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Old media may need Bill C-18, but new media need Google and Facebook

The contentious bill could determine the shape of news for decades in Canada

Media Canadian Business

The future of newspapers in Canada is in jeopardy if the government doesn’t quickly pass Bill C-18, publishing company executives told Senate hearings into the Online News Act this week. A second panel made up of digital entrepreneurs, however, said that online news media will be in jeopardy if Google and Facebook stop their free link distribution service, as they have threatened, rather than pay to provide it under the bill.

The hearings were a tale of two halves which exemplified the split between new media and old and the stakes involved for both. The contentious bill could determine the shape of news for decades in Canada, and is thus something which Ottawa simply must get right. Its last big decision on news media, when it rubber-stamped the ill-fated “convergence” of newspaper and television news at the millennium, turned out to be a disaster after the business model collapsed and brought the country’s press to its current sorry state.

In the first session, senators heard from representatives of newspaper industry association News Media Canada, the Globe and Mail, and French-language dailies La Press and Le Devoir. “We have a market failure here,” testified News Media Canada CEO Paul Deegan in urging them to quickly pass Bill C-18 and send it back to Parliament, where under the ruling Liberal-NDP coalition it can soon become law. The bill has been estimated to require Google and Facebook to pay publishers $329 million a year for supposedly “stealing” their content merely by carrying links to it.

Globe and Mail publisher Phillip Crawley, however, urged limiting the power of the Canadian Radio-television and Telecommunications Commission, which would be tasked under Bill C-18 with supervising the wealth redistribution. “Allowing the CRTC to go fishing for confidential information from news organizations, particularly information related to editorial departments, would be an overreach,” he said. Crawley broke with the newspaper lobby last fall when he called for Bill C-18 to be re-written because giving the broadcasting regulator authority over newspapers and online media could threaten press freedom.

The Globe also notably refrained from blanking out its front pages for a day, as other NMC member papers did in 2021 to call attention to the supposed crisis in news. While other major dailies have also run only commentary in favour of Bill C-18, it published a long front-page column by Andrew Coyne last year which called it a “crude revenue grab.”

In the second session, online journalists warned senators that they would be lost without the free distribution of links to their articles now provided by Google and Facebook. “Smaller and independent media are disproportionally dependent on social media to build a brand [and] develop an audience,” said Jen Gerson of The Line. Jeff Elgie of Village Media testified that Google and Facebook provide more than half of its web traffic, and that “if that traffic was lost, the business would be over.”

Village Media publishes 25 local online news outlets in Ontario that started with SooToday.com in 2000. It often moves into communities that have become so-called “news deserts” because a newspaper has closed, such as in Orillia, where it started Orillia Matters after Postmedia Network folded the long-publishing daily Packet & Times in 2017. The closure was part of a trade of 41 titles between Postmedia and Torstar, of which 36 were folded. A criminal investigation by the Competition Bureau for conspiracy to reduce competition resulted in no charges despite memos showing the companies coordinated the closures.

Liberal Senator Peter Harder, however, suggested that Village Media benefits from local media shutting down. “Given your lack of enthusiasm for this bill, is it safe to say that your business model depends on further small-town media collapsing, which would be guaranteed by delaying this legislation?” The question prompted University of Ottawa law professor Michael Geist, who has followed the hearings closely on his blog, to describe it as another Liberal attempt “to smear anyone who dares criticize the bill.”

A written submission by Ottawa-based Internet publication Blacklock’s Reporter backed up the position of new media outlets by similarly crediting Google and Facebook with enabling it to build up a base of paying subscribers to its online news service. “We thrive without federal intervention because social media platforms created a marketplace of 33 million Canadian internet users,” it said. “Big tech allowed us to build a national customer base so broad no single licensee accounts for more than one percent of annual revenues.”

News Media Canada wants Bill C-18 passed by summer, but that’s what it said this time last year, and the year before. Ottawa’s $595 million news media bailout runs out this year, however, which will leave Postmedia in particular without nearly $10 million a year in government subsidies. Its latest annual report showed that Postmedia, which publishes 15 of the country’s 21 largest dailies but is 98 percent owned by US hedge funds, made a profit of only $13 million last year, which came nowhere near covering its more than $30 million a year in debt payments. Its debt is also owned mostly by the hedge funds, which have been using it to bleed the company dry since 2010.

Postmedia executives almost never testify voluntarily at government hearings such as these, preferring to let News Media Canada do its talking. They have instead been busy laying off hundreds of workers and selling company assets to make ends meet, such as its Calgary Herald building, which brought $17.25 million from U-Haul earlier this year to make into storage lockers.

Other newspapers which have not followed the “harvesting” strategy favoured by hedge funds and have instead invested in quality content are actually making a successful transition to hybrid print-online publications. Crawley has forecast a $30 million increase in Globe revenues this year due to an explosion in its online subscribers and revealed that even the Globe and Mail’s print edition makes an 18 percent profit margin.

Le Devoir publisher Brian Myles told senators that the Québec City daily has been profitable for the past nine years and has gone from 100 employees to 184. FP Canadian Newspapers, which publishes the Winnipeg Free Press and Brandon Sun and is one of the few publicly-traded newspaper companies left in Canada (along with Postmedia), saw its revenues increase from $54.7 million in 2021 to $56.7 million last year, while its operating earnings rose from $6.7 million to almost $7 million, for a 12.3 percent profit margin before depreciation and amortization.

Torstar, which is Canada’s second-largest chain and publishes its largest daily, no longer has to report its earnings publicly since being taken over by a private equity firm in 2020, but it spun off its Verticalscope digital subsidiary the following year for more than double the chain’s purchase price.

Online journalists have long questioned the wisdom of Bill C-18, with Elgie calling it a “huge mistake” in 2019 because it would “disadvantage” other Canadian businesses. Elgie and other digital journalists quit News Media Canada because they felt unwelcome as part of the newspaper lobby and left out of its representations to Ottawa. With the help of Toronto-based Journalists for Human Rights, they formed their own advocacy group, Press Forward, in late 2020.

Now that senators have heard the other side of this story, the chamber of so-called sober second thought might be wondering whether it should approve Bill C-18 at all.

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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