Perhaps the parliamentary secretary could, because the Minister of Sport might want to say that we would come over.
Does everyone agree? I need to get a sense of whether everyone agrees with Mr. Nantel.
Some hon. members: Agreed.
The Chair: Therefore, if we're going to do that, I would like to get the committee's permission to do one round of questions for this first hour. That would leave us off early enough to be able to do what we are suggesting we do. Okay? We can do the same thing in the second hour as well.
Some hon. members: Agreed.
The Chair: All right. I want to welcome the witnesses.
Thank you very much for taking the time to present to us. Here's how it works. Each group will have 10 minutes to present. Then we will have a round of questions, and those rounds of questions will last seven minutes. The answers are included in that seven minutes, so everyone will have to be as crisp and as terse as they can in terms of getting the questions and answers out.
I would like to invite Mr. Dennis Merrell, executive director of Alberta Weekly Newspapers Association, and Mr. Duff Jamison, the chair of the government relations committee of the Alberta Weekly Newspapers Association, to begin.
Proceed, and I will give you a two-minute warning when your 10 minutes is going to be up.
Mr. Duff Jamison (Chair, Government Relations Committee, Former President, Alberta Weekly Newspapers Association):
Okay, thank you.
Good morning from Edmonton, Alberta. My name is Duff Jamison. I am the president and CEO of Great West Newspapers, which publishes 18 newspapers in Alberta. In my role as government affairs chairman, I am representing the Alberta Weekly Newspapers Association today, and I have with me Dennis Merrell, our executive director.
Community newspapers seem to be flying under the radar in the discussion about print media's future. Although they look and feel the same as our larger metro daily cousins, we have some unique qualities that differentiate us.
Print advertising remains the mainstay of any newspaper model, daily or weekly. Community newspapers rely primarily on local businesses, community organizations, schools, and local government, and somewhat less on national advertising and classifieds, which were once the major revenue streams for the dailies. I'm not suggesting that national advertising isn't important; it most certainly is, and this category for us and for the dailies has experienced the greatest decline over the past years.
The majority of community newspapers tend to free distribution and total market coverage. As a result, distribution of advertising inserts has become an important and reliable revenue stream for all of us. Community newspapers generally serve market populations of less than 100,000, and the majority would be well under that. We are the original hyper-local guys providing the primary source of local news for our residents in a very cost-effective means for local advertising.
Our once or twice per week frequency also distinguishes us from our daily cousins. Our news is rarely of the breaking-news variety, and our readers seem comfortable with the fact that it's not available in print every morning. They need and want to know what's happening in their community, but they don't demand it the minute it happens. When it is important to get the story out quickly, we are all quite capable of doing that on our digital platforms. We may lack the digital horsepower of, say, The Globe and Mail, but we're certainly not in the dark ages either.
Free content—the nirvana of the digital age—is old news in the community newspaper industry. Although many paid subscription weekly newspapers remain in small markets, in the larger markets we've long delivered community news free to our residents, paid for by our advertisers wanting total market coverage. Paid circulation dailies, on the other hand, have experienced a significant decline in print penetration as subscribers drop off because national and international news is so freely available online.
The real secret sauce of a successful community newspaper is operating like it's community owned. It's not an arm's-length operation, as can be the case in a daily, but is in the trenches as active participants in our communities, a service club of sorts, really. I often tell our local politicians and community leaders that, like them, we are in the business of building stronger and healthier communities for everyone. We are fully integrated into the community, leaving no doubt in anyone's mind that we have the best interests of the community in mind. When done right, the newspaper earns credibility and respect among its readers and their support when we criticize leaders and institutions that we feel have let the community down.
What is the current picture for community newspapers? Print advertising revenues, far and away the largest source of revenue for Canada's community newspapers, are in decline. Digital advertising revenues tied to our news reporting remain insignificant simply because community newspaper websites and social media feeds do not generate the traffic required to cover the reporting costs. It's not even close today, and we don't think it will be in the foreseeable future.
There are opportunities in providing advertising services on non-print or digital platforms: social media, search, and geo-targeting, and community newspapers are pursuing them where they see benefits for their communities and their customers. It's still to be proven, however, whether a small market can generate sufficient digital profits to support local journalism, and I have to admit that the idea of operating a secondary business to support the news reporting functions of the primary business doesn't feel quite right.
Subscription and newsstand revenues are an important source of revenue for a declining number of paid circulation community newspapers. However, with circulations of less than 5,000 and subscription rates of about $50, these also fall well short of covering reporting costs. Paywalls help to protect this revenue, but also reduce online traffic and digital advertising revenue with it. It's very difficult to see a point at which print advertising revenues will not be the major revenue contributor for even paid circulation community newspapers.
There's no reader revenue in a free paper, and most community newspapers in Canada are not paid for, leaving them to rely entirely on advertising to pay the cost of reporting the local news.
These papers tend to be in larger markets, often on the periphery of metro areas also served by dailies and other media. For that reason, no Canadian community newspaper has been able to maintain a paid circulation in the metro markets. We also require total market coverage to satisfy the market penetration needs of our advertisers, both in print and in inserts.
Not often mentioned in the discussion is that many local advertisers and organizations remain dependent on local media to reach local residents and consumers. In most communities under 100,000, print media deliver the largest audience by far. Although most small businesses have websites, Facebook groups, Twitter feeds, etc., it has proven very difficult to build any real mass of followers. Therefore, without the market penetration of local media, most would find it extremely difficult, if not impossible, to reach the vast majority of local residents.
On top of their marketing needs, these businesses have their own challenges brought on by globalization and the digital revolution. Online competitors, among them Amazon and mega-retailers like Walmart, threaten the very viability of these local businesses, which are the foundation of advertising support for community papers. Just as is the case with local media, government, and a well-functioning democracy, the threat to local media's long-standing symbiotic relationship with local advertisers goes much deeper than print media's problems.
Community newspapers, like all media, must compete for the readers' time. We know that time is finite. Time spent on digital devices is made up by reducing time spent on other activities, including reading, watching TV, listening to the radio, etc. Unfortunately, it is not always productive time—things like Candy Crush, Pokémon, and cat videos come to mind—yet somehow publishers must navigate through the clutter to deliver the local news.
Most worrying of all is that it seems fewer and fewer people really give a damn. It brings to mind the old saying that they won't miss us until we're gone. In our affluent western societies, for the most part, people are content with their lives and disengaged from politics to a large extent. Their complacency—and for some, disenchantment—is evidenced by low voter turnouts and lack of interest in joining community and civic organizations created to build better communities. It is unlikely that the general public has given much thought to a world without media watchdogs.
Does government have a role? It probably does. Here are some ideas we should all think about.
The federal government could replenish its print advertising budget. While local governments remain solid advertisers, federal and provincial advertising has nearly dried up. A decade ago, the federal government spent 47% of its ad budget on newspapers: 28% on dailies and 19% on community, ethnic, and aboriginal weeklies. In the 2014-15 fiscal year, it spent 7% in total on newspapers: 1% on dailies and 6% on weeklies. In that same period, the spending on Internet companies rose from 6% to 28%. Most of that money went to U.S. firms, such as Google.
Simply having the federal and provincial governments make a serious commitment to include community newspapers in advertising budgets would go a long way toward supporting local journalism. As the publisher of the Rainy River Record in Ontario said to a CBC reporter this week about the closure of his paper next week, the government's decision to pull its advertising budget from newspapers and spend it on social media has made a big difference.
The tax system is another source or possibility. Is there a role for the tax system, as suggested in a recent Quebec report and advocated by some groups appearing before the Canadian heritage committee? Could Canadians buying subscriptions to Canadian media claim tax deductions on the same level as they do for donations to political parties, a 75% rate? Is there a way for the federal government to encourage Canadian companies to spend their advertising dollars here? This could be in the form of tax credits or penalties for using foreign firms, as we see in the Foreign Publishers Advertising Services Act. The Income Tax Act limits non-Canadian legacy media, but this has not been applied to digital enterprises. Tax incentives could be created to encourage investment in newspapers and other local media. Instruments could include—
Mr. Duff Jamison:
I would imagine that's entirely possible, and we've seen some evidence of that. When Spain tried to enforce that type of rule with the Internet giant, Google just cut them off and said, “Well, okay, Spain, you don't get our service anymore.”
The Europeans have been quite active on this front with copyright. It's another one of those obvious things to us, that the content creators, the journalists who write those stories, see very little return from the digital distribution of their material. It happened in the music business, as you know. It just about destroyed the old traditional music business.
I do think that copyright laws were designed before we had this mass digital distribution of content. They probably need to be reviewed and brought up to date, so that there is a means.... We put in a possible suggestion. If you click through to a journalist's story, then at that point perhaps that journalist and the newspaper that employs him should receive a payment. There are ways to get at this.
The two companies, the two oligarchs really, Facebook and Google, take 75% of the digital revenues in Canada. It's an enormous amount. That's money that once underpinned our business model. There needs to be some approach through copyright. I've suggested that in the old cable model there were a lot of Canadian television producers who got a slice of the cable bill because they were on a speciality TV channel, like a home improvement or food channel, or whatever.
Is there some way of enacting that type of regulation, which would allow for a better split between the Googles and the Facebooks and the newspapers that are actually generating that content? A great deal of Internet traffic is going to news sites. That's what people are searching for. Readership, as you've probably heard many times, has never been greater. It's just that it's all free today.
Mr. Pierre Nantel:
Thank you Madam Chair.
Thank you, Mr. Merrell, for giving us more information on the subject.
I found it touching to hear you say that although you aren't normally in favour of government intervention, there is currently a problem. The writing's on the wall. Your media sector is in danger.
I believe the Glacier Media Group, whose representative will speak to us later, is part of the entity that owns the St. Albert Gazette. A consolidation occurred, and that's very good. It's important to band together to remain strong and stay in position. However, currently the giant is larger and comes from the Internet.
I think you want to say that we have, in a way, two choices. We can either support at a loss—at the government taxation level—a system because we believe it's valuable to our communities, to local merchants, to the life of smaller communities, and so on, or we can embrace change. Embracing change means we consider the Internet the new workplace, the new battlefield. Investments therefore need to be made in that area.
I still remember GoGaspe.com, a group of local media, community radio and television stations, small privately-owned television stations, and newspapers.
Do you think a government incentive to create a hub that groups together the media in smaller communities would be a good idea? Can it be done?
Mr. Seamus O'Regan:
Gentlemen, thank you very much for joining us.
Once again, I would like the record to show how important it is that we speak to people right across the country for their points of view. I think you offer a very particular one in that you are on the ground and experience every day the issues that we talk about periodically. You also have a very clear sense, it seems to me, of the larger world at play here that still affects people like you and us when we deliberate about these things.
There are two particular things, and the reason I am repeating them is partially that I want to make sure they are on the record. One, of course, is your issues with Canada Post, which I think are very interesting. If they are an impediment to local news in any way, that is something I think this committee should draw more attention to, because we are fixated on local news. That is what our constituents are telling us is a concern to them, and whatever we can do within our power to make sure people have access to more local news is vitally important.
The other thing that struck me.... I feel guilty that it didn't come to me before, because I did sit on the board of The Walrus magazine for a number of years and, of course, that is a magazine run out of a foundation in much the same model you described. Perhaps that is something this committee should take a look at, too, in its deliberations about whether there is an avenue for local news and local newspapers through foundations. Maybe that is something we can explore with the CRA, because it certainly works for The Walrus, and it works well.
You were very kind to us in allowing us to step out to meet the Paralympians, and I appreciate that. Let me write you a bit of a blank cheque here. I think you had about four issues you wanted to talk about, and we have covered a number of them: the tax system for the most part, copyright law, and Canada Post. Was there a fourth one that maybe I missed which you would like to have a little more time to spend on?
Mr. Peter Kvarnstrom (President, Community Media, Glacier Media Group):
Good afternoon. My name is Peter Kvarnstrom. I live in West Vancouver, B.C. and have since 1965. I am currently the publisher of the North Shore News
, the Bowen Island Undercurrent
, which is our very smallest newspaper in our group, as well as the Coast Reporter
, in Sechelt, British Columbia, where I started that paper in 1997.
I also hold a corporate role with Glacier Media Group as the president of their community media division. Glacier Media Group is a publicly traded Canadian information company headquartered in Vancouver, British Columbia. Glacier's community media division encompasses 55 fully-owned community newspapers and their associated digital and print specialty products. Glacier also has interest in nearly 40 other newspapers where the partner is the operating entity.
Mr. Nantel, you mentioned that we are partners with Duff Jamison's Great West news group.
I have also served as president and chair of the Canadian Community Newspaper Association, as well as chair of the Canadian Newspaper Association representing dailies and community newspapers. I currently chair the management committee of Newspapers Canada, which you heard from earlier in this session.
Today I want to share with you some facts and thoughts about the industry and some challenges that we face. I will also suggest some courses of action that the Government of Canada may consider in ensuring that local journalism continues to serve communities across the country. I will try to avoid repeating some of the same points that were made earlier.
First, I want to ensure we recognize that the challenge of our sector is not an audience engagement issue. According to our most recent research conducted by Totem research earlier this year with 2,400 Canadians represented across our country, balanced for age, sex, language, and conducted in both English and French, 87% of Canadians continue to engage with our journalism and the advertising across our channels. They look at our newspapers, our websites, our tablet apps, and our mobile platforms every week.
While the channels are changing and providing easier and faster access to our content, Canadians continue to rely heavily on our Canadian-created local journalism to keep informed about news, community happenings, births and deaths, civic and regional politics, and much more.
We employ hundreds of journalists across our organization, and thousands across our industry. Our journalists work tirelessly to tell the stories in every community that we serve. Their work helps us ensure that our readers and all Canadians have access to the stories that matter most, the local ones.
The journalism we create is rarely urgent or breaking news. Local journalism is relevant, compelling, and unique. Our journalism speaks directly to our readers about their community and their neighbourhood. It reflects the communities that we serve. We see ourselves, our friends, and our neighbours in our pages. Most importantly, we write and tell the stories that no one else does. Our content is truly unique and is under significant pressure.
In most cases, we are the only source of local news and information in our communities. There are many sources of regional, national, and international news and information, but our industry is the only one to employ journalists in every community we serve, which is more than 1,000 communities across Canada.
In many cases, our work is the only way to hold both private and public institutions to account. We believe that local journalism and the work we do is vital to ensuring a thriving democracy and a civil society. We truly help to improve the quality of life in every community we serve.
Community newspapers are under tremendous pressure. Our business model is under significant challenge, based on advertising revenues declining. The relentless loss of single-digit revenue percentages every year forces publishers to reduce their cost base continuously. We do our best to avoid reducing our reporting staff, but no department is spared as we try to adjust our cost base to our revenue realities. We simply can't afford to operate the way that we did in the past.
Local, regional, and national advertisers simply have too many advertising choices in front of them. They still buy advertising from us, just less. They are trying to remain competitive in an increasingly digital age when they themselves face huge online mega retailers. We know whom we are referring to.
What can government do to ensure the survival of local journalism and the publishers that employ them? First, we are not looking for a bailout, but government support as we transition from an industrial business to a knowledge-based one.
Federal government advertising has declined by 96% in newspapers over the past decade. Provincial government advertising has followed suit. Local governments, much as Mr. Jamison said before me, continue to rely on community newspapers because they work. They connect their constituents like nothing else. MPs individually spend their advertising dollars with their community newspapers because they know they are read thoroughly, and they engage their constituents. The federal government has an opportunity to truly communicate with Canadians in every corner of our country by using our community papers and their websites, yet they choose to spend our tax dollars with U.S.-based behemoths like Google and Facebook.
We ask the government to help us review our advertising model, recognizing that paid advertising pays for the journalism and its distribution. Instead, we are watching that advertising flow south of the border to those same corporations mentioned earlier that do not pay significant taxes in Canada, do not employ significant numbers of taxpaying Canadians, and rely on content that they are taking directly from Canadian creators. They have found a way to monetize our content to an incredible level.
Fair dealing within our Copyright Act is a significant detriment to journalism in Canada. Our creators and publishers pay to create content that many news aggregators, including the CBC, republish, copy, broadcast, and sell advertising without compensating the creator or the copyright holder. This must be addressed.
We would suggest a number of taxation strategies—and again, I'm no taxation expert, and we don't have any—that could make a significant difference to the community newspaper publishers. First, consider making all subscription and newsstand sales of newspapers a tax deductible expense for every Canadian, encouraging them in a very small way to subscribe or buy their community newspaper. Second, revise the tax laws that allow advertising that is being bought from foreign owned and operated media companies. Are they to be allowed as a tax deductible expense? They are today: not in print, but in Google; it seems it's okay. Why should money spent with Google be tax deductible for businesses?
Finally, consider revamping the Department of Canadian Heritage's aid to publishers program. Currently only very small paid subscription newspapers qualify for that aid and we do appreciate it and it does keep those papers going. Our company publishes some very small papers that would not be around without that program.
In today's publishing reality, many community newspapers have had to give up on paid subscriptions to compete with free media available on the Internet. Those papers serve their community exactly the same way as the paid subscription papers. Provide an expanded program for improved funding to include all community newspapers.
As publishers of many small-town community newspapers, we feel the obligation to serve. In many cases, it is no longer about the money we once earned, but rather the obligation to serve the communities where we live. We do not want to abandon small towns or any communities; however, we need government to accept some of the responsibility and obligation to ensure that we can continue to serve Canadians for many years in every corner of our great country. Simply put, the work we do matters to all Canadians in every community in Canada.
Thank you for your time and caring.
Mr. Nick Taylor-Vaisey (President, Canadian Association of Journalists):
Thank you to the committee for inviting us to appear today.
I am Nick Taylor-Vaisey, president of the CAJ. I'm here today in that capacity. I should be clear that I do not speak on behalf of my current employer. I'll be sharing my time with Hugo, who is, as you know, the CAJ's past president.
Today we're speaking to you in Ottawa and from Toronto, but our national board represents almost every corner of Canada. We see that as a strength, even if it does make our board meetings across several time zones tricky to schedule. It's a strength because the CAJ is a truly national association of working journalists, with members all over the country and across all forms of media.
Before we offer you our thoughts on how the federal government can proactively, if non-intrusively, encourage high-quality journalism in Canada, allow us to tell you just a bit more about our organization.
The CAJ was founded in 1978 as the CIJ, the Centre for Investigative Journalism, a non-profit organization that encouraged and supported investigative work. Over the years we broadened our mandate, and now offer three primary services to our members: high-quality professional development, primarily at our annual national conference; outspoken advocacy on behalf of journalists and the public's right to know; and an awards program that honours the finest journalism in Canada, both investigative and across several other categories. That program, we're proud to say, is affordable for our members.
Our members are the working journalists who are responsible for outstanding reporting that changes lives, forces governments to do better for Canadians, and ultimately serves the public interest. They're local reporters who keep their eye on city hall when few others are watching, and who simply report the news that better informs their community. Of course, our members are often the first to feel the brunt of layoffs that have cut so deeply across so many newsrooms across Canada.
We're here today to provide two modest recommendations that would allow more storytelling in more local newsrooms and help stem the tide of job losses, at least to some degree, in those same newsrooms. The first recommendation is that government provide incentives to prospective local advertisers in Canadian communities. The second recommendation is that government make it easier for non-profit journalism to take flight in Canada.
I'll now pass the floor over to Hugo.
Mr. Hugo Rodrigues:
Thank you, Nick.
You've heard in prior testimony to this committee what you no doubt already knew, that media are facing a revenue problem. Advertisers are able to exploit digital opportunities that offer more eyeballs and a larger audience share. This has irrevocably shifted balance sheets at media companies across Canada. First it was the classifieds, then the national advertisements, and now it's hitting at every level.
Just this week, as referenced today in earlier testimony, Rainy River Record, a paper that has served its readers for almost a century, announced that it will stop publication this month and shut its doors. Why? The Record's publisher said that two of its major advertisers, the Government of Canada and the Government of Ontario, have chosen to, as he put it, “shun newspaper advertising” in favour of global giants like Google. That closure represents yet another blow to all newspapers in both Ontario and across Canada.
Put simply, as revenue drops, many media owners cut expenses by laying off journalists. With fewer human resources in those newsrooms, less journalism is produced, and journalists spend more time chasing audiences that generate potential new online revenue than they do investing in high-quality content. With less content available and the quality of that content dropping, audiences look elsewhere for the information they want. All the while, revenues continue to drop.
Bob Cox, chair of the Canadian Newspaper Association, told this committee earlier this year, on May 31, that the “federal government could find ways of encouraging Canadian companies to spend their advertising dollars here”. The CAJ supports that view. We're not proposing a regulatory solution to the pervasive revenue question that's gone largely unanswered in many media companies, both big and small. To be certain, different markets face different pressures, and some have more success than others, but there's a clear and urgent need to find creative solutions for those communities in need.
The CAJ does support, generally speaking, government making it easier to invest in Canadian media, such as a tax break for local advertisers who currently see no advantage in placing their ad in their local newspaper or on the air with their local broadcaster. We know that when local media can raise enough revenue from their own communities, they can thrive. Let's offer an incentive for companies to invest in the journalism being done in their backyards.
When media companies can cover their expenses through the revenues they raise from advertising, they can and they do invest in quality, namely, content that informs Canadians about their roles and responsibilities in a civil society, that shines a light in dark places, speaks truth to power, and comforts the afflicted.
Nick, back to you.
Mr. Nick Taylor-Vaisey:
We also think government can play a useful role in the non-profit world, which can play a crucial role itself in public interest reporting and public education. This is, of course, distinct from public broadcasters such as the CBC and its public broadcasting counterparts, including Ontario's TVO. The CAJ believes Canada should embrace non-profit journalism as other countries, including the United States, already do.
To cherry-pick just one example from many, ProPublica is a charitable organization south of the border that counts itself as one among many so-called 501(c)(3) non-profits. That's a reference to section 501(c)(3) of the U.S. Internal Revenue Code, and it allows qualifying organizations tax-exempt status for the purposes of, among other goals, public education.
Now, that doesn't mean transforming local reporters into civics teachers, though we certainly find ourselves playing that role from time to time in our communities. ProPublica describes its investigative reporting as work that “shines a light on exploitation of the weak by the strong and on the failures of those with power to vindicate the trust placed in them.” It's not exactly the sort of thing you'll find in an elementary school classroom, but it's certainly as valuable.
Non-profit journalism does exist in Canada. The Walrus Foundation, the Tyee Solutions Society and the Aboriginal Peoples Television Network all operate as charities, and with success. They've proven that charities can fund journalism.
But there are far fewer examples in Canada than there are elsewhere in the world. The Knight Foundation in the U.S. and trust-backed The Guardian in the U.K. are but two examples of journalism-focused philanthropic initiatives that simply have no equal in Canada. Non-profit media organizations have created compelling, groundbreaking stories that educate and inform their audiences about how their society works. Civic education is lacking in Canada, and while non-profit journalism isn't a panacea for this problem, any government action to create and foster a friendly business environment to invest in these organizations can only help enable more of them to get started and flourish.
The more media outlets, whether traditional, mainstream, online, etc., that operate in Canada, the more informed our residents will be, and that will only strengthen our democracy.
Thank you for your time today.
Mr. Pierre Nantel:
Thank you, Madam Chair.
Mr. Taylor-Vaisey, I agree with your point about investigative journalism. The situation is certainly a problem. The more complex the topics, the harder it is to require journalists to conduct research. The journalists are not the ones asked to make an effort. A journalist would be happy to conduct research and work on a file for the long term. However, the news desk editor must be asked to provide resources for in-depth work on important files, and the editor has fewer and fewer resources. Above all, there's no more money. Therein lies the problem. That's what we're facing.
Our system is based on free or inexpensive distribution, because there is advertising. When the advertising disappears, there will be no more grist for the mill.
I skimmed through the documents prepared by the committees's research staff. They were correct to raise the fact that La Presse+ has introduced its model and that it has certainly dramatically changed the method of consumption, as you said, Mr. Kvarnstrom. I don't know whether you've had the chance to see how things are. You read your Globe and Mail on your application. I am a bit old and I read Saturday's La Presse in print format. However, I sometimes miss the mobility and flexibility of the digital platform, even in terms of advertising. For example, if there's an advertisement for a new Acura and I want more details, I have them in the digital version but not in the print format. This results in an audience migration to new technologies and new methods that need to be monitored.
Mr. Kvarnstrom, you told us that your journalistic visibility will, among other things, be popularized by Google. Could the situation be resolved by creating applications for our media? Earlier, a witness said that we could review the idea of a hub or a regional exchange centre application. For example, if I live in Kamloops and use an application from there—let's say Kamloops Media—, I would click on it and skip Google. Going directly to the application would generate advertising revenue. Isn't that method a big band aid that would solve several problems at once?
My question is for the three of you.