Can Canada’s media be reformed?

July 1, 2016

Abstract illustration involving various aspects of the Canadian media industry

Illustration by Raymond Biesinger 

Remember the nasty shooting war that broke out during the last recession between Canada’s TV networks and cable companies? The networks threatened to shut down money-losing stations and bombarded viewers with commercials braying “Local TV Matters.” They claimed to be in dire financial straits and asked Ottawa to force the carriage companies (Rogers, Shaw, Bell, etc.), which were making lush profits despite the economic downturn, to pay them 50 cents per subscriber to rebroadcast over-the-air programs the cable and satellite providers had always carried for free. The carriage companies fired back by threatening to pass along any retransmission fees to their subscribers and running their own commercials with the slogan “Stop the TV Tax.”

When federal hearings looked into the supposed financial plight of the networks, however, it turned out they, too, were still making healthy profits, just not as healthy as before, and not nearly as plump as the unregulated cablecos. They were just looking for a bit of wealth redistribution. In the end, the networks got the right to negotiate what they called “fee for carriage.” But by then, in a dramatic reversal of fortune, the networks had all been, or were about to be, gobbled up by those very same carriage companies. The Rogers cable conglomerate bought the City network in 2007, Shaw bought Global Television out of bankruptcy in 2010, and Bell Canada, which enjoys a monopoly on satellite TV, reacquired a controlling interest in CTV later that year.

These were the death throes of convergence, the media experiment that visited the world at the turn of the millennium and found its greatest foothold in Canada, because ours was one of the few countries without limits on television and newspaper companies going into business together. (The U.S. wisely maintains a ban to this day.) The theory was that all media were converging into one digital medium, but it didn’t happen and almost certainly won’t. Global TV’s former owner, Canwest Global Communications, collapsed under the weight of debt it took on buying the country’s largest newspaper chain and other media properties. Its television and newspaper assets were sold off separately out of bankruptcy. Quebecor retreated back to a provincial media empire in 2014 when it sold Sun Media, the country’s second-largest newspaper chain. So hare-brained was the partnership between newspapers and television that CTV and the Globe and Mail voluntarily dissolved their 10-year marriage in 2010, joining a worldwide de-convergence trend.

We are now dealing with the consequences of convergence and picking up the pieces of a media system that has been battered by technological change, regulatory neglect (as a 2006 Senate report termed it) and no small amount of ownership connivance. As a result, we now have levels of ownership concentration and vertical integration—carriage companies owning television networks—that are among the highest in the world. The same few media conglomerates also own most of Canada’s radio stations, mobile phone companies and lucrative Internet service providers (ISPs). The country’s largest newspaper chain is mostly owned by U.S. hedge funds, which won the company for a song by buying up distressed Canwest debt for pennies on the dollar. The Harper government turned a blind eye to that flagrant end run around Canada’s foreign ownership limits, then presided over the Competition Bureau’s rubber-stamping of Postmedia’s 2014 purchase of Sun Media.

In other words, we have a decimated news media in Canada. Much of the content found in newspapers and online news media nowadays is not journalism at all but “sponsored” content (also known as “native” advertising) disguised as news. Postmedia now owns 15 of the 21 largest English-language newspapers in Canada, including eight of the nine in the three westernmost provinces. Much of their content is thinly disguised propaganda for one cause or another. In 2013, a front-page ad disguised as a news story in Quebecor’s Vancouver commuter tabloid, 24 Hours, enthusiastically declared Premier Christy Clark the “Comeback Kid” for performing well in a televised election debate. Two weeks later, rather surprisingly given her ratings at the time, Clark and her Liberal party were re-elected. Mere days before the federal election last fall, Postmedia ordered its editors to endorse the Harper Conservatives and subjected the readers of several of its dailies to wraparound cover ads warning that voting Liberal would “cost” them. In the end, such naked partisanship may have worked against Harper’s re-election. It has certainly worked against Postmedia’s reputation, which may never recover.

The remaining chickens of Canada’s lax media ownership laws came home to roost earlier this year when Postmedia announced it would merge the newsrooms of its duplicate dailies in Vancouver, Calgary, Edmonton and Ottawa (despite its corporate ancestor promising never to do so in Vancouver). That prompted parliamentary hearings to seek a solution to the country’s crisis in local news coverage, which has been ravaged by mergers, layoffs and cutbacks by media companies that are again pleading poverty due to plunging ad revenues and heavy debt. Can the country’s broken media system be fixed? An old saying about a horse and a barn would seem to apply here. But with a bit of foresight the evolving media ecosystem could perhaps be nursed back to some semblance of health.

The tragedy of media ownership reform in Canada is that untimely changes in government have thwarted its best opportunities. In 1981, the Royal Commission on Newspapers urged limits on chain ownership, but these died on the vine because the ruling Liberals were soon replaced in government by the Progressive Conservatives of Brian Mulroney. The new government ditched even the lone restriction on cross-media ownership that had been hastily enacted before the election per the commission’s warning. It opened the floodgates for the convergence decade. Amid that policy disaster, a Senate committee began examining Canada’s news media, issuing a report in 2006 that included a scathing indictment of federal regulatory failure. It recommended limiting media concentration the way some countries do, by applying a local news “diversity” test in deciding whether to allow a change in ownership. Bad timing again doomed that initiative, as the Conservatives had been elected with a minority government earlier that year.

This time is different, or it could be. The government is not about to fall but still settling in. The Liberals were elected with a strong mandate to reverse course from Harper’s deregulating tendencies; they now have an opportunity to re-landscape Canada’s media. In a sign the new government may seize the moment, Vancouver MP Hedy Fry promptly convened heritage ministry hearings on local news. “Our government has a strong will to deal with this now,” she said in February. “The thing about politics is that the time comes one day when stuff is facing you so hard that you have to do something about it. That time has come.” 

But the horse is still out of the barn. Can it be reined back in, or would measures to boost the country’s emerging digital news media show more foresight? Wise policy moves now might help return Canada’s news media to something more resembling the public service journalism idealized in democratic theory. For that to happen, however, higher levels of competition and ownership diversity will somehow have to be arranged. And for that to happen, we have to avoid or even redress past mistakes.

As the 2006 Senate report pointed out, much of the blame for Canada’s media mess can be laid at the feet of two federal regulatory agencies. The Canadian Radio-television and Telecommunications Commission (CRTC), which regulates broadcasting, has for decades administered a program of “public benefits” payments that allows the country’s few big media conglomerates to basically bribe their way to ever greater corpulence. While ironically recognizing the perils of ownership concentration, the CRTC has nonetheless allowed big players like Rogers and Bell to grow bigger as long as they agree to compensatory payments amounting to 10% of the purchase price of a licensed TV broadcaster or 6% in the case of radio.

In Bell’s $2.3-billion purchase of CTV in 2000, for example, the company had to promise to spend $230 million on worthwhile projects before the CRTC would sign off on the deal. These public benefits payments, also known as “tangible” benefits, usually go to funding Canadian content, but increasingly they have found their way into higher education. One result of the CTV takeover in 2000 was $3.5 million in funding for a Canadian Media Research Consortium set up by several journalism schools. It promised critical research into Canada’s media but mostly delivered marketing studies—despite the CRTC’s proscription against using public benefits funding for such purposes.

Ryerson University has several endowed chairs named after corporations such as Bell and Rogers as a result of their takeover payments, including, ironically, a Maclean-Hunter Chair for Communications Ethics. Both Western University and the University of British Columbia (UBC) are stained by fellowships named after Canwest Global Communications, which also no longer even exists. UBC’s graduate school of journalism is housed in the Sing Tao Building, named after the Hong Kong newspaper company that founded it. (The initial Sing Tao School of Journalism was rendered generic in 2001 when its endowing corporation defaulted on funding commitments.) Perhaps not coincidentally, academics seemed to fall over each other during CRTC hearings in 2001 to testify to the benefits that corporate convergence would bring Canadian journalism.

The Competition Bureau has arguably been even more derelict than the CRTC in its duty to guard against media monopolies. The 2006 Senate report on news media deemed the Competition Bureau a failure when it came to media industry mergers and takeovers because it considers only advertising revenues, not the information needs of Canadians. “The Competition Bureau’s operating procedures may be well suited to analyzing most markets for goods and services in Canada, but not the news media market,” it concluded.

The report proposed changes to the Competition Act to deal with media transactions differently, but Harper’s election doomed any chance of reform. A measure of his government’s negligence is that the Competition Bureau failed to even hold hearings into Postmedia’s 2014 purchase of Sun Media, investigating it in secret instead and refusing to release its market analysis. (Believe me, I’ve asked.) The regulator absurdly concluded that Postmedia’s owning both daily newspapers in Calgary, Edmonton and Ottawa wouldn’t harm consumers or even advertisers there because those newspapers didn’t compete.

It is hard to resist the conclusion that both the Competition Bureau and the CRTC have fallen victim to the well-documented phenomenon of regulatory “capture,” acting not in the public interest but instead in the interests of the corporations they regulate.

Canadian journalism was set on its course to banana republic status in large part by Conrad Black. He engineered a hostile takeover of the historic family-owned Southam newspaper chain in the mid-1990s before renouncing his citizenship in 2000 to take a seat in the U.K. House of Lords. (Thence deliciously to trial for fraud in Chicago and to prison for five years in Florida.)

By then head of the third largest press empire in the world, Black brought a level of political partisanship to Canadian news media not seen since the “party press” era of the 19th century. He abhorred the “soft liberal” journalism he felt marked much of Canada’s news media and sought to imbue it instead with the hard-headed neoconservatism he pushed in his newspapers in the U.S., the U.K., and Israel. Black founded the National Post in 1998 with the expressed intent, emblazoned on its first front page, to “Unite the Right” of Canada’s fractured conservatives parties.

On cue, much of the country’s news media turned rightward. Soon neoconservative politics and neoliberal economic prescriptions were filling the pages of other once progressive Southam dailies. The sea change was perhaps most noticeable from the outside. “Your media are not representative of your people, your values,” Lawrence Martin reported a European diplomat telling him in a 2003 Globe and Mail column. It was headlined “It’s not Canadians who’ve gone to the right, just their media.”

Black passed the Southam dailies to even more meddlesome owners on his way out the door. The Asper family of Winnipeg pushed their own personal hobby horses, including constant criticism of the CBC, which they saw as unfair government-subsidized competition for their Global Television network, and unstinting support for Israel against the Palestinians. But the Aspers were even less subtle in their wielding of power than was Black, ordering “national” editorials written at company headquarters to be printed over the objections of many Southam journalists who valued their local independence.

Columnists who didn’t conform to the Asper family line soon found themselves out of work. Ottawa Citizen publisher Russell Mills was fired in 2002 for running an editorial contrary to company policy in one of the defining acts of a bleak chapter in Canadian journalism history. It all came down in the crash of 2008-09 after Canwest became over-extended with billions in debt from all its acquisitions. Bankruptcy promised better ownership because, well, it couldn’t get much worse, could it? Not so fast.

The recent collapse of the newspaper industries in the U.S. and Canada has seen a new type of owner emerge. Faceless and secretive hedge funds, “vulture” capitalists whose only fealty is to the bottom line, began buying up the debt of foundering newspaper companies across North America in the hope of taking them over on the cheap when they emerged from bankruptcy. In Canada, print media are supposedly subject to a de facto foreign ownership limit in the form of a tax provision that requires 75% Canadian ownership for a company to be able write off advertising expenses.

That should have discouraged the hedge funds, but instead they found a loophole by taking most of their ownership in the former Southam newspapers as limited-voting shares. Calling themselves Postmedia, hedge funds led by New York-based GoldenTree Asset Management and Silver Point Capital thus owned an estimated 58% of the company, but they claimed that other shareholders, who were Canadian, actually controlled it. Their neatest trick, however, was trading in only part of the secured Canwest debt they held for its newspaper division, retaining enough that they would be first in line with a claim on the company in the event it went bankrupt again (which now looks likely).

The Harper government turned a blind eye to all of this financial engineering and then watched as Postmedia bought the Sun Media chain for $315 million in 2014. As a result, the hedge funds are now bleeding dry not one but two Canadian newspaper chains due to the hefty interest rates (up to 12.5%) on the debt they hold.

The Internet was supposed to make all of this irrelevant. Old media were said to be not long for this world once online media took hold. There was only one small problem with that notion: except for giant platforms like Google and Facebook, online news media have found it hard to make money in the Darwinian world of the Internet. In stark contrast to newspapers and television, where the preferred business model is monopoly, the Internet allows anyone to post a website and sell ads on it. Oversupply thus drives down online advertising rates to a fraction of what legacy media still command. Ironically, newspapers and television stations continue to post enviable profit margins, albeit on greatly reduced revenues. Their profits, however, are enabled only by constantly cutting costs, mostly to original journalism.

By contrast, the few digital startups that have emerged in Canada have had to seek funding beyond advertising. Online subscriptions have shown promise at some online publicationssuch as allNovaScotia in Halifax, which started in 2004 and is said to be profitable with 10,000 subscribers, each paying $30 a month. The Tyee in Vancouver has been providing a progressive slant on the opposite coast since 2003, but it is heavily subsidized by labour unions. If every town in Canada had a similar online news outlet to supplement its dwindling legacy media, the local news crisis would be eased considerably. The problem is, there remain significant barriers to digital news media succeeding in Canada compared to other countries.

Government subsidies have been proposed by some as an answer to both keeping old media alive and incubating new media. Most self-respecting journalists are leery of anything that smacks of government influence, but this ignores the fact that news media have historically benefited from subsidies ranging from low postal rates to government advertising to free broadcasting licences, which press baron Roy Thomson famously described as “like having a licence to print your own money.” Scandinavian countries have long subsidized their press to stave off the wasting disease that has afflicted the newspaper industries in North America. As a result, they continue to enjoy thriving press systems with diversity of both ownership and viewpoint, plus press freedom rankings that are among the highest in the world, unlike in the U.S. and Canada.

One model that has been employed to some effect in other countries is charitable not-for-profit news media companies. In the U.S., dozens of digital news startups have emerged since the recession due to laws that allow them to claim non-profit status and accept tax-deductible donations from foundations and individuals. These companies, designated under Section 501(c)(3) of the U.S. tax code, must re-invest any profits they make and may not pay dividends to investors. Online publications such as MinnPost, Voice of San Diego, ProPublica, and the Texas Tribune are thus able to perform valuable public affairs reporting and even investigative journalism that legacy media are now hard-pressed to afford.

According to a recent study by institutes at the University of Oxford and Yale University, however, Canada is one of the few English-speaking countries in which non-profit news media cannot claim charitable status. “The charitable system in Canada is effectively in disarray,” the report observed, noting that jurisdiction over charitable status belongs to the provinces, yet Ottawa is in charge of defining charity. “Parliament has been so afraid to discuss the definition of charity that the one and only discussion, which took place in the 1930s, was truncated and left to the courts because of the difficult political nature of the discussion. (That is, no MP wanted to be seen as disparaging a ‘good cause’). The key question is why the provinces have decided to abdicate their jurisdiction in this area.” This is obviously one funding avenue in which federal policy leadership could work wonders.

One ambitious new prescription for saving the news media emanates from France and could not only secure funding for new media startups but would also make them considerably more democratic than today’s corporate media. Economist Julia Cagé proposes a model for news media that is halfway between a foundation and a stock issuing company. A nonprofit media organization (NMO) would be able to accept tax-deductible donations, in exchange for which it would issue shares of ownership to donors that would not trade publicly. Readers and employees could also buy shares with voting rights disproportionate to those of larger shareholders. Power would thus be diffused throughout the organization and not confined to those with the most shares.

“The question is not whether the media should be subsidized,” writes Cagé in her slim tome Saving the Media. “It is rather whether they should be granted a favourable legal and tax status in recognition of their contribution to democracy.” She points to the example of universities as organizations that are able to receive tax-deductible gifts because they play a similar societal role. “The news media provide a public good, just as universities and other contributors to the knowledge economy of the 21st century do,” argues Cagé. “For that reason they deserve special treatment by the government.”

Another possible alternative might be a national network of government-funded digital mojos (mobile journalists) covering local communities. But we already have a national network of government-funded journalists. It’s called the CBC. Restoring the funding cutbacks endured by “the Ceeb” during the Harper decade might provide an opportunity to reorient the government broadcaster away from broadcasting and more toward the online realm. Hyper-local mojos could feed into the national network via the CBC website and also provide basic audio and video for radio and TV. Local CBC news websites could offer a basic service free to all, but also provide access to longer-form journalism and special features to those willing to pay a subscription fee in the often successful “freemium” model.

Once a more diverse and democratic news ecosystem is thriving, all that would be left for government to do is police the worst excesses of what passes for journalism these days. The Federal Trade Commission in the U.S. has already taken publishers to task for potentially misleading readers by presenting advertising in a format that resembles news or feature content. It issued guidelines late last year that require sponsored content to be clearly labeled as such. Websites or print publications that fail to adequately distinguish between advertising and journalism risk being prosecuted for deceptive practices. Ottawa needs to similarly protect consumers by drawing clear lines between journalism and hucksterism. 

The Royal Commission on Newspapers was “born out of shock and trauma,” its report observed, after established dailies in Winnipeg and Ottawa were folded by their corporate owners on the same day in 1980, creating two more local monopolies. Its year-long investigation of the Canadian news media also examined the digital alternative then looming on the horizon.

“Canada is in a favored position to understand this new technology, to develop it, exploit it, and benefit from it,” the commission report noted. “We have a solid foundation of theoretical studies in modern communications, largely because of the work of the economic historian Harold Innis, who died in 1952, and Marshall McLuhan, the media philosopher, who died in 1980. McLuhan, strongly influenced by Innis, altered mankind’s appreciation of the influence of media.”

Today considered founders of the so-called Toronto School, after the university where they developed their ideas, Innis and McLuhan revolutionized thinking about media influence in the 1950s and ’60s by focusing on their form rather than their content. As McLuhan famously put it, “the medium is the message.” Control of any society’s dominant medium, Innis realized by examining empires dating back to ancient Egypt, inevitably results in control of its political and economic life. According to McLuhan, changes to the dominant medium in a society bring fundamental shifts in social organization and even sensory perception.

Neil Postman, the American scholar who helped revive interest in what came to be called “medium theory” in the 1980s, pointed to the ability of a dominant medium to influence a society’s definition of fundamental concepts such as intelligence or even truth. Political discourse, he warned, had sunk to dangerous levels of absurdity under television compared to the more rational regime of the printing press. Few could have foreseen the changes wrought by online media, where search engines, blogs and social media now rule.

When the tsunami of convergence washed over Canada at the millennium, few could similarly have predicted how it would reshape the country’s media. Regulators who considered in 2001 whether to limit the merging of television and newspapers decided to let it run its course, which unfortunately went straight into the ground. “They prefer to get a good handle on how convergence will develop before trying to regulate it,” noted the Globe and Mail. “Technology is changing so quickly, they say, that there is no clear indication how cultural diversity will fare.”

Now that we have a better idea of some of the perils inherent in this brave new media world, it behooves government to finally act in the public interest. Fortunately, when it comes to Canadian news media, there is no shortage of good ideas for doing so.

Marc Edge is a professor of media and communication at University Canada West in Vancouver. His last book, Greatly Exaggerated: The Myth of the Death of Newspapers, was published in 2014. His fifth book, The News We Deserve: The Transformation of Canada's Media Landscape, will be published by New Star Books in October.

This article was published in the July/August 2016 issue of The Monitor. Click here for more or to download the whole issue.