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The great Canadian media swindle

Federal government allocated $595 million in subsidies to news media in 2019, but the bailout was based on questionable data

Canadian PoliticsMedia

News media have undeniably been diminished financially in recent years due to the flight of advertising revenues online. The situation in Canada, however, seems to have been systematically overblown by stakeholders seeking government funding, writes Marc Edge. Photo from Radius Images.

Canadian media have perpetrated a self-serving grand deception for the past few years with a little help from academics, media consultants, and think tanks. It worked so well in enriching news media that Canada’s entertainment industries are now following the same game plan by pleading poverty and shamelessly fudging the facts. The news media bailout announced two years ago was worth $595 million, but if the media consultants behind the curtain have their way, a coming entertainment media bailout could be worth billions.

By my count, we are actually up to five news media bailouts now. The Liberals recently showered another $60.8 million in secretive election eve “emergency support” on news media through the federal Aid To Publishers program. It is one story you won’t read about in our mainstream media, and the silence became deafening after Conservative leader Erin O’Toole promised to cancel the $595 million bailout if his party won the recent federal election.

The first news media bailout came in the form of $50 million provided in the 2018 budget under a new Local Journalism Initiative designed to increase news coverage in underserved communities. Newspaper publishers criticized the assistance as a “Band-Aid solution” and howled for more. After a campaign of intense pressure, they were given a full bailout of $595 million in the 2019 budget. Québec also provided $50 million in assistance. Then the pandemic hit and Ottawa introduced the Canadian Emergency Wage Subsidy (CEWS), on which publishers have since been feasting.

Newspaper profits are now the highest in years thanks to this firehose of government assistance. Postmedia Network, the country’s largest newspaper chain, recorded $67.7 million in operating earnings in its 2019-20 fiscal year (before interest, taxes, depreciation and amortization), which was up 37 percent despite the pandemic. Fully two thirds of its profits came from government handouts, according to its annual report, including $40.3 million in CEWS, $4.5 million from the federal bailout, and $700,000 from the Québec bailout. The massive CEWS payroll subsidy didn’t stop Postmedia from making layoffs at its newspapers across the country.

The bailouts began after a media-made crisis arose in 2016 when Postmedia, which is mostly owned by New Jersey hedge funds, merged the newsrooms of its duopoly dailies in Vancouver, Calgary, Edmonton and Ottawa. This came after the federal Competition Bureau rubber-stamped its $314 million acquisition of Sun Media, the country’s second-largest newspaper chain, which gave Postmedia 15 of our 21 largest dailies, including eight of the nine largest west of Manitoba. It also came despite Postmedia’s promises not to reduce news coverage in cities where it suddenly owned both dailies.

Heritage committee hearings on Media and Local Communities quickly convened in Ottawa and sat for more than a year. Before a report could issue, however, it was upstaged by one from the Public Policy Forum think tank titled The Shattered Mirror: News, Democracy and Trust in the Digital Age. It portrayed a severe crisis in news media and quickly became the accepted wisdom, at least as far as Canada’s conflicted news media were concerned.

The Shattered Mirror was instead a masterpiece of disinformation, and it was only part of a larger campaign of corporate propaganda conducted by Canada’s news industry. The first clue was when the report claimed that Postmedia had lost $352 million in its most recent fiscal year. New Jersey hedge funds are not in the business of subsidizing Canadian journalism. That figure represented only an accounting loss on paper after an asset write-down of $267 million and other extraordinary expenses. On an operating basis, Postmedia instead made a profit that year of $82 million, of which $72 million went toward payments on its debt. That debt is absurdly held mostly by its hedge fund owners.

The Shattered Mirror seemed to conjure data out of thin air, at one point stating unattributed: “Since 2010, there have been 225 weekly and 27 daily newspapers lost to closure or merger in more than 210 federal ridings.” Daily newspapers have certainly been going away, but they have been largely giveaways. From 20 free dailies in 2014, mostly commuter tabloids, only one remained by the end of last year due to the ongoing flight of digital advertising revenues. The Shattered Mirror presented data from the Local News Map, a research project commenced the previous year at Ryerson University’s School of Journalism, which was then headed by the wife of report author Edward Greenspon, a former Globe and Mail editor. Map data claimed to show that 169 vaguely categorized “news outlets” had closed in Canada since 2008, with 53 opened. The data were gathered using the easily-fiddled methodology of “crowdsourcing,” however, by posting an online map on which members of the public could record newspaper closures and openings.

First published in 2017, The Shattered Mirror is a 108-page, $270,000 report commissioned by the federal Liberal government and published by the Public Policy Forum, an Ottawa-based think tank. It was widely panned by media experts and pundits alike.

The Local News Map project was headed by April Lindgren, the Velma Rogers Research Chair at Ryerson. A former newspaper reporter who did not hold a graduate degree, Lindgren may have inadvertently admitted the project’s purpose in a 2020 academic journal article she co-authored that counted 92 mentions of Local News Map data in news media reports before the bailout was announced in 2018, plus another 71 over the following year while it was being finalized. “At a time when funders are increasingly demanding evidence that research dollars are well spent… map data were incorporated into news and social media content that helped push the news industry’s problems onto the government’s policy-making agenda.”

The Shattered Mirror predicted that newspaper sales would fall to only two per 100 households by 2025, down from 18 in 2015. This ignored the fact that newspapers have never made money from copy sales, instead historically losing money on every copy sold only to make it all back and more through advertising sales. Carleton University professor Dwayne Winseck, who closely tracks media industries through the Canadian Media Concentration Research Project he directs, pointed to this prediction in accusing The Shattered Mirror of exaggerating the plight of newspapers. “The report is chock-a-block full of such examples, which lends to the impression that the report’s authors are goosing the numbers.”

Winseck also contradicted the report’s claim that between 12,000 and 14,000 journalism jobs had been lost since the 1990s. His 2019 study co-authored with Sabrina Wilkinson cited Statistics Canada data that showed the number of employed journalists increased from about 6,000 in 1998 to a peak of 13,000 in 2013 before falling back to about 11,000 in 2017. “There are in fact more journalists in absolute terms at the time of writing than at most points in the past 30 years.” Winseck noted in a scathing blog post that “these examples are not innocent. They are part of a process of ‘threat inflation’ with the aim of buttressing the case for the policy recommendations on offer.”

While The Shattered Mirror painted a worst-case scenario for news media, it made little or no mention of Postmedia’s industry dominance and foreign control. This was not surprising, according to Winseck, given that many of those involved in producing the report “have not just sat back and taken arm chair academic views on these matters but have been leading cheerleaders for the processes of consolidation.” He declined to identify the cheerleaders and urged readers to do their own research. “The industrious reader need only consult the list of acknowledgements to sort out who is who and draw their own conclusions. Given all this, that media concentration wasn’t on the agenda is not surprising.”

The report listed in its acknowledgements section hundreds of people who provided input, including a quartet of media scholars, none of whom was known for being critical of ownership concentration. Among the dozens of media consultants it listed, Ken Goldstein of Winnipeg’s [email protected] Management Inc. was singled out as having been “particularly patient in helping us understand industry numbers.” A former vice president of Canwest Global Communications, Goldstein warned in a 2015 “discussion” paper posted on his firm’s website that “there will be few, if any, printed daily newspapers” left in Canada by 2025.

The paper, which did not disclose its genesis, purpose, or funding, simply extended circulation trends downward similar to The Shattered Mirror and forecast that newspaper penetration would fall below 10 percent of households by 2025. “To the extent that the trend lines are realistic, we do not believe that a viable print business model exists for most general interest daily newspapers once paid circulation drops below 10 percent.” In a 2017 paper, Goldstein doubled down on his projection of newspaper doom and included a graph that was almost identical to the one that appeared earlier that year in The Shattered Mirror. “The race against time and technology is no longer 10 years,” he concluded. “It is closer to five.”

The data source which definitively contradicted claims by The Shattered Mirror and the Local News Map, however, was published every year by the newspaper industry’s own trade association, News Media Canada. Well, every year except for 2018, when NMC’s case for a bailout was being made to the government through the media. The annual inventory of community newspapers usually showed that their number remained remarkably stable over the years at slightly over 1,000. The annual count was not updated for 2018 until the following year, however, after the bailout had been announced. It showed that the number had actually risen by 14 in 2018. It fell by 20 in 2019, however, for a net loss of six over the previous two years.

Community newspapers in Canada

A second disinformation campaign is now underway in pursuit of a bailout for Canada’s entertainment industries, which could be several times larger than what news media got. The campaign is epitomized by the well-reviewed 2019 book The Tangled Garden by media consultants Richard Stursberg and Stephen Armstrong. “The biggest media companies seemed destined for insolvency,” they wrote. “If the federal government does not wake from its torpor, the major Canadian media companies are likely to collapse. If this happens, English Canada will be effectively annexed by the United States.”

On the contrary, the annual profits of Canada’s largest media companies are greater than the entire economies of many countries. Bell’s $9.5 billion in profits that year would have ranked it 142nd in GDP among the 185 countries listed by the World Bank, while the $6 billion made by Rogers would have ranked it 151st behind Barbados and ahead of Sierra Leone. Their profit margins of 40 percent and more are fueled by some of the highest rates in the world for telecommunications services.

The book described how a Stursberg, former head of CBC English, devised the system of labour tax credits used in the news media bailout. It urged the federal government to tax foreign digital media such as Facebook, Amazon, Apple, Netflix and Google—for which it used the ominous acronym FAANGs—and re-route the proceeds to Canadian media. Making the FAANGs charge their Canadian customers federal and provincial sales taxes would bring in $100 million a year, it calculated, while disallowing the cost of advertising on foreign media as an income tax deduction would repatriate about $1.3 billion in ad sales annually. The advertising that didn’t return would be liable to pay an estimated $590 million a year in tax. Making Netflix and other foreign streaming services contribute 30 percent of their Canadian revenues to fund Canadian content, as the national television networks must, would bring in an estimated $438 million a year.

Ottawa was in the process of enacting the so-called “Netflix tax” before the election put a hold on legislation with Bill C-10, which would reap an estimated $800 million windfall. It was rammed through Parliament but stalled for the summer in a more skeptical Senate. More contentious will be a “link tax” pushed by publishers that would pay them every time a link to one of their articles appears on Google or Facebook. NMC and the lobby group Friends of Canadian broadcasting have been campaigning for such payments by claiming the digital giants are “stealing” news stories. The Toronto Star, which was recently acquired by a private equity firm, has joined the campaign with its long-running series “De-fanging Big Tech.”

It turns out that all those government reports issued decades ago—the Special Senate Subcommittee on Mass Media (1970), the Royal Commission on Newspapers (1981), and the Senate Report on News Media (2005)—were right when they warned that Big Media in Canada were getting too big and powerful. Now they are monetizing their power over public perceptions and laughing all the way to the bank as a result, at least from New Jersey.

Marc Edge is a journalism researcher and author who lives in Ladysmith, B.C. His books and articles can be found online at www.marcedge.com. The findings in this article were published recently in the peer-reviewed Canadian Journal of Communication.

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