Thank you, Madam Chair, and honourable committee members. Good morning.
First of all, I would like to thank you for inviting Postmedia to participate in today's session. The heritage committee has quite rightly identified the very real need to explore Canadians' access to news and information. This is a critical time for Canadian news media, and the need for action is quite urgent.
My name is Paul Godfrey, and I'm the president and CEO of Postmedia. With me today is Doug Lamb, Postmedia's executive vice-president and CFO, and Gerry Nott, senior vice-president of content, Postmedia, and senior vice-president of the National Post.
Postmedia's daily newspapers have in total the highest weekly print readership in Canada, reaching 8.3 million Canadians each week. Our digital properties have 12.8 million average monthly unique visitors, including websites that rank number one in Canada in the newspaper category. We have more than 180 print titles in all, reaching cities and communities including Melfort and Gananoque, Saskatoon and Ottawa.
I'm here today to tell you that everything you read or have seen or have clicked on for telling the doom and gloom in the news media industry does not provide the picture. In fact, it is actually quite understated.
To be clear, it is not nearly as glamorous to own a newspaper as it was back in the heyday. Just last week another Canadian media company reported troubling results. As I'm sure the committee well knows, threats from all comers—new digital operations, massive international players, and shifting advertising budgets—have wrought havoc on the cornerstone of our democracy, a free and independent press. The myriad of challenges to the traditional news media business model is well documented. We all know that a free press isn't really free.
However, without community newspapers covering hyper-local stories, they simply would go unexplored, unchallenged, and unreported. Larger Canadian cities are made up of neighbourhoods that are represented in our urban daily newspapers, too. Even at a time when people everywhere have more access to news than ever and when anyone can take an active part in breaking the news around them through social media, it is still the role of professional journalists to delve deeper, to gain access, and to ask questions on behalf of us all.
Joelle Kovach of the Peterborough Examiner won an Ontario newspaper award for coverage of municipal affairs, including the debate around a city bureaucrat owning property being re-zoned for commercial use. Stories like this would simply cease to exist without people reporting from city halls and town offices across the country in places such as Nipawin and Portage la Prairie, Lloydminster and Kincardine. Even the city of Montreal has local stories that probably don't trend on social media. Nevertheless, Linda Gyulai from the Montreal Gazette waged a seven-year access to information battle to expose corruption in Montreal's municipal government. Her work has been nominated for a National Newspaper Award.
Last week, as wildfires burned, Fort McMurray Today was delivered to the citizens in evacuation centres. When those evacuation centres were evacuated, their local paper followed them to Edmonton, more than 430 kilometres from home. Even with the ever-expanding availability of news from around the world at our fingertips, it is important that we continue to preserve local perspectives, encourage discourse, and remain a reliable source of credible Canadian news and information.
At Postmedia we have undertaken a massive transformation in an effort to create a company that can survive in spite of this rapidly shifting landscape. But if current trends continue, Madam Chairman, more drastic measures will need to be taken, which could impact publishing schedules, amount of available content, staffing levels, and even the number of titles.
This ultimately affects not just our operations, but other media outlets that have always relied on newspaper content. Radio, television and web still rely heavily on the work of newspaper journalists, even more so as these outlets look to further reduce their own operating costs.
We have committed to taking out $80 million in operating costs over the next couple of years. We have developed new business acumen and offerings and have teamed up with complementary businesses to develop new revenue-sharing opportunities. We're exploring new innovations that can transform our business model, but these efforts are not filling the widening gap fast enough.
In April 2015 we completed the acquisition of the English Sun Media properties in an effort to extend the runway for both companies and brands. When we met the Competition Bureau in the time leading up to receiving the okay for the acquisition, we made the case that this was the option that gave us the best chance to preserve the most brands possible.
In its “no action” letter regarding the merger, the bureau cited a number of reasons why the combination of businesses was likely to result in a substantial lessening or prevention of competition.
So what can be done? How can we work together to preserve distinctively Canadian views and protect access to proud local voices that may be silenced soon?
We very much consider this committee an ally in our quest. But be clear, we're asking the government to be an ally, not for a bailout of the Canadian newspaper industry. As this committee prepares recommendations to take back to the House, we respectively submit that there are things that the government can do to help preserve our industry.
The first is a straight-up sales pitch: come back and advertise in our newspapers and on our websites. As with many advertisers, ad budgets have been cut, and the cuts from the Government of Canada have disproportionally been to newspapers.
According to the 2014-15 “Annual Report on Government of Canada Advertising Activities”, compared with the 2010-11 report, the share of government advertising spending has increased for television from approximately 48% to 54% of the total budget. Internet share increased from approximately 15% to almost double, 28%. The lion's share of that spending went to foreign-owned digital giants who create no Canadian content and employ few actual Canadians. The share for print advertising has been halved, declining from approximately 17% to 8.5%. Also, during 2014 and 2015 Canadian Heritage spent $6 million on advertising, but did not include any print.
We would also ask that the government explore incenting other advertisers to advertise locally. Currently, Canadian companies can write off the cost of advertising with foreign-based digital entities at the same rate as with Canadian newspapers. We would ask that the government consider a higher deduction for advertising with Canadian media.
Another avenue to explore is one of this department's existing initiatives, the aid to publishers program. Expanding the program to include daily publications and free community newspapers could help to support local voices, telling the most relevant stories directly from within the communities they serve.
Recently, Ontario significantly changed the Ontario interactive digital media tax credit, such that it no longer applies to our businesses. But this type of program, which included innovation in digital news and information creation, could be developed into a national program. Supporting innovation in Canadian news delivery could help give our industry some additional runway as we work to create the new model we all see. In a fight for survival, investing in innovation, while absolutely critical, is often what suffers most.
Madam Chair, I would like to again thank you and the honourable committee members for hearing from us today. Our hope is to have been helpful in this important endeavour. We will be available to provide further information should the committee request it of us.
We would be happy to take any questions you may have at this time.
Thank you very much.
Following Mr. Vaughan, I'm reluctant to give you advice on how to run your business. That said, I will first start with one observation.
That is that your local publications that have been successful in my neck of the woods have done so by being, in the past, extraordinarily in touch with the local community, whereas the Torstar or York Region news group or Metroland papers have tended to be very centralized in their production and to lose touch with their communities, which is why your papers grew favour.
The people of Pefferlaw don't like being told they live in Aurora all the time through their local media. I've seen some recent trends in which you're trying to do almost that Metroland model of centralizing editorial and control. I warn you that I think it will harm some of your long-term competitive advantage.
I offer that for unsolicited advice for what it's worth.
I want to focus on your recommendations. Firstly, you have a recommendation—you call it “shop local”. This is to have Canadian companies write off the cost of advertising.... Right now you want an advantage in writing off advertising in Canadian publications versus foreign-based digital advertising.
I want you to expand on that a bit and say whether there are any policy precedents. Finally, to clarify what you're asking for, since Mr. Vaughan is suggesting something, is this something that would benefit only your publication, or would it benefit all print outlets in the country?
First of all, with print, it would encourage advertisers to advertise in Canadian publications. Who would it benefit? It would benefit the advertisers themselves.
You know, and I think most people know, that if you give a tax break to anyone, there's a tendency to follow the path of how they can achieve the tax break.
Right now, section 19 of the Income Tax Act basically says that if you're owned by a foreign publication and it's not cured within a year on the various opportunities to cure, then the ability for that advertiser to deduct that expense.... You can't deduct it as a proper business expense.
What we're saying is, why not reverse that? Use an encouragement to Canadian advertisers and say to them, instead of going to a foreign publication, a foreign website, a foreign tablet, or a foreign smart phone, give a better tax break on the write-off for business expenses if they advertise in any Canadian media outlet, which would be an incentive for them to do it.
It would be an incentive not just for us. We're not here talking about just Postmedia. I think my colleagues who are direct competitors in the print business would tell you we all suffer the same problem.
That's what I'm saying. This is not something that we would benefit from directly. We would benefit if they advertised more, but they would get the result of that tax break.
I guess that's the circle we're trying to square here as a committee. It's difficult. People have made their choices about whether or not they want to pay 99¢, as my colleague mentioned, for a newspaper subscription, but they have no problem paying $7.99 a month for Netflix.
We want Canadian content and we want to make sure it's represented, yet at the same time people seem to be voting with their mouses and their keyboards, clicking on exactly what they want.
I look at the number of subsidies that are given. I don't contest it; I'm just trying to figure it out.
For instance, a number of your community newspapers receive funding from the Canadian periodical fund, and cumulatively it's a fair amount, but when you look at it, it's a small amount for each one of them—$25,000 to $40,000—and it does make a big difference to those newspapers. I grew up in a small town; I know what it is to have and rely upon a community newspaper, even if it has evolved to a website.
How do we—and I would ask the same question of Bombardier or anybody—justify taxpayers' dollars, in a free market area, subsidizing certain industries or companies, when the people are choosing somewhere else, whether it be within the country or exceedingly, it appears, outside it?
That's a very important question.
I think it is a balancing act. I guess the same thing could be said about how a government could subsidize or lend any money to General Motors and Chrysler over the years. It's groundbreaking, in many ways.
I looked at this thing, and I said, “We are looking for an ally. We're not looking for a bailout.” I think this is the important part.
I agree with you. Why are a lot of people objecting to pay 99¢, when for years they paid for a newspaper to be delivered to their door? Sometimes it didn't make it to the door; it made the driveway. In the winter it got awfully wet. Somehow they dried it off, continued to pay for it, and then read it. Yet if you take it through the door and put it on a screen, where there's no negative environmental impact whatsoever, they say they're not going to do that.
It has changed, and changed slightly. The problem is that even the 99¢ doesn't solve our problem. The problem we have is that our revenues are going down to such a degree that we are....
The heritage committee was set up. It was set up to find solutions for news media. It's not just newspapers: I can tell you that the television industry is not far behind where we are today. You know that many of the major television networks are suffering the same way we are suffering, but they haven't approached the point we are at. Magazines are ahead of us in suffering. We come second. You're going to see. You're going to have them coming forward, I am sure, to ask for certain amendments, especially the over-the-air channels, as they face more challenges. They're going to want to be treated the same way the cable channels are, by getting subscriber fees.
This is a phenomenon, and it's not an easy one for government. I recognize that. I'm here at your invitation to try to give you some solutions that are realistic, that can be done, and can be worked on—and not necessarily just to help the company, but also the advertiser, and to make things easier for them too, because they're going to get the tax break if you open up the door that way for them.
Look, there's no doubt. You can call it a rose; by any other colour it's still a rose. I totally understand that.
The committee invited me here to ask what some solutions would be. I could have come here just to state what the problems are and say, “Okay, here are the problems. You figure it out.”
I think the industry is looking for an ally. These are ways.... Look, there was an Ontario digital tax credit for innovation. It was helpful for a few years. I didn't hear a public uproar, asking “Why are we doing this for these companies?” We were in better shape when that was put into place.
All we're saying now is that maybe should look at that, because the state of affairs in the industry is much worse today. I'm not trying to paint an overly bleak picture. I'm painting the picture that's out there. I will tell you that within three years, there'll be many more closures in some of your own communities because of the state of the newspapers.
We operate about 180 newspapers in this country. Local newspapers provide local content for people who can't get that information in other places. That's not going to be available if we allow this to continue.
We have made cuts for years now. I've been back in this business for six years. We have done everything we can. We believe that merging with Sun Media.... We went to the Competition Bureau, and spoke to them, and said, “That gives us a little bit more runway”. The erosion of the print ad revenue has been so dramatic that even that runway is short.
Yes, you're absolutely right, an option for the government is to do nothing. You're our elected representatives. I commend you for even having this meeting. If you decide to do nothing, that's your call. I'm not trying to paint an uglier picture than what it is. It's ugly and will get uglier, based on the trends that exist today.
I think digital news will continue to grow. I think as the next generations come along, there's no doubt that people will continue to see it on the websites and on the tablets, but I think the smart phone is the one that is galloping away with the eyeballs more quickly than anything. That's the reason we talked about the Ontario interactive digital tax credit. It gives industry an opportunity to help promote innovation, because that's where the trend is going.
I think a great number of people in our generation will still want to see print. I don't think print is going to disappear entirely in the next short period of time, but I do think there will be publications that will just not be able to survive. At this point in time, print revenue is still the most important part of our revenue stream.
People say, “why don't you charge more for the paper?” The fact is that if people want it for the content, they should pay more, but it's like everything else. In government if you provide something free and then you tell people you're going to raise the price, your phone starts ringing. They're not phoning to congratulate you; they're phoning to complain. We receive the same thing. The model that worked for many decades was that 80% of your revenue came from advertising and 20% came from the reader even though prices went up.
When I was a boy many decades ago, I remember the newspaper was three cents and then it went to five cents and then 10 cents. Then newspapers became a little greedier and they bumped it up to 25 cents because it was a single coin and you could get away with that. Now it's significantly higher.
I can remember from my days in municipal life, that when we raised the transit fares a couple of pennies, ridership fell off.
I think the first thing to say is that the merger of the Sun
newsrooms was not envisioned at the time we entered the agreement to purchase Sun Media, but became a reality of the business as we saw the decline of advertising dollars.
When we merged those two newsrooms, we stuck to our core belief of providing great local content. That's had some significant benefit, particularly on the Sun side, where the newsroom of the merged Citizen and Sun is a much larger newsroom than the Sun standing on its own. Therefore, it's had some benefit in terms of local content creation.
There have been, and there is, similarity in the content of those papers. We've charged those editors with the responsibility of trying to define differentiation by the brand values of a tabloid versus a broadsheet. The tabloid would focus more on crime, courts, and sports, and the broadsheet would look more at a deeper civic file, a richer national file, and a richer international file. It differentiates significantly on the use of columnists. Their columnists' voices maintain distinction, their editorial voices maintain distinction, and we separate the two that way.
We think the audience duplication in the Ottawa area is less than 15%, so when those stories do appear in both publications, it's not a significant duplicated audience.
Well, let us deal with your amendment, which says “before October 31, 2016”.
(Amendment agreed to)
The Chair: Now we're dealing with the amended motion that has now had another amendment to it, which says, to update members of the committee for a televised “two-hour meeting”.
We will discuss the two-hour televised meeting amendment.
If anyone wants to, or if everyone is in agreement, I will call the question.
(Amendment agreed to)
The Chair: Good, then we now have a motion that reads:
||That the Standing Committee on Canadian Heritage invite the CEO of CBC/ Radio-Canada, Mr. Hubert Lacroix, for a televised two-hour meeting, to update Members of the Committee on the plans and strategies of the Crown Corporation, in light of the most recent reinvestment announced in the latest federal budget, and that this meeting be held before October 31, 2016.
Now, I'm going to ask everyone to vote on the amended motion.
(Motion as amended agreed to)
The Chair: Good. We can finish that.
Now we have another motion that we can deal with right now before we go in camera, and it is by Mr. Vandal. If you recall the last....
I agree with him on the last point. They have a great hockey team, and following our conversation at the last meeting, I even have the tickets already arranged for him for the game in September.
I believe we had agreed, because Brandon is in the middle of Saskatoon and Winnipeg. I think, logistically, it's a great place to be, because there is diversity in the opportunities for people to come to Brandon as well. I agree with that part of it. You certainly don't want to exclude anyone. Knowing some of those folks and some of the papers Mr. Vandal has indicated and some of the media outlets there as well, there are opportunities in Brandon. It's also a situation where we're looking at no Saskatoon. I will let Mr. Waugh speak to that himself. We're going to Edmonton, so there's an opportunity for Lloydminster, to go there, and anything on the northwest side of Saskatchewan. There is an opportunity here for many of the smaller communities, including Regina, to come to Brandon. Weyburn, Estevan, Yorkton have quite a news outlet there as well, for both radio and papers. Dauphin is the same, and we're trying to look at how we get media into rural and remote areas.
God bless Winnipeg, and I agree with it—I spent a lot of years there in the legislature—but it's not a remote area and it's certainly not rural from that perspective.
I agree that there is an opportunity to have those people come to Brandon. I also think there are many community newspapers, weekly and daily. With The Brandon Sun, there's a great story to be told by the Westman Communications Group in Brandon as well. Their co-operative has been a success in their whole process. In fact, I talked to their chair, David Baxter, when he was here just the other evening with the Canadian cable services group. He's the chair of Canada for them. He would make a presentation. He would be willing to do that as well. I've already spoken to some of them, and I said, of course, it was subject to.... There are some pretty good stories and pretty good opportunities there with local papers as well. That's part of the reason I suggested Brandon in the first place, and I appreciated Mr. Vandal's support for that the other day.
I appreciate just having the opportunity to discuss this openly. There is still a good opportunity to have Brandon as a major centre for the type of study we are doing.
Thank you, Madam Chair.
At the last meeting, when we talked about travel, we agreed about all the cities that we would be visiting, tentatively. Options 1 and 2 were the ones we discussed. After revising this with the logistics officers, who are working with us, it seemed like we were going to Iqaluit first, in option 2.
Going to Iqaluit first saves us a lot of time. I will explain why. If we put Iqaluit in the middle of our trip, we have to plan backwards in adjusting for departure from, and arrival in, Iqaluit. With those two flights, we will have to work around this. If we do it first, logistically speaking, it will be much easier because we would leave on the Sunday, get there, arrange our meetings as we want, and leave afterwards. It doesn't have much effect on all the rest, as opposed to if it's in on Wednesday per se, when it would be really problematic. It could increase the costs of the airfare on top of that.