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The Federal Communications Commission released a mammoth “state of the media” report on Thursday, looking at the upheaval in the media industry across all sectors including newspapers, magazines and television. Although there were fears when the report was first announced that the regulator might recommend subsidies and other changes that would distort the market in favor of existing media entities, the final version actually goes some distance in the other direction. It effectively tells media companies that the government can’t do much to help them, and the companies had better start adapting.

Much of the 475-page report, entitled “The Information Needs of Communities: The Changing Media Landscape in a BroadBand Age” (the full PDF version is located here and the text is also embedded at the end of this post) is an exhaustive catalogue of the decline of traditional media over the past decade: the fall in circulation, the disappearance of newspapers and local TV stations and other sources of news and journalism, the ongoing decline in advertising revenue, and so on.

The loss of “accountability journalism”

One of the biggest trends that the FCC flags as important in the report is the loss of what it calls “accountability” journalism, in which news outlets on a local and/or national level cover the government and thereby act as a check on power. As more than one person has noted, this conclusion isn’t exactly a news flash that required government funding and two years of research to unearth, but is arguably still worth highlighting, since it’s a gap that has yet to be filled.

And what does the FCC think can be done to fill it? Not much. As the report notes, it’s not clear how that kind of journalism — which doesn’t tend to attract much advertising interest — is supposed to pay for itself on an ongoing basis. As Hamilton Nolan at Gawker noted, this is one area that doesn’t attract high-profile or sexy alternative sources.

Some alternative models

The report does note that some alternative models have emerged, such as Politico and ProPublica and regional non-profits like the Texas Tribune model (PDF link), which rely on donations. But at the same time, it acknowledges that these efforts can’t fill the gap that has been created — and arguably continues to widen — as existing media entities cut back, lay off reporters and editors and scale back their coverage in a number of areas such as political reporting.

Within hours of the report’s release, AOL (s aol) released a statement arguing that its ongoing Patch hyperlocal effort is helping to fill that gap, with Patch editor/reporters in more than 800 towns across the U.S. and some high-profile “investigative” stories to its credit. But the success of Patch as a business is still a large question mark, despite the more than $100 million that AOL has poured into it over the last year and a half.

When the FCC media report was first being discussed, it looked as though some media outlets and lobbying groups were going to try to convince the agency to propose tax breaks and other subsidies that would help newspapers or traditional media entities stay afloat – including a proposal to allow newspapers to claim tax-free status. But the FCC’s report does not advocate any of these things.

Recommendations for government

Instead, the report says media companies need to adapt to the new shape of the industry, and try to learn from alternative models and businesses. Probably the biggest move it recommends is that the government shift some of the $1 billion or so it spends on advertising its own services to smaller and/or alternative news sources, as a way of helping media outlets on the revenue side.

It also recommends governments become more transparent and reveal more information about their activities to help fill the gap in “accountability journalism.” And there are some recommendations involving regulatory easing for broadcasters, and some proposed changes that would make it easier for non-profit entities to raise money.

The report produced two major reactions from media-industry watchers. Some said that it was a disappointment because they hoped the FCC would advocate more sweeping changes to the media regulatory system that would help the industry evolve (Dan Gillmor called it a “voluminous disappointment” because it didn’t address increasing access to broadband). Others, however, said they were just happy the agency didn’t mess around with subsidies or other market-distorting mechanisms and chose to take the “do no harm” approach.

In the end, after describing the ongoing disruption in the industry, the report more or less leaves media companies on their own to evolve and adapt without any help from the broadcast regulator. Not necessarily a happy message, but arguably a worthwhile one.

Post and thumbnail photos courtesy of Flickr users Kevin Dooley