Pablo Rodriguez Signals Link Tax Benefits Will Focus on Legacy Publishers

Canadian Heritage Minister, Pablo Rodriguez, signalled that legacy media players will be the focus of link tax benefits.

Last December, the Canadian link tax was promised to make a comeback. Viewed widely as a massive cash grab, the link tax would force aggregators and social media platforms to pay a license fee for the privilege of linking to news sources. It’s unprecedented as no other discipline requires a license fee for referencing content. Further, linking, snippets, and thumbnails are widely regarded as fair dealing in Canada.

Of course, legacy corporations and publishers have been pushing for a policy to allow them to freeload off of the success of web platforms for some time. With their intensive lobbying efforts, they have made gradual inroads in bending and breaking copyright laws to suit their needs. Australia is a big example of this where they passed the link tax in their country. The results was that smaller publishers basically got left out in the cold while Rupert Murdoch and his properties saw a massive cash windfall.

Corporate interests in Canada have been lobbying hard for the same kind of freeloading benefit here. Most brazenly, they are openly saying that they are wanting Canada to model their approach after the disastrous Australian model. The government responded through the notoriously lobbyist influenced Minister of Canadian Heritage who is basically following through on the marching orders of lobbyists and drafting legislation accordingly.

Recently, Rodriguez signalled that the focus for who benefits from the link tax will be for legacy players who own radio, print media, or television broadcasts. From the National Post:

The Liberal government’s upcoming legislation to force Google and Facebook to share revenues with news publishers will include broadcasters, Heritage Minister Pablo Rodriguez said.

“It will be the same. Because news are news,” Rodriguez said during an online event Wednesday. “If you get it printed, or if you get it on radio or if you get it on television, they all contribute to informing Canadians, so we will make sure they’re all included.”

Bell and CBC were among the large broadcasters who urged the government to ensure they would be covered by the new bill, the National Post reported earlier this year, based on documents obtained through access to information., Bell, whose Bell Media division includes CTV, told Heritage Canada the local television sector in Canada has been unprofitable since 2012, and said it “cannot continue to operate its news business at a loss indefinitely.”

The Liberals have promised to introduce the legislation soon. It will be based on the Australian model, which imposes bargaining rules between outlets and publishers, including broadcasters. Because that bargaining code allows Google and Meta, Facebook’s parent company, to strike commercial deals with publishers, the arbitration mechanisms under the code have not had to kick in yet.

Now, according to financial statements, Bell Media has been reporting significant profits in their quarterly reports. The fourth quarter of 2021 shows that Bell Media has raked in net earnings of $658 million. What’s more is that, in their quarterly report (PDF), they had no problem bragging about how much money they were making off of Bell Media:

Bell Media

  • Media operating revenue increased 7.3% in Q4 to $849 million, and by 10.4% to $3,036 million for 2021, driven primarily by increased TV advertiser spending and higher subscriber revenue.
  • Advertising revenue increased 11.8% in Q4, driven by stronger conventional and specialty TV performance, due to the return to a more regular sports schedule and fuller fall TV programming line-up compared to Q4 2020, higher year-over-year out of home advertiser demand as leisure and travel activity resumed with the easing of COVID-19 restrictions, and continued digital media growth. For full-year 2021, advertising revenue was up 16.3%.
  • Subscriber revenue was up 1.9% in Q4 and 4.8% in 2021, driven by Crave subscriber growth over the past year. Crave subscribers increased 6% in 2021 to more than 2.9 million subscribers.
  • Digital revenue increased 36% in Q4 and 35% in 2021, due to Crave direct-to-consumer growth, continued scaling of our strategic audience management (SAM) TV media sales tooland growth in TV digital advertising including with CTV advertising-based video-on-demand (AVOD). Digital revenues represented 20% of total Bell Media revenue in 2021, up from 16% in 2020.
  • Adjusted EBITDA decreased 19.0% in Q4 to $153 million, resulting in a 5.9 percentage point margin decline to 18.0%. Despite higher revenue, the year-over-year decrease in adjusted EBITDA was the result of a 15.6% increase in operating costs, due to an acceleration in programming costs and broadcast rights reflecting the return to a regular sports schedule in 2021 and a higher volume of original TV productions compared to 2020 when cancellations and delays had a favourable impact on operating costs. For full-year 2021, media adjusted EBITDA was up 4.3% to $725 million, yielding a margin of 23.9% compared to 25.3% in 2020.

So, on the one hand, they are telling the government that they are impoverished and on the verge of going under. Then, they are turning to their shareholders and splashing money all around as the good times continue to roll. The last point about increased operating costs is quite revealing because, with the return of sports, they are spending more to carry those games on their broadcasting channels. Obviously, this is a very different story than what they are telling the government.

This, of course, makes it harder to have any sympathy for these larger broadcasters who stand to be the ones making the financial gains from all of this.

Another angle in all of this is asking what effect does this have on journalism in general. When you have the larger players getting free government mandated money, smaller players are automatically disadvantaged by this. All this over top of the idea of how ridiculous demanding a link tax is in the first place. Of course, when lobbying is involved, common sense matters little – especially when free money is involved.

In the end, a scheme like this is the governments way of picking winners and losers in the market. If you aren’t already a large player, then you stand to suffer the most in all of this. You are basically trying to scrape by with little money and know full well that platforms you depend on will be highly unmotivated to carry your content given that the cost of linking (which ought to be free) has gone up. Under this new scheme, it’s going to make life a heck of a lot harder for smaller outlets such as ours.

Drew Wilson on Twitter: @icecube85 and Facebook.

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