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Marc Edge: Canada’s news media need a plan—and some help—to find a way forward

Commentary

The news media in Canada is in crisis. Policy responses to date are failing to solve for the information that citizens need to make informed decisions about important issues and debates. The Future of News series brings together leading practitioners, scholars, and thinkers to imagine new business models, policy responses, and journalistic content that can support a dynamic future for news in Canada.

Things have gone from bad to worse to sideways in Canada’s news media recently, thanks first to decades of inaction by Ottawa in failing to limit media consolidation and convergence, which now sees our largest newspaper chains being dismantled by private equity players and U.S. hedge funds. Ottawa’s ill-advised Online News Act has driven Meta out of news distribution here on its Facebook and Instagram social networks, but at least now Google has come through with a promise of $100 million a year for a news fund, which is a good start. The question becomes where we go from here. 

Instead of the patchwork quilt we have seen recently of bailouts and forced subsidies, a coherent strategy is needed to assist our news media in charting a viable course forward. This should be the subject of a federal review guided more by experts who study journalism and media industries than by lobbyists for media owners, who seem to have mostly held Ottawa’s ear until now. It should focus more on incubating our emerging online media, which are undoubtedly where the future lies, and less on propping up old media and corporate profits. Let’s face it, there’s not a lot of profit left now in providing news, which should instead perhaps be considered more a public service than a business, so non-profit news might be a better way forward. Concordia journalism professor Magda Konieczna chronicled in her 2018 book Journalism Without Profit how non-profit news media in the U.S. have flourished under its tax code, which allows them to accept charitable donations. Canada has unfortunately lagged the world in this regard, and while Ottawa finally allowed news media to claim non-profit status in 2019 and provided some tax incentives to do so, few publications have gone this route. 

Before we can radically re-imagine our news media for a sustainable future, however, we must first repair some of the worst damage that has been done recently. In my recent book The Postmedia Effect, I urge cutting off federal funding to foreign owners as the only way to get rid of the U.S. hedge funds which somehow own 98 percent of our dominant newspaper chain despite a supposed 25 percent limit. Radical action is needed to rid Canada of this cancer that has afflicted our news media since 2010, which has seen more than $500 million sent south in debt payment to the vulture capitalists. Pulling Postmedia’s subsidies would likely see many of our most historic local news media quickly go out of business, but that is an inevitability anyway with the way they are now being run into the ground. Ottawa would then have to immediately intervene to keep major dailies like the Ottawa Citizen, Montreal Gazette, Edmonton Journal, and Vancouver Sun alive and publishing until a comprehensive rescue plan could be implemented. Community stakeholders should be involved in this effort, as has already been seen in Montreal under Liberal MP Anthony Housefather. 

One important change that should be made to media assistance programs is to take them out of the hands of federal bureaucrats to help restore public confidence in journalism, which has been plummeting recently with all the government aid. Proceeds from the $595-million bailout which began in 2019 have been dispensed by the Canada Revenue Agency, while the Online News Act is supposed to be supervised by the CRTC. An arm’s-length granting agency is instead needed to better insulate funding for news from political or corporate influence. Subsidies for journalism themselves should not cause concern for press freedom, only how they are allocated. Canada has long subsidized news media innocuously, from early postal subsidies to discounted telegraph rates to mandated government notices, which have now mostly disappeared. The press in Scandinavian countries is heavily subsidized, yet those countries appear annually atop the world rankings for press freedom.

Next, we need to decide what needs supporting and what doesn’t before thinking about how to support it. A well-functioning democracy needs its citizens to be aware of what is going on with their institutions of government, how their tax dollars are being spent, and how well the system is working. Also of public interest is the state of order in society and the economy, so reporting on the justice system should be encouraged, as well as on business and technology. News of sports or entertainment is hardly essential and should take a lower priority. Fans of different teams, sports, arts, and entertainers have taken advantage of the low-cost distribution brought by the Internet to publicize and analyze their favorite pastimes thoroughly, as have promoters of the same. 

Websites that provide comprehensive news coverage of their communities should take priority. There has been an explosion of online publications across Canada in recent decades, but many are more like magazines and publish mostly opinion. Few would ever cover such a routine event as a city council meeting. While opinion journalism can be valuable in connecting the dots on issues, news coverage is more important in creating more dots to connect. One of the biggest problems with journalism recently has been the soaring ratio of opinion to news, which needs to be reversed by providing more news.

Many worthwhile suggestions for how to support news were put forward around the world following the 2008-09 recession, which dropped newspaper revenues sharply, causing a premature death scare. There is thus both a rich literature on possible ways to salvage a viable news media and a spate of programs that have already been implemented in other countries, the best of which should be considered for adoption here. One of my favourites is the Local Democracy Reporters program in the U.K., which provides funding for a publication in each town to hire a journalist to cover local council meetings, some of which hadn’t seen a reporter in years. In exchange, publications must share any resulting news stories with other media outlets. The program has been such a success that calls have been made for expanding it to also cover courts and other institutions of government. It has since been replicated in New Zealand and is similar to our Local Journalism Initiative, which was first funded with $50 million over five years in 2018 to increase news coverage in under-served communities and has now been extended for another two years. Expanding the LJI should be strongly considered, as should beefing up CBC News online and the Canadian Press, which was once a co-operative of its member newspapers but had to be rescued by several of the largest in 2010 after chains began leaving it to cut costs.

New ownership models should be considered to replace the profit-driven corporation, which is legally required to maximize shareholder value at the expense of journalism. Community ownership similar to that of the Saskatchewan Roughriders football team has been proposed by the Public Policy Forum think tank. Co-operatives such as the ones that rescued Victoria’s CHEK-TV in 2009 and the Prince Albert Daily Herald in 2018 should also be encouraged, perhaps as the new Employee Ownership Trust. French economist Julia Cagé proposed in her 2016 book Saving the Media a model halfway between a foundation and a stock issuing company. A Nonprofit Media Organization would be able to accept tax-deductible donations in exchange for shares of ownership that would not trade publicly to avoid accumulation. Readers and employees would also hold shares, helping to diffuse voting power throughout the organization. 

Of crucial importance will be a system for deciding who gets how much funding. The current method of tax credits should be scrapped in favour of the fund to which Google has agreed to contribute. One of the many problems with tax credits, as the PPF’s 2017 report “The Shattered Mirror” pointed out, is that they need not go to journalism and “could even be applied to a company’s bottom line, to the benefit of shareholders and executives.” That was one result of the 2019 bailout when former Postmedia CEO Paul Godfrey retired with a pay packet that exceeded $5 million that year, including bonuses and stock options. 

Rather than relying on bureaucrats, stakeholders, or so-called “experts” to decide which publications get how much funding, one recent suggestion by U.S. media analyst Ken Doctor is simple enough. “Reward local news newsroom headcount—not company headcount or national news company headcount,” he wrote. “Put the money where it’s needed: paying a new generation of professional journalists to do the work of local democracies.” An even simpler possibility would be allocation by the real experts—readers. Ottawa actually had a good idea in the 15 percent tax credit for subscribers to digital publications that was included in its 2019 bailout package. It has not provided much assistance, however, as it is capped at $75 a year and must be applied for on your annual tax return.

What might work better is to provide an increased benefit upfront. In their 2010 book The Death and Life of American Journalism, Robert McChesney and John Nichols proposed a voucher system similar to what is often used in allocating public funding for schools. Taxpayers could be given a credit of several hundred dollars annually which they could use to subscribe to publications of their choice, which would have the added advantage of helping to reduce concerns over government influence or favouritism. If you’re a liberal environmentalist and love the Toronto Star and The Narwhal, you could use the money to subscribe to them, ditto conservatives and the National Post. This could also create competition among publications to offer affordable subscription plans, perhaps with several like-minded publishers getting together to offer attractive packages.

Finally, we come to the thorny issue of where the money will come from. Google’s promised $100-million annual contribution should be just a start, as a robust Canadian News Media Fund many times that size could be easily amassed from appropriate sources. The first would be the proceeds of the new Online Streaming Act, which taxes and regulates digital audio and video services for the first time. It is expected to bring in at least $830 million a year, a minimum 10 percent of which should be allocated to creating news content. Then there is the planned 3 percent Digital Services Tax, which will target large companies that earn revenue from online advertising and is estimated to soon bring in $1.4 billion a year. Earmarking just 5 percent of that for news would add another $70 million to the fund, bringing it up to $253 million a year.

The richest and most overlooked source of possible funding for Canadian news, however, is the unregulated monopoly profits that internet service providers like Bell, Rogers, and Telus make at profit margins of about 45 percent just to provide us with online access. ISP revenues have soared from $13 billion to an estimated $15.3 billion in just the past two years. A levy (not a tax) to claw back 5 percent of those revenues, similar to the 5 percent levy that cable TV companies must contribute to the Canada Media Fund to subsidize broadcast content, would provide another $751 million for a news fund and still leave the ISPs with profit margins of about 40 percent. That would bring our fund to more than $1 billion a year, which would nourish an enviable online news ecosystem. Just don’t expect the grasping telcos to fork over the money without a fight.

There is no shortage of ideas and possibilities for reimagining our news media for the digital age, or even of resources to do it with. This is a subject I am now researching for my next book, which is tentatively titled How to Save Canada’s Media and should appear next spring. 

The Future of News series is supported by The Hub’s foundation donors and Meta.

Peter Menzies: The government surrenders to reality with rewritten Online News Act—and pleases no one

Commentary

There were some long faces in the news industry last week when Heritage Minister Pascale St-Onge rolled out the final terms of her surrender to reality.

Media executives who once campaigned for the Online News Act with sugar-plum visions of Big Tech cash dancing in their heads were left to deal with some pretty serious lumps of coal. After years of effort to procure what they once fancied would be hundreds of millions of dollars annually from web giants, all St-Onge could bring down the chimney was a bump up in Google’s spend to $100 million.

How much the mother of all search engines was already paying to publishers is unknown, but in-the-know estimates tend to range from $30-$50 million. Splitting the difference at $40 million would mean the industry—newspapers, broadcasters, and online platforms—wound up with $60 million in fresh cash, give or take. 

That’s less than the Lotto Max jackpot Rhonda Malesku of Kamloops and Ruth Bowes of Edmonton shared last summer. A lot of money for Rhonda and Ruth for sure, but for an entire industry it’s a drop in a leaky bucket.

Then there’s the fact the Act resulted in Meta blocking all news links in Canada on Facebook and Instagram. Again, the exact cost is unknown but the social media company had been spending $18 million on journalism supports plus—and here is the killer—Meta estimated it had been sending $230 million a year worth of referrals to news websites. 

Even if Meta is only half right, that still leaves the news industry many tens of millions of dollars worse off. If Meta’s estimate is accurate—and no one has really debunked it—the scenario is a lot uglier.

This is what happens when you make things up. 

The Act was rooted in the make-believe premise that “web giants” were profiting from “stealing” news. Legislation was designed on that basis to force Big Tech to “negotiate” commercial deals and share those profits with all news organizations.

In the end, as Michael Geist has detailed, that charade of “compensation” was dropped as the government, desperately afraid Google would follow Meta’s lead, posted regulations that essentially rewrote the Act to suit the search engine and, as an aside, puzzle lawyers. All that the media were able to salvage from the hustle was a fund they wound up fighting over like street urchins in a soup kitchen.

Here, St-Onge actually did something sensible. Her original plan was to have the fund distributed solely on a per journo basis. In other words, if there are 10,000 journalists, $100 million would turn into $10,000 per journo, never mind whether they are paid $35,000 or $150,000. The problem with that is that one in three Canadian reporters works for CBC, which is not in mortal peril. The next highest is Bell Media, whose parent company made $10 billion last year. Meanwhile, the Toronto Star is hemorrhaging at a rate of $1 million a week, small centres are becoming news deserts, and Postmedia’s stable of zombie newspapers continues to, well, zombie on.

Broadcasters would have consumed 75 percent of the loot and the vast majority of the cash would wind up with companies for whom news is not a primary aspect of their operations.

St-Onge changed that to cap private broadcasters’ windfall at 30 percent, with CBC limited to 7 percent.

That means 63 percent of the money will go to operators in the greatest peril which, for a fund resulting from a need to address industrial poverty, is at least rational.

Still, there was grumbling.

“Well, this is disappointing—sure wasn’t expecting a cap on broadcasters’ access to compensation,” Tandy Yull, vice president of policy and regulatory affairs for the Canadian Association of Broadcasters, posted on LinkedIn.

“Hey, Universe! More needs to be done to support Canadians’ most important providers of news, local radio, and television stations, who are facing significant—even existential—declines in advertising revenue,” she added.

Yull went on to stake broadcasters’ claim to government assistance currently reserved for newspapers and online-only media: the Journalism Labour Tax Credit and the Local Journalism Initiative.

And of course “our democracy demands that we explore these and other options—soon.”

She may not have long to wait.

Broadcasters opened up a fresh lobbying for loot campaign just last month when the Canadian Radio-television and Telecommunications Commission (CRTC) held a hearing to launch the implementation of the Online Streaming Act.

Supposedly about funding Canadian entertainment programming, the concept of a news fund was introduced early and repeated often. 

Commissioners appeared happy to embrace well-worn lines about a news “crisis” that needs  “urgent” attention to prevent—cue the tympany—the death of democracy. And they did so without needing to be persuaded there was any rational reason for creating a fund which, logically, makes no more sense than taxing cinemas to pay for newspapers. Nor were any concerns raised about impacts on entrepreneurship and online innovators.

“Local news is in crisis and requires immediate intervention,” Susan Wheeler of Rogers, which made $7.12 billion last year, told the panel.

“A fundamental outcome of the modernized contribution regime must include new mechanisms to provide long‑term financial support for high‑quality Canadian‑produced broadcast news from credible outlets,” she said, calling for 30 percent of money raised from foreign online streaming companies to be directed to a news fund “accessible by all private TV and radio stations producing news.”

The humiliating squabbling over the remnant scraps of the Online News Act clearly wasn’t the end of the Great Canadian Quest for other people’s money.

So maybe the shakedown of Meta and Google didn’t quite work out. But Spotify, Disney+, and Netflix? They have money. Let’s mug them instead.

It’s not like anything bad could happen. Right?