Canadian Heritage Minister Melanie Joly does not plan to release her digital culture policy plan until September, but the pressure to address the financial challenges faced by media organizations increased last week with the Standing Committee on Canadian Heritage report (the same report that recommended an Internet tax that was swiftly rejected by Prime Minister Trudeau) and a proposal from News Media Canada that seeks hundreds of millions in annual government support. The recommendations don’t end there: copyright reform, tax changes, and amendments to government advertising policies are all part of the proposals to provide support to Canadian media organizations.
Andrew Coyne’s must-read column persuasively argues against a media bailout, noting the dangers of permanent government funding of an otherwise independent media. He rightly argues that if funding is established, it isn’t going away as government will be reluctant to allow funded media organizations to fail. Further, Ken Whyte, former editor-in-chief of the National Post, openly acknowledges in a Twitter stream the constraints that come from criticizing government when funding or regulation is at stake.
The News Media Canada proposal adopts the approach that if you’re going to ask for something, you might as well ask big. The organization argues that “the news media industry in Canada is under threat from competitors with bigger reach and development budgets but no real stakes in Canadian democracy.” Its solution is to ask Canadian taxpayers to hand over hundreds of millions of dollars per year to cover the cost of doing business by rebating 35 cents of every dollar spent on journalism up to $175 million per year. There is an additional proposed fund for “business innovation” that would chip in $90 million per year. The funding is limited to established entities (must have at least a 12 month publishing cycle), limited by subject matter covered, and limited by ownership and location of editorial work.
These proposals are similar, though not identical, to the Canadian Heritage committee recommendations (and also echo the Public Policy Forum’s Shattered Mirror report). The committee’s recommendations included:
- amend sections 19 (newspapers), 19.01 (periodicals) and 19.1 (broadcasters) of the Income Tax Act to allow deduction of digital advertising on Canadian-owned platforms.
- introduce a tax credit to compensate print media companies for a portion of their capital and labour investments in digital media. This would be a temporary five-year measure.
- level the playing field among industries publishing Canadian news, on all platforms, by ensuring that foreign news aggregators, which publish Canadian news and sell advertising, directed to Canadians, are subject to the same tax obligations as Canadian providers.
- change the Canada Periodical Fund to make daily and free community newspapers eligible and offer greater support for the online distribution of magazines and newspapers;
- set aside a part of the revenue from the 600 MHz auction to support locally reflective news and programming.
- require CBC/Radio-Canada to eliminate advertising from its digital news platforms.
- change the definition of a registered charity in the Income Tax Act to include not-for-profit media or foundation.
While the proposals will all be lumped together as a plan to “save the media”, there is the good, the bad, and the terrible.
The good include efforts to support non-for-profit foundations or charities that support investigative journalism (as is found in the U.S.), setting aside revenue from spectrum auctions for digital purposes (everyone wants a crack at this money and the government should commit to plowing the revenues back into all things digital – access, literacy, culture, and media), making CBC an ad-free digital news competitor (thereby removing a taxpayer-supported competitor), and levying sales taxes on foreign digital services (this is also an issue with Netflix). None of these changes affect the independence of Canadian media and they might help support independent journalism and address some competition concerns.
The bad are the proposals that simply misread the digital advertising market. For example, News Media Canada wants to ban government advertising on foreign owned sites or services. Government advertising isn’t a subsidy program, however. If government invests in advertising, it must surely be to inform Canadians in the most effective way possible. If that means advertising on foreign owned sites, so be it.
The various proposals also hope to make foreign digital advertising more expensive by playing with the tax deduction eligibility. The goal is presumably to push advertisers away from foreign sites and services or away from digital advertising altogether. Yet digital advertising is a function of the audience. Given that more and more people are shifting their viewing and media consumption habits from offline to digital, advertisers are unsurprisingly following their audience. A change in the tax code will not result in a shift to less effective advertising venues. Rather, it will simply make the digital advertising more expensive and leave Canadian business less competitive in the digital marketplace.
The attempts to distinguish between foreign and domestic digital advertising is also far more complicated that the reports suggest. Many advertisers don’t know where their ads will appear and ad networks do not typically distinguish between the ownership or residency of the sites themselves. In fact, the changes would ultimately make it more difficult for small and medium sized business to reach Canadian audiences since they could not easily use existing digital ad networks.
Further, digital advertising with companies such as Google typically involves a revenue share between Google and the site where the advertising appears. In other words, the advertising often appears on the same Canadian sites that the reports want to support. That revenue initially goes to Google, which then sends a portion back to the site or media organization. For that form of advertising, Google is simply matching advertisers and websites, while collecting a commission for providing the service. If advertising through the Google or Facebook network alone were enough to disqualify the advertising from tax deductions, Canadian sites would be harmed in the process.
While those are the bad, the proposals also contain some terrible proposals. The government bailout plans should be a non-starter for the reasons articulated by Coyne. Some media organizations are certainly struggling with new competitors and the shift to digital, but turning the media into a state-supported industry imperils an independent media. Moreover, the proposals invariably favour struggling incumbents over upstart digital operations that are an increasingly important presence in the marketplace.
Further, looking to Canadian copyright reform as a solution (as found in the Shattered Mirror report and raised by News Media Canada) would cause considerable harm to freedom of expression and the practice of news reporting with little likelihood of economic benefits. There are at least two kinds of activities at issue. First, there are sites that largely re-write original reporting and run the alternative version of a story on their site with their own advertising. This may be the reference in the report to bloggers using materials without permission. For this form of use, fair dealing is not implicated at all. Copyright law is designed to protect specific expression, but rightly recognizes that ideas and facts should not be controlled by a single entity. To change the law would grant a single rights holder exclusivity over reporting, effectively limiting the ability of the press to do its job.
Second, there are sites that aggregate content and link back to the original story. This has generated frustration among some media organizations, who fear that users rely on intermediaries and social networks to decide what to read. It is true that aggregators typically rely upon fair dealing (or fair use) to generate snippets or short summaries of the articles. Yet left unsaid is that fair dealing is exceptionally important for journalists and efforts to restrict it would harm the practice of news reporting. Indeed, news reporting is included as one of the purposes of fair dealing to ensure that copyright is not used to stop important journalism. Claims that fair dealing is a detriment to journalism fails to understand that newspapers are themselves active users of fair dealing. If the media were required to seek permission each time it quoted from another work, expression would be curtailed and costs to produce original reporting would increase.