(updated below - w/correction)
The Washington Post this morning published a lengthy article detailing the fortune -- and now the trouble -- generated for its parent company, The Washington Post Co., as a result of its acquisition of Kaplan Higher Ed. While The Post continues to lose money, Kaplan -- particularly its sprawling network of for-profit "universities" which the company began building in 2000 -- generates huge profits for the company, profits on which the Post Co. depends almost completely for its sustainability.
Indeed, the newspaper has become little more than a side vanity project for the Post Co. and the Graham family which continues to dominate it; it is now, at its core, in the business of profiting off of lower-income students who pay for diplomas, often obtained via online classes. "The fate of The Post Co. has become inextricably linked with that of Kaplan, where revenue climbed to $2.9 billion in 2010, 61 percent of The Post Co.'s total," the article detailed; "the company is more dependent than ever on a single business,' [CEO Donald] Graham wrote in last year's annual report, adding that the newspaper had never accounted for as large a share of overall company revenue as Kaplan does today."
The article is largely devoted to recounting the corruption and abuses which pervade the for-profit education industry in general and Kaplan in particular (saddling poor people with debt in exchange for nothing of real value). But what I found most notable is how dependent is this industry -- including The Washington Post Co. -- on staying in the good graces of the Federal Government. Because these schools target low-income students, the vast majority of their income is derived from federal loans. Because there have been so many deceptive practices and defaults, the Federal Government has become much more aggressive about regulating these schools and now play a vital role in determining which ones can thrive and which ones fail.
Put another way, the company that owns The Washington Post is almost entirely at the mercy of the Federal Government and the Obama administration -- the entities which its newspaper ostensibly checks and holds accountable. "By the end of 2010, more than 90 percent of revenue at Kaplan’s biggest division and nearly a third of The Post Co.’s revenue overall came from the U.S. government." The Post Co.'s reliance on the Federal Government extends beyond the source of its revenue; because the industry is so heavily regulated, any animosity from the Government could single-handedly doom the Post Co.'s business -- a reality of which they are well aware:
The Post Co. realized there were risks attached to being dependent on federal dollars for revenue -- and that it could lose access to that money if it exceeded federal regulatory limits.
"It was understood that if you fell out of grace [with the Education Department], your business might go away," said Tom Might, who as chief executive of Cable One, a cable service provider that is owned by The Post Co., sat in at company-wide board meetings.
Beyond being reliant on federal money and not alienating federal regulators, the Post Co. desperately needs favorable treatment from members of Congress, and has been willing to use its newspaper to obtain it:
Graham has taken part in a fierce lobbying campaign by the for-profit education industry. He has visited key members of Congress, written an op-ed article for the Wall Street Journal and hired for The Post Co. high-powered lobbying firms including Akin Gump and Elmendorf Ryan, at a cost of $810,000 in 2010. The Post has also published an editorial opposing the new federal rules, while disclosing the interests of its parent company.
The Post is hardly alone among major media outlets in being owned by an entity which relies on the Federal Government for its continued profitability. NBC News and MSNBC were long owned by GE, and now by Comcast, both of which desperately need good relations with government officials for their profits. The same is true of CBS (owned by Viacom), ABC (owned by Disney), and CNN (owned by TimeWarner). For each of these large corporations, alienating federal government officials is about the worst possible move it could make -- something of which all of its employees, including its media division employees, are well aware. But the Post Co.'s dependence is even more overwhelming than most.
How can a company which is almost wholly dependent upon staying in the good graces of the U.S. Government possibly be expected to serve as a journalistic "watchdog" over that same Government? The very idea is absurd. The whole point of the First Amendment's free press guarantee is that adversarial journalism is possible only if journalists are independent of political power. Yet the U.S. now has exactly the opposite dynamic: most major media outlets are owned by corporations that are anything but independent of government: they are quite dependent upon political officials for their profit in countless ways. We have anything but an independent press, which is another way of saying we have anything but a free press.
If you tell journalists that they are restrained in adversarial reporting by such motivations, they will vehemently deny it and perhaps even believe their denials. Media self-censorship is rarely overt; these journalists thus do not typically receive memos instructing them to lavish political officials with favorable treatment and avoid alienating them (though sometimes that's exactly how they receive those dictates). But that's because such instructions are unnecessary. Any employees who thrive in large corporations do so by learning what's in their employer's interests and acting dutifully to promote those interests. No corporate employee can remain for long if their actions subvert their employer's core interests.
So inextricably linked are these media corporations and government officials that it's a cultural merger; the prevailing corporate ethos is that it is far better to be viewed favorably by those with political power than unfavorably. Why would any employee of these corporations -- including their journalists, editors, and producers -- possibly want to do something (such as alienating political officials) that is so plainly at odds with the financial needs of their corporate employers?
There are many well-documented reasons why the American media is so deferential to political power. Currying favor with political officials is how they secure scoops, leaks and access. Because media stars are now as wealthy and celebrated as the politically powerful whom they cover, they identify on socioeconomic and cultural grounds with these political officials; media stars are far more integrated into the halls of political power than they are outside of them. Whereas independent journalists are constitutionally inclined to scorn the powerful, employees of large corporations -- by their nature -- tend to be people who are revere institutional authority and are talented at flattering and accommodating those in power. And, as Jack Goldsmith recently argued, many establishment journalists are driven by what he bizarrely celebrated as "patriotism," by which he means fealty to American political officials and their actions.
But one crucial factor driving this decisively non-adversarial journalistic posture is that the large corporations which own these media outlets need desperately to maintain good relations with the political class. How could you possibly be a journalist at The Washington Post -- knowing that for your corporate employer "if you fell out of grace [with the Education Department], your business might go away" and that your boss is spending huge amounts of his time and money currying favor with federal officials -- and not have it affect what you write? I don't doubt that there are isolated reporters and editors who bracket out such considerations, but on the whole, the wholesale dependence of these companies on the Federal Government goes a long way toward explaining why the nation's major media outlets are so eager to please -- rather than check and expose -- those who wield the greatest political power.
UPDATE: CBS is no longer owned by Viacom, so my inclusion of that specific example was in error.