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Financialization is the latest business model for Canada’s media

Financial elites have gained greater influence over economic policy than ever before

Media Canadian Business

The Toronto Star sign after being stripped from the 1 Yonge Street building. Photo by Fareen Karim/BlogTO.

Canadian media have traditionally been highly lucrative businesses. Some of the country’s richest families made their fortunes in the newspaper industry, including the Thomsons (Globe and Mail) and the Irvings (Brunswick News). Television was also a great money maker in the days of rabbit ears and roof-top aerials, enriching families such as the Bassetts (CTV) and Aspers (Global).

But that was in the good old days of ownership concentration, which took a turn for the worse at the millennium with multi-media convergence and has now gone off the rails in the Internet age. Media fortunes reached a peak with convergence deals like the Aspers paying Conrad Black $3.2 billion for the Southam newspaper chain in 2000 and Bell buying CTV for $2.3 billion and then getting into bed with the Thomsons as Bell Globemedia. Quebecor topped them all, however, first paying $983 million for the Sun Media chain in 1999 and then buying provincial telecom giant Groupe Vidéotron for $5.4 billion.

It all came crashing down a few years later with the 2008-09 recession when advertising revenues cratered and the Internet began to offer cheaper and more effective advertising alternatives. The Aspers quickly went bust and the Thomsons quietly snuck out of bed with Bell and CTV. Quebecor retreated from the national market a few years later by selling Sun Media to Postmedia Network, a company created by a US hedge fund to hoover up the Southam newspaper chain out of the 2010 bankruptcy of Canwest Global and is now bleeding it dry, along with almost all of the rest of Canada’s major newspapers.

Media valuations are now in the millions instead of the billions. A measure of how far they have sunk came last year when the Irvings sold their New Brunswick newspaper monopoly to Postmedia for a measly $16.1 million. The deal was not so much a sale as a merger, however, with more than half of the price paid in Postmedia shares, which made the Irving family one of the company’s largest Canadian shareholders. Fourth-generation Jamie Irving was even named to replace Paul Godfrey as chairman of Postmedia’s board of directors earlier this year. The 2020 sale of Torstar to private equity firm NordStar Capital for $51 million was less than the former family firm had in cash on hand, and was soon dwarfed by the spin-off of its online arm VerticalScope in an initial public offering that raised $125 million and valued the division at almost $400 million.

The age of media concentration, which turned so disastrously to convergence at the millennium, has now descended into the dystopian hellscape known as financialization. Under this business model, the media endgame is played out by stripping assets and using to advantage whatever political influence publishers might have left. According to economist Thomas Palley, financialization is a process whereby “markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes.” According to journalist Rana Foroohar in her 2016 book Makers and Takers, financialization is an “economic illness” that is undermining economic growth, social stability, and even democracy. The rise of finance has led to the fall of business, she added, because it has “come to rule—rather than fuel—the real economy.”

The malaise has hit the media especially hard because its businesses have become vastly undervalued since the recession, largely due to uncertainty over the future of print. Spanish scholar Núria Almiron noted in her 2010 book Journalism in Crisis: Corporate Media and Financialization “finance capital has become the real owner of the world’s top news-media firms” in “a scenario that turns journalistic autonomy into an illusion.” Financialized media are today more of a market power “than guardians of liberty, creators of consensus, egalitarian democratizers, or subverters of the structures of authority.”

Hedge funds, which specialize in buying up the debt of distressed companies such as newspaper chains at pennies on the dollar on the bond market, now own seven of the 10 largest US chains, including Gannett, the largest. New York-based Goldentree Asset Management bought up enough high-interest Canwest debt to acquire it out of bankruptcy in 2010 despite Canada’s supposed 25-percent limit on foreign ownership of newspapers.

It then kept as much of the debt as possible on the company’s books to ensure that any earnings Postmedia generated went to paying it first every month. “All it had to do was to keep the company alive long enough to collect on its loans,” as I note in my new book The Postmedia Effect. “A bond paying 12.5 percent interest bought for 10 cents on the dollar, after all, provided a return of 125 percent a year.” Goldentree sold out in 2016 to New Jersey-based Chatham Asset Management in an ownership change the New York Times would later note “happened so quietly that Postmedia’s own financial news site described it as a debt restructuring in a report that included a single mention of Chatham as ‘one of the investors.’”

Perhaps the most egregious example of monetizing media influence was seen recently in Australia, where media mogul Rupert Murdoch owns 14 of the country’s 21 metropolitan daily and Sunday newspapers plus the Sky News television network. After Murdoch’s media influence helped elect a new Liberal government there, he prevailed on it in 2020 to enact a News Media and Digital Platforms Mandatory Bargaining Code, which forced Google and Facebook to license content from the country’s newspapers. It has so far extracted hundreds of millions of dollars from the digital giants, which has publishers here licking their lips.

In Canada, publishers monetized their media influence to first extract $50 million in assistance from Ottawa in 2018, which they literally deemed an insult. They then launched a full-court lobbying press which brought a five-year $595 million bailout the following year designed to give them sufficient “runway” to transition to profitable online publications. Some have, like the Globe and Mail, which by investing in a quality product is growing not only its digital revenues, but also its print profits.

Others are in a crash dive, like Postmedia, Winnipeg Free Press owner FP Newspapers, and maybe Torstar. As a private company, Torstar no longer has to report its financial results publicly, so we don’t know the exact state of its finances, but it went through a messy divorce recently between the NordStar partners.

As part of its asset-stripping strategy, Postmedia is now selling its buildings in Calgary and Saskatoon and its printing plant in Windsor. It recently announced that it will lay off another 11 percent of its staff chain-wide, which sparked outrage in Montréal, where union job numbers at its Gazette have already dropped from 155 to 35 under Postmedia. According to CWA Canada union president Martin O’Hanlon, “Postmedia is now treading water to survive.”

Mostly publishers are now hoping for Ottawa to enact Bill C-18, the Online News Act, which would force a wealth redistribution from Google and Facebook similar to that seen in Australia. It may not be fair, but that’s financialization.

Marc Edge is a journalism researcher and author who lives in Ladysmith, BC. His books and articles can be found online at www.marcedge.com.

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