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Michael Geist: Why the Bell Media layoffs and the government’s failed media policy are connected

Commentary

Bell’s announcement this week that it is laying off thousands of workers—including nearly 500 Bell Media employees—has sparked political outrage with Prime Minister Justin Trudeau characterizing it as a “garbage decision.” The job losses are obviously brutal for those directly affected and it would be silly to claim that a single policy response was responsible. Yet to suggest that the government’s media policy, particularly Bills C-11 and C-18, played no role is to ignore the reality of a failed approach for which there have been blinking warning signs for years. Indeed, Trudeau’s anger (which felt a bit like a reprise of his Meta comments over the summer) may partly reflect frustration that his policy choices have not only not worked, but have made matters worse.

Bill C-11, the online streaming law that is now before the CRTC, was never really designed to address Bell’s broadcasting concerns. Indeed, the company made clear what it wanted: access to cheap U.S. programming. When the company appeared before the committee back in 2022, it said its primary risk was competition from foreign streaming services accessing the Canadian market directly and bypassing Canadian broadcasters. This challenge has been readily apparent for years. In fact, in 2011 I wrote about how this was likely to become a major issue for Canadian broadcasters dependent on licensing U.S. programming to profitably fill their broadcast schedules:

Once U.S. rights holders conclude that it is more profitable to retain the Internet rights so that they can stream their programs online to a global audience and capture the advertising or subscription revenues that come with it, Canadian broadcasters may find that they can only license broadcast rights with the U.S. rights holders competing directly with them via the Internet.

This was back in 2011. More than a decade later, Bell wanted the government to fix the commercial problem by intervening through Bill C-11:

“We can ensure the central role of Canadian broadcasters by securing access to foreign content. We can also incentivize foreign streamers to partner with Canadian broadcasters, much like foreign linear services have done for decades. We believe Bill C-11 should explicitly enable this.”

Bill C-11 rightly doesn’t do that, but removing licensing fees said to be worth $40 million was supposed to help. That approach of shovelling money through grants, tax credits, reduced fees, or regulated payments has been the government’s go-to strategy for years and the only thing it seems to bring are demands for more.

The layoffs on the news side of the business implicates both Bills C-11 and C-18. In the case of Bill C-11, broadcasters are still holding out hope that the CRTC will order the large online streaming services such as Netflix, Disney, and Amazon to contribute to their local news production costs. The Canadian Association of Broadcasters has asked the Commission to create a new News Fund that it would administer. Funding for the fund would come from the Internet streaming services, with 30 percent of their contribution allocated toward a sector with which they have virtually no connection whatsoever. Even if the CRTC agrees, the fund would not take effect until later this year and Bell was apparently unwilling to wait to see how it plays out.

While I have seen some suggest that Bill C-18 has nothing to do with radio station sales or layoffs, the government’s approach is inextricably linked to it. First, the government’s longstanding media approach has largely focused on print and digital news outlets, not broadcasters. For example, the labour journalism tax credit worth hundreds of millions of dollars excludes broadcasters. It is now worth nearly $30,000 per journalist, but broadcast journalists are not eligible. I think there are serious problems with this approach (not the least of which is the implications for press independence), but the government clearly made a bet that it could focus its attention on the traditional print sector with the expectation that hugely profitable companies such as Bell would continue to support their news divisions. Much like the mistaken bet that Facebook couldn’t live without Canadian news, the same may be true for parts of the broadcasting sector.

Bell Canada signage is pictured in Ottawa on Wednesday, Sept. 7, 2022. Sean Kilpatrick/The Canadian Press.

Second, the government promoted Bill C-18 as providing hundreds of millions to broadcasters for news. Indeed, the Parliamentary Budget Officer estimated that it would generate $329 million, with 75 percent of that money going to broadcasters. Given Bell’s position in the market, it stood to be one of the two largest recipients of those revenues (alongside the CBC), amounting to tens of millions per year. But as everyone knows, Bill C-18 ultimately only generated a fraction of what was promised, with a single $100 million payment from Google shared among all sectors. Once the administrative costs and lost Meta deals are taken into account, that number is closer to $75 million, some of which is a re-allocation of existing Google money.

For Bell, the revenues are even smaller, however, because the government then decided to cap the amount allocated from Bill C-18 to broadcasters at 30 percent or $30 million (the CBC picks up another 7 percent). In other words, broadcasters went from expecting a quarter billion dollars in annual payments from Bill C-18  to support news to just $37 million for the entire television and radio broadcast sector. Further, those radio stations that do not produce news content to be made available online aren’t eligible for anything and everyone has lost traffic and the resulting ad revenue due to the removal of links on Meta. To suggest that this had no impact on Bell’s media decisions this week is to engage in the same policy fantasies of the past few years that have cost hundreds of millions of dollars and placed the independence of Canadian media at risk.

This column originally appeared on michaelgeist.ca.

Steven Globerman: Canada should learn from Singapore’s stunning economic growth 

Commentary

Over the past 10 years, Canada’s per-person GDP, a common measure of living standards, grew at just 0.8 percent per year on average, which was Canada’s slowest decadal rate of growth since the 1930s. And you can’t blame COVID because Canada’s average per-person GDP growth during this period was almost 30 percent less than in the United States.

Why is this happening?

Many economists have pointed to declining business investment in Canada after 2014 as the major contributor to stagnant labour productivity growth and slow overall real economic growth. Unless there’s a greater incentive for the private sector to invest in machinery and equipment, information technology, software, and other productivity-enhancing assets, Canada’s economic performance will continue to disappoint.

In response, the Trudeau government, which claims to recognize the importance of greater private-sector investment, has made increased immigration and a “net-zero” emission plan the basis of its growth strategy. But those policies are more likely to discourage business investment by discouraging the substitution of capital for labour, as wage growth is suppressed and climate regulation increases the cost of doing business. 

However, if the government wants to genuinely promote productive capital investment, it should study the experience of Singapore. Since gaining independence in 1965, Singapore’s economic performance has been remarkable. In 1961 Singapore’s per-person GDP was only 20 percent of that of the U.S. By 2020, the two countries were essentially identical on this crucial economic measure. 

Strong capital investment has spurred Singapore’s economic growth. Over the past five decades, only Korea has outperformed Singapore in the rate of capital investment due in part to Singapore’s openness to inward foreign direct investment, which stands in stark contrast to Canada’s restrictions on foreign investment across a range of industries including banking and telecommunications.

Another feature is taxation. Corporate income in Singapore is taxed at a flat 17 percent rate compared to a 26.5 percent corporate tax rate (federal plus provincial) in Ontario, for example. Correspondingly, government spending as a share of Singapore’s economy is around 15 percent compared to more than 40 percent in Canada. The relatively low rate of government spending and taxation in Singapore partially reflects Singapore’s unique reliance on personal savings accounts to fund social services that in most Western countries are paid for by government. In Singapore, personal savings accounts, funded primarily by payroll taxes, can be used to pay for health care, education, housing, and retirement among other things. The government subsidizes savings accounts for low-income earners.

To be sure, Singapore is not a free market nirvana. Through its sovereign wealth fund, the Singaporean government invests in private-sector companies and provides financial subsidies (also known as corporate welfare) to attract business investment. Still, according to the latest Economic Freedom of the World report, Singapore’s economy is the freest in the world while Canada’s ranked 10th when considering factors such as protection of property rights, freedom to trade internationally, and limited government regulation.

Canada and Singapore obviously differ substantially with respect to culture, political and economic institutions, and historical experience. For these and other reasons, adopting Singapore’s economic model in totality is unrealistic. Nevertheless, if Canadian policymakers want to emulate some of Singapore’s economic success and increase living standards, they should strengthen the fundamental linkage between investment risk-taking and the rewards for assuming investment risk.