Issue 43: Should the media get a(nother) bailout?
COVID-19 might indeed be an "extinction event" for newsrooms, but the pandemic doesn't change the fact that every plan to save legacy media is terribly flawed
Today’s briefing is by Andrew Potter (AP), who is the former Editor in Chief of the Ottawa Citizen. He is currently an associate professor at the Max Bell School of Public Policy at McGill University.
THIS IS AN EXCEPTIONALLY BAD TIME FOR THE NEWS BUSINESS. As many people have pointed out, there is an irony in that even as news reporting finds itself more important than at any time since 9/11, the business itself is hurting worse than at any time since the financial meltdown of 2008. The shutdown of the economy has killed what remains of newspaper advertising revenues, while the lockdown and need for extended social distancing has taken a sledgehammer to new revenue streams like events and cruises. The result is verging on what has been called “an extinction event” for newsrooms.
The toll both in the US and in Canada is grim: at least 2100 media layoffs since the pandemic began, 50 community newspapers have closed, and a few dozen other publications have suspended their print editions. And if history is any guide, there is also little reason to believe things will get better once things return to normal: the newspaper advertising revenues that evaporated in 2008 just never came back.
Inevitably, this has given new voice to insistent calls for something to be done to help the business. But outside of any of the temporary financial supports that have been made available to many business in Canada, we should resist the urge to increase the current federal bailout or bring in new measures to support the industry. Pandemics can make for bad policy, and this is a case where doing nothing is the better path.
1. The case for a bailout
To be clear, any eligible news organizations should apply for any of the various temporary federal subsidy and financing options that are available, and it is good that Torstar and Postmedia have both applied for the Canada Emergency Wage Subsidy (CEWS). But in his recent video testimony for the finance committee, Globe and Mail publisher Philip Crawley said ““the long-term outlook for The Globe and many others has darkened because of the pandemic,” and he urged the federal government to go further, asking for both more federal money and for a deal with “foreign internet companies” -- that is, platforms like Google and Facebook.
This pairing -- more federal money, and significant cash transfers from the big platforms -- has become the mantra of those looking to save the news business. For example, in a very good survey of the current situation, Ryerson’s April Lindgren acknowledges that there’s no silver bullet for saving the news business, but she lays out five elements that need to come into play if the industry is to be saved: Audiences need to start paying, journalists and academics need to collaborate more, there needs to be more philanthropy, Google and Facebook need to start paying for the content they are taking from news outlets, and the government needs to intervene with significant bailout money.
There’s nothing objectionable about the first three of these, although the amount Canadians are willing to pay for local news appears to be very little, partnerships with academics are fine but limited, and Canadian foundations are pretty gun-shy about funding journalism directly. Which is why, like Crawley, she puts the biggest emphasis on the last two - government support and platform cash.
A clear statement of this can be found in Ed Greenspon’s National Post piece from May 6, which opens by noting that, in the pandemic, journalism has become “mission-critical” even as it is becoming an endangered species. He proposes pumping up the existing federal bailout (notably by increasing the labour credit salary ceiling from what he calls an “arbitrary” $55,000) and raising the subscription tax credit from 15 per cent to 50 per cent.
But as Bruno says to Boots in Go Jump in the Pool!, “twice small potatoes is still small potatoes”, and Greenspon’s proposals for expanding the bailout are nowhere near enough to genuinely help the industry. For example, Torstar boasted revenues of over $1.5 billion in 2011, $935 million in 2013, and in 2019, revenues were just under $480 million. Which means that the entire federal bailout wouldn’t even make up for seven years of decline from Torstar alone. Conrad Black sold Southam to the Aspers for $3.5 billion in 2000. The residual company, Postmedia, today has a market cap of under $200 million. These losses are pretty much the same across the industry, which should give you get a sense of the mountain that needs to be climbed. Short of outright nationalisation, the federal government simply can’t do that much for the news business.
Greenspon knows this, which is why he ends up coming back to his big proposal, originally mooted in the Shattered Mirror report, to take funds from platform companies to fund journalism. As it was outlined in that report, the idea is to skim about $300 to $400 million a year from the big platforms to fund a “Future of Journalism & Democracy Fund”, which would give money for “digital innovation” and be directed at operators producing civic-function journalism. The idea of taxing platforms to pay for civic journalism got new legs recently when Australia announced a plan to force Google and Facebook to share revenue with domestic media companies.
2. Against a bailout
It sounds like a win-win deal: The platforms are eating newspapers’ lunch and not giving anything back. They are rich, and newspapers are not. So take money from the rich and give to the poor, and society will be better off, right?
Yet there are a lot of problems with this idea, not least of which is that it is based on a complete mis-representation of what is going on. As the legacy media orgs have spun it, Google and Facebook are stealing their rightful ad revenue by linking to their news stories and charging ads against it. It’s not remotely true, and, in a piece that is essentially one long riposte to Greenspon, Michael Geist explains why. (tl;dr: There’s really not not that much money being made off selling ads against Canadian news; the snippets the platforms link to constitute fair dealing; the platforms send oodles of traffic to the news companies to monetize if they can; if media outlets don’t want Google indexing them and sending them traffic, all they have to do is use robots.txt to keep from being scraped).
As Geist argues, the problem is simply that news consumers have more choice than ever, and it isn’t the fault of Google or Facebook. And besides, if the media organizations really wanted to go after the platforms that are actually eating their lunch, they would be targeting the ones that took their real cash cows, namely eBay and Kijiji.
And so ultimately, Geist concludes the federal government is where the money is, and it is where the industry should look for a saviour.
The problem is, Geist and Greenspon are both wrong. Greenspon is wrong for the reasons Geist gives, and Geist is wrong for the reasons Greenspon gives. On the one hand, Geist is right, there’s not enough money flowing to the platforms from selling ads against Canadian news to make a case for robbing FB and Google to fund Torstar and Postmedia, and even if there were it would be a bad idea. But on the other hand, Greenspon is right, the existing federal media bailout is too little to do anything serious for the media.
3. The case for doing nothing
So where does that leave us? Oddly, the pandemic doesn’t really change things all that much.
First, if you believe in the basic process of creative destruction, then you have to accept that along with the creativity there will be some destruction. The recent purchase of Torstar by a private equity firm, with at least $50 million of new investment into the company, suggests that there is still significant private money looking to invest in innovation in the media sector. That process must be allowed to run its course, and the more the federal government intervenes to support existing organizations, the longer it is going to take.
Second, Geist is on the right track though when he ends his piece by saying that journalism serves the public interest and so the public should help fund it. The thing is, Canadian taxpayers already do support the media: it’s called the CBC. The problem is that we beggar it. Canadians like to think we have a public broadcaster, and it’s one of any number of ways we consider ourselves superior to the Americans. But the truth is, by most measures, the CBC barely qualifies as public broadcasting. The amount it gets is paltry by international standards (the CBC receives about $29 per Canadian per year, while the average public broadcasting subsidy in industrialized countries is $87 per capita, with the BBC getting $111 per capita).
But finally, there’s a more philosophical issue here, which is that while we talk a lot about trying to ensure that we have a healthy media ecosystem, we actually have no idea what that looks like. More to the point, we have no idea what it would look like in the absence of big legacy players such as Postmedia and Torstar.
Before we start strong-arming the platforms into funding journalism, and before we double or triple or quadruple the size of the federal government’s bailout, before we decide that someone other than news consumers should be paying for news, we should figure out just what it is we want from the media, and what a post-legacy media ecosystem might look like. It’s not good enough to just point out that journalism plays a vital “civic function” and then conclude that money must be found to support existing media outlets. We may be in the middle of a pandemic, but that’s no excuse for bad policy. (AP)
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Policy for Pandemics is produced and edited by Andrew Potter. If you have any feedback or would like to contribute to this newsletter, please send an email to email@example.com. If you liked this, why not share it?