Evolution of Media

Extortion, Dependency and Media Welfare: The Liberals’ Bill C-18

Peter Menzies
April 11, 2023
Many are concerned about Big Tech’s increasing censorship, manipulation and left-wing bias – sometimes openly admitted. But that doesn’t mean Facebook, Google et al are always wrong, nor that their enemies are necessarily our friends. In this instance, Canada’s legacy newspapers, which are waging an increasingly unctuous campaign for legislated subsidies both from government and the unwilling tech giants. Peter Menzies believes Canada’s media companies are dead wrong. The former newspaper publisher and media regulator regards their demands as unfair extortion by a dying sector – “palliative care for zombies.” Even worse, signal an increasing dependency upon and subjugation to the censorship-happy, control-obsessed Justin Trudeau government.
Evolution of Media

Extortion, Dependency and Media Welfare: The Liberals’ Bill C-18

Peter Menzies
April 11, 2023
Many are concerned about Big Tech’s increasing censorship, manipulation and left-wing bias – sometimes openly admitted. But that doesn’t mean Facebook, Google et al are always wrong, nor that their enemies are necessarily our friends. In this instance, Canada’s legacy newspapers, which are waging an increasingly unctuous campaign for legislated subsidies both from government and the unwilling tech giants. Peter Menzies believes Canada’s media companies are dead wrong. The former newspaper publisher and media regulator regards their demands as unfair extortion by a dying sector – “palliative care for zombies.” Even worse, signal an increasing dependency upon and subjugation to the censorship-happy, control-obsessed Justin Trudeau government.
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Twenty years ago, the newspaper I worked for earned an easy $50 million-plus a year in profit. Less than three months ago, its building was sold (and will probably be turned into a storage facility), the remnants of its once-bustling newsroom work from their homes, its print editions are ever-more infrequent and its press run is of such secondary interest it can’t accommodate last night’s sports scores. Its owners beg and bully the federal government for public assistance. Some in the industry shamelessly use their pages to lobby for legislation that constitutes little more than an extortionary shakedown. Or so their critics say.

This month Bill C-18, the Online News Act, goes under review in the Senate where there may well be more former journalists these days than there are active ones in the newsrooms of once-proud titles such as the Regina Leader-Post and Kingston Whig-Standard. There is virtually no doubt the bill will pass.

Bustling no longer: The empty headquarters of the once teeming and remarkably profitable Calgary Herald was recently sold to U-Haul. Can government subsidies and measures like Bill C-18, the Online News Act, possibly halt the underlying decline of Canada’s legacy media? (Source of bottom photo: Azin Ghaffari/Postmedia)

Those in favour have no qualms about creating a news media industry permanently dependent upon the good graces of the two most imposing powers in the lives of citizens these days: Big Tech and Big Government. They claim the likes of Facebook and Google have been “stealing” and profiting from their journalism. The merits of their argument – most publishers long ago designated newsrooms as pure “cost centres” – remain dubious and are convincing mainly through their continued assertion. Their most effective defence often consists of refusing to publish critical commentary and the maintenance of a Big-Tech-as-robber-barons narrative. This, in turn, insists democracy will crumble should their decrepit companies fail. In other words, whatever it takes to get the loot.

We are a long, long way from the days when newspaper publishers would have made any hint of subjugation by the state a hill to die on. For those generations, the trust of their readership was everything. This generation, which has watched Canadians’ trust in media sink to record lows, clearly sees things differently.

The last time it was suggested that the government should involve itself in regulating the press – in 1980 through the Royal Commission on Newspapers, aka the Kent Commission – the idea was repudiated. As Richard Keshen, now Professor Emeritus of Humanities at Cape Breton University, wrote 20 years later: “The negative reaction that met the Kent Commission on publication was unprecedented in the history of Canadian Royal Commissions. ‘Idiot’s delight’, ‘monstrous’, ‘vindictive’, ‘unacceptable and dangerous’ were typical of the insults hurled at the Commission (Saskatoon Star-Phoenix 1981). Innumerable references were made to ‘Big Brother’ and to the end of press freedom. Personal attacks were levelled at Tom Kent. He was said to be ‘authoritarian’ and a dupe of the Liberal Party. Often, the Commission was simply treated as a joke. Fred Hagel, Editor-in-Chief of the two Irving newspapers in Saint John, proclaimed, ‘It reads a bit like a psychedelic dream’ (Saskatoon Star-Phoenix 1981).”

“Unacceptable and dangerous” as well as plain “monstrous”: The last time anyone suggested government exert control over Canada’s newspapers – the 1980 Royal Commission on Newspaper, chaired by Tom Kent (middle) – the response was unequivocal. As Cape Breton University philosophy professor Richard Keshen (right) would write 20 years later, Canada’s newspaper owners were of one voice in fiercely guarding their independence.

How did that defiant, ruggedly independent mentality transition to today’s supplicancy?

Back when newspapers were a licence to print money, 30-40 percent of the revenue generated by the Toronto Stars, Edmonton Journals and Vancouver Suns of the world came from classified advertising. In a world long before Kijiji, society’s cavalcade of births, deaths, marriages and engagements passed through those pages, along with Help Wanted ads, plumbing, carpentry and other services. If you had something to sell, you bought an ad. Looking for some used furniture? A house? A rental? A career change? Need to sell your old car? That’s where you went for pretty much everything and, while journalists hated to hear it – and still do – this comprehensive and unmatched utility was a primary reason for subscribing to a newspaper.

Thanks to upstart online entities such as Craigslist and Kijiji, that money was the first to disappear. According to this article in the Harvard Business Review, by offering online ads for a pittance – sometimes nothing at all – Craigslist saved American consumers $5 billion in just its first seven years. Which means it cost newspapers the same amount, with proportional impacts in Canada where Kijiji is the undisputed leader in online classifieds.

Need a plumber? Trying to unload your car? Prior to the Internet era, people relied on classified ads (like those at top from the Vancouver Sun in 1959), giving them a practical reason to subscribe to newspapers, and giving the papers a lucrative and reliable revenue stream. Starting in the late 90s, online advertising options began cutting ever-deeper into newspaper ad revenues. (Source of top photo: Tyler Thorne, Roka Projects/vancouverisawesome.com)

Newspapers had no response. Nor did they when car dealers, real estate agents, grocery stores and others discovered they could sell directly to customers through their own online presence. All the gates once kept by newspaper publishers were blown wide-open by a free and open internet. Concurrently, Google and others developed search engines that assumed the role of matchmaker between buyers and sellers and then – boom – along came Facebook where people could announce their OMG I said Yes! engagements, the births of their children and the deaths of their parents. The only thing press barons had left to sell was news – something they had long ago defined as mere cost centres.

The business effects, extended over a number of years, were cumulatively devastating. The relentless culling began in the first decade of the century following the acquisition by CanWest Global Communications Corp. of most of the nation’s big newspapers and its then-desperate attempts to survive in an era of decreasing profitability. After CanWest’s collapse and the creation of Postmedia Network Canada Corp., the “efficiencies” became even more pronounced. The overall headcount of newspaper company employees in Canada is difficult to determine but between 2014 and 2020, employment at just four locals of UNIFOR (Canada’s largest private-sector union, which includes “media workers”) dropped by 45 percent. Of 1,587 jobs, only 877 survived just that six-year period of downsizing.

The collapse of CanWest Global Communications Corp. and formation of Postmedia Network Canada Corp. did not slow the traditional media’s long decline. In just one group of union locals, nearly half the media workers fell victim to downsizing. Shown at left, CanWest’s former headquarters in Winnipeg, Manitoba; at right, Postmedia’s office in Toronto. (Source of right photo: Google Streetview)

The more eyeballs moved to the much, much shinier objects available online, the more advertising followed and the more jobs disappeared from newsrooms until there literally isn’t even any furniture left. Almost 500 Canadian newspapers (many of them weeklies in smaller cities and towns) have died.

On the bright side, more than 200 new online news platforms based on internet delivery have started up as entrepreneurs unshackled by legacy encumbrances embraced change and found willing buyers for what they were selling. But they lack lobbyists, which means it’s the aging dailies and “supper hour news” constructs that remain our political class’s fixation. At a time when the nation needs to look to the future, federal Heritage Minister Pablo Rodriguez – or so his critics say – has opted to preserve the past.

“Parasites of the state”: While many of her former colleagues have been pressed into editorial service promoting Bill C-18, former Postmedia journalist Jen Gerson asserts Canada’s media industry is “in a state of terminal decline.” (Source of photo: Chris Bolin/The Gauntlet)

“What they produce has so little value that they need to evolve into parasites of the state,” wrote former Postmedia journalist Jen Gerson in her online platform, The Line. The legacy media, Gerson continued, are “little more than a zombie in nun’s drag,” an industry “in a state of terminal decline and keeping it alive poisons the earth for the generations to come after.

Zombie drag queens, it turns out, have plenty of pull on Parliament Hill. Representatives of the Canadian newspaper industry, most of which is now consolidated under Postmedia and its majority owner, the American hedge fund Chatham Asset Management, had been lobbying Ottawa for subsidies since 2016. At the time, Terence Corcoran of the libertarian-leaning (and Postmedia-owned) Financial Post bristled at the thought of government involvement.

“The first battles against government control were fought centuries ago in England over Licencing of the Press laws and other variations on measures that limited press freedom,” Corcoran wrote. “The fight was waged by the likes of John Milton, John Locke and John Stuart Mill. The result became known as the libertarian theory of the press. In Four Theories of the Press, a classic 1950s book once on reading lists in journalism schools, Frederick Siebert summarized the theory. ‘Let all with something to say be free to express themselves. The true and sound will survive. The false and unsound will be vanquished. Government should keep out of the battle and not weigh the odds in favour of one side or another.’”

Despite Corcoran’s objection, the pleading publishers won $595 million over five years through a labour tax credit designed to cover them while they “transitioned” to the digital age – something they had already proved incapable of doing. They also scored $10 million a year – now doubled to $20 million – for something called the Local Journalism Initiative, by which a government-appointed panel funds newspaper reporters to cover approved topic areas (such as climate change or public health measures).

Andrew Coyne, writing for the National Post in 2018, predicted that wouldn’t be the end of it. “The money the government is giving us is not going to solve our problems,” he wrote. “It is only going to ensure we put off confronting them. Before long we will be back for more.” If concurrent developments in another English-speaking country whose media sector faced similar challenges were anything to go by, Coyne’s prediction for Canada was entirely reasonable.

The principled outlier: The Financial Post’s Terence Corcoran eloquently opposes Ottawa’s involvement in the news industry. In one column he reminded Canada’s journalists of the book Four Theories of the Press, which advised government to “keep out of the battle” so only “ the true and sound will survive.”

“More,” as it turned out, was already in the works in the land of Oz. There, Rupert Murdoch – a media wizard whose assets so dominate the Australian media landscape that prime ministers seemingly serve at his pleasure – had an even better idea. Murdoch accused Facebook/Meta and Google/Alphabet of “stealing” his products and demanded the Australian government – in the midst of a pandemic – do something about it.

The government responded with legislation imposing a News Media Bargaining Code forcing the web giants to pay up. Facebook responded by preventing the posting of links to news stories. Fuelled by Murdoch’s 60 percent ownership of Australian media, controversy flared. In the end, the government amended its legislation and Meta/Facebook and Google made a number of private (and confidential) commercial funding deals that ensured the publishers didn’t have to turn to government to impose a solution. (This is interpreted in Canada by C-18 backers as “Facebook folded.”)

Prime ministers seem to serve at his pleasure: Australian media magnate Rupert Murdoch’s accusation that Facebook and Google “steal” his companies’ content prompted that nation’s federal government to pass a law (right) forcing the Big Tech companies to make commercial deals with content providers. Some argue this has further weakened journalism in Australia. (Source of left photo: Eva Rinaldi, licensed under CC BY-SA 2.0)

The jury remains out on how well this worked. In a 12-month government review published last November, Facebook asserted that the Australian model “does not solve the longstanding digital transformation challenges facing the news industry. It actually undermines – not supports – its purported public policy goals of supporting the long term viability of journalism in Australia.” The company also claimed that the new Australian law misled news publishers “into thinking they are entitled to payment simply for using our free services to expand their own audience.”

Australia’s news organizations are understandably happier. Many assert that the deals have indeed created more journalism jobs. Then again, just two months ago Murdoch’s News Corp. announced it would cut 1,250 positions, or 5 percent of the company’s international workforce, by year-end.

In Canada, the Justin Trudeau government’s enthusiasm for something similar to Australia’s News Media Bargaining Code remains undiminished. So much so that, after newspaper owners did all the legwork, the nation’s broadcasters saw what was going on in Australia and quickly bellied up to the bar. They lobbied effectively to influence the structure of Bill C-18 so that, according to the Parliamentary Budget Officer, they will take home $249 million of the $329 million his office estimates the bill will generate annually in fees from search engines and social media companies for news providers. The two largest beneficiaries would be the CBC, which already receives $1.4 billion per year (70 percent of its budget) in taxpayer subsidies, and Bellmedia, which is profitable. That would leave only $80 million for everyone else, including the Toronto Star which, according to its own executives, is losing about $1 million per week.

Last fall Facebook/Meta’s Canadian policy representative, Kevin Chan, was hauled before the Heritage Committee to defend his company’s opposition to Bill C-18. Similarly to Australia’s code, it will force tech giants to compensate Canadian news providers for the use of their content – unless, of course, companies like Facebook simply stop carrying that content. (Source of photo: mediapolicy.ca)

Adding to the drama was that the House of Commons Heritage Committee chose to exclude Facebook from its deliberations. Until late last fall, when the web giant stated publicly that unless Bill C-18 was amended it would refuse to carry news links. Then it was swiftly called in to the committee where Liberal MP Chris Bittle, parliamentary secretary to Heritage Minister Rodriguez, delivered his version of a pants-down spanking to Kevin Chan, Facebook’s head of public policy for Canada.

Conservative Heritage critic Rachael Thomas’s more measured approach was then excoriated in a National Post editorial for “softball questions” that failed to take into account the newspaper’s view that Facebook hates conservatives and so she should hate Facebook back. According to the Post, Thomas did a disservice to the nation “by giving far too much deference to a company using fear tactics to try to escape its obligations to the media companies it has spent years siphoning revenues from.”

Last month, to the news lobby’s dismay, Facebook announced it would stop (to use the publishers’ terminology) “siphoning revenues” and “stealing” news by confirming its plan no longer to permit links to news stories once Bill C-18 passes. The reasons for these tough tactics are straightforward. According to Facebook, news accounts for just 3 percent of its business and it’s not what most Facebook users want. And if generating 3 percent of its business is going to cost it hundreds of millions of dollars a year in payments to media companies in Canada, that will quickly turn into tens of billions if C-18 is replicated globally. From Facebook’s standpoint, better not to carry such content at all. The Liberals and news organizations insist publicly this is all bullying and bluffing.

Halifax lawyer and privacy expert David Fraser sees Bill C-18 as “one of the worst examples of bad public policy in the technology space,” using “pretend market and bargaining mechanisms…to prop up failing news businesses.” (Source of left photo: www.mcinnescooper.com)

But it seems like a reasonable position for Facebook and similarly situated companies to take. Indeed, Google then began a widely publicized assessment of the potential impact to its traffic, revenue and usage if it de-indexed Canadian news websites. The touch was relatively light, a series of “experiments” denying 4 percent of Google’s search engine users access to Canadian news results. News remained available by using apps, going directly to websites or by accessing their addresses through favourites.

Like Facebook, Google was summoned before the Heritage Committee to explain itself and, in an extraordinary move, the committee demanded Google produce correspondence between it and anyone it has communicated with in Canada regarding public policy. The heavy-handedness prompted the Canadian Chamber of Commerce last month to write a stern letter of rebuke accusing the government of posing a “serious threat to the privacy of Canadians and to their right to hold and express opinions on public policy issues.” At this time, whether Google will comply remains an open question.

Numerous experts see C-18 and its attendant chaos as a disaster that, even if it does pry more loot from the web giants, will still leave the likes of the Toronto Star, National Post and their satellite dailies impoverished while enriching the CBC, Bell, Rogers and Quebecor, none of which are under duress. Halifax lawyer and privacy expert David Fraser calls the bill “one of the worst examples of bad public policy in the technology space. It essentially uses pretend market and bargaining mechanisms to legally extort money from successful technology companies in order to prop up failing news businesses.”


Konrad von Finckenstein, former chair of the Canadian Radio-television and Telecommunications Commission (CRTC), co-authored an op-ed in the online trade magazine Cartt.ca with former federal lawyer Phillip Palmer of the Internet Society – Canada Chapter (ISCC). They doubt the legislation is even constitutional. Even the “framers of the legislation themselves seem to have had some doubt as to federal jurisdiction,” they wrote.

The ISCC’s submission to the Senate calls the bill a “statutory shakedown of search engines, social media and news aggregators…The basic concept is flawed. It uses the power of the state to run an extortion scheme that seeks to preserve a legacy business model whose economic rationale has been overtaken by new and more efficient means of disseminating information to the public.”

Openmedia, a far-from-conservative advocacy organization, says Bill C-18 misunderstands the crisis in funding for journalism by “misdiagnosing why news advertising revenue has collapsed and who is at fault for it. As a result, Bill C-18 ‘fixes’ the problem through a convoluted system that makes news producers increasingly dependent on and subservient to both online platforms and government, threatening their critical role in holding these powerful bodies accountable.”

This story doesn’t yet have an ending. All involved will huff and puff self-servingly, while the Trudeau government happily renders media companies ever-more dependent on federal funding. Google may yield and there may yet be a twist in this tale. There may be legal challenges regarding the law’s constitutionality or federal jurisdiction. But consensus is building that the best Bill C-18 can offer is palliative care for zombies. All we know for sure is that years from now, when old newspapermen speak of that era of $50 million a year in profits, no one will believe them.

Peter Menzies is a past vice-chair of the CRTC and is a Senior Fellow at the Macdonald-Laurier Institute.

Source of main image: Shutterstock.

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