PBO May Have Overestimated Financial Benefits of Bill C-18 By 50%

Recent data suggests that the Parliamentary Budget Officer may have over-estimated the financial benefits of Bill C-18 by as much as 50%.

Last month, the Parliamentary Budget Officer released some data of how much value they expect to extract from large platforms through the link tax. The total amount of money estimated wound up being $329 million per year. While that sounds like a reasonably healthy payday for media outlets, that number didn’t tell the whole story.

When digging further into the numbers, it turns out that roughly 75% of the money would work its way over to the largest players in the sector. This is namely organizations like CBC, Rogers, and Bell Media to name a good portion of names that fall squarely in that category. This leaves the remaining newspapers and smaller players with a paltry 25% of the expected revenue. The actual money estimated to be destined for the big players worked out to $247,677,000 per year. This leaves everyone else fighting over the remaining $81,550,000 per year.

To the average lay person, $81,550,000 per year sounds extremely lavish still. However, the mathematics quickly takes over. You are dividing that money across the numerous newspapers and small TV news stations all across the country. According to News Media Canada, there are over 1,000 community newspapers in Canada. According to Wikipedia, there are 46 Designated Market Areas (DMAs) across the country. It wasn’t clear how many TV stations that comes to, but if we presume that it’s just one TV station, the most optimistic number we can come to is 1,046 entities presumably vying for this money. Obviously, we are missing chunks of the media landscape still, but still, that works out to roughly $77,963 per year. That is enough to maybe pay the salary of one or two journalists.

That number, however, ended up being optimistic. As we reported earlier this month, news production is now optional for benefiting from the link tax legislation. All that is required is a CRTC license to operate. So, this adds in pretty much every radio station operating in Canada. How many radio stations are there in Canada? According to the CRTC, there are 721 privately run radio stations. As a result, that works out to, optimistically, 1,767 entities fighting over the remaining scraps. At $81,550,000 per year, that works out to roughly $46,151 per year. Enough to maybe pay a single journalist with a little bit of extra cash to spare, but not exactly game changing for the industry as a whole.

Recently, however, numbers uncovered suggest that even those numbers are wildly exaggerated. Another set of numbers released by none other than Canadian Heritage paints a far less rosy number. From Michael Geist:

Canadian Heritage Minister Pablo Rodriguez has touted Bill C-18, the Online News Act, as critical for Canada’s media sector, but government’s internal modelling suggests there will be limited benefits for most news outlets. Earlier this fall, the Parliamentary Budget Officer estimated that it would generate $329 million per year, with over 75% of that revenue going to broadcasters such as Bell, Rogers, and the CBC. At the time, I noted that meant that “newspapers will receive less than 25% of the funding or about $81 million to split among hundreds of news outlets.” It turns out that the government believes that vastly overstates the benefit as its own modelling estimates about $150 million in total revenues, less than the 50% of the PBO’s estimate. Assuming a similar apportionment of revenues between broadcasters and newspapers, that would place the benefit at just over $37 million for the entire newspaper sector. In fact, as the government has expanded the eligibility to hundreds of additional outlets, the benefits for each organization shrinks even further.

The revelation of government modelling came during the most recent Canadian Heritage committee hearing on the bill. Asked to speak to the PBO estimate, Heritage official Owen Ripley responded:

I won’t speak to the PBO report which is the source of the numbers that you cited. That was not a department-led initiative. The internal modelling that we did when we tabled the bill and mentioned in our technical briefings was more around $150 million impact. That was based again in terms of how this played out in Australia and making some assumptions about how it might play out here. With respect to the PBO report, any questions about that particular number would have to be directed towards them. 

The $150 million figure is, indeed, quite an eyebrow raiser. Assuming the 75-25 split between the largest players and everyone else, that works out to $112,500,000 for the largest players while the remaining players get stuck with a paltry $3,750,000 per year. Divide that with the aforementioned 1,767 players and that works out to a measly $21,222.41 per year. That works out to $408.12 per week or roughly $816.25 per paycheck of one person. At best, you are barely covering the cost of a part time employee with that kind of money let alone throwing in minimal benefits over top of that. This, of course, depends again on which region of the country you are talking about as minimum wage varies between province and territory.

Someone explain again how this is supposed to be in some way the silver bullet that supposedly revitalizes journalism in this country again?

This, of course, is also assuming the optimistic outcome that Meta and Alphabet will just happily go along with this whole money for nothing arrangement in the first place. Facebook, for their part, is already threatening to block news links in Canada already. The loss of Facebook alone could be devastating to numerous journalism outlets across the country.

All of this truly paints a picture that when smaller media outlets join in pushing for this link tax, they are actually risking quite a lot for what amounts to pocket change in this day and age. The risk reward ratio is brutal in that regard. News rooms are probably better off setting up a volunteer run lemonade stand to try and shore up losses on the balance sheet. At least a potential major source of traffic wouldn’t be at risk at that point and you are working the good will of the community in the process.

It truly is a bad sign when the picture isn’t looking good when running the numbers of an up and coming payment scheme. Industry revolution? More like wet fart. The most a supporter can say at that point is that it’s all about principle. Guess what? Principles alone won’t pay the bills, bro. Scream about principles all you like, but please do that on the sidewalk. The owner has decided to rent out the building to someone who will pay the rent at the end of the month and that person is not you.

Drew Wilson on Twitter: @icecube85 and Facebook.

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