Big Media Admits Bill C-18 Was a Disaster, Is Now Lobbying for MORE

After getting pretty much everything the major media outlets wanted, they are lobbying for more to “save” the news.

Let’s face it, the major media companies have no clue what it’s even trying to do here. They pushed for the Online News Act (formerly Bill C-18) for years. Experts and critics had long argued that the legislation would create enormous harm to the news sector. All critics were ignored and dismissed as “shills” for “Big Tech”. The platforms themselves warned that they would rather drop news links altogether rather than pay the ransom payments. Those warnings were dismissed as little more than a “bluff”. All the lobbyists envisioned was a massive $329 million windfall and they figured that they had somehow backed the evil parasitic platforms into a corner, forcing them to shell out that money.

As critics pointed out, this never ended up happening.

Meta dropped news links after they explained that news links matters very little to their business model. It turns out that news links were highly replaceable after all. As a result, the free $230 million in free referral traffic went poof overnight back in August of last year. Faced with an even bigger looming disaster should Google do the same thing, the Canadian government caved and handed Google everything it had long asked for to avert news outlets from having the same fate on Google’s products. It resulted in the originally asked for $100 million fund model, meaning the media ended up operating at a $130 million loss as a result of its out of control greed.

Faced with the long warned about predictable conclusion of the Online News Act, the Canadian mainstream media then began to go shoulder to the wheel with the Online Streaming Act. Lobbyists pushed for a massive windfall coming from this legislation, siphoning money out of that hoped for windfall from general broadcasting and redirecting it to whatever slush fund they had originally envisioned. One example of this is Rogers who had pushed for 30% of the redirected funds to go to mainstream news outlets. The problem is that the streamers they are trying to rip off in this legislation are already contemplating leaving the country should the lobbyists get everything they want in this. With streaming serves potentially pulling up their tents and leaving the country, news publishers are threatening to repeat history and see their massive free money scheme collapse again, leaving Canadians with even fewer choices should they not be savvy enough to use a VPN service.

Meanwhile, back with the Online News Act, government has already started exercising its new power to silence criticism with the threat of pulling funds from newspapers who intend on publishing politically inconvenient stories. At the same time, south of the border, far right wing politicians are pushing laws to further crack down on journalism. With right wing politics reportedly on the rise here in Canada, it isn’t entirely out of the question that something similar could happen in this country – however unconstitutional such a law would be here in Canada as well.

With the Online Streaming Act threatening to topple over on the major media companies, it seems that the news companies are now brainstorming ways of trying to get more money out of the system. You know, because the last thing that they want to do is actually provide a product that people are interested in having in the first place. That’s just crazy talk. So, in a piece in the Globe and Mail, a whole new theory was conjured up on how to “save” journalism in this country.

The piece starts with the same talking points we’ve heard for the better part of five years now. Advertising is drying up and journalism is dying as a result:

Local media are essential contributors to the cultural and economic livelihood of the communities they serve. They also fulfill an essential mission in defining the specificity of Canadian culture and ultimately fostering Canadian unity.

But over the course of the past 20 years, a number of Canadian media outlets have had to close as their advertising revenue base dried up. These include numerous daily and weekly newspapers, radio stations and cable television channels. Major television networks have had to reduce their staff counts considerably.

This was supposedly a problem that the Online News Act was going to solve. With that failing, this is a problem that was also supposed to be solved by the Online Streaming Act. The media got everything they wanted here. Both laws were passed. According to the lobbyists, this was supposed to “save” journalism. Common sense and reasoning was defeated, the experts were ignored, and conspiracy theories triumphed! What more could you want, right?

Well, apparently, the author here thinks that this still hasn’t saved journalism after all:

Canadian advertising expenditures have shifted away from Canadian media in the past two decades, to the point where today only 30 per cent of advertising expenditures accrue to local media. No wonder they are closing en masse! The other 70 per cent of the total Canadian ad spend, some $10-billion, accrues overwhelmingly to foreign-owned digital media.

This debacle is essentially the result of the “winner takes all” dynamic characteristic of the digital age, not because local media are any less relevant. So, contrary to popular belief, this is not inevitable. Concrete measures can and must be taken right away to reverse this worrisome trend and strengthen the link that unifies our country.

Well, the reason why so many media outlets are closing en masse is because of technological change, a reluctance to innovate to the digital environment, services such as classifieds shifting to online after that reluctance to innovate in the digital environment, venture capital sucking the profits dry that big publishing managed to earn during their hey-day, saddling them with insane amounts of debt, cutbacks in services, and many other issues. No, that would point to reality here. Reality doesn’t count, remember? We have a conspiracy theory to run!

So, what’s the conspiracy being cooked up? Well, if an advertiser wants to advertise, they have to choose one service at one business and one only. After all, advertising has always been a “winner takes all” dynamic characteristic. I mean, when was the last time you saw an auto manufacturer advertise on more than one medium? That has never happened, right?

Further, you can’t blame people who run these media companies in the first place. It would totally be mean to point out the decades of poor business decision making that led them to this point. No, why would anyone in their right mind suggest that? People who run mainstream media companies are perfect in every way. When problem’s arise, it’s always the fault of someone else. The leadership of media companies would never create problems of any kind.

So, who is to blame for the lack of “saving journalism” this time? Well, clearly it’s all the governments fault, here:

The solution lies in Canada’s tax laws. In the early 1960s, Parliament added Article 19 to the Income Tax Act. It stipulates that when a Canadian advertiser uses foreign-owned media, the expenditure is not deductible for tax purposes. This has kept the magazine, television and radio industries healthy for many years and is still in effect. But its applicability has not been extended to include foreign-owned digital media.

In March, 2018, Friends of Canadian Broadcasting issued a paper recommending that the applicability of Article 19 be extended to foreign-owned digital media (Close the loophole: The deductibility of foreign internet advertising). That August, a report of the standing committee on transport and communications (The Tax Deductibility of Foreign Internet Advertising in Canada) rejected the idea, stating it would impose an undue tax burden on Canadian businesses. This conclusion is obviously based on the assumption that the incentive would not produce the desired result of bringing the advertising spend back to Canada – a somewhat dismissive conclusion.

Extending the applicability of Article 19 to foreign-owned digital media should have been done 20 years ago. The implementation of this measure is totally under the control of the federal government, does not require the consent of media companies and is easy to do.

Yup, you heard that right: when we are dealing with hugely complex problems such as ensuring the viability of an entire sector, the solutions are always easy. That’s just common sense, right there. If the government just implemented this one weird trick, journalism would totally be saved.

Now, to be fair, at least the media finally conjured up something that doesn’t break the internet for once. It’s hard to visualize a situation where this would lead to companies reconsidering their position in Canada. That’s more than what can be said for both the Online News Act and Online Streaming Act. I suspect that the idea is that this call would only be limited to the biggest players, however, so there’s still market distortions that are being created from a system that heavily favours the largest players, but, you know, that’s not important right now.

I’ll give the author some credit here, though, because there was an admission that Bill C-18 was a total failure:

To date, the Canadian strategy has centred on creating funds to support journalism and independent production and attempting to force, through Bill 18, foreign-owned digital media to negotiate royalties with Canadian media for the use of their content. In reality, these initiatives are only marginally useful and do not compare in size with the advertising revenues lost, which, if repatriated, would bring Canadian media back to life. For perspective, the $100-million deal with Google represents just 1 per cent of the $10-billion Canadian advertising spend lost to foreign-owned digital media. Furthermore, Bill 18 is not within the control of the government, as it requires foreign-owned digital media to comply and is at the root of the current blackmail campaign by some media companies, further accelerating the demise of Canadian media.

From any major media outlet, that’s a pretty big admission. It’s something that was widely known, but large media companies are reluctant to even come close to even entertaining the idea that Bill C-18 has failed in any way. Credit where credit is due, here.

While that was a brief moment of clarity, it didn’t last long because the article then goes on to conclude this:

Canadian media do not need nor want giveaways from the government. But if we can get the advertising dollars back to Canada, we have a fighting chance to prosper. Why does this matter? Because if we maintain the current course, artists and journalists will receive meagre compensations, but their employers will disappear.

Wait, let me get this straight: the proposal here is that you want tax breaks for buying advertising in foreign digital platforms, yet at the same time, the media would never ask for giveaways from the government? You’re basically asking for yet another money giveaway and saying you don’t need a free money giveaway. On what planet does this make any sense whatsoever?

On top of that, you are wanting a tax incentive that actively encourages spending ad dollars in foreign platforms as an argument to say that this will bring advertising dollars back into this country? Again, nothing about this makes any sense whatsoever.

It’s hard to see this making much of a difference. If the situation is as dire as that author claims to be, then this would amount to a rounding error in expenses in the grand scheme of things. Why? The media’s failed advertiser boycotts told the story. When the Toronto Star suspended their advertising campaign on Meta, we dug through the numbers and found out that they spent about $3,292 for the year up to that point. This is a major chain newspaper we’re talking about. Chances are, other news outlets have similar advertising budgets at most on platforms like Meta.

So, if we are talking about a few hundred dollars per month, possibly a few thousand dollars per year, the idea that a tax break on that spending doesn’t seem to amount to much. Even if you were to argue that 100% of that money is tax deductible, even a figure of $8,000 per year (and, yes, I’m using an optimistic number here) doesn’t necessarily translate much to a $10 million per year operation. At most, we’re talking about a windfall that might pay for the yearly budgets of paperclips.

The logic employed here is a real head scratcher. Even worse, the math really doesn’t add up for the grand objective of “saving journalism”. a few extra bucks here and there for large media companies? Maybe. A game changer for the legacy media? That sounds like a stretch. Still, this shows that the lobbying continues for the legacy media as they are clearly scrambling to come up with a plan “D”*.

(*Plan “A” was the Online News Act. Plan “B” was the Online Streaming Act. Plan “C” was to somehow throw the book at the platforms for… something.)

(Via @MGeist)

Drew Wilson on Twitter: @icecube85 and Facebook.

7 thoughts on “Big Media Admits Bill C-18 Was a Disaster, Is Now Lobbying for MORE”

  1. You are confused. The proposal isn’t to give a tax break for advertising on a foreign platform; its to make advertising on a foreign platform not deductible for tax purposes. That means all the canadian businesses that advertise on Google, Meta, Netflix et al would pay more income tax. For example, a business in the 40% tax bracket that paid $20,000 for advertising on Google would now pay an extra $8,000 in income tax.

    Given Canadian organizations spend $10B on advertising on foreign platforms making that amount non deductible would mean these organizations would pay billions more in income tax. Their reaction would be to cut their advertising spending and or to shift some spending to Canadian platforms. The foreign platforms would likely file a free trade grievance and lobby the US government to respond with tariffs.

    1. This was a pretty confusingly worded article on the Globe. In that light, though, yeah, trade retaliation would be an automatic one from the US as such a concept would easily be construed as anti-trade.

    2. Why should any advertising money be given for news?

      In the 19th to early 20th century, the model was to sell the news. There were thousands of daily,weekly, monthly newspapers/newsletters in North America back in those days.

      Then radio came and eventually TV. This started the change to selling advertising and giving the news away for cheap. Many widely read newspapers (many dealing with labour issues) went away because they could not compete with advertiser friendly newspapers.

      Now the internet has come and Meta and Google have changed the market for advertisers. It’s time that media adapts by selling news again. There is absolutely no reason that advertising needs to be the funding model for news.

      The real reason is that media news is a dying industry right now that’s owned by private equity. They are getting as much money as possible out of the dying industry before casting aside what remains. All the money is going to line the pockets of rich people. Not to journalists.

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      2. Alright, looks like your comments are safe. The wave of data restoration that was public facing has been completed. Sorry for any confusion my previous comment might have caused.

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