La Presse, one of Canada’s largest newspapers, announced on Tuesday that its business model is no longer viable after 134 years of sustained operations. This is a dark day for Canadian media and the democracy it sustains.
The company’s executives pointed directly to the flight of advertising money to Google and Facebook as a key driver of the restructuring, a reality aggravated by Ottawa’s policy of subsidizing companies for buying ad space from Google and Facebook.
The entire Canadian media sector is exposed to this problem.
Google, Facebook and other foreign internet giants extract 80% of Canada’s digital advertising spending, and this outsized dominance sucks the life out of newsrooms who are needed to defend our democracy against corruption and fake news.
In a last-ditch attempt to stay afloat, La Presse will restructure as a non-profit organization to qualify for government handouts and corporate charity. And if that doesn’t work out, the curtain will soon come down on Quebec’s largest paper.
This is another wake-up call. The media crisis is here, it’s hitting hard, and it will run roughshod over nearly all Canadian journalism if we don’t act now.
So here’s the question: What will it take to make Ottawa act to save our local media?
If La Presse can’t survive as a business, most Canadian media outlets have little chance. Ottawa needs to take meaningful action to address this crisis now.
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In Budget 2018, the federal government launched a $50 million fund to assist publications with the “transition to digital”. Ottawa also announced a yearlong study of whether journalism should be funded by charity.
What’s wrong with these measures? Basically everything.
First, La Presse didn’t have a problem going digital, it was already a fully-digital operation. It was a world leader in this regard, but that wasn’t enough.
What’s more, this approach opens the door for government and big money to stick their fingers into Canada’s newsrooms, a recipe for undue influence on the news agenda.
And even without these problems, Canadian media won’t make it without way more money than government and foundations are likely to provide.
There is a market-based solution that can bring enough cash to Canadian media while avoiding the ethical pitfalls of government subsidy. This solution doesn’t cost a thing – it would actually save the government money. But it requires Ottawa to close a loophole in the Income Tax Act.
Last year, Canadian advertisers spent more than $5 billion on online ads. Where once this money sustained credible media outfits like La Presse that provide critical reporting in service of democracy, most of it now flows down a tax-free express lane straight into the pockets of Google, Facebook and other giant American internet corporations. As this ad money heads south, La Presse and other Canadian media find themselves face-to-face with extinction.
Ottawa actually encourages this exodus. Section 19 of the Income Tax Act creates rewards for Canadian advertisers who work with Canadian media outlets, effectively imposing a tax road bump on companies who advertise to a Canadian audience using foreign media.
Here’s the rub: The government does not apply these laws to internet-delivered media. You are free to place an ad in the Canadian edition of the New York Times, but you cannot deduct the cost of it. If you place the same ad on nytimes.com, you reap the full tax deduction that is supposed to be reserved for those who buy from Canadian media.
This is yet another way the federal government privileges foreign tech companies over their Canadian competitors. The web giants don’t want to play by the rules, and Ottawa is content to let them have their way.
By refusing to close this loophole, the federal government is effectively providing Canadian companies with a $1.3 billion annual subsidy for buying ads from Google, Facebook, and other foreign media giants, many of which are widely disgraced.
Closing this loophole would raise public income by $1.3 billion annually, and repatriate up to $440 million in ad spending to sustain Canadian media and the critical work they do in service of democracy.
Let’s not wait until another major news operation joins La Presse in the intensive care ward before this loophole is closed.
Daniel Bernhard is executive director and spokesperson for the watchdog group Friends of Canadian Broadcasting.