Local news coverage may disappear unless the government provides direct financial support, according to an independent report on the future of the British media, warning that the collapse of the sector poses a threat to the "long-term sustainability of democracy".
Dame Frances Cairncross was appointed by the government last year to investigate ways to ensure the future of high quality journalism in Britain.
His report concluded that there should be a public inquiry into the dominant position of Facebook and Google in the advertising market. It also recommends a new regulator to oversee the relationship between press agencies and technology giants, which have absorbed much of the advertising revenue used to fund the reporting.
But the Cairncross magazine also concluded that many local newspapers that are vital to a functioning democracy are owned by debt-laden publishers who have cut their investments and fired hundreds of journalists in an attempt to maintain profit margins.
It has drawn parallels with formerly dominant companies that have failed to make the digital leap, such as Kodak or Blockbuster, and said that priority should be to ensure that high-quality journalism continues to be produced in Britain rather than trying to save the newspaper industry in its current form.
Key suggestions in the report include:
Direct funding for information agencies of public interest, with public funds used to support the reporting of local democracy through a new institute of news of public interest.
An investigation by the regulator of competition in the online advertising market, which would consider if Facebook and the position of Google are too dominant.
A new code of conduct between publishers and large technology companies, supervised by a regulator that would ensure that technology companies deal fairly with news publishers.
Tax relief for publishers investing in journalism of public interest, potentially giving charity status to some publishers.
Removal of the 20% VAT tax on subscriptions to digital news, alignment of online paywalls to printed newspapers.
Cairncross claimed that the loss of jobs in local newspapers meant that there was a crisis in the coverage of democracy. "The cost of investigative journalism is great and rarely seems to repay … given the evidence of a market failure in the provision of news of public interest, public intervention could be the only remedy".
He added that there is no clear way to provide a lucrative coverage of a local council meeting, as these stories tend to attract a few clicks over the Internet. "Ultimately, the biggest challenge for the sustainability of high-quality journalism, and the press, could be the same that is affecting many areas of life: the digital revolution means that people have more demands on their attention than ever before.
"In addition, the stories that people want to read may not always be the ones they should read to ensure that a democracy can properly take its public employees into account."
Printed newspaper sales plummeted during the last decade, with print advertising revenue following the same downward trend. Even if the public has gone online, even national publishers have struggled to make similar sums of money from digital advertising given the size and targeting offered by Facebook and Google.
The research commissioned for the Cairncross report found that the number of front line journalists in the United Kingdom dropped from 23,000 in 2007 to 17,000 today, with redundancies and closures of securities that should continue.
Local newspapers have been particularly affected by the changes, especially in the classified market. Advertising revenues from small businesses with the three largest regional publishers have declined from £ 2.8 billion to £ 832 million in the 2016 decade.
However, publishers did not escape criticism. Cairncross pointed out that many local newspaper groups had to cope with massive pension and bond debt, accumulated when expensive buy-backs were made before the market collapsed in the late 2000s.
Cairncross said that this means that Reach plc and JPI Media have "less money available for investment in substantial innovation that requires a successful digital future", instead of cutting or restructuring their debt at the expense of the editors.
In an attempt to solve the problem, he proposed the creation of a public interest news institute, which could distribute funding from both the government and other sources, based on the success of the BBC local democracy reporter project and modest project spending. journalism by Google and Facebook. He said that an independent institution was necessary because if the state or large technology companies would directly finance the production of news "the effect could be to further undermine trust in the press".
Cairncross concluded that the Internet was good for consumers by allowing them to read a wide variety of news sources for nothing. He also rejected publishers' proposals that Facebook and Google should be paid to include news content on their systems, warning that such a move could cause "significant harm to people who want to see the news". He suggested that the BBC had to avoid trampling on local news sites for profit.
The culture secretary, Jeremy Wright, said that the government will consider the full report and report this year.
Cairncross, former rector of Exeter College, Oxford, previously worked as a journalist for various publications, including a decade spent at the Guardian in the '70s & '80s.