STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 19, 1998

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[English]

The Chairman (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): Order.

I declare open this meeting of the Standing Committee on Canadian Heritage pursuant to the order of reference of the House of November 3, 1998, a study of Bill C-55,

[Translation]

An Act respecting advertising services supplied by foreign periodical publishers.

[English]

Appearing before us is the Canadian Business Press.

I would like to welcome the witnesses, and ask Mr. Terry Malden, the chairperson and vice-president of Maclean Hunter Publishing, to introduce his colleagues.

Mr. Terry Malden (Executive Vice-President, Maclean Hunter Publishing; Chairperson, Canadian Business Press): Thank you.

I am executive vice-president of Maclean Hunter and chair of Canadian Business Press, which represents about 140 business publications in Canada.

I'd ask my colleagues to introduce themselves, please.

Mr. Michael Atkins (Chair, Legislative Affairs, Canadian Business Press): I have a small publishing company in Canada, in both the Canadian business area and consumer publishing. I am the chair of legislative affairs for the Canadian Business Press.

The Chairman: Where is your operation based?

Mr. Michael Atkins: Actually, I started in the hotbed of Canadian publishing, Sudbury, Ontario, but we now have branch offices in Toronto.

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Ms. Lilia Lozinski (Senior Vice-President, Multi-Vision Publishing Inc.): I'm publisher of Elm Street magazine, and a partner in a small publishing company called Multi-Vision Publishing. We also publish OWL Canadian Family, Images and Healthwatch magazines.

We are located in Toronto, with branch offices in Montreal and in Vancouver.

Mr. John L. Thomson (President, Beautiful British Columbia): I'm president of Beautiful British Columbia magazine, based in Victoria, B.C. We publish Beautiful British Columbia magazine and Beautiful British Columbia Traveller.

The Chairman: Thank you.

I should mention, Mr. Malden, to you and your colleagues, that if you see a small attendance of members, it's because a lot of committees of the House are sitting now. There's a lot of legislation going through. Members will be drifting in from time to time. In the interests of time, however, I thought we would get started.

Mr. Malden, would you like to proceed?

Mr. Terry Malden: Yes, I would, thank you.

We're here, of course, to discuss Bill C-55. Let me just mention that I think you have there, or it's coming to you, a document that covers the ground we will be covering in our presentation this morning, and some additional material we can refer to if questions come up that make it relevant.

To assess Bill C-55, in our view, it's necessary to understand three things: what is the issue it addresses; what's the source of the issue and the solution required to address that issue; and third, since we're here because of an international trade dispute what's the relationship between Bill C-55 and Canada's international trade obligations.

Let's begin by talking about the issue. I think it's valuable to talk about the issue by first mentioning some of the things that are not at issue in this bill. One of the things that is not an issue is free trade. There are no restrictions whatsoever on the imports of foreign magazines into Canada. Foreign publishers sell hundreds of thousands of magazines in a totally open Canadian market.

Imported magazines in fact account for 50%, according to Statistics Canada, of magazines purchased in Canada, and for over 80% of magazines sold on Canadian newsstands.

The issue is not one of protecting Canadian publishers in the magazine marketplace. As we've just said, Canadian publishers have to compete every day with hundreds of thousands of imported magazines. We have never asked for, and never have been given, protection against import competition for readers. The fact that we're able to succeed in such a competitive market is due to the fact that we deliver editorial content that Canadians want to read.

The issue is not restriction of what Canadians can read, obviously. Canadians can and do buy magazines from everywhere in the world. They demonstrate a strong demand for information and stories about our own Canadian society, but they also demonstrate strong demands for stories from other countries, particularly the United States. What Canadians really want and what they have and will continue to have under Bill C-55 is choice.

The issue is not a breach by Canada of its trade commitments to its trading partners. Bill C-55, as we will discuss later on, is entirely consistent with our trade agreements. In fact, I think the right way to look at this issue is that Bill C-55 is needed because of an American attempt to circumvent Canada's rights under trade agreements to which it is a party.

The issue is not a ruling by the World Trade Organization against Canada's policy in the magazine sector. The WTO said, “We would like to stress that the ability of any Member to take measures to protect its cultural identity was not at issue in the present case”. What they were saying was that there was nothing wrong with Canada's policy in this area. Only the previous measures were found to be technically in violation of GATT.

So what is the issue? The issue is whether Canadians will continue to have channels of communication through which to share the values, interests and stories that make Canada the best country in the world. The issue is whether American publishers should be allowed to threaten these channels of communication by competing unfairly in the Canadian advertising services market. The issue is whether Canada will stand up for its interests and rights, including our rights under international trade agreements.

Now let's talk about why this is an issue. Government policy now and for the last 30 years has aimed to ensure an environment in which our Canadian identity can be maintained in the face of a huge amount of foreign—particularly United States—cultural product coming into this country.

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Fundamental to this policy has been the belief that Canadians must continue to have the opportunity to read about their own interests, stories, and values.

The government measures that have been in place and that underlie Bill C-55 have been based on two important premises: one, in a free and democratic society, media should operate primarily in the private sector; and two, Canadians should have the chance to tell their own stories.

Now, those two premises mean that Canadian publishers must be able to operate in a viable, competitive environment.

Talking about where publishers compete, we have to recognize that publishers compete for two groups of customers—readers and advertisers. As we've seen, Canadian publishers can and do successfully compete with foreign publishers for readers in a totally open market. But to survive, Canadian publishers also need to be able to compete successfully for advertisers. We should note that advertising revenues are essential to any publisher's viability. They can account for anywhere from 60% to 100% of a publisher's revenue.

It's clear that Canadian publishers need to be able to compete successfully for advertising revenues if they are to survive, given the importance of advertising revenues to a publisher's commercial success.

The fact is, even the most efficient Canadian publishers with the most loyal and interested audiences could not compete with American publishers in the advertising services market. So despite the demand by readers for Canadian stories, Canadian publishers would not survive in the face of unfair competition for advertising revenues by American publishers.

To understand why they're such a threat in the advertising services market, we have to look at the answers to four questions.

One, do U.S. publishers have an unfair and insurmountable competitive advantage? Two, would U.S. publishers exploit this advantage in the Canadian advertising services market if they could? Three, would Canadian publishers be displaced, and would they lose market share to U.S. publishers in the advertising services market? And four, would Canadian publishers go out of business as a result if they were to lose market share?

Let's go through these questions one by one. Do U.S. publishers in fact have an unfair and insurmountable advantage in the advertising services market? To understand the answer to that question, we have to understand how U.S. publishers could come into this marketplace to sell advertising services if they were allowed to. The way they could come into the market, because they already have magazines with significant circulation and audiences in Canada, is through the publication of split run advertising editions, which would bear very little incremental cost. They could generate revenues without incurring very much cost at all.

In a split run advertising edition, Canadian advertising would be inserted into the U.S. edition, which is already sold in Canada, without any cost of editorial or corporate overheads and with minimal production costs. Really, it's just the cost of stopping the printing press when the copies for Canada are being printed, changing the printing plates to put the Canadian ads in, and starting it up again.

Because of this cost advantage, U.S. publishers could earn high profit margins on the sale of advertising revenues. Using our own publishing costs as the basis for making this estimate—and Canadian publishers by any comparison are as efficient on a scale-by-scale basis as American publishers, so we can use our costs as a representative way of estimating the profit margins a split run could make, using our costs of MacLean Hunter magazines in particular—we have estimated that with the absence of those costs that would not be incurred by split run editions, profit margins could be estimated at anywhere from 50% to 80% of the incremental advertising revenue. Even if U.S. publishers believed they had to discount their rates to take into account that their advertising services would not be a tax-deductible expense under section 19, margins could still be 30% to 70%.

These high profit margins obviously give U.S. publishers a huge amount of room within which to compete for advertising with Canadian magazines in terms of discounting their rates to make themselves more attractive. In the goods market, this would be dumping. The practice in this marketplace is akin to dumping. Unfortunately, there are no remedies to address the dumping of services in current trade rules.

When you contrast the situation that American publishers would be in with that of Canadian publishers, the advantage is clear. Canadian publishers cannot duplicate the cost advantage of advertising split run editions—all publishing costs are incurred in this market, in Canada. Our advertising rates, therefore, must cover all normal publishing costs.

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So the answer to the question of whether U.S. publishers have an unfair and insurmountable advantage is clearly “yes”.

Would U.S. publishers exploit this advantage in the Canadian advertising services market if they could? There have been a number of studies done for and by the government over the last 30 years when they've been called on to address this issue, and all of them have concluded that American publishers would, in fact, be attracted to the profit opportunities that split run advertising editions would offer them.

Just looking at Time Canada as the only major example of a split run edition currently operating, it's clear there is a huge cost advantage and that the profit opportunity would be easily significant enough to attract other split run advertising editions of other magazines.

Canadian editorial content of Time magazine and Canadian editorial costs are minimal. If you take last week's issue, it had one page of Canadian editorial content. I've not counted pages, but I might note that if Time Canada has five pages, on average, per issue, of Canadian content over the course of the year, I'd be surprised. It might cost, if it did have that much, as much as $1 million to produce, at the high side. Maclean's magazine, which is its direct competitor as a news weekly, has a budget of editorial costs for next year of $9 million—an $8 million difference.

Time has around 25 employees. That's the number listed on the masthead, and it's a number that was confirmed to me by a colleague of mine who recently left Time. Yesterday they said 54. Whether it's 54 or 25, in comparison to Maclean's 125 employees, there is a huge cost advantage represented by that.

Time's advertising rates are, in fact, 30% to 40% below those of Maclean's, depending on the target category that the advertiser is aiming at. Time yesterday mentioned that Time's rates were above Maclean's, but they were talking about advertising rates on a cost-per-thousand circulation basis. Advertising isn't bought on the basis of circulation, advertising is bought on the basis of audience.

Time magazine, Maclean's, and most significant consumer magazines in Canada are members of an organization called Print Measurement Bureau, which measures the audiences of magazines, regardless of the circulation. It is those audiences that are the basis on which advertising is bought. Time's rates are 30% to 40% below those of Maclean's.

I think the final piece of evidence as to whether U.S. publishers would exploit the advantage they have in the Canadian advertising services market is that they are aggressively pursuing it. They and their government are aggressively pursuing access to this market. Businesses generally actively pursue something because they see a profit opportunity.

So the answer to the question of whether they would exploit this advantage is clearly “yes”.

Would Canadian publishers be displaced by U.S. publishers in the advertising services market if they entered it? Well, a study mentioned in yesterday's discussion, by Harrison Young Pesonen and Newell, concluded that large portions of advertising budgets would go to U.S. publishers.

Harrison Young also concluded that the amount of spending in magazines would increase. Their point was that magazines would gain a bigger share of the total advertising expenditure in Canada because there would be more titles to choose from, particularly titles in narrow, special-interest categories in which there aren't currently Canadian magazines. But they concluded that only 24% of that would go into categories of magazines where Canadian publishers do have titles, and that in fact, even with that 24% increase in revenues in categories in which we have magazines, Canadian magazines would lose.

They concluded that depending on the target audience the particular advertiser was aiming at, anywhere from 30% to 90% of the advertiser's budget would find its way to split run editions, which would be a huge loss of market share to Canadian magazine publishers.

The last piece of evidence as to whether market share would actually shift in any significant way to split run editions is the fact that, as I think you will hear next week, Canadian advertisers are clearly and quite understandably attracted to the opportunity for discounted advertising rates that would be offered to them by split run publishers.

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If we lose market share, will we go out of business? We've already seen that advertising revenues are crucial to the financial viability of publishers, accounting for 60% to 100% of our revenues.

On page 6 of the document you have, there is a financial analysis that indicates the effect on the profitability of a magazine with a small loss of advertising revenue.

The numbers on this page are based on the actual financial results of one of our larger and more successful Maclean Hunter magazines. I've used a consumer magazine in this case, because I wanted specifically to use a magazine that had significant circulation revenue as well as advertising revenue.

I've taken the actual revenue for that magazine, pretended it was $1,000, and then indexed all the other revenues and costs to that number.

What you see is that in the current situation, that magazine generates a profit that is about 13% of advertising revenue and something less than 10% of total revenue.

The second column, or the “after” column, is what would happen to our numbers if we lost 10% of our advertising volume and if our rates went down by 10% because of price competition from split run editions. You can see that in this scenario, which is a pretty optimistic scenario in terms of the amount of damage that could be done, this magazine that is currently profitable and healthy would no longer be that way.

So despite the success of Canadian publishers in meeting the demand by Canadians for stories about themselves—and that is clearly demonstrated—the loss of advertising revenue to unfair competition in the advertising services market would drive us out of business.

I'll go back through those questions one more time.

Do U.S. publishers have an unfair and insurmountable advantage? Yes.

Would they exploit that advantage if they were allowed to? Yes.

Would we lose market share in the advertising services market to split run editions? Yes.

Would that loss of advertising revenue force us out of business? Absolutely.

So what happens if this takes place, if this scenario happens? Well, two things. Canadians are the losers. They would lose an important channel through which they currently share their stories, their values, their interests—those things that serve to make Canada the best country in the world.

American publishers would, by the way, have no reason to incur the incremental costs of adding Canadian content to their split run editions. The reason they are able to do split run editions and do it so economically is that Canadians are interested in the non-Canadian content those magazines deliver, and they would continue to be interested in those magazines. Therefore, the American publishers could continue to deliver the audiences that advertisers would be attracted to without going to the extra cost of adding Canadian content.

So there would be no offset to the Canadian content and the channels of communication that Canadians would lose with the disappearance of Canadian magazines.

So Canadians would be the losers, American publishers would be the winners. They would have the opportunity to make more money in Canada. Their government also would be the winners. They would have received a trade concession—namely, access to a marketplace, the advertising services market, to which they've never had access and never been given access. They would have achieved access to that market without giving anything to Canada in return by way of any trade concession on their side.

If Canadians are to have the opportunity to read about their own interests, values and stories, Canadian publishers cannot be subject to unfair competition from U.S. publishers in the advertising services market. It comes down to a choice between ensuring that Canadians can continue to read about themselves or allowing American publishers to make more money in Canada.

Let's talk briefly about Bill C-55 and its relationship to Canada's trade obligations. Bill C-55 has become necessary because the U.S. overturned Canada's previous measures through a narrow, technical interpretation of GATT, the WTO agreement on the trade in goods. That was because the previous measures did, in fact, relate to magazines as goods. But I remind you that in its ruling, the WTO said, “We would like to stress that the ability of any Member to take measures to protect its cultural identity was not at issue in the present case”. Canada's policy was not in question. Only the measures for implementing the policy were found to be offside.

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The new measure enacted by Bill C-55 does not affect magazines as goods. It deals directly with the advertising services market, and therefore falls under GATS, the WTO agreement on trade in services. Under GATS, the U.S. has no rights of access to Canada's advertising services market, and Canada has no obligation to provide such access.

Canada has specifically declined to offer advertising services market access in negotiating GATS, and the U.S. neither obtained nor paid for that access. The U.S. in fact is now trying to gain access to Canada's advertising services market for free. To allow them to do so, I submit, would not only be bad cultural policy but also bad trade policy.

In conclusion, enactment of Bill C-55 is essential to the maintenance of Canada's policy of fostering an environment in which we can maintain our own Canadian identity. It prevents unfair foreign competition in a market to which Canada has never negotiated access by foreigners.

It seems to me it would be doubly galling to grant access to a market to foreigners in return for no trade concessions, and then to allow them to operate in that market in an unfairly competitive way.

It serves the needs and wants of Canadians with a measure that is entirely consistent with our obligations to our trading partners. I might add that it's the only measure that, after a couple of years of very hard work by people inside the government and outside the government, has been identified as both effective in achieving the policy objective and consistent with our trade obligations.

You may hear next week—and I think it's often said—that people who oppose this particular measure and previous measures support the policy objective but are just objecting to the measure itself. I think the question that has to be asked is, what's the alternative that is both effective and meets our trade obligations?

Failure to enact Bill C-55 would make Canadians the losers and Americans the winners. In the interests of Canada, Bill C-55 deserves your support.

Thank you.

The Chairman: Thank you very much, Mr. Malden. I think you've made your point of view very clear to us.

I would like to open the meeting for questions, unless your colleagues have something to add.

Mr. Lowther.

Mr. Eric Lowther (Calgary Centre, Ref.): Mr. Chairman, I came in a little late. I apologize for that. Perhaps I could get a question on the second round. I'll forgo my first position at this point.

The Chairman: All right. Thank you.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): First of all, I'd like to thank you, ladies and gentlemen, for appearing before our committee. I don't usually sit on the Heritage committee; today I'm replacing Ms. Suzanne Tremblay, our Heritage critic, who apologizes for her absence. I am a regular member of the Foreign Affairs Committee, where I sit as the international trade critic for my party, so if I may, I will ask questions on that particular aspect of the bill.

I don't want to be unpleasant, but I believe that this is a somewhat touchy subject—I know this may sound political, but I'll do my best not to make it so. Are we not treading on sensitive ground when we say that we are the best country in the world when we negotiate, for example, with the Americans or the French? How do we rank those countries? Do they rank tenth, seventh, or ninth? If I were to take part in international negotiations, and if I were to make that type of statement about my country, I think that, as a Canadian negotiator, I would feel somewhat uncomfortable. But that's my personal opinion.

My question is twofold. Firstly, at point 5 of the document that you submitted this morning, we read the following question: "Aren't we subjecting ourselves to the possibility of retaliation?" Secondly, you state that:

Canada is entitled to adopt new measures that respect its trade agreements. Bill C-55 does just that.

However, in point 4, you don't seem as certain. You say:

If Bill C-55 is not agreed to by the WTO, the validity of the GATS and the structure of the WTO agreements could be challenged.

I find that statement rather hard to swallow. Knowing that Bill C-55 could be challenged by the WTO—that's why we are discussing it this morning and why we have already discussed it at length—do you really think that if that were the case, the entire structure of the WTO would be revisited, rather than simply the legislation that would have been passed here?

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[English]

Mr. Terry Malden: I'm not sure I'm qualified to answer that question. My understanding, from all the advice we publishers, who are not trade experts, have been given by our trade experts and lawyers, is that Bill C-55 is clearly consistent with GATS and should clearly be adjudicated by GATS.

The statement you referred to under point four is simply saying that if a measure that's constructed as clearly, as a services measure, as this is not found to be adjudicable under GATS, and somehow is found to be adjudicable under GATT, then you have to wonder what the two different agreements mean, and whether GATS has any meaning in a general sense at all.

I can't comment on what the implications would be for the more general trade questions you've asked.

[Translation]

Mr. Benoît Sauvageau: Agreed. I will attempt to ask another question.

[English]

The Chairman: Mr. Malden, if any of your colleagues want to comment or jump in to amplify the answer, they should, by all means.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau: If we paint ourselves into a corner, so to speak, with respect to advertising in split-run editions of magazines, do we not risk depriving ourselves of other tools when we negotiate other agreements with the United States or other countries? For example, we are at this time negotiating a free-trade zone with the Americas, and we are constantly negotiating with the Americans or with other partners. Do you think it could be harmful if we were to maintain Bill C-55? I don't have an answer to that question; and it isn't a trick question. I fear that this bill could be harmful to us when we undertake other negotiations.

[English]

Mr. Terry Malden: My view on that would be that Bill C-55 has been drafted in good faith by the Canadian government to be consistent with our trade obligations, and that Canada was very careful to not include access to the advertising services market in the GATS agreement. Therefore, it is not doing anything that should be seen to be contrary to our trade obligations, or should have any impact on the impression that Canada is totally committed to rules-based trade.

What we are saying is that there are rules, and we just want to live by those rules. This measure does that.

Mr. John Thomson: Perhaps I could add to that.

While trade-offs are made in international trade negotiations, with different things given back and forth between countries, I think we can theoretically talk about that with respect to this issue, but quite frankly, I don't think any of us believes for a minute that Canadian culture is negotiable. The bottom line is that we are entitled to a culture in this country. It's unique. It's distinctive. It's different from anywhere else in the world. It's what makes us love living here. We're proud to be different from the United States.

At some level, that's just never negotiable. It's not on the table. What we're concerned about is making sure it stays that way.

[Translation]

Mr. Benoît Sauvageau: I see, thank you. The Multilateral Trade Agreement gave us an example of non-negotiation on culture. I have no problem with that.

Finally, I would like to comment on something that I read in today's press clippings. I was absent when it was discussed, but I've learned that my Reform colleague Mr. Solberg had stated that Bill C-55 was in fact a lobby by two large Canadian publishers in order to make money and protect themselves against the Americans. I don't share that opinion, and I would like to know what you think about this statement that was made recently before this committee and that you have no doubt heard about.

[English]

Mr. Michael Atkins: I have not ever, in my life, worked for Telemedia or Maclean Hunter. I own my own business. In fact, I compete reasonably effectively with my colleagues here.

That's just nonsense, and should be treated as such. It's a political statement to make that kind of remark.

Perhaps I could draw your attention to these two magazines we've passed out. You'll see hundreds and hundreds of Canadian magazines, many of which can not and will not exist if this predatory kind of policy is allowed to exist.

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So to throw in some silly remark that there are certain companies that are central to this is just not fair, and certainly doesn't represent the truth.

Ms. Lilia Lozinski: I would like to respond to that as well, being a small publisher.

Probably just under 300 magazines belong to an organization called CMPA, the acronym for the Canadian Magazine Publishers Association. This organization and MacLean Hunter and Telemedia are all part of this, and we're all in this together. This isn't a big company against a small company. I'm here to represent the little guy along with the big guy beside me.

Mr. John Thomson: I would also speak to that point.

Our magazines, too, belong to CMPA. We also belong to the British Columbia Association of Magazine Publishers, which has about 20 members. At their annual general meeting in September, they passed a motion of that association in support of this measure. That was passed without opposition from any member. I can tell you that the B.C. Association of Magazine Publishers includes members from all points in the political spectrum. It includes arts and literary journals of tiny size as well as some significant, substantial publications.

The reason the B.C. association is unanimously in favour of this, as is CMPA, is that they're concerned about retaining a Canadian cultural space in this country. You know, there's a gigantic American entertainment industry that has the wealth and power and political access in Washington to bully their way into our market and beat up on people offering advertising services in Canada.

[Translation]

Mr. Benoît Sauvageau: I would like to close by saying that I am happy to hear that all points in the Canadian political spectrum are respected in British Columbia. Thank you.

Mr. Mark Muise (West Nova, PC): Probably all of them.

[English]

The Chairman: Go ahead, Ms. Lill.

Ms. Wendy Lill (Dartmouth, NDP): Thank you.

Thank you for coming. I also apologize for arriving here late.

I'd like to pick up on your comment; it sounds like we had some people beating up on our committee last night around this issue.

I'd like to ask for some comments on a sheet I have here, put out by the Embassy of the United States of America, “The Facts on Bill C-55 and Canada's Magazine Policy”.

I'd like your comments on this statement, because I'd like to know how to respond to this:

Advocates of C-55 often refer to the proportion of Canadian newsstand space occupied by U.S.-based magazines. First of all, the percentages given in these statements are no better than conjecture, since there's no formal or scientific measurement for newsstand space. More importantly, much of the Canadian magazine market is supplied through the mail by subscription, and estimates are that Canadian magazines have at least four-fifths of the subscription market.

What do you make of that statement? I think we all have trouble trying to understand the difference between the 80% and 50%, and whose magazines are actually getting into Canadian homes.

Mr. Michael Atkins: I think Terry may be able to speak more to the specific numbers, but the reality is, I mean, I invite anyone in this room to wander down to a local newsstand. Go to the Ottawa airport and take a look at what's there. Take a look at the little kiosks that are bought by the American publishers to display their goods.

You cannot go anywhere, to any significant newsstand anywhere in this country, and not have a foreign country's magazines dominate it. I don't care if it's 70% or 90%; it's a reality. It takes no genius to be able to see that at the Ottawa airport on your way home.

I recommend that this be the solution to the conjecture that is referred to.

Mr. Terry Malden: I guess the other response I would make to this is that, first, the numbers we use come from Statistics Canada, so however they measure them, we've just used them.

Secondly, though, as we've pointed out, the issue isn't whether Canadian publishers do compete successfully for readers, because we do, and we do because Canadians want to read what we have to deliver along with what they want to read in foreign magazines, mostly American. We've never denied that we do okay in competing for readers. We're saying that despite our ability to compete there, we can't survive if we have to compete for advertisers.

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So I don't think the issue of how healthy you are with respect to readers is a relevant issue.

Ms. Wendy Lill: Okay.

I'm interested in understanding more clearly where postal subsidies now sit in this equation. Have postal subsidies for Canadian magazines disappeared? What's the status? Are American magazines, the ones that are grandfathered, now going to be receiving them?

Maybe we could have some clarification, in your estimation. I know postal subsidies were the backbone of Canadian magazines' survival for many years.

Mr. Terry Malden: Well, they're an important part of the economics of a magazine's commercial performance.

Several years ago, controlled-circulation magazines—and that's what most of the business publications are, non-paid circulation, delivered for free to specialized audiences—lost subsidies altogether. So they will now be paying the same postal rates as foreign magazines coming into this country. Consumer magazines, paid-circulation consumer magazines, will continue to receive the postal subsidy.

The WTO had an issue with the way in which that subsidy was paid, but not with the fact of subsidization. The proposal is that the method of distributing the subsidy be brought into compliance with WTO requirements, which will leave a difference in postal rates for Canadian magazines versus foreign paid-circulation magazines.

I don't know what the percentage is, but much more than 50% of the circulation of the normal U.S. magazines circulated in Canada is done through newsstands, so they're not hugely affected by postal rates.

Ms. Wendy Lill: Okay.

The Chairman: Thank you. Mr. Muise.

Mr. Mark Muise: Thank you, Mr. Chairman.

I'd first like to start by thanking our guests today.

Like most members of this committee, I have a real concern about the influx of split run magazines in Canada. I think it's clear we understand that if produced in the States, and effectively they just change the plates, as you mentioned, they can sell ads for much reduced prices. That really concerns me. But from our point of view, we have to assure ourselves that we're doing the best thing possible to assure that this does not continue in such a way that we don't negatively affect our position internationally.

I'm wondering, are there other ways that you could see we could accomplish more or less the same thing by using either tax incentives or disincentives, or something like that, other than this type of legislation?

Mr. Terry Malden: Michael and I worked on an industry task force with our own independent experts as advisers, and then we had some contact with Heritage, as it looked at alternatives. I can tell you that none of us were able to come up with a measure that was effective, that would achieve the objective and be consistent with trade obligations.

We looked at subsidies as one solution, but whether or not that would be consistent with trade obligations, there are all kinds of reasons why it wouldn't achieve the policy objective. There are also all sorts of questions about why the Canadian taxpayer should have to pay for the incremental profits of American publishers. So aside from whether it works, was it a good solution for Canadians.

And tax breaks and so on, no, we could not...and there were independent financial economic experts who looked at those kinds of things and drew that conclusion.

Mr. Mark Muise: Okay.

Another issue that some witnesses pointed out to us—and I know this won't affect you directly, but I'd like to hear your opinions on it—concerns clause 21, or the grandfathering.

Some witnesses have mentioned to us that the way clause 21 is written at this present time, it leaves too much to interpretation, and it doesn't give them the protection they would like to see there. They have suggested that the grandfathering should basically just list those who are already there, and have been there for a long time, so they just can continue with the way they're going.

I'd just like to get your opinion on that, although I understand it doesn't affect you directly.

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Mr. Terry Malden: Right.

Both Canadian publishing associations, business and consumer magazine, have no desire to see Time magazine, for example, capped in terms of the amount of revenue it's allowed to generate, but whether or not the suggested changes to the grandfathering clause is a good way to do it from an international trade perspective, and from a legal perspective, I don't feel capable of commenting on.

In other words, presumably the wording is there for a reason, but perhaps not. Perhaps the recommended solution is acceptable.

In other words, we don't object to Time magazine being able to grow Time magazine's business in Canada. It's an established business, and it should be grandfathered.

Mr. Mark Muise: Would any other members from the group like to speak to that?

Mr. Michael Atkins: Once you've crossed the bridge of grandfathers, then I think you should stay with it, so we don't have an issue with capping. I don't understand that this was the intent at all of the legislation, so as to the mechanics of how you would address that kind of a specific concern, I think we'd have to defer to others.

Mr. Mark Muise: So what you're saying is that the publishing industry doesn't have a problem with, for example, Time being there and continuing to do its thing, as it had in the past.

Mr. Michael Atkins: Right.

Mr. Mark Muise: My last question is, could you tell me approximately what percentage of gross revenues of the publications—for example, that you represent—are used to hire Canadian writers and editors in relation to the purchase of articles and features from Canadian writers?

Mr. Michael Atkins: That's a tough question to answer, for a couple of reasons. The variability of whether you have a very high press run or low press run changes the percentages. In other words, I have a small business publication in northern Ontario, and a high percentage of my investment is with editorial folks. It would run 20% to 25%. But the national golf magazine I have would have a low percentage, because it has 125,000 circulation.

So it's not a very reliable fact, because it could run anywhere from 10% to 20%, depending on the size of your press run, not the size of your staff.

Mr. Terry Malden: I guess one of the realities of the situation we face is that many of the costs of publishing a magazine are the same regardless of the scale of the magazine. If Chatelaine spends $2,500 a page, on average, to create an editorial page with, in our case, 800,000 circulation, Better Homes and Gardens in the States, with 5 million circulation, probably doesn't spend much more than $2,500 or $3,000 a page.

That's another advantage that big publishers have over small publishers within any given market, and also between Canada and the U.S.

Ms. Lilia Lozinski: But in any given issue, ultimately, for a publication like Elm Street, we have a full-time staff that works on the magazine, but we hire approximately, depending on the issue size, anywhere from 35 to 45 freelancers per issue. These are writers, photographers and illustrators to provide that content, and that Canadian culture we're talking about. We're doing this on a per-issue basis. Over the course of a year, that may be 360—whatever the math works out to—freelancers, writers, illustrators, photographers, and stylists that we are hiring to provide this content for the Canadian reader.

Mr. John Thomson: I would echo the previous comments. We have two magazines. One is about a quarter of a million circulation, and the other is just about 120,000. For the smaller one, editorial costs are more than 20%. For the bigger one, they're in the 12% to 14% range. Yet we spend more per page on the big magazine than we do on the small.

As with Elm Street, there is a whole community of freelancers throughout British Columbia who contribute to our magazines. Our existence is a big part of their lives, for them to tell their stories from all the nooks and crannies of B.C.

Mr. Mark Muise: Thank you.

The Chairman: Thank you, Mr. Muise.

Mr. Lowther, you had agreed to skip your turn because you came in late. Would you like to have a turn now?

• 1155

Mr. Eric Lowther: Yes, thank you, Mr. Chairman. I'll be quick. I appreciate that very much.

I certainly agree with a lot of what the witnesses are saying here about the importance of Canadian culture and wanting to protect it. You know, we're all there. We wouldn't be here if we didn't care about our country, and maintaining it and strengthening it wherever we can.

I just wonder about this particular vehicle of this particular bill. I want to speak to a couple of things.

One, we talked about newsstand space as an indication of how that Canadian cultural space is being invaded. As I understand it, newsstand space is purchased more than anything else, and I don't know how the purchasing patterns would really change with this particular bill.

In addition, as I understand it, this bill says that if 100% of the product of a magazine you produced was Canadian arts, let's say, and 100% of the shareholders were Canadian, if the chairman happened to be American, that would not qualify under this particular bill—all within the context of providing Canadian product to Canadians. I mean, it doesn't seem to me that this fits.

My primary concern is this. I have a Canadian business, let's say, and that wants to advertise to a Canadian audience, but there isn't a Canadian magazine that goes to that audience, or at least not a good fit—a sports periodical, let's say. That Canadian business is now forced to advertise to the North American market to target his Canadian market.

Do you have any comments on his dilemma?

Mr. Michael Atkins: I think you'd find that it would be a pretty rare occasion that you'd find such an issue. It's possible, no doubt, that there are niches out there, particularly on the business press side, that are small enough that they don't attract the attention of a regular magazine.

Mr. Eric Lowther: How about Bauer skates in Sports Illustrated?

Mr. Michael Atkins: There are any number of places to advertise.

Ms. Lilia Lozinski: There isn't a shortage of media or vehicles in which the advertisers can advertise in this country. We have magazines on the table right now that list Canadian magazines. I mean, let's face it, beyond just the televisions and the radios and all of that, there's rink board advertising, little league hockey, the minor leagues, the triple A teams.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): There's Hockey News.

Ms. Lilia Lozinski: Yes, there's Hockey News. There's also washroom advertising, grocery carts, floor advertising. GE is making a light bulb that's going to talk to us soon. It's the Pepsi challenge, right? As soon as you turn on the light.

So there isn't a shortage of vehicles in this country, realistically, or there isn't a shortage of alternative media, if you really wanted to get that message across.

Mr. Michael Atkins: I think something else that is a growing reality is the emphasis and the power of all the advertising decisions made in the United States and such. I don't think you will find that there are very many niches a Canadian advertiser cannot address. There may be one or two, but certainly skates wouldn't be one of them. There are all sorts of smaller publications that get to their target markets right across the country.

Mr. Eric Lowther: Okay.

I'll pass, Mr. Chairman.

The Chairman: Mr. Godfrey, and then we'll get on to the second round.

Mr. John Godfrey (Don Valley West, Lib.): Thank you, Mr. Chairman.

Thank you for coming, folks.

I have some questions that were prompted by Time's evidence yesterday. I would gather from some remarks that Mr. Malden made that he's aware of what was said, so I thought I would allow perhaps an expanded response to some of those comments.

Toward the end of the testimony—and I have to admit, I was not here at the beginning, so I'm going both by the written brief and what I heard myself—I think there was a direct question asked of Time about the economics of split runs.

I think the question came down to, well, is it likely that if we didn't do what we're going to do, there would be more split runs coming, that the economics of split runs would encourage further incursions into the Canadian market? I believe I heard the representative of Time say “no”. I wanted you to be able to respond to that.

In your appendix, for example, you seem to make the alternative case, but I thought you might want to possibly take a swing at that one.

• 1200

Mr. Terry Malden: I think the appendix is the best way I know to address that question. Probably the second-last page of the hand-out is the place I would refer you to.

What this is meant to do is to show what the profit opportunity for a split run advertising edition would be. I've used actual numbers in this case—which I hesitate to do, with my competitor sitting beside me—for one of our publications that happens to be of a circulation size that is comparable to several U.S. magazines operating in Canada.

Mr. John Godfrey: Have your associates guessed?

Mr. Terry Malden: They will quickly guess, yes.

Voices: Oh, oh.

Ms. Lilia Lozinski: I want a $9 million editorial budget, let me tell you.

Mr. Terry Malden: I've shown the actual results we achieve on one of our consumer magazines. The second page of numbers is on one of our business publications.

So these are real numbers. What they show is that we make a margin on our business of about 11.2% of revenues.

The numbers a split run would be looking at if it did it...and we're talking here just incremental. We always have to remember that U.S. publishers will make their decisions as to whether to come based on incremental revenues and incremental costs, because they're already here with their circulation revenues, and their production costs and so on, and they must be making money through those numbers or they wouldn't be here. So all they're faced with is, “Do we, given that we're here, and are incurring all those fixed revenues and costs, go after advertising revenues?”

So the second column is what the numbers would look like to a split run edition, if all it had was incremental advertising revenues to consider, and incremental printing and distribution costs and advertising sales.

The cost numbers I will explain as printing and distribution, $300,000, is just the cost—quoted by our printer—of taking all the existing ads out of our magazine and replacing them with other ads when the copies are printed. It's trivial, as you can see.

Then I'm assuming that the split runs would bear the same cost of selling advertising in Canada as we do. That's all they would have. They don't have any editorial costs they would have to incur. Their circulation costs are part of what they're already doing. Management and administration; they would not set up operations in Canada to just sell advertising. So what they end up with is an 80% margin.

The number below that shows that if they set out to generate a profit that was identical to—I almost mentioned the magazine—the “Maclean Hunter magazine”, they could cut their rates by 64% and end up with that same million-dollar bottom line.

Now, they wouldn't do that. They wouldn't have to do that to win market share from our magazine. But they clearly have huge room to discount rates.

Mr. John Godfrey: Thanks.

I have two supplemental questions prompted by Time's presentation yesterday. The first really tags onto what Mr. Lowther was asking, but focuses specifically on the magazine medium.

I'm just going to read you two sections from their presentation, on pages 8 and 9. There's a reference to the underdeveloped nature of the magazine medium in Canada, which is caused primarily by, “lack of advertiser available titles and little or no Canadian title coverage for many editorial segments—specifically Men's, Sports, Fashion and Youth”.

Then it says:

You might question representatives of the CMPA when they are here next week why their members have not moved more aggressively on price, unique editorial content or targeted audiences.

Now, I realize you're the business publications, but you might want to take a swing at that one.

Finally, I just want to understand the response you made to Mr. Muise. I'm still a little confused about what the “freeze” means.

Is it your understanding—and perhaps I should be asking this of somebody else—that the freeze applies...? In the case of Time, they interpret it as applying to their existing Time magazine business. Is that the way you interpret it, or do you interpret it to new enterprises?

Those are the two questions—first, Time's observations on the nature of the Canadian magazine market, specifically, in terms of what it offers advertisers, and then this issue of the freeze.

Ms. Lilia Lozinski: I'm sorry, but could you just repeat the categories you quoted?

• 1205

Mr. John Godfrey: The categories that Time quoted were men's, sports, fashion, and youth. Then they sort of go on about targeted audiences and unique editorial content.

That gives you something rather specific to respond to.

Mr. Michael Atkins: I'm involved in two areas of sports. We do a variety of publishing with the National Hockey League and such, but we also have a golf magazine.

To go directly to the question of what is the percentage of advertising that is attracted to the category of magazines—and I won't mention the companies, because maybe one day we'll get them—the reality is that when we put on our packsacks and go down to New York to ask them why they're not advertising in our wonderful golf magazine, they say, well, it is a wonderful golf magazine; it's not all that interesting to me, because it's about Canadian golfers and Canadian courses and all the rest of it. And the reality is, the spill-over we get from United States we believe to be sufficient—which is to say perhaps Sports Illustrated; it comes into this country, because there's nothing to stop it; we're happy to get it, and some people buy it—and a variety of other American publications that fill that newsstand that we made reference to. A number of advertisers feel that they have covered at least part of the marketplace by that spill-over.

So the market is naturally, in Canada, smaller all over the place, whether it's our media or other medias. We could give you any number of examples of major advertisers that love our product but just don't think they want to—

Mr. John Godfrey: I guess the focus would be on Canadian advertisers who feel that this might be the best vehicle, sort of along the lines of what Mr. Lowther was saying. So it's Canadian advertisers feeling that there isn't a Canadian magazine that would do the job as efficiently as some American product.

Mr. Michael Atkins: I think this should carry on to someone else, but my remark would be that we are in a smaller market, so there are some niches that we may not be covering. Others could speak more directly to that than I could.

Mr. Terry Malden: I'd like to address that, if I could.

The argument that there aren't magazines in these kinds of segments in Canada, that it's because of protection in the advertising services market, doesn't make sense to me. The fact of the matter is, we all spend significant parts of our working life looking for opportunities to grow our business, and we often think, “What about this magazine idea, or what about that magazine idea?”

The areas they've mentioned are special interest areas. What that means is that in the States or in Canada, a special interest magazine attracts a circulation and audience size, because of its specialization, that's smaller than the big, broad type of magazines, like a newsmagazine or a woman's service magazine.

We talked earlier about the economies of scale that publishing involves, where it costs no more to produce a page of editorial on sailing in the U.S. than it does in Canada, but in the U.S., if they generate 600,000 circulation for that type of magazine, we in Canada might expect to generate 60,000 circulation. So the ad rates we can charge are maybe a tenth of what they charge, even though many of our costs, not only editorial but other fixed costs, are the same.

Maclean Hunter used to publish boating magazines and skiing magazines and tennis and other racket sport magazines, and year after year we lost money. The fixed costs are the same but the audience size isn't big enough to generate high enough advertising rates to cover our costs. As well, Canadians in some of those categories find U.S. magazines to be better for them, I'd have to say, than we could afford to produce, because they're bigger and they're thicker—and a boat is a boat. You can read an American magazine about yachting and find it every bit as useful to you as a reader as a Canadian boat magazine. So when you go to the newsstand and you see a Canadian magazine that's 100 pages and your choice is an American magazine that's 250 pages, we often lose out.

So we're not not in those marketplaces because we don't want to be; we're not in them because the economics are not there.

• 1210

When Harrison Young talks about the growth in money going into magazine advertising that would result from split runs, what they're talking about is split runs of those special interest publications coming in and being available for advertisers—who are currently using other vehicles, by the way, as Lil said—for them to now have a place to put ads in the magazine sector if they choose to do that. They say nothing about Canadians' ability to produce those kinds of magazines all of a sudden.

Mr. John Godfrey: But if I'm a Canadian yacht manufacturer and there are no Canadian boating magazines, is the only specialized vehicle for me to try to get to the Canadian market then an American publication?

Ms. Lilia Lozinski: There's a lovely magazine called Cottage Life.

Mr. John Godfrey: Right.

Ms. Lilia Lozinski: It's very targeted, very upscale.

Mr. John Thomson: There's also Pacific Yachting and Canadian Yachting.

Ms. Lilia Lozinski: Sorry; now we're getting competitive.

Voices: Oh, oh.

Mr. John Thomson: If you look at that catalogue of magazines, which has been distributed, there are nearly 300 different titles there. There are few imaginable special interests that some entrepreneurial Canadians have not somehow found a way to address with a magazine, even though the economics are strained, to say the least. There are people who believe in these areas, and are so interested and passionate about them that they'll do it out of their basement or garage or with three friends. They will find a way to get magazines out that are outside the conventional economics, and also inside.

On the subject of youth, we have some fantastic children's magazines in this country. One of the top national magazine awards this year was won by Chirp magazine, a new magazine for preschoolers, for toddlers. It's terrific. It's as good as anything I've seen in the world.

Mr. Michael Atkins: In fairness—actually, not in fairness—to Terry, some of those magazines he referred to are still publishing. Somebody else is publishing them.

Mr. John Godfrey: I didn't want to get into that.

Quickly, the freeze—or is that inappropriate in terms of time?

The Chairman: Yes. I think we'll move on for now. You can come back after, Mr. Godfrey.

Mr. John Godfrey: Fine. Thank you.

The Chairman: I have a request from Mr. Bonwick, followed by Mr. Bélanger.

Mr. Paul Bonwick: Thank you, Mr. Chair.

First of all, I want to thank you for coming forward and to congratulate you for actually providing some substance and some factual detail to back some of your statements rather than just broadbased statements or aggressive statements saying, “This is the way it must be”. Rather, you've provided us with graphs and something we can actually examine, something that substantiates your statement. It's very well done.

As the committee is moving along here, we've heard from a variety of witnesses, and I'm starting to form an opinion—that Bill C-55 is not about censorship. It's not about protection. It's not about subsidies of a magazine industry or a specific section of our economy. It's about Canadian values, Canadian culture, Canadian messages, Canadian stories.

At the risk of repeating myself, what I'd like to do is provide you with a couple of questions I've tried to get out at different points in time, and to get your perspective on them. I'll try to come full circle as I do so.

The first question involves distancing yourself. From a federal government perspective, do you see a responsibility for the federal government in ensuring that Canadians have access to Canadian stories, to Canadian publishers, to Canadian vehicles to deliver those messages?

Mr. Terry Malden: We definitely believe in that. Despite the fact that we have a profit motive behind our position, I think all of us believe that as Canadians.

I was watching a newsmagazine program on TV the other night, and it was talking about I think the 90th anniversary of the Yukon gold rush. It was a story about people going up the Chilcoot Trail in celebration of the 90th anniversary. They interviewed people as to why they were doing it. One woman said she had read all about it in Maclean's magazine when she was a kid, and when she heard about this, she wanted to do it. My wife turned to me and told me I should take that clip to the hearing. Because that's what we're talking about; American magazines wouldn't tell that story.

Mr. Paul Bonwick: The question itself seems simplistic in nature. It's funny, because the chap from Time who had travelled up from New York had stated that, yes, he sees the federal government as having that kind of responsibility as well. But as we travel through the questions, I think it comes right back full circle again, then: How does the federal government ensure that very simplistic question, and in turn that simplistic answer?

Could you tell me what percentage of Canadian advertisers—and I know there are competitors here at the table—represent, proportionately speaking, the total component of advertising within your magazines? How dependent are you on strictly Canadian advertisers?

• 1215

Mr. Michael Atkins: It depends on your market. In the business press in particular, there's tremendous variance. In the high-tech sector, the number of advertising Canadian companies would be 25%. Other sectors may well be much higher, but it does vary by business sector.

So we can't give a flat answer to that. In some areas it's quite low, and in other areas it's quite high.

Mr. Terry Malden: Speaking for Maclean Hunter, we have medical publications where 100% is Canadian advertising, and we have industrial publications where 35% is Canadian and 65% comes from the States.

Mr. Paul Bonwick: I don't mean to be rushing you along, but I have four or five questions I want to get through here. Again, it's open to the panel for comment, whomever wants to share in it, if the answers could be short.

As an expert in the industry, do you see anywhere where Bill C-55 restricts Canadian people having access to foreign publications; censorship, in other words?

Mr. John Thomson: Absolutely not.

Mr. Paul Bonwick: Because that was certainly a word that was used on different occasions yesterday.

Again, as experts in the industry—I'm a lay person just trying to go through this stuff—do you see any censorship provisions in Bill C-55 on editorial content, as you've reviewed it?

Mr. John Thomson: No, absolutely not.

Mr. Paul Bonwick: Because there were a lot of statements made yesterday on censorship and freedom of the press. That was a general direction of the presentation.

Perhaps there were people brighter than I am, reading it, and I just missed it, but I didn't see anything that was censoring editorial content.

The Chairman: Mr. Malden, if you want to be on the record, you have to do more than shake your head. It won't appear in print.

Mr. Paul Bonwick: Obviously, then, by way of response you don't....

Based on Mr. Godfrey's comments, again based on four expert opinions here, do you see any provisions in the bill—and I think this is incredibly important for advertisers, as we'll be hearing from them next week—restricting them from advertising in foreign publications on a general level? Have you seen anything in there on that to suggest that?

Mr. Terry Malden: No.

The Chairman: Can I pass on, and come back to you?

Mr. Paul Bonwick: Well, if I'm out of time, obviously.

The Chairman: Monsieur Bélanger.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): I'll pass in favour of Paul. He's on a roll here.

The Chairman: All right.

There you go.

Mr. Paul Bonwick: I have one last question. Then perhaps I can draw a conclusion and ask for your opinion on that conclusion as well.

You've shown us a very detailed analysis—and I thanked you at the start—showing obvious cost-of-production advantages for split runs or for a publication that is producing, for example, 10 million versus 100,000, or whatever the number might be. Yet the gentleman from Time yesterday stated unequivocably, very clearly, there was no cost-of-production advantage, period.

Based on that cost-of-production advantage, do you see an opportunity whereby foreign publications could come in and markedly reduce their display advertising or their advertising rates in such a way as to just make you completely uncompetitive, and thereby not an option?

Mr. Terry Malden: Yes, absolutely, although the example we gave in the appendix was not based on economies of scale; it was based on just the absence of costs because of a split run approach to publishing.

But, yes, in addition to that there are all kinds of economies of scale because of the fixed cost nature of much of what goes into publishing.

Ms. Lilia Lozinski: On your point, you used a number of 10 million. Please understand that a lot of these magazines in the U.S. market are printing 2 million to 5 million copies. So ultimately, to keep the button on the press going, their unit cost, obviously, is much less in competition—in Canada, let's say—with a Canadian Living or a Chatelaine, at 600,000 or 800,000 copies.

Mr. Paul Bonwick: I think it's incredibly important that the record show that, because the opposite was stated yesterday.

• 1220

In conclusion, I go back full circle to my original question. If the government has a responsibility to Canadians, to make sure they have access to Canadian stories, to Canadian culture, to make sure there's a Canadian mechanism or Canadian vehicle in place to deliver those things—and it's been clearly demonstrated that split runs would have an incredibly negative impact on your industry, on your publications; that there are no censorship provisions; that there are no provisions in there to restrict Canadian advertisers from using foreign publications—then I would suggest that Bill C-55 is extremely valid.

Hence the reason for my very first statement, that I see that this is not about censorship protection or subsidy but rather about protecting those things that are so important to Canadians—that is, Canadian values and messages.

Mr. Terry Malden: We agree.

Mr. Michael Atkins: We're on the record.

Mr. John Thomson: Perhaps I can comment on what you said.

Yes, Canadians governments do have that responsibility, and that's why Canadians elect governments, precisely to protect their Canadian distinctiveness and Canadian institutions. If that wasn't the case, if Canada wasn't different, the institutions that are symbolized by the building we're in, and that are around us here today, wouldn't need to exist. And yet what we have is American publishers who want to treat Canada as if it were a 51st state.

Mr. Paul Bonwick: Well said.

The Chairman: Thank you, Mr. Bonwick.

Monsieur Bélanger.

Mr. Mauril Bélanger: Il a déjà tout dit.

The Chairman: Mrs. Lill.

Ms. Wendy Lill: A lot of the conversation has been around readers and advertisers. In light of the fact that we have all the Governor General's award winners for literature here today in the House of Commons, I'd like to turn the focus to the writers and the cultural workers, and the impact that not having some type of legislation such as Bill C-55 would have on these people.

Again, in the age of quantifying things, I would like to know from you, if you have any sense of it, the number of writers, editorial writers, photographers—Canadian cultural workers—involved in this industry who will be adversely affected by not having this bill.

Ms. Lilia Lozinski: I would just reiterate the points I made earlier. I'll use the example of Elm Street. We publish eight issues a year. On average, we employ 35 to 45 Canadian writers, photographers, and illustrators. So over the course of the year, for that one publication, we would employ about 360 people for Canadian content, photography, illustration, and styling.

Ms. Wendy Lill: I guess I'd like to think that this kind of statistic would be accumulated, because we're talking a major job sector. I think governments and the public would want to know the impact on our Canadian creators.

Mr. Terry Malden: Could we come back to you with an answer for that one?

Ms. Wendy Lill: Absolutely. That would be excellent.

Mr. John Thomson: It's certainly in the tens of thousands.

Ms. Lilia Lozinski: Yes. Collectively, if you did all of the Canadian magazine industry, it'd be huge.

Mr. John Thomson: I think StatsCan has that number, actually.

Mr. Terry Malden: We'll get back to you on that.

Ms. Wendy Lill: Okay. Thank you.

Mr. Mauril Bélanger: Mr. Chair, I'd like to have the floor very briefly to table a document, if I may, once we're done with the questioning.

Mr. Eric Lowther: Can I ask just one more?

The Chairman: Yes, Mr. Lowther.

Mr. Eric Lowther: And then we'll conclude, unless there are other questions, of course.

I was interested in Mr. Atkins' comments earlier to Mr. Godfrey's question about some of the Canadian magazines in the States that probably wouldn't sell because they have Canadian stories.

Do you feel, Mr. Atkins, or are you suggesting, that none of your members expect to expand internationally and adopt this technique of split run editions to help pay for their expansion?

Mr. Michael Atkins: Well, it's possible that somebody would, or might like to, but I think the only reason a Canadian magazine exists is to reach Canadian readers.

• 1225

Mr. Eric Lowther: So if they want to expand into other markets and use the split run technique, you're saying, intrinsically, we just don't do that as Canadians.

Mr. Michael Atkins: The reality is, it's possible. There may well be some Canadian entrepreneurs who are in effect publishing what might be a North American magazine. It's entirely possible. But the absolute preponderance of Canadian magazines that I'm aware of—and I'm involved in the weekly newspaper business and the trade business and the consumer side—is that we tell Canadian stories. And those Canadian stories don't sell in Houston. They don't care about somebody—

Mr. Eric Lowther: But you could sell American stories in America and still be a Canadian magazine, do the same split run.

Mr. Michael Atkins: Yes, that's possible. It's conceivable that you could write a Canadian magazine about New York, I suppose, and find a way to be successful. That's possible. I'm not sure there are a lot of people who would find that's the way they'd want to spend their lives, but it's possible.

You see, the Canadian magazine industry is quite unique. It's not exportable. It's not like another industry where you can say, well, we'll make it better and then export it somewhere.

The best thing we can do is write compellingly about the Canadian experience, and by and large, the people who are interested in the Canadian experience live here, and want to know about it. So it's not an exportable commodity.

You could find some exceptions, no doubt. You might do some kind of magazine that would find some currency in the United States. I don't deny that's possible. But the preponderance of our activity is to tell Canadian stories of interest to Canadians.

Mr. John Thomson: It's really a one-way street. The United States is a very large, very self-confident and very self-reliant country. They live in such a big island in our world that they don't need to be all that aware of what goes outside their island, because it's such a large world inside their country.

Here in Canada, at one-tenth the size, we, like many small countries, have to be informed about what goes on outside our borders. Consequently, there's very little demand for information about Canada in the States. The volume of demand in the United States for information about Canada, originating in Canada, is much less than the reverse, because as Canadians we just have to be aware of this elephant sleeping to our south.

Mr. Eric Lowther: Okay. Are you saying, then, that because we're smaller, it's okay for us to do split runs in the States, but because they're bigger it's not okay for them to do it here?

Mr. Michael Atkins: There'd be no split run. It's not a split run. If you felt like it—and there are, no doubt, some people who do, or would—you could create a North American magazine, but you certainly wouldn't create a Canadian magazine with the thought that you were going to export that into the United States successfully. There is not enough interest.

Mr. Terry Malden: Canada isn't unique in that it isn't a big exporter of magazines, and we're not unique as publishers in not looking at exports as an important growth opportunity. I think the numbers show that most countries in the world, most publishers in countries in the world other than the United States, export maybe 1% of their total circulation. The exception is the U.S., where I think it's 5%. And almost all that 5% comes to Canada.

When the U.S. exports its titles to other countries outside of North America, there are different magazines that get read in those other countries. They localize the content. It's only the Canadian-American relationship that allows them to export magazines unchanged and get an interested audience.

To your point about what about us producing split runs, Michael is absolutely right. I have confidence that as smart publishers, we could successfully produce, if we chose to, North American magazines with circulation in Canada and the United States, and then we could do split runs into Canada just the way the Americans could. But the policy objective would not have been achieved, because to do that we would have to eliminate our Canadian content. And this isn't about keeping us in business other than as a way to ensure that Canadians have Canadian content. It's not about us maximizing our profits; it's about Canadian content.

Mr. John Thomson: And I think it could be said that when the Canadian magazine publishing industry threatens the very survival of the American magazine publishing industry, and threatens the ability of Americans to tell their own stories to themselves, no doubt Canadians will look reasonably on reasonable measures by the American government to defend their industry.

• 1230

Mr. Eric Lowther: What I find surprising—well, not surprising, but interesting—is that, from what you're saying, Mr. Malden, your altruistic commitment to Canadian culture supersedes your commitment to making your business succeed.

Mr. Terry Malden: No. I didn't mean to say that. What I meant to say was that if we chose to grow our business in that route, we could. Instead, what we've chosen to do is to operate a business with the one competitive advantage we have—that is, that we know how to produce content about Canada that is of interest to Canadians.

That's why, on the point you were making yesterday, that this measure has no content requirements, our answer is, look, if you allow us to compete in a viable, competitive environment, the one competitive advantage we will use to make sure that we have a successful business is producing Canadian content. We can do that better than foreign publishers can. And we don't have to be told to do that in any kind of legislation, because it's in our interest to do that.

We may care about it as Canadians, as we all do, but from a business perspective, we're producing Canadian content not out of altruism but because it happens to be the best business model for us as Canadian publishers.

Mr. Eric Lowther: Thank you. I appreciate that clarification.

The Chairman: I think I have an intervention from Mr. Bélanger, then we'll close it to questions.

Mr. Dennis J. Mills (Broadview—Greenwood, Lib.): Mr. Chairman, I have an intervention too. I have a motion here.

The Chairman: I realize that.

Mr. Bélanger.

Mr. Mauril Bélanger: Mr. Chairman, there have been references for the last two days to a particular study. In fairness to the members of this committee, the government will table that study. It's not available in both official languages at the current time, but hopefully by next Tuesday it will be tabled, and will be directed to the clerk for distribution to members of the committee.

The Chairman: Thank you, Mr. Bélanger.

Mr. John Godfrey: What was the subject of this study? Perhaps you can remind us.

Mr. Mauril Bélanger: This was referred to yesterday and today, in both presentations, one by Time-Warner and today. This is the study by Harrison Young Pesonen and Newell.

The Chairman: Thank you, Mr. Bélanger.

I think we'll close this part of the meeting. We have two brief items of business afterwards. I would like members to stay to finish those. It won't take very long.

Meanwhile, I would like to thank you very much, Mr. Malden, and your colleagues, for being clear and forthright, and for making your point of view quite convincingly. Thank you.

Mr. Terry Malden: Thank you.

The Chairman: I think we'll talk about our agenda first. We have to clear that before I give the floor to Mr. Mills. It won't take very long to clarify one way or another.

I think the clerk has given you a letter we received from Lang Michener on behalf of the representatives of the advertising industry of Canada, who were slated to appear on November 24. Lang Michener says some of them can't appear before December 1, and they would like to have a postponement.

I would suggest to you that there are problems with this. We have this schedule that has been slated until November 26, because there's another piece of legislation before the House, Bill C-48. We have to do the clause-by-clause.

From the perspective of my discussions with the clerk, and looking at the schedule, the only thing I could suggest to them is that if they want to switch to the 24th or the 25th, which is still open, that will be in order. Otherwise, I don't see how we can accommodate them beyond the 26th.

I would like to put it over to the members to discuss briefly.

Mr. Bonwick.

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Mr. Paul Bonwick: I would move that we not change the meeting date, unless it's for the one day.

Mr. Chair, you outlined our schedule, our agenda, yesterday or the day before, and it took you about 10 or 15 minutes to go through everything we have to deal with. We have an extremely tight schedule.

Although the committee certainly welcomes witnesses to come forward and present their position on various forms of legislation, it's a privilege to be able to come and present to the House of Commons what their particular position is. So I think to try to readdress our entire schedule....

I don't see a lot of need for debate or discussion on the issue; flexibility for 48 hours, yes, and anything more than that, no.

The Chairman: There's a motion before us. Is there any discussion on this? Do you want to discuss it or do you want to go to a vote?

Mr. Dennis Mills: Put it to a vote.

Mr. John Godfrey: Or just an understanding.

The Chairman: If all the members agree, then we'll just move on with that motion. If you want to have a motion, we'll have a motion. Agreed?

Some hon. members: Agreed.

(Motion agreed to—See Minutes of Proceedings)

The Chairman: So it is decided. I will instruct the clerk to write to Lang Michener to offer a substitution of dates, in which case I will advise the members in good time of the switch.

We have a motion now before us from the subcommittee.

Mr. Mills.

Mr. Dennis Mills: Thank you, Mr. Chairman.

As you know, we ran into some technical glitches a couple of weeks ago when the committee had to go to Toronto for the NHLPA, plus the experts in gaming. I must tell you that all parties participated in this meeting. We took it on our own to sort of backstop the translation, rental of room, etc., that was required. We managed, actually, to get the Rogers organization in Toronto to do the taping of the event, in both official languages, for nothing. They in turn handed it over to CPAC.

So you can see that this motion is about 66% less than the one that was in front of the committee three weeks ago. I'm hoping the committee will approve this so that members can be reimbursed.

By the way, all our air fares, etc., were done out of our own travel points.

The Chairman: I would like to say to the members that according to the rules, normally you have to give 24-hours' notice of motion, but because it's just a housekeeping item, I hope members will agree to give consent so that we can deal with this thing and go on from here. It's only a very small matter.

Is that acceptable?

Mr. Benoît Sauvageau: Bien sûr.

The Chairman: In that case, do any members have any questions or comments before this is submitted to the budget committee?

Mr. Godfrey.

Mr. John Godfrey: I assume there is a detailed accounting of those—

Mr. Dennis Mills: Yes, the clerk has a backup for all of that.

Mr. John Godfrey: As long as there's a paper record that shows exact expenditures.

Mr. Dennis Mills: Oh, yes.

The Chairman: The budget committee will certainly not pass it without it, will it.

The question has been called.

(Motion agreed to—See Minutes of Proceedings)

The Chairman: Mr. Bélanger.

Mr. Mauril Bélanger: There is another motion before us, Mr. Lowther's motion from last Tuesday.

The Chairman: No, that's not a motion. And it was already dealt with the other day. All I wanted to say was that Mr. Lowther made a motion pursuant to Standing Order 106, backed by four members. According to 106, we have to hold a meeting on the subject that was discussed the day before within 10 sitting days, which means we'll have to organize a meeting within two weeks of here.

It refers to the motion we discussed, that pursuant to Standing Order 106, a meeting of the Standing Committee on Canadian Heritage shall be convened within ten sitting days for the purpose of examining the process by which the report on Canada's compliance with the United Nations Convention on the Rights of the Child is prepared.

This is a subject that is within the jurisdiction of the Department of of Canadian Heritage. The motion is acceptable. We discussed it. We actually voted on it last Thursday, did we not?

Oh, I see. There was no vote on it. It was just to give notice of the motion.

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Mr. Paul Bonwick: Just for everybody's benefit, I don't think it's a motion. My understanding on procedure here is that if four members of the committee—

The Chairman: Yes, that's right. It's just notice.

Mr. Paul Bonwick: —want to submit, through the chairperson, a request for a witness to come forward to speak to a standing committee of the House of Commons, then that witness is hereby summoned. It's not open for debate or discussion; rather, it's up to the chair to schedule that at the earliest convenience.

The Chairman: You're quite correct. Thank you for the correction.

So we have to have a meeting within 10 sitting days of the time of that letter, dated November 2, 1998. We'll schedule that and let you know.

Mr. Eric Lowther: Mr. Chairman, I have a little point of clarification. Mr. Radford may help me out in this.

Yes, according to the standing order, we ought to have a meeting on this topic, but it's my understanding that doesn't necessarily mean we can call witnesses without the agreement of the people who are at the committee today. So part of my request would be that we'd have the ability to call some of the key witnesses that could explain this process to us, if the committee members would be so inclined to allow, to make this meeting fruitful.

Mr. Paul Bonwick: If you're going to request witnesses, Mr. Lowther, what I was going to suggest to you is that I sit on the subcommittee on human rights. Over the last 16 months we've been dealing with human rights issues abroad, child human rights issues. Although this report, I think, touches on several different ministries, it certainly fits very nicely within that committee's mandate.

This afternoon, I believe, we're meeting, and I'd certainly be prepared to bring forward that there should be an opportunity to review this, or certainly to get a position on behalf of the bureaucrats in regard to that topic.

So perhaps we could forward it.

The Chairman: Mr. Lowther, could I suggest this? Perhaps you and Mr. Bonwick's committee, through the clerk, could negotiate how we proceed from here. You've given us notice, notice in due form, and from there on it's just a case of finding out what the best way of doing it is.

Mr. Eric Lowther: Well, I would like to suggest we go ahead with the meeting, as we've scheduled. The only question I'd like to know is whether this committee would allow us to submit some witnesses for appearance at that committee meeting. I don't really want to shift the date, if we can help it, now that we kind of have one, within the standing orders. I just wanted to know if I could bring some witnesses.

Mr. Mauril Bélanger: Mr. Chairman, if I may, we have an element of business in front of the committee that we should be dealing with. To have this spring up at this moment certainly could be construed as a delaying tactic.

Mr. Eric Lowther: Absolutely not.

Mr. Mauril Bélanger: Mr. Bonwick, of the committee, has offered a very worthwhile suggestion that this be referred to the subcommittee dealing with human rights, and there seems to be resistance to that. So if it's a matter of delaying tactics, then let's deal with it as such.

And I would like to see any list of witnesses the member would like to suggest put in writing to the committee so that we can deal with that as a committee.

Mr. Eric Lowther: If I may speak to that, Mr. Chairman, this is certainly not a delaying tactic.

Secondly, Mr. Bonwick's suggestion was, when we were talking about witnesses, perhaps having people come from his human rights committee as witnesses, not that we defer to that committee. Or that was my understanding.

An hon. member: No, the other way around.

Mr. Eric Lowther: That was in the context of what we were discussing, witnesses coming before this particular meeting.

So I'd like to hold to the standing order and press ahead.

The Chairman: According to the standing order, you have a right to have a meeting called. As regards witnesses, I don't see any unanimous consent today. So we'll just see. Maybe you could discuss it with the clerk, submit a request. If within one meeting it can be done—

Mr. Eric Lowther: Sure.

The Chairman: —then we'll do it. We have to have a meeting anyway.

Mr. Eric Lowther: Good.

The Chairman: Mr. Mills.

Mr. Dennis Mills: Mr. Chair, I forgot to mention, when I talked about the motion, that next week our committee would be circulating to all members of this committee our final draft report so that members will have a chance to react to it.

The Chairman: All right. Thank you, Mr. Mills.

Thank you. The meeting is adjourned.