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Half Off by J Stimp (CC BY 2.0) https://flic.kr/p/XtBCyj

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Big Cost, Smaller Benefit: Government Modelling Pegs Likely Bill C-18 Revenues at Less Than Half of Parliamentary Budget Officer Estimates

Canadian Heritage Minister Pablo Rodriguez has touted Bill C-18, the Online News Act, as critical for Canada’s media sector, but government’s internal modelling suggests there will be limited benefits for most news outlets. Earlier this fall, the Parliamentary Budget Officer estimated that it would generate $329 million per year, with over 75% of that revenue going to broadcasters such as Bell, Rogers, and the CBC. At the time, I noted that meant that “newspapers will receive less than 25% of the funding or about $81 million to split among hundreds of news outlets.” It turns out that the government believes that vastly overstates the benefit as its own modelling estimates about $150 million in total revenues, less than the 50% of the PBO’s estimate. Assuming a similar apportionment of revenues between broadcasters and newspapers, that would place the benefit at just over $37 million for the entire newspaper sector. In fact, as the government has expanded the eligibility to hundreds of additional outlets, the benefits for each organization shrinks even further.

The revelation of government modelling came during the most recent Canadian Heritage committee hearing on the bill. Asked to speak to the PBO estimate, Heritage official Owen Ripley responded:

I won’t speak to the PBO report which is the source of the numbers that you cited. That was not a department-led initiative. The internal modelling that we did when we tabled the bill and mentioned in our technical briefings was more around $150 million impact. That was based again in terms of how this played out in Australia and making some assumptions about how it might play out here. With respect to the PBO report, any questions about that particular number would have to be directed towards them. 

The government response raises several issues. First, it should be acknowledged that all of this is guesswork if the bill is genuinely just facilitating negotiations. Bill C-18 stacks the negotiations and arbitration against the platforms, but there are very different views of the value of links to news articles. Indeed, it is the uncertainty associated with potential liability that runs into the hundreds of millions that has led Facebook to indicate that it would consider blocking news sharing altogether. Moreover, while Ripley suggested that the estimate was raised at technical briefings, I attended the English language briefing and do not recall the number coming up. It is certainly possible that I missed it or that it was discussed at a different briefing, but it was not found in the presentation used by the department and has not previously made its way into media coverage or defences of the bill from government MPs.

Second, it is notable to see the government distance itself from the PBO estimate. When the estimate was first released, Canadian Heritage raised no concerns and News Media Canada, the lead lobby group for the bill, embraced it. Ripley’s statement suggest that the government thinks the benefits of its own bill are far smaller than previously reported based on the PBO study.

Third, while News Media Canada has implausibly raised the prospect of paying one-third of newsroom costs for links, the government’s own estimate indicates it will be a tiny fraction of that. If the government is right about its own bill, $37 million split among hundreds of newspaper outlets – the numbers also include a foreign outlets eligible under the bill and keep growing as eligibility requirements are expanded – is unlikely to make a material difference for most outlets. By comparison, Postmedia alone reports receiving millions each year from the government’s Journalism Labour Tax Credit as part of a $595 million package that was focused exclusively on the newspaper (digital and print) sector. If a few large media companies scoop up the lion share of the newspaper allocation, there will be little left for small, community, and digital-first outlets.

Fourth, the lower government estimated benefits of Bill C-18 must be offset against the costs of the bill. If Facebook were to block news sharing in Canada, that would not only further reduce the financial benefits of the bill but also reduce the reach of Canadian news outlets. Further, the existing deals between Canadian news outlets and the Internet platforms are placed at risk since the companies will have little reason to continue with those agreements if they are also mandated to pay for linking to news content. Beyond the financial cost, there are the broader societal harms: the damage to freedom of expression that comes from mandating payments for links, the government and regulatory interference into the media sector that reduces media independence, and the competitive imbalance, particularly for small and digital media outlets that may find themselves excluded from eligibility or facing a government-backed competitor such as the CBC that now benefits from both tax dollars and Internet platform money. That is a big price to pay for benefits that by government’s own estimates are far smaller than previously reported.

3 Comments

  1. There may possibly be another reason for the distancing from the PBO numbers. The PBO released reports that the carbon tax would have a greater negative effect on Canadians than the narrative the government was selling. So in doing this, it can become a pattern of discrediting the PBO on their reports altogether when they cause difficulty for the government

  2. Pingback: PBO May Have Overestimated Financial Benefits of Bill C-18 By 50%

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