A messy fight erupted Saturday in Nevada when the owner of a Las Vegas television station disclosed that the state’s mining industry association had pulled ads as the result of an investigative series exploring lucrative tax breaks granted the industry.
The fight illustrates why what’s not said by the media can be more important than what is.
The Nevada Mining Association had been advertising to buff up its image. State lawmakers are considering a law to cut a steep tax break granted to mines in the state’s constitution. The proposal gained momentum on allegations in 2011 that mines were cheating on state tax audits and that auditors had become too cozy with the industry.
A four-part investigative series by KSNV-TV Channel 3 ran in late February. That’s when the director of the mining association called a lawyer for the station to warn that it might lose the ad campaign over its reporting. Sure enough, the ads were pulled before the contract ran out.
The cost, put at $9,000, is small potatoes. But the public disclosure aired by the station and published in the Las Vegas Sun is unusual, because it highlights a two-year backstory. It could cause the industry pressure to backfire.
In this case, the station’s reporting wasn’t silenced. The mining lobby waited until the series was airing instead of trying to stop it. But in cases across the country, media outlets are repeatedly pushed around by companies intent on using ad budgets to silence them.
Worse, jittery bean-counting executives are caving to the pressure. Readers and viewers never hear or read the material removed from view. And the executives rarely admit anything.
Executives usually won’t strike back publicly. But the owner of the Las Vegas station immediately issued a statement pointing to mining industry “blackmail.”
“They’ve got no trouble using the power,” said KSNV owner Jim Rogers of the Mining Association. “If you question (them) you’re going to be punished.”
The fight has a history. Mining’s tax break is enshrined in the state’s constitution, which caps state taxes on the value of minerals it pulls out of the ground. The TV series reported that Wyoming mines pay 20-25 percent in taxes on the value of the minerals they extract, while the comparable Nevada rate is as low as 1 percent.
The mines use their ability to deduct the direct costs of extracting the minerals, so that the out-of-ground value is taxed. But they’ve also tried to lard on all kinds of improper costs, according to reports in the Las Vegas Sun and industry critics. Those deductions included expenses for travel, employee severance pay, promotional campaigns and even health insurance, the paper reported.
The reports soon hit home in Nevada, hard hit by budget shortfalls. By the end of 2011, the Sun suggested the state had dug itself into trouble by over-promoting its “business friendly” reputation. Its division of minerals had declared it duty-bound to “promote, advance and protect mining.”
Next came disclosures that the state tax department hadn’t bothered to audit mining deductions for two years. It conceded it hadn’t bothered to hire and train auditors. As a result, Gov. Brian Sandoval removed the department’s head.
Mining is important in Nevada, booming because of a rise in gold prices. The state is said to lag only Russia, Australia and China in the gold it sells, much of it internationally.
It’s easy to see how tightening up mine accounting, with its $4.2 billion of deductions, could ease a state budget hole of $2.2 billion. But the first audit of mine taxes since 2008 found they’d underpaid by a mere $8.7 million.
Quiet ad boycotts usually stay under wraps. But station owner, Jim Rogers, isn’t pulling many punches. As a result, all the mining revelations are being rehashed.
“These are the tactics of an industry that uses 1950s bullying to get its way,” he declared after the TV series’ reporter declared mines were “pumping big bucks into big ad campaigns to convince you they are good for the state.”
The Nevada fight spotlights a rare case where a strong power play by a big advertiser can backfire. The fight includes exactly who made the threat and what was actually said. An industry official conceded that he’d visited the station’s lawyer. But he insisted he only asked what the lawyer had thought of the first story in the series.
But no one who has sat on the receiving end of such tactics would mistake their intent.
But here’s a strange truth. Advertising boycotts to pressure media only work as threats. Once actually implemented, they lose power because little more harm can be inflicted. Like a boat loses its ability to steer when engine power is cut, an ad boycott loses its power when it’s actually put in place. The trick is to let the threat remain in force over a period of time, though media execs don’t dispense such wisdom to those intent on controlling what they report.
It’s all part of game theory. But you do have know how it’s going to end. In Nevada, station owner Jim Rogers has changed the rules. He was supposed to play quietly, keeping his lumps to himself.
But it isn’t working out that way.
The writer (email@example.com ) is a founder of the Aspen Daily News and appears here Sundays.