TABLE VIII.-Volume of mail, postage paid at pound rates for 15 leading magazines} quarter ended June 30, 1946 1 1 Does not include free in county, 1 cent a pound, postage stamps. Fourteen of the leading magazines listed in table VII (to indicate the size of leading magazines) are included in table VIII, provided by the Third Assistant Postmaster General; the fifteenth is the Reader's Digest whose circulation has been variously estimated at eight or nine million. For intelligent discussion of proposed increases in second-class mailing rates, these figures and many more like them are essential. The sum indicated in the "postage paid" column represents the amount paid by each magazine at pound rates in the given quarter. These 15 magazines provided 30 percent of the Department's second-class revenue in this quarter. Judging by the deficits indicated in table VI drawn from the Cost Ascertainment Report of 1945, these magazines are carried at a 75 percent loss to the Post Office ("all other publications" class). If these statistics (and the cost ascertainment procedures of the Department which have been a source of considerable controversy) can be taken at face value, the cost of carrying each of these magazines is four times what they pay. Thus Time, Inc., according to this table, paid over a million dollars to mail Time and Life for 3 months. (Its two additional publications, Fortune and Architectural Forum, are not included.) At the rate of 4 million dollars of postage paid annually, the loss to the Post Office would be 12 million dollars each year on these two publications. And the loss on these 15 magazines, paying ten million a year in postage, would be around 30 million dollars, or between a third and a quarter of the probable loss on all publishers' second-class mail. If, that is, the loss is the same 75 percent it was in 1945 and the volume is increased according to expectations. These figures are not meant to be definitive. They are given here to illustrate the importance of one factor in discussions of proposed second-class rate increases the relative amount lost by the Post Office in carrying large and small publications. Further study of these estimates, and the basis of Post Office Department calculations would be required before any definitive statements could be made. As the rest of this report demonstrates, the hazards facing new and small publishing enterprises are legion. Any change contemplated in the second-class mail rates must take these into account. The ideal formula, if it could be arrived at practically, would be for a rate: 1. Which would not result in a loss on this class of mail; All of these may not be possible. In that event, it seems to me the choice is clear. If the Post Office Department must have more revenue from the second-class mails, it should come from those who have grown the most as a result of its benefits the largest users who are also more able to pay. If it should be found that the largest users can provide enough revenue, appropriate additional reductions should be given to new and small papers and periodicals. Congress has ordered the reduced second-class mailing rate on the basis of an irreproachable ethical choice the diffusion of information and opinion. Another value, the fostering of diversity and competition, should henceforth be used as a basis of rate determination. The whole structure of second-class postal rates should be overhauled to achieve these goals. Above all, regardless of what postal benefits go to large magazines, the rates should help those most who need it most. The present rates actually embody an effort to achieve that end; they ought to go even further. One solution proposed has been for a new free rate for the first ten or fifteen thousand copies of any publication, regardless of sponsorship or destination. Another proposal is to provide a free rate for twenty or twenty-five thousand copies of a new publication for the first few years of its life. All of these, as well as the system of cost ascertainment, are deserving of extended study by the appropriate committees of the House of Representatives and the Senate. OWNERSHIP STATEMENTS Each user of second-class mailing privilege is required to file a statement of the ownership, management, circulation, etc., of his publication (appendix II). At the present time these are checked by local postmasters to determine the validity of the applicant's claim to second-class rates. These statements, however, provide the best single source of information on the control structure and the extent of concentration of ownership of newspapers and periodicals. No analysis of this data is now undertaken by the Post Office Department. One of the suggestions made at the beginning of this report is for an "annual report to the Congress by the Federal Trade Commission on competition, concentration, and ownership in the newspaper-radio industries." It is proposed that the Federal Trade Commission make this report. But appropriate data and analyses should be prepared by the Post Office Department on the basis of these statements of ownership. Appropriate funds should be appropriated to make this a regular annual report. CAPITAL In its studies of other small businesses, this committee has dealt at length with the difficulty with which the smaller concerns are confronted in capitalizing their ventures or in obtaining adequate credit. Small newspapers are no exception to this general pattern. Two aspects of the capital and credit situation affect the survival of a diversely owned competitive press. In the first place, one of the traditional ideals of democratic theorists of the press has been the right and the freedom of anyone "with a shirt tail full of type" to start a newspaper. In the second place, small- and middle-size papers must have adequate capital and long-term credit to enable them to operate with up-to-date equipment and with the benefit of volume buying and a secure supply of raw materials. Only then can they maintain their competitive positions in the face of the challenge of giant papers widening their circulation areas. In an article in the Virginia Quarterly Review (summer 1945), Freedom of the Press for Whom, Mr. Earl L. Vance made this statement about the cost of handling the newspaper business: To begin with, newspaper publishing has come to be big business in its own right. Even small-newspaper publishing is big business. Time magazine recently reported sale of the Massillon (Ohio) Independent (circulation, 11,858) for "around $400,000"; the Spartanburg (S. C.) Herald (17,351) and Journal (8,678) for $750,000-all smaller dailies. In contrast, William Allen White paid only $3,000 for the Emporia Gazette in 1892. A metropolitan daily now represents an investment of many millions. Scripps-Howard in 1923 paid $6,000,000 for the same newspaper that had been offered in 1892 for only $51,000; the Philadelphia Inquirer sold for $18,000,000 in 1930; the Kansas City Star for $11,000,000 in 1926. In brief, newspaper publishing is no longer a trade one takes up lightly even if he has substantial cash-or takes up at all if he doesn't. If freedom of the press is to be had only through ownership of a newspaper, it can under present conditions, be a reality only for the well-to-do. A successful publisher estimates that— The cost of new machinery and equipment necessary to publish a daily newspaper with a circulation of 10,000 will run as high as $250,000. A new 24- or 32-page press, together with 6 new typesetting machines, will run more than $150,000 at today's prices. In addition to a press and typesetting equipment, considerable other equipment is necessary. But machinery alone does not mean that you have a newspaper—you must have circulation. Whether you buy it or whether you create it, it is expensive and not infrequently is the largest single item on the balance sheet. Because of the cost of new equipment, the small newspaper too frequently goes to the second-hand market rather than the manufacturer for its needs; with old equipment it is constantly at a disadvantage, both from the standpoint of the quality of its product and operating costs. It should be pointed out that orders for new equipment are running from a few months to a few years ahead of delivery dates. The publisher of a weekly in Alabama sums his problem up this way: I sometimes feel that the Government itself follows too jealously the policy of big business when it comes to advertising in small newspapers, which are often the sale of this thing we call free speech in this Nation. In the case of surplus commodities, sale of bonds, and a world of other informational services which the Government agencies send out-much of which goes in wastebaskets, and not to the people—this sort of material might well be put in advertising form and inserted at Government cost in small newspapers. My problem, therefore, as a small businessman, is to be able to secure sufficient credit or aid from the Government to be repaid over a long period of time, sufficient to enable me to buy first-class equipment, lay in adequate paper stock, and to finance operations for at least a year without money worries. With that sort of assistance, almost any small business dealing in something the world needs and is willing to pay for could make some money and make a needed contribution to a richer and fuller life for all the people. I think we must make it possible for a small businessman to operate a business with a soul, a private enterprise operated for public good, instead of encouraging the formation and operation of that type of so-called business which in reality gyps the unsuspecting public, the kind of business which breaks people's backs, and stupifies their minds, and steadily leads the Nation into a situation where combines are stronger than government for the people. GOVERNMENT ASSISTANCE Numerous proposals have been made for special and additional Government efforts to expand the loan facilities available to small businesses. To some small degree this is being accomplished through the Small Business Division of Reconstruction Finance Corporation. But the limited extent to which RFC funds have been used to assist small business are indicated by this latest tabulation of loans made between February 1932, when the Reconstruction Finance Corporation was established, and December 31, 1946. In that 14-year period 36,794 loans were made of which almost 90 percent, or 32,990, were for $100,000 or less. But in terms of the actual funds made available 80 percent went to 3,804 borrowers of loans in excess of $100,000. Thus of the more than 3%1⁄2 billion dollars loaned, almost 3 billion went to big business. The 32,990 small businesses received $709,882,567 and the 3,804 big-business borrowers received loans of $2,960,406,083. Further discussion of the need for expanding all small-business credit through private and public financing will be found in the progress report of the committee, Future of Independent Business. But it must be pointed out that small newspapers do not have access to Reconstruction Finance Corporation financing. The following statement from John D. Goodloe, General Counsel of the Reconstruction Finance Corporation, states its official position: Reference is made to your recent inquiry concerning the policy of the Reconstruction Finance Corporation with respect to authorizing loans to newspapers, radio-broadcasting stations, and nonprofit cooperatives. We have made no loans to newspapers, magazines, or other publications. Our Directors decided that the Corporation should not authorize loans to publications having an editorial policy, believing that governmental control of the press, even through loans, and to a small extent, is not for the best interests of the country. For similar reasons, our Directors are of the opinion that the Corporation should not authorize loans to radio broadcasting stations. The publisher of a Montana weekly discusses the policy and the way it has applied to him: In reply to your recent inquiry regarding threats to profitable operation of small publications, I can only plead my own case in the matter: The only difficulty that I have encountered to date is due to the fact that the Reconstruction Finance Corporation has refused to lend money for expansion to publications. In April 1944 I tried to get a loan from them for the purpose of enlarging my business so that I could compete in some degree with the larger publications in this district. The loan was refused, and in fact not even considered. I quote from a letter written April 15, 1944, by Charles B. Henderson: "We have made no loans to newspapers, magazines, or other publications and the Directors of the Corporation are of the opinion that such loans should not be made. The Directors feel that if such loans were made, even though in relatively small amounts, it might be said that the publishers were subject to governmental control, and, of course, that would not be to their best interest." I also have in my files a letter written May 18, 1944, by Charles B. Henderson stating that for the same reasons listed above they would not make loans to servicemen wishing to start their own publications. I am not positive, but believe that this is in direct violation to the principles of the GI bill of rights. As I am not a veteran this does not directly apply to me, but the fact that the Corporation will not lend money to a publication does, in my opinion, offer a threat to the profitable operation of my business. You might say, Why not borrow the money from a bank or a private individual? I have tried and have not been successful due to the fact that the local bank does not make capital loans to any business, and any individual that could lend the amount wanted by me would be, when he raised the money, placed in a higher income-tax bracket, and therefore would have to pay more tax on the money than I or anyone else could pay in interest. That brings it back to the Reconstruction Finance Corporation, which will lend money to any business but a publication. Why should lending to a publication be a reflection on the operation of that business any more than it would be in any other? Why this fatherly interest in the welfare of the press? Millions of dollars are loaned annually to farmers and other business in Montana without worrying about whether it would prejudice them. Having been in the business of politics for as many years as you have, you must know that the average publication is not prejudiced in any degree unless they wish to be, and in that case the fact that they could or did borrow money from the Government would not make any difference. Perhaps there is something that your committee can do in this matter, and; if so, I would appreciate your advising me regarding the results. Government lending agencies, as we have seen, have loaned billions of dollars of taxpayers' money to thousands of persons and companies. It is probable that many of those borrowers were politically active. Yet the loans if they were made in accordance with the intention of Congress, which authorized them-involved no consideration of personal opinions or party affiliations. There is no good reason for believing that a nonpartisan agency like the Reconstruction Finance Corporation could not lend money to small newspaper publishers and radio-station operators under the same conditions. They are private business enterprises. Balance sheets and circulation figures, not editorial viewpoints, would be what determined the action of the analyst who would pass on the loans. To argue that Government loans would make newspapers and stations subservient to the Government implies that whose who are now able to borrow from private lenders are subservient to them. With the impending technological revolution in the communications industry, adequate capital facilities will determine whether a small publisher or a new publisher can keep pace with the technology and efficiency of his large or established competitors. If the RFC does not think it is sufficiently nonpartisan to make loans without reference to the political preferences of newspaper and radio borrowers, a new small-loan agency is needed on that basis alone. In other connections-wages-and-hours law, taxes, labor relations statutes-the newspaper industry has been dealt with as any other industry. The position of the Government has been that its economic needs were those of the rest of the economy. The courts have upheld this view. Since this is so, adequate provision for loans to new and small newspapers must be made by any Government agencies authorized by |