Sunday, October 15, 2017

Newspaper bailout rightly rejected, but for wrong reasons

An edited version of the following was published on the website of Policy Options.

Edward Greenspon isn’t giving up on a bailout for Canadian newspapers. “It is a good thing more thinking time has been allowed around the policy framework,” he wrote in response to Ottawa’s recent rejection of a proposal for giving $275 million in annual assistance to the country’s troubled dailies. (Unfinished business for Canadian journalism, Policy Options, Oct. 2) Greenspon somehow sees in background documents filed with the policy pronouncement a door left open just a crack for the ailing newspaper business. That means more work for his think tank, the Public Policy Forum, which has been pushing a bailout since Hedy Fry’s committee on Media and Local Communities released its report calling for government action in June. 

Greenspon laid the groundwork for a bailout in the PPF’s report The Shattered Mirror, which was released in February late January and paid for mostly by the Heritage Ministry, with a half dozen major corporations also contributing. It so exaggerated the plight of newspapers, however, that it brought howls of derision from Canadian media economists, myself included. He quickly switched hats and began officially working on a bailout in conjunction with News Media Canada, an industry group formed by the recent merger of the Canadian Newspaper Association and the Canadian Community Newspaper Association. Community newspapers already get assistance, as do magazines, from the Canadian Periodical Fund, which doles out $75 million annually. 

Greenspon’s proposal was simple, but expensive – extend CPF assistance to dailies and boost the fund by $275 million a year. That fell flat with the federal government, no doubt due in part to the fact that Postmedia Network, by far the country’s largest newspaper chain, is 98 percent owned by U.S. hedge funds. They are bleeding it dry by siphoning off most of Postmedia’s annual earnings as payments on the company’s massive debt, the majority of which the hedge funds also hold. This arrangement was allowed to stand by the Harper government despite a supposed limit of 25 percent on foreign ownership in this culturally sensitive industry. It then looked the other way in 2014 as Postmedia took over Sun Media, the country’s second-largest chain, which gave it 21 of the 25 largest Canadian dailies, including eight of the nine largest in the three westernmost provinces. Soon after that deal got Competition Bureau approval, and despite promises not to, Postmedia merged the newsrooms of duplicate dailies it thus owned in Vancouver, Calgary, Edmonton, and Ottawa. It shamelessly pushed the Conservatives for re-election in 2015, ordering its editors to endorse Harper and running full-page, front page ads warning that voting Liberal or NDP would “cost” Canadians. It even spiked an election day column by the National Post’s Andrew Coyne because it endorsed a party other than the Conservatives. Then it turns around and sticks its hand out to the newly-elected Liberal government, asking for a bailout? Puh-lease.

Heritage Minister Melanie Joly made the right decision but for the wrong reason in her nixing of assistance for Canada’s dailies. “Our approach will not be to bail out industry models that are no longer viable,” she said in setting out her vision for the government’s relationship with Canadian media. “Rather, we will focus our efforts on supporting innovation, experimentation and transition to digital.” Ironically, and contrary to widespread misconception, newspapers remain viable, as I chronicled in my 2014 book Greatly Exaggerated: The Myth of the Death of Newspapers (Vancouver: New Star Books). Despite an historic downturn in advertising revenues as a result of the Great Recession and a sharp pivot to cheaper digital advertising, no publicly-traded newspaper company in the U.S. or Canada (ie. the ones for which earnings reports are available) lost money on an operating basis between 2006 and 2013. Postmedia made $82 million in its most recent fiscal year, but $72 million of that went on debt payments to the hedge funds. The result has been massive cuts to news coverage, which fledgling digital media have been unable to make up for because few, notably subscription-based outlets such as allnovascotia.com, have figured out how to make money online. 

Greenspon, whose Shattered Mirror report was largely silent on the sticking points of ownership concentration and foreign ownership, protests that denying daily newspapers a spot at the media trough is wrong. “Excluding the major originators of the country’s news, including local news, from a scheme based on original editorial content would make no sense.” He has a new idea, however, which smacks of a Hail Mary pass on behalf of Canada’s dailies whose bailout ambitions he is quarterbacking. But it’s not that crazy an idea. If the government is queasy about bailing out foreign hedge funds, he writes, “there would be less static if, as part of a future support package, these enterprises agreed to become (officially) nonprofits.” The notion of converting legacy media to non-profit status has been bruited by some, such as French economist Julia CagĂ©, in order to free them from the money-making imperative that has run them into the ground. “In the case of newspaper chains,” writes Greenspon, “each individual newspaper could be sold to owners based in the local communities.” 

Now we’re talking. Instead of cutting back on journalism to feed their owning vulture funds, the country’s largest dailies would be legally obligated to reinvest any profits in reporting. The advantage to the government would be that the money to pay the vultures to flock off would come not from the public purse but instead from new, hopefully more civic-minded local owners. The only remaining matter would seem to be price. How much would it cost us to pay off the hedge funds and be rid of their malign neglect? The devil, as always, will be in the details.