industry if you wish, but the push to change the advertising requirements for public meetings and other notices is a misguided attempt to save a few dollars.” It points out that public agencies spend less than one per cent of their budget on legal noticed advertising.

But there is an increasing popular view that  the laws – many of them dating back to the 19th  century-- requiring legal advertising in general circulation newspapers  amount basically in today’s world to government subsidies. In California, for instance, a municipal sewage agency wanting to hold a public meeting must give notice “in a newspaper of general circulation printed and published within the entity …once a week for two successive weeks. Two publications in a newspaper published once a week or oftener, with at least five days intervening between the respective publication dates are sufficient.”

Wouldn’t it be much less expensive and just as effective for that sewage agency to have that public meeting posted on its web site? Newspaper publishers see red at such a thought. As the aforementioned Reading newspaper wrote, “The Internet, despite its overwhelming growth, is not available to everybody. Many people, especially the elderly, have no desire to learn how to use a computer or to access the Web. Many others simply cannot afford a computer and Internet access. As a result, allowing public agencies to do their advertising on Web sites would disenfranchise a good many people.”

Ok, so what about the free newspapers delivered to every household in the community? “Shopper papers are notoriously unreliable. Sometimes they are delivered on time, sometimes they are not delivered at all,” the newspaper says.

So does the Reading newspaper claim that everybody, absolutely everybody in Reading, reads that newspaper?  Could it be that more people in Reading actually access web sites than read the newspaper? And does it deliver its print edition every day on-time?

The truth, of course, is that newspapers have been charging government entities high rates for monopoly advertising – that advertising certainly aided those 30% margins and is even more important in today’s lower margin business. The fact is there are other media out there now that can deliver the message at a far less cost. The new laws don’t mean the general circulation newspapers are shut out, but they probably do mean that those advertising rates come down to be more competitive. And that’s a real service for newspaper subscribers who happen to be the taxpayers paying for that legal advertising.

There’s no question that those who hold legal advertising budgets can flex their financial muscle from time to time. In Long Beach, California, the local council, angry when Dean Singleton basically merged the Press-Telegram into the Daily Breeze in nearby Torrance, threatened to withhold its advertising claiming the Torrance paper was not its general circulation newspaper.  That caused Press Telegram executive editor Rich Archbold to ask the council not to do that.

And it’s not just in the US where governments are looking for ways to save money. Guernsey, one of the English Channel Islands off the northwestern French coast, has closed its official gazette that it paid to have published in the local newspaper, and instead it publishes such news in a new publication it is starting.  That’s a revenue loss of some £67,000 (€88,000, $134,000) for the local Guernsey Press, and probably job cuts.

Such a storm is forming in the Caribbean. In Trinidad & Tobago the information minister says that the government now intends to target its advertising to specific sectors of the population – the young, the middle class, senior citizens – and it is therefore going to review how it spends the millions of dollars it now spends on its official advertising.

“It’s an approach that will definitely raise concerns among some sections of the media, some of whom will undoubtedly scream discrimination and raise the specter of favoritism and bias,” Neil Parsanlal told a symposium at the International Association of Business Communicators.

“It is because of this targeted, very strategic approach to our communication efforts that the Ministry of Information must, as a matter of course, undertake a review of all Government advertising to ascertain whether there is in fact value for money.”

And it’s even worse in Bermuda where the government has decided to stop advertising in The Royal Gazette. A government news release said, “The Cabinet determined it was not cost-effective or penetrative enough to rely heavily on print advertising in an electronically advanced community.”

The Gazette’s cause has been taken up by the Inter American Press Association that said the government was using the advertising ban as a “weapon of reprisal” against the newspaper.  But Premier Ewart Brown responded that the newspaper received $800,000 in government spending during the past fiscal year and since 80% of Bermudans have Internet access it was more prudent now to advertise online.

The newspaper has been critical of the government since it came to office in 1998 and it recently ran a series of articles pushing for legislation for public access to information, something the government opposes. Coincidence or not, after that series the advertising was cut off (but not to any other newspaper) and government subscriptions have been canceled. 

The fact remains, whether it is in Pennsylvania or in the Caribbean, politicians are aware there are cheaper ways of getting their messages across than the high rates charged by general circulation newspapers. The writing is on the general circulation print wall that this advertising, like classifieds, may be going the way of the Dodo unless general circulation newspapers make their rates more competitive.