Torstar . . . er, Nordstar going all-out for cash

Holy Joe Atkinson must be spinning in his grave. Earlier this year his nervous descendants sold off – for a pittance – the Toronto Star he turned into a journalism and social justice giant. Now that the country’s largest daily is in the clutches of private equity player Nordstar Capital, it is linking arms with the U.S. hedge funds that own most of Canada’s other major newspapers in a shameless cash grab. A few weeks ago, its new Public Editor joined the chorus of industry association News Media Canada in demanding a “new regulatory regime to safeguard trusted journalism.” The “free ride” for Google and Facebook must stop, wrote Bruce Campion-Smith as part of a NMC campaign urging Ottawa to halt their “monopolistic” practices. 

This is more than just an arm wrestle over digital ad revenues, the bulk of which have been snapped up by Facebook and Google. . . The two companies have used their market dominance to unfair advantage to control 80 per cent of digital ad revenues while not providing “fair” compensation for news content.

He’s right. It is more than just an arm wrestle over digital ad revenues. It’s also an arm wrestle over online streaming services. Ottawa is about to make changes to the Broadcasting Act that will regulate the Internet for the first time in Canada. After years of promising “no Netflix Tax,” the feds have finally caved in to Big Media’s lobbying efforts to tax and regulate online video. The price tag is an estimated $800 million. I’m sure you realize who will end up paying.

But it is also an arm wrestle over digital ad revenues. Newspapers once got rich selling classified ads, but most of those have gone online to websites that offer cheap (or even free) ads. Facebook and Google have scooped up most of the rest by simply building better mousetraps for ads. Google gets about half of all digital advertising revenues by planting cookies on your computer that follow you around online to find out what you’re interested in. Then it sells ads tailored to your interests that show up on whatever website you are visiting. It is doubtless the perfection of target marketing. Facebook gets about half of the rest by letting people connect with others online and then slipping in the occasional ad. 

Such technological cunning is unfair, Old Media seems to be saying. That ad money used to be theirs, and they want it back. The newspaper lobby is leaning as hard on the feds as the broadcasting lobby did, and they have the combined might of the nation’s press behind them. They want Ottawa to impose a “link tax” that will pay them every time someone posts a link to one of their news stories. Linking to journalism on the Internet, they claim, is nothing less than “content poaching.” It’s a bone-headed idea that has been tried elsewhere to no avail. Now it’s being tried again in Australia, and NMC is jumping all over that fact to try and persuade Ottawa to attempt it here. 

Unfortunately the newspapers are playing checkers while the tech giants are playing chess. All that Facebook and Google have to do is stop linking to news websites to avoid paying the tax. Traffic to those sites will drop off, and *ouch* you’ve gone and shot yourself in the foot again. University of Ottawa law professor Michael Geist has been all over this with some brilliant analysis. So much so that Ottawa is apparently re-thinking the wisdom of such a tax. NMC is mounting a major counter-offensive, and the Star is all-in.

Its latest contribution to the debate comes from Vancouver correspondent Joanna Chiu. She’s been riding the Link Tax Express for a while now. She seems earnest enough, posting on Twitter that “I worked with editors on this piece with zero input from Torstar executives and in fact the piece includes some sharp criticism of media leaders’ handling of financial crises.” I am sure those Torstar executives are nonetheless delighted with her work. 

Under the headline “Why Canada’s media industry is in more danger than you think — and what we can do to save it,” Chiu does her best to muddle through the technological and economic forces that have made it so difficult for her and other young journalists to find and hold a newspaper job. She starts her story the way any good feature should – with an anecdote. This one is about her hometown Tri-City News in the eastern suburbs of Vancouver. It has enjoyed a local monopoly since 2015, when the competing Tri-Cities Now closed down. Chiu laments this without mentioning how the local news monopoly arose, which is the real reason Ottawa should take action. She fails to mention that local news is also covered by the Vancouver Sun and Province dailies, although their newsrooms were merged in 2016 in another glaring example of federal inaction. 

Who is the real Journalism Doctor?

John Miller curiously quotes 19th Century circus operator P.T. Barnum in support of his contention that newspapers are essential to acquiring news and information these days. Ouch! Has the retired Ryerson University journalism professor not heard of the Internet? In an embarrassing screed posted on his blog The Journalism Doctor and reprinted on rabble.ca as “Ottawa dithers while local newspapers die,” Miller notes that a number of local newspapers have folded or suspended publication since the pandemic hit. As a result, he claims that “tens of thousands of us have been cut off from our only sources of local news.” I’m sorry, but I can’t hold it in any longer. OK BOOMER. And I’m a boomer! But John has been retired for so long that he might actually hail from the Greatest Generation. Sorry, I couldn’t resist.

Contrary to what Miller claims, there has never been as much news and information available literally at our fingertips. This is especially true when it comes to the big story these days. All of the latest Covid-19 facts and figures can be found with the click of a mouse if you have any search skills, along with all of the health advisories and warnings. You don’t even have to wait for the Pony Express to drop off the latest edition of your local weekly any more. And if official health information isn’t your cup of tea, you can go on Facebook or Twitter and find no shortage of news links, citizen journalism, contrary opinions, and yes, even conspiracy theories. If anything, the problem is too much information, not a lack of it.

I can certainly sympathize with Miller. Like him, I’m an old newspaper journalist. I love newspapers. I fiercely defended both their importance and viability in my 2014 book Greatly Exaggerated: The Myth of the Death of Newspapers. As I have told him, I greatly enjoyed reading his important 1998 book Yesterday’s News: Why Canada’s Daily Newspapers are Failing Us. It was about how Conrad Black was ruining Canada’s press, of which he certainly did a good job. But that is so much Last Century’s News. Things have changed a lot in the ensuing 22 years, in some ways for the better, but in other ways much for the worse. Black got out of the newspaper game at the millennium while the getting was still good. The problem he created went to another level in the following decade, however, and it has reached crisis proportions in the past 10 years. Now that we are on the cusp of a third post-millennium decade, I fear the worst-case scenario may be coming true – non-stop swindling combined with total bamboozlement.

Media ownership in Canada has degenerated into nothing less than a series of scams. The “convergence” scam of newspaper-television cross-ownership that was popular at the millennium imploded within a decade as Canwest Global went bankrupt and the Globe and Mail divorced CTV. The latest scam is called “financialization,” in which debt is weaponized. The former Southam newspaper chain which Black passed along to Canwest was scooped up out of bankruptcy by a consortium of U.S. hedge funds which had bought up its distressed debt at deep discounts on the bond market. They used some of the debt to bid for the company at auction, renamed it Postmedia Network, then kept the rest on its books to ensure they get paid first every month. In short, they are skimming it off the top. There might not be much money in owning newspapers any more, but there is in owning high-interest debt, some of which was taken out at 12.5 percent by a desperate Canwest. This isn’t just happening in Canada. Hedge funds now own seven of the 10 largest U.S. chains, including Gannett, the country’s largest, which two of them fought a bidding war for last year. Apparently the vulture capitalists understand something few others realize – there is still some money to be made in newspapers, which may actually be the way of the future in news since digital media have so far been unable to find a viable business model.

The takeover of our largest chain by Americans was inexplicably allowed by the Harper government despite a supposed 25-percent limit on foreign ownership of newspapers. Then in 2014 Postmedia bought Canada’s second-largest chain, Sun Media, which was inexplicably allowed by the federal Competition Bureau despite it giving the vultures 15 of our 21 largest newspapers, including both dailies in four of our six largest cities. Postmedia promised to preserve newspaper competition in Vancouver, Calgary, Edmonton and Ottawa, but soon merged the newsrooms of its duopoly dailies there to cut costs in order to keep paying its debt. It has been bleeding both chains dry ever since, all the while demanding government handouts by claiming they are losing money. Quite the contrary, Postmedia Network saw its profits rise slightly in the first six months of its 2019-20 fiscal year, to $26.8 million from $26.4 million in the same period a year earlier, according to the quarterly report it issued last week.

Miller, who isn’t really a doctor (I am. Of journalism, no less.) demonstrates how misinformed he is by claiming that “news media have only two sources of revenue – subscriptions and advertising – and both are in steep decline.” Advertising revenue has certainly drained away, mostly to Facebook and Google. Newspapers worldwide have rearranged their business models to compensate, however, by boosting their circulation revenue. Most are now charging more for hard copies they once sold at a loss to maximize their ad rates. While numbers are not available for Canada, U.S. newspapers increased their print circulation revenue by 12 percent from 2011-17. And while no real hard numbers are available on either side of the border for digital circulation revenue, most newspapers in Canada and the U.S. are now charging for online access by erecting “paywalls” that require a subscription after a few free articles every month. When the Toronto Star erected one in 2018, that brought the total to 65 percent of Canadian newspapers with a paywall, while 77 percent of U.S. newspapers charged for online access.

Postmedia saw its profits jump by 18 percent in 2017-18 after swapping 41 newspapers with Torstar, Canada’s new second-largest chain, then closing all of its acquisitions to create lucrative new local monopolies. The Competition Bureau finally acted, however, raiding the offices of both chains after leaked documents reportedly included agreements between Postmedia and Torstar not to compete for years in the markets they vacated and even on which employees would be axed. The chains and their executives now face fines of $25 million and prison sentences of 14 years on possible criminal charges of conspiracy and monopoly. Coming hard on the heels of its newsroom mergers, which prompted Parliamentary hearings in 2016-17, you would think the vultures would be flocking rapidly toward the border. Instead they somehow engineered a miraculous reversal of fortune which gifted them with a $595 million government bailout. How this happened is quite the story, which I am currently unraveling for my forthcoming book The Great Canadian Media Swindle.

Suffice it to say that Postmedia could not have done it without a little help from its friends. Industry association News Media Canada, which Postmedia dominates by dint of its ownership share, has run a masterful campaign with the aid of media consultants, journalism academics, and think tanks like the Public Policy Forum. NMC is headed by Winnipeg Free Press publisher Bob Cox, who seems like a nice enough guy and heads one of Canada’s last independent dailies. When you see Bob Cox quoted, however, think about how much less persuasive his arguments would be coming from Paul Godfrey, who until recently was Postmedia CEO.

Miller, who now hangs out his shingle as an expert witness, curiously gives over more than half of his screed to an “email interview” with Cox, which allows him to update the propaganda campaign Canadians have been inundated with for the past few years. It could be summed up as “we need money – give us money.” It certainly worked, to the tune of $595 million. But that is just a start, if Big Media in Canada have anything to say about it. They have their eyes on all that money U.S. digital giants like Facebook and Google are making and want Ottawa to gift them a portion of that, too. The total could add up to billions. For that to happen, however, Big Media will need a lot more help from their friends.