Tech Titans Should Pay to Save Canada’s Newsrooms

The following excerpt from my forthcoming book, Tomorrow’s News: How to Fix Canada’s Media, was published by The Walrus on November 29.

The evolution of journalism in the twentieth century was away from hard news aimed at citizens and toward what media critic Ben Bagdikian called “fluff” aimed at consumers and designed to attract ads. Bagdikian found that hard news made up about four pages of the average daily newspaper in 1940, and that while editions had more than doubled in size forty years later, most of the increase consisted of fluff since the amount of hard news had grown to only about five pages. “Most fluff is wanted by advertisers to create a buying mood,” noted Bagdikian, who added that surveys showed readers wanted more hard news. “An article on genuine social suffering might interrupt the ‘buying mood’ on which most ads for luxuries depend.” Fluff matched perfectly Marshall McLuhan’s description of media content as “the juicy piece of meat carried by the burglar to distract the watchdog of the mind.”

Hard news came to be avoided by newspapers because not only did it not attract ads—it repelled them. Newspapers arguably crossed the Rubicon in the 1930s, when they suppressed news of studies that linked cigarette smoking to cancer because tobacco companies were among their biggest advertisers. That opened the door for other advertisers to demand the removal of news that might hurt their business. Air Canada, noted Bagdikian, warned newspapers in 1978 that “its ads would be canceled as long as any news story of an Air Canada crash or hijacking ran in the paper and if its ads were carried within two pages of a news story of any crash or hijacking on any airline.” This new advertiser sensitivity to news perhaps triggered a move toward even more ad-friendly content, and newspapers weren’t shy about promoting it to ad buyers.

Starting in the 1970s, entire new sections sprang up in newspapers, devoted to such hot-selling topics as cars, travel, and real estate in order to attract ads, and they soon began to blur the line between advertising and journalism. According to Bagdikian, the fluffy features derided by journalists as “advertorials” were simply bait for advertising. Weekend editions grew fat with these special sections because people had more time for newspaper reading. Real estate advertising, in particular, was so lucrative, according to Columbia Journalism Review, that it was where “papers are most tempted to sell their soul.” Meanwhile, consumer reporting wasn’t “even a beat anymore at most papers,” having been replaced by coverage of personal finance, which was “a safe topic that usually doesn’t pinch the holy trinity of media advertisers—car dealers, supermarkets, and real estate brokers,” noted Trudy Lieberman in 1994. It ran on the business pages, she added, which “almost guarantees that it will not be hard-hitting and confrontational.” Advertiser support for personal finance content, noted CJR in 1998, was “so luxuriant as to make any publisher weak in the knee.”

The result was a turn away from accountability reporting and toward access reporting, according to Dean Starkman, who distinguished between the two types of journalism in his 2014 book The Watchdog That Didn’t Bark. Accountability reporting was pioneered by the investigative “muckrakers” of the Progressive Era in the early twentieth century who held the powerful to account by exposing corruption, health hazards, unsafe working conditions, and monopolistic business practices of the robber barons who dominated the first Gilded Age. Access journalism was instead favoured by business and public relations, as it traded access to newsmakers for publicity that helped promote products, candidates, and even ideologies. A turn to access journalism, Starkman argued, was what allowed modern-day robber barons to pillage the US economy to the extent that the housing bubble burst in 2007 and led to the Great Recession. “What journalism was able to do in 1903 it could not muster in 2003,” Starkman noted. “And that’s tragic.”

Suffice it to say that the journalism we need to save in order to preserve democracy is not fluff or advertorials but, instead, what Alex S. Jones (not the infamous talk show host) called in his 2009 book Losing the News the “iron core” of reporting on politics, government, business, the economy, the environment, and other things that citizens need to know about.

We need accountability journalism, plain and simple, so we should focus on feeding the watchdogs. If others can make money publishing celebrity news, sports reporting, or their opinions, they should be encouraged to do so at their own expense. CJR noted in 2014 that accountability journalism was “at once journalism’s most powerful and paradoxically its most vulnerable form; the riskiest, the costliest, the most technically difficult. It’s the journalism we need to worry about. Other debates are a parlor game by comparison.”

Now that advertising has largely fled newspapers and they are increasingly asking readers to pay more, perhaps they can redeem themselves by focusing on our best interests for a change. If journalism is to be subsidized by tech companies or digital taxes, or even directly from the public purse, hard news and investigative reporting are what should be prioritized. Accountability journalism is both what we need most and what is now in shortest supply.

Given the fluctuations in which party holds power in Ottawa, any prescription for fixing Canada’s news media should appeal to the fiscally conscious. Then Conservative leader Erin O’Toole promised to cancel the news media bailout during the 2021 federal election campaign, and his successor, Pierre Poilievre, has been a harsh critic of both the media and the bailout. If a Conservative government were to cancel the federal subsidies that are keeping our newspaper industry on life support, it would mean an even worse crisis, one that would take some hard thinking to resolve—which should be done in advance. What we need is a plan that reimagines our media for a digital future of news sharing enabled by the internet. Let’s forget about subsidizing old media and instead do whatever is necessary to allow digital media and new ways of communicating news to flourish in Canada. Legacy media outlets will find their own level in the new media ecosystem and may survive or perish. Most likely, some newspapers will evolve into print/online hybrids able to compete with digital media on their own terms, not on terms dictated by the government under the Online News Act. They should be given the same incentives that digital media get, in order to help them develop that side of their operations, but old media should not be privileged to the extent they have been.

We need to start afresh with a new digital-first approach to journalism that will be funded in part by the $100 million a year that Google has agreed to contribute under the Online News Act, but the company is hardly alone in reaping the riches of the digital world and thus should not be alone in subsidizing online news. The supply of accountability reporting in Canada would be boosted immensely, first, by a direct injection of Local Democracy Reporters—LDRs—into our news media, similar to what has been done in the UK and New Zealand. This would create a solid base of local reporting that could help renew interest in civic affairs and support a renovated superstructure of journalism in Canada. A thousand LDRs reporting from coast to coast could be funded by Google’s promised contribution alone and would provide even more extensive local news coverage than the 165 LDRs covering the UK, which has a much larger population. That would allow them to report on business, the justice system, other government agencies, and the environment; plus it could also staff an investigative unit for longer-term projects.

An even more comprehensive solution to our news crisis could be financed by a fund which, with contributions from other digital sources, could reach ten times what Google has agreed to pay, and it could bring nothing less than a golden age of journalism in Canada. Ottawa is already collecting taxes levied under the Online Streaming Act, which is expected to bring in about $830 million a year. Its new 3 percent Digital Services Tax on large online businesses that profit from the engagement, data, and content of internet users, as well as from the sale or licensing of their data, is estimated to reap more than $1.4 billion a year. Earmarking 10 percent of the proceeds from both of those for news provision could add $220 million a year to a news fund. Then there’s the more than $15 billion a year that our telecom companies are raking in from internet service provision at profit margins approaching 50 percent. A portion of those monopoly profits should go toward creating Canadian online news, similar to how the 5 percent levy on cable TV revenues helps fund broadcasting content. The same 5 percent levy on internet service provider revenues would add more than $750 million a year to a news fund and still leave most telcos with more than a 40 percent profit margin. These four sources, along with anything Meta might care to contribute if it could be brought back on board to help spread the news again in Canada, could bring a news fund to well over $1 billion a year.

That would be enough to fund not only 1,000 LDRs but to also pay for the payroll tax credits being handed out to legacy media under the seemingly endless news media bailout, which in 2023 was extended until 2029 at a cost of $25.8 million a year. It could also replace the tax credits by allowing daily newspapers to instead apply for formula-based funding to the Canada Periodical Fund, as News Media Canada proposed in 2017. Digital taxes could also bolster the local news-gathering capacity of the CBC and allow it to expand its digital reporting resources. They could also fund a voucher system that would give each Canadian several hundred dollars a year up front to spend on subscriptions to the online news media of their choice—and would replace the $75 tax credit we must now apply for on our annual tax return. That would allow for multiple subscriptions, so publications would likely start offering different tiers and packages of service. Vouchers could also include an allotment to make “micropayments” to read individual articles, as the Toronto Star began allowing for 75 cents each in 2024. Such a system was pioneered in 2013 by the Dutch firm Blendle, which signed up major dailies, including the New York Times, Wall Street Journal, and Washington Post, but it never took off and was shut down in 2023. The Winnipeg Free Press introduced a similar payment plan, of 27 cents per article, in 2016; that also failed to gain traction and was discontinued in 2021, but it might work under a voucher system.

The possibilities are endless and could bring a robust digital “marketplace of ideas” to news. A billion-dollar annual news fund could also finance a greatly expanded non-profit news sector by allowing media outlets to qualify more easily for charitable status under a simplified set of rules. While collaboration has its place, especially between small news outlets, good journalism thrives on competition, so as much of it as possible should be encouraged. That’s why the CBC and the Canadian Press should both be bolstered and as many young journalists as possible encouraged to get into the news business, perhaps under an apprenticeship program similar to the Report for America service in the US. The CP could coordinate a Local Democracy Reporting program, as it already does with the Local Journalism Initiative, which should also be extended and expanded into even more underserved communities.

Now here’s the part designed to warm the cockles of even the most fiscally conservative heart. Any subsidies to news media should go not to funding opinion, entertainment, or sports journalism but only to hard news. Watchdog reporting on government and business is what we need most and what has been most in decline recently, especially at the local level. Vigorous press oversight of our democratic institutions would likely save millions a year in government waste and corruption, which is what conservatives hate most. Businesses also rip off consumers and governments for millions every year, much of which could also be saved simply by exposure. As Bill Birnbauer noted in his 2019 book The Rise of Nonprofit Investigative Journalism in the United States, “investigative stories costing thousands of dollars can deliver millions of dollars of benefits to society through policy changes and social returns.” Press coverage can bring enormous savings to the public, according to a 2020 study which showed that the cost of local government borrowing rose significantly as a result of local newspaper closures. Owing to a lack of press scrutiny, “potential lenders have greater difficulty evaluating the quality of public projects and the government officials in charge of these projects.”

How the bottom fell out of Canada’s news media

The following excerpt from my forthcoming book, Tomorrow’s News: How to Fix Canada’s Media, was published by The Hub on October 16.

The bottom abruptly fell out of Canada’s news media in 2023 after decades of federal neglect, and it kept falling in 2024. The precipitating event ironically saw the government only trying to help by passing the Online News Act, but by then a collapse was perhaps inevitable. Instead of safeguarding a healthy and diverse news media ecosystem, as governments had done in other countries, Ottawa’s policy had for decades seemingly been to let media owners get away with anything they wanted. The result was a series of blunders that only kept making things worse. Canada’s press had thus been reduced to banana republic status, with its two dominant newspaper chains owned by private equity players and U.S. hedge funds that were bleeding them dry and stripping their assets.

Their massive lobbying campaign persuaded the federal government to give the newspaper industry first a five-year, $595-million bailout in 2019, nominally to help them make the transition to sustainable digital publications. Then the newspaper lobby mounted a second campaign aimed at persuading Ottawa to force Google and Meta to subsidize them on the dubious grounds that the digital platforms were stealing their news stories, rigging the sale of online advertising, and/or enjoyed an unfair bargaining advantage over them. The real reason of course had everything to do with money, as the digital giants had been taking billions in advertising dollars that once went to newspapers by perfecting target marketing online. The bottom fell out when Meta said no to the Online News Act and dropped news from its Facebook and Instagram social networks in Canada instead of paying up, leaving the embarrassed Liberals of Prime Minister Justin Trudeau with little choice but to extend the 2019 bailout.

Canada’s annis horribilis for news media bottomed out in mid-2023 when unusual trading in Postmedia Network shares forced the company to admit that it was in merger talks with Torstar, its largest competitor by far. Negotiations broke off when an agreement could not be reached on how much of the debt held by Postmedia’s owning hedge funds would be carried over to a combined company. Despite the Star’s liberal politics and Postmedia’s ardent conservativism, Torstar and Postmedia were now corporate birds of a feather. The chains had been investigated on criminal charges of monopoly and conspiracy after they traded 41 newspapers in 2017 and closed 36 of them, giving each other even more local monopolies, but charges were never laid despite some incriminating evidence.

The same week that Postmedia admitted it was discussing a merger with Torstar, Bell eviscerated its broadcasting staff and asked the government to dial back its obligation to provide news coverage. The country’s largest and most profitable media company announced the layoff of 1,300 workers – or 6 percent of its Bell Media division – closed a half dozen radio stations, and shut down CTV’s last foreign bureaus in London and Los Angeles. It also asked Ottawa to let it drop local news on its CTV stations, claiming it had been losing tens of millions of dollars by providing it but ignoring the fact that carrying news was part of its public service obligation provided in exchange for its otherwise lucrative broadcasting licences. Bell was hardly hurting, having made a 2022 profit of $10.2 billion, which was more than the GDP of dozens of countries, at a profit margin of 42.2 percent. So rapacious were its shareholders that the company’s 2022 dividend of $3.87 per share marked the fourteenth straight year that the company had hiked its annual payout by at least 5 percent, and this time it somehow even exceeded the company’s earnings per share of $3.40.

Outrage grew after Bell’s financial results for 2023 were released and showed that its profits had risen by more than $200 million to $10.4 billion. Its dividend increased by only 3.1 percent to $3.99, however, sending its stock price down by $1.44 to $37.95 that day. Bell’s telecom division made a profit margin of more than 44 percent, but its media division, which included CTV, cable channels such as TSN and BNN Bloomberg, along with its broadcasting stations, was not quite as profitable. Its 2023 earnings fell by 6.4 percent to $697 million and its profit margin was off slightly to 22.5 percent. In response, Bell announced a major restructuring designed to save it $250 million a year by laying off 4,800 workers, or 9 percent of its entire staff, and selling 45 of its radio stations. Trudeau called the layoffs “a garbage decision by a corporation that should know better,” while B.C. Premier David Eby went even farther, calling Bell and other media owners “corporate vampires” because they bought up news outlets and then “sucked the life out ofthem.”

Rogers, the country’s second-largest media company, became almost as big as Bell in 2023 when it took over the Shaw cable empire that monopolized Western Canada. The federal Competition Bureau went to court in a vain attempt to stop the takeover, but its enabling legislation was so weak that a judge instead awarded Rogers $12 million in legal costs. A desperate Trudeau soon eliminated the Competition Act’s contentious “efficiencies defence,” which allowed mergers to stand even if they created a monopoly if they also brought cost savings to the companies, which most mergers after all aimed for. The amount of money that the big telecom companies were taking out of the wallets of Canadians was almost as astonishing as the amount their chief executives were putting into their own. Bell CEO Mirko Bibic was paid handsomely to cut a swathe through Bell’s workforce and keep increasing its dividend, pulling in a compensation package of $13.6 million in 2022, including $10.6 million in bonuses and stock options. That was nothing compared to the $31.5 million hauled off that year by Rogers CEO Tony Staffieri, which included bonuses and stock options worth $17 million in large part for stickhandling its purchase of Shaw. Even in the newspaper industry, rich bonuses were awarded to executives who came up with successful money-making schemes, as witnessed by former Postmedia CEO Paul Godfrey’s pay packet that topped $5 million with bonuses and stock options in 2019 after he masterminded that year’s newspaper bailout.

It’s not like nobody saw this coming. Big Media’s growing power was a problem Ottawa had been warned about repeatedly for more than 50 years by its own inquiries, yet it did little more than allow media companies to grow bigger and bigger until they were arguably more powerful than the government itself. A 2006 Senate report on news media placed the blame for Canada’s elevated level of media ownership concentration squarely on its ineffective federal regulators, which it accused of nothing short of “neglect” for failing to halt the consolidation. The Competition Bureau had cozied up to Big Media more like a lapdog than a watchdog in a phenomenon known as “regulatory capture,” or regulation in the best interests of the regulated, not the public. In broadcasting, the CRTC had arguably done even worse, as it allowed media owners to literally bribe their way into monopolies by making so-called “public benefits” payments.

It looked like the country’s news media were rapidly dying, but those under more sustainable management were actually doing quite well. The Globe and Mail, which was owned by the ultra-wealthy Thomson family, continued to invest in quality content that attracted 250,000 online subscribers and was making an admirable transition to hybrid print/online sustainability. Winnipeg Free Press owner FP Newspapers, which also published the Brandon Sun, was one of the few remaining newspaper companies in Canada that was publicly traded on the stock market and thus had to report its earnings. It was also keeping its head above water with a paywall that first asked readers to register after a few free articles, then demanded they pay after a few more. Its annual reports showed that while its revenues had fallen by almost half in the previous decade, its profits had held steady at about $7 million in recent years, and its profit margin was comfortably in the double digits.

Many felt that the Online News Act was a clumsy attempt at a government shakedown of the prosperous digital platforms on behalf of the country’s still-powerful newspapers, the largest of which were now owned by vulture capitalists. “The notion that we should be compensated for the traffic Facebook and Google send our way, often at our behest, is bizarre in the extreme,” wrote Globe and Mail columnist Andrew Coyne, who was one of the few mainstream journalists to speak out against the scheme. “This has nothing to do with fairness, in other words. It’s a shakedown, pure and simple. But it is hostage to its own illogic. The reality is that the news business needs Facebook and Google far more than they need us.”

University of Ottawa professor Michael Geist, who studied Internet law, called the Online News Act “an embarrassment  to the news media lobby that demanded it.” Geist counted more than 100 registered lobbyist meetings by News Media Canada with government officials and politicians over the previous three years and chronicled “skewed coverage of the issue in which the overwhelming majority of news stories backed government intervention.” Even worse was the corporate censorship Geist said he experienced first-hand after editors at a newspaper he did not name accepted an opinion article he had written, only to have it spiked by upper management. He wasn’t the only one, as Carleton University professor Dwayne Winseck reported that the same thing happened to him twice. Worst of all, according to Geist, was the high-handed process followed by government, which saw the ruling Liberals attempt to railroad Bill C-18 through Parliament on a fast track without even hearing from Meta. “This represents nothing less than a government-backed shakedown that runs the risk of undermining press independence, increasing reliance on big tech, and hurting competition and investment in Canadian media,” he wrote.

Geist deemed the Online News Act a “massive policy blunder” after Meta began to block news in Canada following its passage. “The bill is already a failure and seems certain to cost the Canadian media sector hundreds of millions of dollars.” Former CRTC vice-chair and Calgary Herald publisher Peter Menzies called it “the most spectacular legislative failure in Canada’s living political memory,” and noted that Canada was “on the verge of destroying far more journalism jobs than it ever could have hoped to save.”  Coyne called it “a policy catastrophe on a grand scale” and argued that the government was interfering in the natural evolution of news media. “In its desperate attempt to prop up the media’s past, the government has instead conspired to destroy its future.”

Ottawa’s inaction and then its misguided actions had pretty much ruined Canada’s news media, and everything it did only seemed to make things worse. The country’s largest newspaper chain appeared set to crash and burn after years of being run into the ground by the vulture capitalists who had been profitably dismantling them. Its largest telecommunications companies, despite being wildly profitable, balked at living up to the public service news obligations of the broadcasters they had been allowed to acquire. Emerging online news media were seemingly being sacrificed in Ottawa’s attempts to appease the country’s press. The worst part was that the government had repeatedly refused to follow the advice of its own media inquiries going back more than a half century, instead preferring to follow the dictates of media owners. It was small wonder that such a recipe for disaster should result in a media cataclysm. 

Tomorrow's News to be published Nov. 21

Canada’s news is a mess. A self interested, divisive, and profit-fixated news business has bred a corrosive and deepening distrust not just of the media, but of our democratic institutions themselves. Many see this crisis of the fourth estate as an existential threat to a bedrock of democratic decision-making.

In Tomorrow’s News, Marc Edge lays out some of the new forms of journalism that are emerging in the post-print, digital-first world. The bad include “dark money” funded non-profits, such as the US news outlet Richmond Standard, which have been rushing into the breech with “pink slime.” The good include worker co-operatives, such as CHEK-TV in Victoria, B.C., the Prince Albert Daily Herald, and CN2i in Quebec. Tomorrow’s News also explores the potential of a voucher system as a financing mechanism for local news organizations.

People will always be news hungry; journalism isn’t going away, Edge argues. The news organizations that thrive in the post-print world will be the ones that are able to shift their support base, and revenues, from advertisers to readers.