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Standing Committee on Canadian Heritage


NUMBER 042 
l
1st SESSION 
l
42nd PARLIAMENT 

EVIDENCE

Tuesday, December 6, 2016

[Recorded by Electronic Apparatus]

  (1100)  

[English]

     I think we have quorum, so we can begin.
    As you know, we have a guest today. Linda Solomon Wood, from the Observer Media Group, is here to present to us. She will tell you about it, but I think hers is one of the groups trying a new way to get newspapers to function. I think it's all about community non-profit groups.
    You're going to tell us about that, and we're really interested, because we've heard about different ways to fund newspapers. You have 10 minutes to present. After that we will have a round of questions, seven minutes each, for both questions and answers. I'll give you a two-minute heads-up before you get to your 10 minutes.
     Please begin.
    Madam Chair, honourable members, thank you for inviting me to talk with you today.
    By way of introduction, you may note from my accent that I was born in the United States. I immigrated to Canada in 2001, and became a Canadian citizen a few years later. You'll see from my submission that I'm CEO of Observer Media Group, but what you won't see is that I'm the mother of four wonderful children. I feel really fortunate to be able to watch them grow up and begin to establish their futures in Canada, where the days look so bright. Canada has given a lot to me, and it is very important to me every day to try to give something back to Canada. That's why I've devoted myself to building a company whose core mission is creating a positive future through influential journalism.
    I had my first journalism job when I was 16 years old. Being a journalist is what I've done for much of my career. It's what I was trained for, it's what I love, and it's what I do best. But as you guys know all too well, the business model for journalism is in such distress that many of my colleagues have had no option but to leave the profession they love. Rather than do that, I started my own company.
    Observer Media Group is a journalism organization producing two daily digital-native publications. That is to say, we're online only: National Observer and Vancouver Observer. Our submission to this committee outlines recommendations for the role that the federal government, with respect to journalism in Canada, can play.
    I'll spare you further hand-wringing over the state of Canadian journalism and the state of journalism in the world and get straight to the point. We believe journalism needs to be addressed as a category of support distinct from discussions of Canadian content, culture, and entertainment. Good journalism is necessary for the democratic process to function well. It is a public good, in the sense of being foundational to effective politics, much like education. As such, the present crisis in Canadian journalism deserves to be addressed directly by policy-makers. We urge government not to conflate support for journalism with the needs of other sectors.
    Here are some policies that we recommend be undertaken directly by the Government of Canada. First of all, we would love to see Canada create a hybrid tax and non-profit status for journalism organizations. We urge the government to establish a category for journalism organizations, similar to universities. Philanthropic foundations should be able to make grants to support newsgathering and investigative reporting organizations. Individual donors, philanthropists, and readers should be able to make tax-deductible donations as stand-alone contributions or through crowdfunded efforts. Note that new media organizations in Canada are broadly unwilling to establish innovative structures because of the risk of CRA interference with freedom of the press in anything other than a for-profit structure. Another idea is to create incentives for investors to support emerging, independent digital media journalism—incentives and grants for job creation in journalism, incentives for capital expenditures, including digital applications.
    We also recommend that Canada follow the example of European jurisdictions in cracking down on Facebook and Google for tax avoidance. These companies are simultaneously vacuuming up advertising dollars, which previously have supported news organizations, while avoiding their fair economic share of contribution to Canadian society. In addition, these companies, which are among the top ten largest publicly traded in the world, receive federal and other government advertising contracts effectively subsidizing American tech giants at the expense of Canadian news organizations. Please note that academic studies find that a decrease in advertising revenue is demonstrably related to a reduced quality in journalism.

  (1105)  

     There is much more in our submission that I urge you to read. I am not going to read it all here, because I'd like us to have a chance to talk and for you to ask questions in a more informal way. However, I want to say that Observer Media Group's business model has been based, for ten years, on leaning in to the changes taking place in the industry today. We've grown through finding new ways to leverage opportunities in a turbulent environment. Building resources for reporting primarily through crowdfunding has taught me that our most important relationship is with our readers. I have learned that there are thousands of readers in Canada who value and will gladly pay for profound stories with universal meaning that document a changing world that they recognize, stories told with fairness and compassion.
    We have found a small group of investors who support National Observer because they know how important critical reporting is in a healthy democracy. In launching a paywall last August, our readers affirmed this again, providing in our beta testing that in time we can grow and sustain National Observer's thoughtful, award-winning journalism, journalism that improves people's lives and supports the foundations of democracy on a daily basis, that at its best is a voice of the people. Our team of journalists is devoted to helping secure a future for strong, independent reporting in Canada. We just need a few more tools to help us along the way.
    Thank you.
    Thank you very much.
    I want to congratulate you: you came in under seven minutes. This is fabulous.
    We'll now go to the question and answer session. The rounds are seven minutes.
    Ms. Dabrusin for the Liberals, you have seven minutes, please.

  (1110)  

    Thank you for that presentation. It's very interesting to start considering other models that might be available in other jurisdictions.
    You mentioned that you're from the States, and that you have experience there as well. I'm wondering if perhaps you can flesh out a little more what you would like to see with regard to supporting the non-profit model or foundation model for journalism.
    When people contribute to the National Observer or to the Vancouver Observer, which they've been doing for years through crowdfunding, and sometimes just through the fundraising campaigns we run....
    I never know whether to call it a donation or a gift, but it's really a gift, because they can't get any tax credit for it. They're just giving a gift.
    We believe that a lot of the reporting that we do, and that other media does as well, really is a public good. It's a public service. It's essential to the healthy functioning of a democracy. We believe that it would be great if the government could make it possible, without having to navigate really difficult laws that put you in a grey zone, to create a category for journalism that would allow foundations, for instance, to grant journalism companies, to work with journalism companies, to provide funding for, let's say, coverage of public health, coverage of life-and-death issues that they really are concerned about—charities that are in line with their mission. Right now they can't really do it because they don't know how to do it. There is no charitable structure for them to donate into.
    I understand there are some notable international examples. I believe The Guardian in the U.K. is a foundation model. There are U.S. models as well. We have some. The Tyee spoke to us about their model a bit earlier, and I think The Walrus magazine is also supported by a foundation. There are some examples out there.
    We can make some broad recommendations about it, but do you have any warnings or parameters that you would want us to consider when we make those suggestions?
    Yes. I say this with a tremendous amount of respect for The Tyee and for The Walrus and for everyone trying to create a charitable structure that works for them, but I think right now those structures limit the kind of journalism they can do. In my opinion, they change the quality of it. They weaken it, because they have to be so careful to stay within a structure that complies with the current language around political activity.
    Additionally, because the environment in Canada has been such over the last five years, with attacks on environmental groups through the CRA, I think it has put a freeze on really free expression in journalism through those structures. That's why we've maintained a for-profit structure, so that we would not be subject to the kind of self-censoring that has to happen in those structures.
    All right. That's actually a helpful point for us in terms of trying to consider our parameters.
    I think now you've answered my next question, which was going to be about the CRA problems. You had flagged that there were CRA problems. Are there others that we should be watching for when we're looking at new media formats?

  (1115)  

    If I may, I wanted to add that in the U.S., their structures are different. There is less of a demand on journalism companies and projects in the U.S. that do go with a non-profit structure or a charitable structure. They can get tax deductions for contributions without such narrow confines to the work they do. I just wanted to put that on the record.
    Why are there less narrow confines?
    I think I would have to get back to you. I'd be happy to follow up in a written statement on that. From what I know, it's just to do with the tax law. We just have different [Technical difficulty--Editor] charitable.
    If you have something else that you'd like to add, that would be great. You can submit that in writing.
    You have one minute.
    Okay.
    One thing we've been hearing a little bit about, sort of on the edges, is with regard to creating echo chambers, too, in different types of new media now. People are focused, and not necessarily getting a broad-based perspective on their news.
    As we look at new formulations and new models, do you have anything you can tell us about the development of echo chambers?
    I think that problem has escalated dramatically over the last year in the U.S. It was probably going on longer than we really knew it was going on. We didn't really understand the ramifications completely, until now.
    I think part of the problem is that when you have a small company like ours, for instance, that has limited resources, we don't have the ability to advertise. Even though our articles would be of interest to people way beyond whatever narrow niche people are thinking of us in, it's very hard for us to reach those audiences. I would say part of that gets back to the advertising dollars going into Facebook and Google.
    As a solution to that, thinking into the future, one of the most wonderful things I can imagine as a media company owner is that the government would devote part of the government's budget to advertising with Canadian media outlets and pull it out of Facebook and Google. It's just really a matter of resources. Companies need to be able to advertise in order to get to more readers.
     All right.
    Thank you very much.
    Thank you.
    I'll now go to Mr. Maguire for the Conservatives.
    Thank you, Madam Chair.
    Thank you for your presentation this morning, Ms. Wood.
    You just formed your company a year ago?
    No, I formed my company in 2011, with the Vancouver Observer. The Observer Media Group has been around since then. At that time I was managing the Vancouver Observer, which is a local publication. In April of 2015 I founded the National Observer as a national publication.
    Yes, as an online news site.
    Yes.
    What has been your experience, or how have you been able to generate revenue, then, in your online environment?
    Initially, when I first started, I really believed that the ad dollars were going to migrate from print to digital. I bootstrapped the publication in the early days, thinking that day would come, but that day never came. At that point I was faced with the fact that we were winning awards, doing excellent journalism, being recognized by our peers, and we literally had no money in the bank. I realized that if I wanted to continue, I was going to have to go out and raise money. I did that through crowdfunding.
    First I tried a small Indiegogo campaign. It was modestly successful. The next year I tried a Kickstarter campaign. At that time it was very successful for us. I started to realize at that point that cultivating a relationship with the readers and the community that valued that reporting was the only way, as a small media company owner, that I could go forward. That was the beginning. Then when I launched the National Observer, I was able to bring in investment money as well. But that's different from revenue, of course. For revenue, we do sell advertising; we have reader donations; and now we're really having success with our paywall, our subscription model. We just started that at the end of May. We had a technology system that didn't work very well, so we didn't get very far at first. We relaunched it on new technology starting in September, and our first three months have been, I think, very successful—enough to show that this can work for us.
    But it's going to take time. Our goal is 10,000 subscribers. If we have 10,000 subscribers, we'll be fully self-sustaining. All of my effort to bring in investment money now, or fundraising—everything—is around the idea of our needing enough of a runway to get there, to 10,000. We will live or die on the quality of our reporting. If it's no good, nobody's going to subscribe.

  (1120)  

    How much is your subscription?
    Our subscriptions are $12.99 a month, and there's a reduced yearly rate, 20% off.
    Okay. So it's about $150 a year, something like that.
    Who are your major competitors in your area? You're moving totally into digital. We've had people here presenting from the newspapers association who have given papers away for free, who do survive on the advertising. They don't have a subscription rate anymore.
    Could you comment on the differences there and who your major competitors are in your area?
    That's such an interesting question. I think the honest answer is that we're all competing against each other now. It often seems crazy, because our budget is so tiny, but we do compete with Postmedia. We had six million readers in Canada alone in our first year from the National Observer, so they're finding stories that are valuable at the National Observer. So yes, that takes something away from Postmedia.
    On the level of media companies that are more in the same range as us size-wise, there's of course The Tyee, but The Tyee and the Vancouver Observer have always been in a kind of “co-opetition”, as we like to call it. We're friendly competitors.
    Yes, in the same area.
    Yes.
     Have you—
    There's The Globe and Mail as well. We try to scoop The Globe and Mail. They don't like it when we scoop them.
    You mentioned the competition. You mentioned Postmedia. Postmedia was here and said that their biggest competitor was CBC—because of the subsidies, I guess—
    For sure.
    —and it would be one thing if CBC were doing the broadcasting they did originally, but they're into digital and everything now as well. How do you see that?
    Honestly, it's hard to get my own personal feelings out of the way on this. As an American who immigrated to Canada, I'm so grateful for all the things Canada has given and is giving me. CBC is just such a fundamental part of Canada that I hesitate to criticize it.
     However, they're right that of course it presents a very difficult competitive environment, and I think there are a lot of innovative things that could be done to shift that. Some are in our submission, and I'm sure you've heard from other people about this too. For instance, there could be more collaboration. CBC could make their content free to other publications to use, because they are a public service and they are funded by the government. Why not let us all use their content?
    I really don't think they should have delved into the opinion game. Wouldn't it be great if we could just have one news outlet that is free from the sniping at each other and the kinds of just questionable...? I think it just gets into an area with opinions where people are giving their opinions, and some of it is questionable. I think for them to moderate it well, it's going to take a lot, and I haven't seen them doing that.

  (1125)  

    Thank you.
     I'd like to see them not do that.
    Is my time up?
    Yes, your time is up. Thank you.
    Before I go to the next MP, you keep mentioning a submission. We don't have a written submission from you.
    Really? We submitted it quite some time ago.
    We will search for it and then distribute it, of course, to the members of the committee, but the clerk doesn't know of it. However, he's going to search and find out what happened to it.
    We submitted it in French and English.
    Okay: so we can't say that it's stuck in translation.
    No. We will resend it.
    We'll hunt it down, but if you can send resend it, that would be very helpful.
    Absolutely.
    Thanks very much.
    I will now go to Mr. Nantel from the New Democrats for seven minutes.
    Thank you, Madam Chair.
    I will speak English for you in order to make it simple.
    Thank you for your very interesting point of view, and I thank you for your journalistic virtue. I think it's amazing. Also, I was looking at the National Observer site, seeing that the Vancouver Observer, like you say, is a spinoff of the National Observer, if I'm right.
    Is it fair to say that your online paper started as voluntarily biased in response to the voluntarily biased media sympathy to the oil industry, and that you came out as a voice for people objecting to this situation? Is it fair to say so?
     Al Jazeera did a documentary about the media in Canada a couple of years ago and featured us as one of the few critical voices of industry in Canada. I think it's an accurate portrayal that we're a critical voice in a country where the large newspaper chain has been a very supportive voice. The fact that the large newspaper chain—and other news outlets as well—was a very supportive voice of industry truly opened up a business opportunity that we moved into.
    Thank you for putting the right words on the description I was attempting to give.
    Can we say in this way that it creates, as you say, a business opportunity to tap into this audience so that it is potentially viable, even though there isn't a ton of advertising on your websites?
     Yes, absolutely. Honestly, when we came out of the gate in our first year, we didn't know whether the National Observer could work. It could easily have failed, but it didn't. It has really been a test. Next year we could decide that we are going to start covering women's issues, or—
    Obviously you're not limited to pipeline issues.
    Right.
    You may have answered this, but maybe I'll ask you in simpler words. How are you doing in terms of your finances? Are you achieving your budget?
    It's been really hard; really hard. Last August we got to the point where I thought we were going to have to close. I had expected an investment that didn't come in, and I thought, okay, that's it. At that point, I got together with my advisory board, and they said, no, they did not want me to quit. They put in a little bit more money.
    Mainly I turned at that point to writing a very heartfelt letter to our list of people. We have about 20,000 names on our list, and they came forward and began to subscribe. That provided us with the income we needed to get to where we are now, and we've had some more investment come in.
    I have to say that in the years leading up to the U.S. election, I was always trying to explain to people why I thought journalism was so important. I don't have to explain that anymore. John Oliver explains it. Trevor Noah explains it. We see it. We all know it. So things have shifted a bit for us now.

  (1130)  

    Good. Thanks.
    Thank you.
    You mentioned that the quality of journalism is an important thing for society. Please tell me a little more about the Comet pizzeria thing in D.C. It is the case that misinformed people came with a machine gun into a pizzeria, thinking there was something going on in that restaurant. Am I right?
    You're right. I think you and I both can spin that out into other scenarios historically where propaganda has led to mass killing, whether it's in Rwanda or Cambodia. It's a historical truth, and it's very dangerous. It's very important that we try to have some agreed-upon idea, common ground for what we accept as a society as truth. I think we'd like to be part of holding the ground for that.
    One of our recommendations in the submission is that the Government of Canada—and I know this is tricky—create an agreed-upon definition of “journalist”. France did it at the turn of the century. France is a real leader in terms of valuing journalism and creating a structure that supports it. I think 12% of the funding of the revenue that goes into their journalism companies in France comes from the government. It's based on the idea that they should support media companies across party lines in order to foster a pluralistic society.
    Okay.
    Can I have your impressions on the idea that CBC has submitted that they take away all advertising in exchange for $318 million per year? Would you rather have the money? Would you rather have a free market for you to advertise even more? Or—and I suggest this may be the case—for your audience, if you have advertising and CBC does not, it may make you look not as concentrated.
    That's an interesting question.
    I would rather see us survive and thrive through subscriptions and not advertising, for sure. I would rather answer to the readers. I don't think you really do have to answer to advertisers, but still, the question of what should happen about advertising, and all the government's advertising dollars, I really think is an important one for the committee to grapple with, because yes, I'd much rather see it go to the CBC, or I'd much rather see....
    I'm sorry, I'd have to think more about that question.
     It's another issue.
    Yes. Thank you.
    Thank you very much.
    Thank you very much.
    The floor is yours, Mr. Samson, for the Liberals.
    Thank you very much for your presentation. It's always interesting, as a committee, to receive all kinds of different ideas on what works, how it works, and why it works.
    You've been in it for a year plus now. You've learned certain things that you were unsure of and certain challenges you weren't sure of. What's the future plan? If I were asking you about the next three years, what would you like to accomplish and what would you need to arrive there?
    I've been in it full time for ten years. I started the Vancouver Observer ten years ago. I'm very devoted to making this work and I don't plan on giving up.
    Again, I see the future for us based on more of a relationship with the readers, and that depends on building our audience. That depends on doing really high-quality reporting that is compelling and that people judge to be work they can't get anywhere else. When we see big media cutting their newsrooms and cutting their investigative reporting teams, we know that's where we need to go. We build our investigative reporting team. I see more of that.

  (1135)  

    Thank you.
    Let's talk about professional development in the schools of journalism. What can we do to improve that? It's becoming clearer, as we move forward, that this is a key cornerstone to the success of quality. What would be your advice to help in that area?
    To help in education?
    Mr. Darrell Samson: Yes.
    Ms. Linda Solomon Wood: My advice would be to make sure that the journalism schools are teaching skills that are really relevant in today's journalism world. I believe at King's College they have an entrepreneurial journalism program. I think that's really important, because I think the journalists of the future have to be entrepreneurial. For us, we can't really hire people who aren't willing to also come in with the spirit of wanting to help build this company and not just be an old school reporter. That is really important.
    Another skill, and I don't know how to teach it yet, is around teaching people how to be critical thinkers but also how to distinguish themselves from fake news. I was just reading an article in the The Guardian this morning that talked about how the Koch brothers in the U.S. paid massive amounts of money to various different websites to attack Elon Musk and to put out fake stories on Elon Musk. Now lots of people believe something about his rocket ship falling from the sky. Basically they're trying to attack the solar energy industry and discredit it and crush it.
    As was brought up by another member of the committee, as journalists, how do we break out of the echo chamber, and how are we going to speak to people? I think some of the education—honestly, I've been thinking about this a lot—needs to happen in public schools. It's not as much about educating journalists as it is about educating kids, teaching them to smell a fake news story or to just think that they might be the victims of propaganda.
    I agree 100% with you. I'm a 30-year educator, and I find that area, and entrepreneurship as well, key elements to learning about society and how to contribute at a certain level that's fundamental.
    What do we tell young people who are interested in journalism, based on what we're seeing today? There are not many opportunities, so how do we change that message? How do we make it work?
    Honestly, it breaks my heart sometimes when I see kids pouring into journalism schools. Most of these programs are really successfully telling kids that they may not have a job in journalism when they come out of school, but they will have a lot of really valuable skills. I think that is true. The skills you learn as a journalist are applicable in a lot of places, but I think we need to solve a lot of the problems going forward. We need to be innovative. If we innovate the industry again, I think people can come back. We have seven people on our team now and we'll be hiring more next year. That's just because we're dedicated to hanging in there and innovating.
     You have one minute left.
    Okay.
    This is a catch-22 for our committee. I mean, we want quality. We want Canadian content. We want local content. The readers are moving online. The investment, the advertising, is up in the air. You talked about incentives and tax deductions. What would be your top suggestion that we should focus on to try to ensure that we're hitting the target: local, quality, and good journalism?

  (1140)  

    Local is a really hard nut to crack. I can't say I've fully cracked it with the Vancouver Observer. I think that is where we would really benefit from some sort of non-profit/charitable status, special status for journalism, that would allow in Vancouver, let's say, the Vancouver Foundation to support local reporting projects that will just cover city hall and provide people with basic information about what's going on. I think that's really important.
    For us, removing sales tax on subscriptions would be incredible. There are all these little things. Now journalism is treated as if it's just any other business. It needs to be treated as a public good.
    Yes, because it's all about democracy.
    Right.
    Thank you, Mr. Samson.
    I want to thank you very much, Linda. Earlier I said that we did not have your submission. The clerk researched this and has pointed out that your submission was sent to all the members on November 2, in English and French. We do have it, so you don't need to send it back to us.
    I have a question, because I think Mr. Samson has hit on it—the whole catch-22 thing in terms of what we're trying to do in this committee, the challenges, and the circular things we get into with no resolutions.
    Specifically, you talked about a definition of journalism. We had a witness the other day who said that if you want to rate what good journalism or news is all about, it must be verifiable and accountable. Now, that's an important thing. How do you do that when aggregators are just throwing everything at people, nobody knows what is verifiable and what isn't, and therefore there's no accountability for it? How do you take that horse and put it into a stable somewhere—i.e., you can actually refer to it as a guideline, or gold standard, for when people decide that they've just written a piece of news when it really isn't? That talks to the whole false news bit and the post-truth stuff.
    Well, again, I think as a committee, to do it, or as a government, to do it, you would have to be very bold. You would be attacked by people who disagree. Whatever definition you would come up with, I'm sure it would be under fire. However, again, you can look to France, where they have done that. I think there can be established guidelines, such as verifiable, fact-based....
     But in terms of who is a journalist, what is a journalist, in the same way that lawyers have to be certified or pass a bar exam, we could have those kinds of structures for journalism.
    It would be accreditation, so to speak.
    Accreditation, yes, because right now we're in a pretty dangerous situation, actually. Anybody can say, “I'm a journalist. I get to come in. I get to crash the party.” Then they can start to use Twitter, use Facebook, or use their own web platform to promulgate untruth: lies.
    Thank you very much. That was a very thoughtful and thought-provoking presentation. Thank you for coming in at the last minute and giving us some of your insights.
    We'll next go in camera for committee business.
    [Proceedings continue in camera]
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