Saturday, March 12, 2016

Canada’s chief media apologist sings the blues (to an American)

Ken Goldstein dropped by the Poynter Institute recently. Who knows what he was doing in St. Petersburg, Florida. Maybe he was on vacation. After all, it’s c-c-cold this time of year in Winnipeg, where Goldstein lives. Or maybe he was there at the behest of a client. His firm Communic@tions Management Inc., according to its website “provides consulting advice in media economics, media trends, and the impact of new technologies on the media.” FULL DISCLOSURE: Goldstein and I have locked horns before, on the letters page of the Vancouver Sun way back in 2002. He was then executive vice-president and chief strategy officer of Canwest Global Communications, which owned the Sun and most of the other major dailies in Canada. That was before its leadership ran Canwest into bankruptcy, forcing Goldstein to hang out his shingle as a consultant. Back then my complaint was about a Sun column Goldstein wrote headlined “Newspapers’ dwindling role belies fears about monopolies,” in which he argued that Canwest’s overweening influence was nothing to worry about. You can see from the correspondence that Goldstein made sure he got the last word back then. That won’t happen now that I have a blog.

Ken Goldstein -- Canada's media "expert"
Down in St. Petersburg, Goldstein got the ear of Rick Edmonds during his visit to Poynter’s campus. (Endowed by the late Nelson Poynter in the 1970s, the Poynter Institute runs journalism education programs, does much journalism research, and also publishes the St. Petersburg Times.) Edmonds is a media business analyst for Poynter and he co-authors its excellent annual State of the News Media report. So he’s fairly influential. You can see why Goldstein might want to tell him all about the woes of Canadian media, or at least his (or his latest client’s) version of them.

And what a tale of woe Goldstein spun. Postmedia Network, the consortium of mostly U.S. hedge funds that took over the former Southam dailies after Canwest went bankrupt, has been dealt a “nasty” hand. A faltering economy and falling Canadian dollar have made it tough on the company because its enormous debt is payable in U.S. dollars. No mention of that fact that much of its high-interest debt is held by those very same U.S. owners, plus a Canadian hedge fund that financed most of Postmedia’s $316-million purchase of 175 newspapers from Sun Media. These hedge funds are sucking the company dry as a result, all the while complaining about how tough times are.

According to the headline on Edmondsaccount of what Goldstein told him, “business model woes are running off the charts” up here as far as media companies are concerned. Things are so bad for Postmedia that it has been forced to implement “waves of layoffs and consolidations, some of the most draconian this January.” No mention of the contentious newsroom mergers at its dailies in Vancouver, Calgary, Edmonton, and Ottawa, which have now prompted federal hearings. No, the way Edmonds understood it from Goldstein, the newsrooms in those cities were “nearly halved and asked to produce separate reports for the two titles Postmedia owns in each market.” Well, that sounds a lot better than newsrooms being merged.

Government, according to what Goldstein told Edmonds, is a “complicating factor” in Canadian media, what with the state-owned broadcaster CBC providing competition for the private sector. “And a Competition Bureau regularly considers whether to rein in concentration at the biggest chains.” Yeah, then it lies down until the feeling passes. Some complication.

This promotion of the woes besetting newspapers in Canada is nothing new for Goldstein. Last summer, mere weeks before after Postmedia bought the Sun Media dailies (surely just a coincidence), Goldstein issued a dire warning. By simply projecting current trends to continue downward (which rarely happens), he predicted that within a decade “there will be few, if any, printed daily newspapers” left in Canada. Edmonds also picked up on that “expert” forecast. Except that such predictions were rampant in the U.S. following the collapse of newspaper classified advertising there during the 2007-09 recession. Among major dailies, only a flagging few folded. No major newspaper in North America has ceased publication since 2009 despite all the dire predictions, as I chronicle in my 2014 book Greatly Exaggerated: The Myth of the Death of Newspapers. The biggest threat is not so much to newspapers, which from the company financials I have examined are still profitable. The threat is to companies like Postmedia which own newspapers but are heavily loaded with debt which they may soon have problems paying off if their revenues keep falling. Newspapers are remarkably resilient, as has been amply demonstrated, because they can quickly downsize by cutting staff and other costs. They will thus continue publishing. They may have different owners, however. In the case of Postmedia, that would be a blessing.

But wait, it gets better . . . I mean worse. Things are just as bad in Canadian television, according to what Goldstein told Edmonds. “TV stations in Canada are in roughly the same bad shape as newspapers. . . . Canadian local stations don’t have the saving grace of huge political advertising revenues and rising retransmission fees, which have kept TV so prosperous here.” No, we actually didn’t have a federal election last fall, with lots of advertising on TV. And remember those retransmission fees, which the networks campaigned so hard a few years ago to get the government to force the cable and satellite companies to pay them? As I chronicle in this article, it took the networks several tries, and a barrage of “Save Local TV” commercials, to get the right to negotiate retransmission fees. They sang the blues, claiming they were losing hundreds of millions of dollars, except that they weren’t, as one enterprising blogger discovered. But almost as soon as they won the war, the networks were taken over by those very same cable and satellite companies that were making even more money than the networks. This is the disastrous legacy of convergence, which 16 years ago saw newspaper and television companies frantically partner in a fruitless quest for ever-greater profits. Since it all collapsed, CTV is now owned by Bell, Global by Shaw, and CITY by Rogers.

But here’s my favorite line from Edmonds’ account of his meeting with Canada’s media guru. “Goldstein told me that the four private stations in his home town of Winnipeg have collectively lost money each of the last nine years.” I think this one proves the old saw about how to lie with statistics. I am surprised to hear that there are four private stations in Winnipeg, as we only have three private networks, so I suspect there is a cable access channel in there bringing down the average. If you instead prefer hard data, as I do, luckily the CRTC keeps a close eye on broadcasting company financials. You will see from its latest annual monitoring report that the television networks are doing quite nicely.

So, keep it up Ken. You’re doing a great job of twisting the facts to the advantage of Canada’s bloated media companies. Good thing nobody’s watching.

Tuesday, February 23, 2016

A letter the National Post won't publish

Re: Government to the newspaper industry’s rescue? No thanks, Feb. 6

I have been nominated by Terence Corcoran for an award he calls the Most Pompously Wrongheaded Argument for a Government Bailout of the Newspaper Industry. My nomination cannot stand, however, because I am actually opposed to government subsidies for Canada's press. Mr. Corcoran quoted me from a CBC panel discussion as pointing out that Scandinavian countries are highly ranked for press freedom despite subsidizing their press, but he ignored the following quote: “I have to agree with Lorne [Gunter], that most self-respecting journalists would not want to see government funding.” Mr. Corcoran is also incorrect when he states that the 1969 Davey commission on the media proposed a Press Ownership Review Board that would have issued licences and guidelines. The Davey report made no mention of licensing, which is anathema to press freedom. The proposed Press Ownership Review Board, similar to one in the United Kingdom, was to approve – or, more likely, disapprove – newspaper sales or mergers. Such a board’s basic guideline, according to the report, would have been that “all transactions that increase concentration of ownership in the mass media are undesirable and contrary to the public interest – unless shown to be otherwise.” Mr. Corcoran’s opinions might carry more weight if he could get his facts straight.

Marc Edge
University Canada West

Postmedia’s promises prove practically worthless

As published on and reprinted by World News Publishing Focus and Danielle magazine.

And so the Great Canadian Newspaper Roll-up has begun.
This was predictable once the Competition Bureau rubber-stamped Postmedia Network’s $316-million takeover of Sun Media last year. As a result, Postmedia now publishes 37.4 per cent of Canadian daily newspaper circulation, according to my calculations.
It is in the three westernmost provinces, however, where its grip is truly unprecedented. In B.C., Alberta and Saskatchewan, it now owns eight of the nine largest dailies and accounts for a whopping 75.4 per cent of daily newspaper circulation. It owns both daily newspapers in Calgary, Edmonton and Ottawa, as it already did in Vancouver.
In all four cities, newsrooms will be merged. Residents of these burghs should be outraged, as should all Canadians who cherish what little remains of journalistic independence in this country. Not to mention those who put any value on promises made.
The immediate angle that emanated from certain journalistic quarters in response to this news was a hand-wringing wail that it was only more evidence that newspapers are dying.
Nothing could be further from the truth, as I explain in my recent book, Greatly Exaggerated: The Myth of the Death of Newspapers. A quick glance at Postmedia’s latest financial statement shows it recorded operating income of $42.5 million on revenues of $251 million in the first quarter of its 2015-16 fiscal year, for a very healthy profit margin of 16.9 per cent.
The self-serving myth that newspapers are dying is one that publishers have promoted to advantage for decades. It was used with great success in the U.S. after the Supreme Court ruled illegal in 1965 the increasingly popular “joint operating agreements” between newspapers that went into business together, set advertising and subscription rates jointly and split the profits.
Newspapers lobbied furiously for an exemption from U.S. antitrust laws after the Supreme Court ruling, claiming that under the prevailing natural monopoly theory of newspapers there would otherwise be only one daily eventually left in each city. The result was the Newspaper Preservation Act of 1970, which sanctified newspaper marriages, but only if they maintained journalistic competition by keeping separate newsrooms.
In Canada, joint operating agreements sprang up on the west coast in the 1950s. The Victoria Times and The Colonist amalgamated mechanical operations in the early 1950s, but kept separate newsrooms until the newspapers were merged by Thomson in 1980. After the Vancouver Sun and the Daily Province combined non-editorial operations in 1957, however, the Restrictive Trade Practices Commission ruled the merger an illegal combination between competitors, as I document in my 2001 bookPacific Press: The Unauthorized Story of Vancouver’s Newspaper Monopoly.
The owners of the Sun and Province, however, pointed to the closure on both sides of the border of smaller, weaker newspapers as evidence that newspapers were dying, and they were allowed to go into business together. The Restrictive Trade Practices Commission made them promise to keep separate newsrooms forever, which now seems to have been officially forgotten.
The events of “Black Wednesday,” which saw the Ottawa Journal and the Winnipeg Tribune close on August 27, 1980, prompting a Royal Commission on Newspapers, was proof positive to many of the natural monopoly theory of newspapers.
The 1981 Royal Commission report pointed to the rising tide of ownership concentration, as had a 1970 Senate report on mass media. Both urged measures to stem the inexorable economic forces that drove industry consolidation, but nothing was ever done.
The Senate report recommended a Press Ownership Review Board to oversee changes in ownership, along with government subsidies to encourage a competing bare-bones “Volkswagen press.” The Royal Commission urged limits on chain ownership of newspapers, but none were enacted as the Liberal government of Pierre Trudeau was replaced by the Progressive Conservatives of Brian Mulroney.
But then a funny thing happened in those two cities and others where only one newspaper remained. Colorful tabloids, modeled after the wildly successful Toronto Sun, sprang up as competition to monopoly broadsheets in Ottawa, Winnipeg and Edmonton. Soon there was an entire chain of tabloids Suns across Canada. Even staid old Southam converted its dowdy old Vancouver Province to tabloid format in 1983 to stave off extinction, and it thrived with a younger readership, which in turn attracted advertisers trying to sell to that valued demographic.
When Postmedia bought the Sun Media chain in late 2014, CEO Paul Godfrey promised it would continue to operate independently with its own newsrooms and opinions. He repeated the promise after the Competition Bureau approved the purchase in early 2015. By the time the Sun Media takeover was completed a few weeks later, however, the promise had been softened. Postmedia’s senior vice president of content, Lou Clancy, said then that some writers may be shared between the chains, but that the “Suns and Postmedia broadsheets would compete with each other.”
I guess it just shows the value of promises where hedge funds are concerned.
Marc Edge is a professor of media and communication at University Canada West in Vancouver.

Thursday, January 28, 2016

Seeking a Villain for Postmedia's Crisis? Try the Competition Bureau

As published in The Tyee January 23, 2016

If you're looking for a villain in the latest crisis of Canadian journalism, don't blame Postmedia Network. It's just doing what comes naturally to a bottom-line corporation that is mostly owned by U.S. hedge funds that are bleeding it (and Canadian journalism) dry with high-interest loans, which they also largely hold. Postmedia is just trying to do what it thinks it can get away with to fatten the bottom line and feed its rapacious owners.

If you want to point fingers, look no farther than the federal Competition Bureau, the regulatory body that keeps letting them get away with it. The bureau, according to its website, is ''an independent law enforcement agency'' that is supposed to ensure that ''Canadian businesses and consumers prosper in a competitive and innovative marketplace.''

Worried about the future of Canadian media?
Understand who's made the decisions.
It is knee-deep in complicity when it comes to the sorry state of Canada's news media, in particular for ''foolishly'' rubber-stamping Postmedia's $316-million purchase of 175 Sun Media newspapers last year without even the need for hearings. This was effectively the takeover of the country's second-largest newspaper chain by its largest (seller Quebecor retained three French-language tabloids), yet it was adjudicated in secret by the Competition Bureau. Not only that, but after it announced that its economic analysis absurdly concluded that the two newspapers Postmedia now owns in Calgary, Edmonton, and Ottawa didn't compete anyway, the bureau refused my request for a copy of this taxpayer-funded research.

Once it got the green light for its takeover, Postmedia's announcement on Tuesday that it was merging its newsrooms and eliminating 90 jobs in those cities was predictable. The shocker is that it would try the same thing in Vancouver. When the Vancouver Sun and theDaily Province formed a partnership in 1957, the Competition Bureau's predecessor, the Restrictive Trade Practices Commission, held hearings in both Ottawa and Vancouver.

As I document in my 2001 book Pacific Press: The Unauthorized Story of Vancouver's Newspaper Monopoly, the RTPC declared the merger an illegal combination between competitors. The Sun and Province argued that if they weren't allowed to go into business together, under the peculiar economics of the industry there would eventually be only one newspaper left in Vancouver. That ignored the fact there were then three, but Pacific Press bought the morning Herald from Thomson Newspapers and quickly folded it. Oh, all right then, responded the RTPC, go ahead and merge, but make sure you keep separate newsrooms forever and ever. It was a small price Pacific Press was forced to pay for its lucrative new monopoly. Well, so much for that.

Competition 'virtually dead'

The Restrictive Trade Practices Commission published its findings in book form in 1960. A Special Senate Committee on Mass Media held hearings and published three thick volumes a decade later. ''There are only five cities in the country where genuine competition between newspapers exists,'' it noted in fruitlessly recommending a Press Ownership Review Board to slow consolidation.

A decade after that, when dailies folded in Ottawa and Winnipeg on the same day, the first Prime Minister Trudeau quickly convened a Royal Commission on Newspapers to investigate. It held hearings across the country and published a report that was accompanied by no fewer than eight book-length research studies. ''Newspaper competition, of the kind that used to be, is virtually dead in Canada,'' its report noted. ''This ought not to have been allowed to happen.'' It recommended limiting newspaper ownership to five dailies per chain, but a proposed Canada Newspaper Act was never tabled in Parliament as the government changed from Liberal to Progressive Conservative.

A 2006 Senate report on Canadian news media was sharply critical of the Competition Bureau, which succeeded the RTPC in the mid-1980s, for failing to prevent our stratospheric level of press ownership concentration. It accused the Competition Bureau of nothing short of ''neglect'' for failing to halt press consolidation. ''One challenge is the complete absence of a review mechanism to consider the public interest in news media mergers,'' it noted. ''The result has been extremely high levels of news media concentration in particular cities or regions.''

It recommended a new section for the Competition Act to deal with news media mergers and prevent corporate dominance in any market. As the Competition Bureau was unlikely to have the expertise to deal with such mergers, it recommended an expert panel conduct the review. Election of an ardently deregulationist Harper government that year, however, doomed the recommendations.

Still profitable, but for whom?

Postmedia, of course, argues that it now has to compete with the Internet. Yes, and it now owns Sun Media's news website in addition to its own, giving it two of the country's largest online news operations. That is in addition to its 37.6 per cent share of paid daily newspaper circulation in Canada, by my calculations, including 75.4 per cent in the three westernmost provinces, where it now owns eight of the nine largest dailies.

But newspapers, they will add, are facing tough times. Sure, but as I document in my 2014 book Greatly Exaggerated: The Myth of the Death of Newspapers, they are still mostly making double-digit profit margins. Its latest quarterly report shows that Postmedia made a healthy 16.9 per cent return on revenue from September to November, with earnings of $42.5 million on revenues of $251 million.

But it's funny how things change. The incoming Trudeau government now has the opportunity to halt the madness. Or it can sit back and watch as one giant media corporation consolidates almost all of the country's remaining press competition.