Thank you, et merci,
Monsieur Nantel. I will say that you're a more generous chair than some, because I was told that I'd have five to six minutes, so my presentation will perhaps be shorter than 10 minutes and not longer than that.
In any case, I am pleased to be with you here today to speak about the “The Shattered Mirror: News, Democracy and Trust in the Digital Age”. I'm joined by two of my colleagues from the Public Policy Forum: Claude Lauzière, who is one of our policy leads at the Public Policy Forum, and Carl Neustaedter, who is our director of communications.
The Public Policy Forum is proud of its consultative process and of the report it produced.
But we're not the Standing Committee on Canadian Heritage, and so I think all people who care about the state of news in Canada have high hopes for your deliberations over the next while.
I am struck, as I'm sure you all are, by how increasingly important the questions of news and democracy look with each passing day. Last week we saw more layoffs at Postmedia. Over the weekend we were reminded of the importance in the United States of a free and strong press. The coverage of the terrible shootings in Quebec City speaks to the need for reliable news and the role of news in communities seeing themselves reflected in their communities.
I know that we do not have much time, and that you have had an opportunity to read the report, or the media coverage of the report. I will take five minutes or less to guide you through some of our twelve recommendations.
I'll spend one minute on analysis, and I'm happy to answer questions.
As you'll see, there's a long diagnostic section at the beginning of the report.
On the analysis, I think we've documented fairly convincingly not just the sharp decline of revenues in the traditional media, especially in newspapers and increasingly in local television, but the fact that there's an unsustainable acceleration of this downward trajectory. Perhaps more disturbing to me in our study was the absence of indicators that new digital-only news operations have the capacity to fill this growing democratic gap.
Several of our recommendations are, I believe, simple enough.
The first is rectify the perversity that Canadian companies are charged sales tax on digital advertising and subscription sales but foreign news companies are not. We believe that's simple enough to address, and 20 to 30 countries have already done so.
Two, address the lack of clarity that inhibits philanthropic organizations from investing in journalism in Canada.
Three, bolster the “informs” part of the CBC/Radio-Canada mandate in a world with not enough genuine news and increasing volumes of fake news.
Four, remove digital advertising from CBC.ca and Radio-Canada.ca. This is something that they have said they are open to as well now.
We say this not because we think this money will shift to Canadian publishers—which is a bit of a pipe dream, I think—but rather because we think it's good for the CBC not to be distracted from its core mission of serious news by chasing clicks and eyeballs, which has, we believe, more serious repercussions digitally than it has for television.
At the heart of this report is a modernization of section 19 of the Income Tax Act that would rebalance the playing field in favour of news organizations providing original civic news for Canadians. This has several elements, and I just want to go through these, because this is technical in some places. The committee is very familiar with these issues, so I think you will understand it, but I don't think it has been universally understood.
Number one is to extend section 19 to the Internet, a matter that often tends to be treated as a more simple thing than we believe it is. The original sections 19 and 19.1 were intended to change advertising behaviour. It is less likely that behaviour would be changed with regard to digital advertising, and therefore a different approach is required.
The second element is to address the new realities of international trade agreements—when I say new realities, I mean from the 1960s and 1970s ,when sections 19 and 19.1 were introduced—which don't allow public policy to be based on corporate nationality. We've chosen two new criteria: one, that a news organization is subject to taxation in Canada; and, two, that it meets a minimum threshold of journalistic investment in Canada.
Three, instead of either being able or not being able to deduct advertising costs under section 19, we've recommended moving to a 10% levy or withholding tax on distributors of news that fall outside of our section 19 criteria. This borrows from the approach of the long-standing cable levy.
I would say that the penalty of not being able to deduct under section 19 is not something that is used or has been used very often. As I said earlier, those elements were meant to change behaviour, and they did change behaviour. The Internet advertising world is a very different world, a much more complex world. We expect that maintaining those kinds of criteria would be very difficult to administer.
Fourth, we estimate that the 10% levy would produce revenue of $300 million to $400 million a year. This money would go to an arm’s-length future of journalism and democracy fund. We find this approach superior in many ways to tax credits. It generates money to support journalism and digital news innovation from the $5.5-billion digital advertising pie rather than from the government's treasury. The governance structure we have suggested for the fund would keep the government out of decision-making about where the money goes. These are critical points. I am a journalist, like some of you, and I want to keep the government as distant as possible from both supplying money to the fund and disbursing money to news organizations. This was a concern that came across in the public opinion research we did. I think it's a concern that the industry shares. We are trying to develop something that is independent of government once the structure is set up.
Why is this better than tax credits? Tax credits are more prone to politics, we believe, than our proposal. You can see this right now in Ontario, where the newspaper industry is lobbying to be reinstated in the Ontario digital media tax credit scheme. The newspaper industry should not be lobbying government any more than is absolutely necessary. I'd rather it be absolute zero, but certainly they should not be having something, losing it, and trying to get it back again. This is not good for an independent press. Tax credits also tend to reward equally those organizations that spend their money wisely and those with less stellar records of managing their enterprises.
I have been asked in recent days who would qualify for this fund. My answer is that any bona fide news organization can apply. We were very conscious not to be excluding either early-stage news companies that need help to grow or the established news companies that still provide the vast majority of news.
Beyond the application for funds, we hope that this new fund will be more creative than we can anticipate. We have suggested, as well as the application process, four initiatives that the fund would support.
One would be a badly needed local news initiative under the auspices of the Canadian Press, an underappreciated national asset with high standards and good infrastructure.
Two, we favour an indigenous news initiative to cover the institutions and debates of indigenous democracy, particularly on a local level. In our round tables across the country, we were struck by some very small indigenous news operations that were trying to hold indigenous governments to account in the same way that occurs here on Parliament Hill, but that were completely devoid of resources to be able to do it.
Three, we suggest a legal advisory service to bolster smaller news organizations in pursuing investigative journalism. These organizations tend to get chilled very easily by intimidation, and if they go down this route, it's very expensive. We want to create incentives so that they feel freer to pursue more aggressive lines of journalism.
Finally, we suggest that the funds support a research institute. In the course of our research—and I'm sure you've had the same frustration—there are just so many things that seem impossible to find out, particularly in Canada. We don't know how much fake news there is in Canada or where it comes from. We don't know what happens when a community loses a local news organization. We don't know where news originates, as opposed to where we access the news. We don't really understand very well the public attitudes to news, democracy, trust, and other kinds of essential information.
These are some of the pieces we are looking at. I'd be happy to answer your questions.
I was just at a public policy event at the Château Laurier. Steven Chu, the former energy secretary for the United States government, was speaking there. He cited a Chinese proverb that I thought was pretty good: it was that if you don't change directions, you'll end up where you were heading. I think where we're heading at the moment isn't very great.
When Canada was quite young, every journalistic publication, every newspaper, had a perspective. In fact, it went so far that in the campaign handbooks that the political parties provided to their supporters, there would be a list of the newspapers that were acceptable for them to read. The newspapers all came from a perspective.
Then journalism evolved a little bit. When I was in grade 2, we studied newspapers and we were told that it was all objective but that we should be careful not to believe everything we read. Then, a little bit later, they started introducing media literacy courses into schools, because you had to be able to learn to read between the lines and apply critical thinking and so on.
My point is that all these things evolve over time, and I think people have the ability to adapt to these evolutions and sort them out and find their way.
You say here in this report on page 3 in your opening stuff:
||The ‘truth neutrality’ of the dominant digital platforms is incompatible with democracy.
I'd say that if somebody was writing 120 years ago, they would say the truth neutrality of all these printed publications was incompatible with democracy because they represented just one view or another, on the extremes.
It's not the technology that's at issue, in my view; it's how people choose to consume and want to consume. Wouldn't it be the case that what you're really talking about here is the public's literacy in the new medium, about how they are beginning to understand—as I think they do, and I don't think you give them credit for this—that everything has to be approached with skepticism? Increasingly, people do. I think I give them credit for that.
A lot of people who are accustomed only to the old traditional media perhaps don't have the same skeptical eye, but I put it to you that younger people do have it and are nicely adapted. Isn't it a question of adapting our media literacy as we evolve to this new technology? We're trying to put our finger in the dike and push a bunch of money through it to keep the old stuff alive. Why would it have any more impact on people than it has over the past several years when they were still fighting?
They're losing their revenue, perhaps. They're not being consumed as much. That model with those old traditional outlets is not working from a business perspective, but if people are looking for that kind of information, surely the same kind of people who seek it will begin to figure out who they want to trust and seek out that information in the new context. Aren't we just going through a dynamic transition? Isn't it the case that trying to make things the way they were and keep things the way they were through government intervention simply will never succeed?
I'm going to come to that.
One of the problems with truth and falsehood grappling is that if you're in a filter bubble, you actually don't get exposed to the grapple very much. You get exposed to information that reinforces your views going in.
I think that the issue isn't.... I think you're pointing to a very provocative paradox that we're seeing. People have never had more access to news than they do today. That's clear and that's a very good thing, but there's also a drying up of the source of original news. There's more debate in digital form than there's ever been, which is good for democracy, and there's more opinion that's exchanged, which is good, but the source news that all this is based upon is shrivelling up. There's no science for this, I must say, but based on union data that we were able to gather, we estimate that one-third of journalism jobs have been lost since 2010. There are fewer reporters on the ground, day in and day out, working as professionals who report things.
There are more bloggers who might come across things, which again I think adds a level of vibrancy to the whole system. I actually hope to see the kind of world that you described, in which digital-only options were actually employing people not just to process information, comment on information, and be opinionated on information, but also to actually go out and find out things. It does exist in some places, but it's much smaller than what's been lost on the other side.
Finally, when I talk about truth neutrality on page 3, I'm not talking about a debate between, let's say, Fox and CNN, or whatever that might look like. What I'm talking about is what's patently true and debatable and what's patently false and not debatable, which pollutes the system, and people are having a lot of trouble discriminating. There's a lot of data—or rather, there's some very convincing data from Ipsos and Buzzfeed, which did some work together after the U.S. election, showing that people were very confused by the things that were patently false.
Thank you, Mr. Greenspon.
I was going to mention Andrew Coyne as well. It's almost as if he could be a member of the committee, which would probably make it even more interesting than it already is.
He speaks to this, and as you said, you've had this debate for some 20 to 30 years. Anybody who was in the field of journalism or who respects good journalism is always going to be reticent to see any sort of government involvement, although we'd be kidding ourselves to say that there's obviously not some now.
You stated very clearly in the report that journalism must be independent from government, which means that whenever we talk about tax credits or financial support of any kind, we have to be so careful about it. I mean, as you said, any bona fide news organization can apply for the fund, but then it comes down to how we determine what a bona fide news organization is. We heard from hither and yon, from all sizes, shapes, and colours of news organizations, or at least organizations that argue that they are news organizations, and the classification becomes very difficult.
If government does take a more active role, as you seem to be recommending, how do we make sure we protect journalistic independence? Surely—and I come back to this fairly frequently on this committee, and so I apologize to my colleagues—we are not the only functioning democracy to be dealing with this right now. As you were exploring the issue, did you find any other examples in other countries of how they may be succeeding at this in varying degrees?
Let me take your first question first, and I'll try to be as quick as I can.
I think there are two colliding principles. It's unfortunate that they're colliding, but they are. One is journalism, news media. We all want it to stay as far away from government as possible. As you say, that has not always been so. Section 19 has been around since 1965. The CBC has been around since the 1930s. There is policy that governments have put in place. Nonetheless, that's principle one: we want to keep journalism as independent from government as possible. However, we want journalism, and particularly the reporting of original news of a civic nature, to be vibrant in a country that's lost 225 weekly newspapers, 25 daily newspapers, one-third of jobs, etc. We have a problem. How do you deal with that?
I think the public is very much onside with your view and Mr. Van Loan's view and my view that we don't want to create a dependency here in any way, that it would not serve democracy well. This is why we rejected the tax credit route, which I think has been the prime route that many in the industry have been advocating for. That route would have the industry coming back to government every year about its tax credit, and government every year doing its budget, looking at the consolidated revenue situation, having to decide whether to keep the credit at 20%, move it to 15%, or whatever. You'd be in a constant policy relationship, which is not good.
This is why we try to invite a structure—and I think this is really important to your question—such that they're not coming to government for this fund, but they're coming to what I like to call a double-arm's-length agency, which would be more independent than the Social Services and Humanities Research Council or NSERC or the Canada Council. It's set up on a governance structure that's used by the Canadian Foundation for Innovation, which is kind of complex, but ultimately the board of directors is not appointed by the government and the CEO is not appointed by the government, unlike the CBC, for instance. It's more independent than we are accustomed to. That would be making the determinations.
Now you may make the argument that it would not be sufficiently accountable, but the money is also not coming directly from government. The money is coming from an industry levy. We are trying on both sides of this equation to keep government as distant as possible. Government is required to set up the structure for this, clearly, but after that, government's out. You don't need to come back every year and do what's happening in Ontario right now in the lobbying for the return of the tax credit.
Yes, what do we do about Google and Facebook? I have mentioned that they were responsible for 82.4% of the ad impressions in the quarter that was measured, and in the United States, in the quarter that we talk about in the report, there was a $2.7 billion growth in revenue year over year in that quarter, of which $1.4 billion went to Google, $1 billion went to Facebook, and $300 million went to everybody else.
There was a great reluctance toward a lot of policy types of solutions, but we heard a receptivity from the public to tax Google and Facebook. That didn't seem a principled approach to us. They are two very successful innovative companies that have hit the sweet spot with Canadians and people all over the world.
Nonetheless, I think that when you've got that kind of consolidation of the Internet, consolidation over both audience and revenue, it's an issue that should be considered by policy-makers, and I don't think it's a national issue. You're talking about a global company, and I think that's beyond the ken of one country itself to address, but I think it's worth considering.
I wouldn't want to penalize success, though. I don't believe in that, but I would like to have a system. The cable companies are a good example. The cable companies were seen to be common carriers that were profiting from content created elsewhere, so a levy was placed upon them. I'm not placing a levy on Facebook or Google, but I recognize that a lot of that levy could very well fall on them. We've taken a principled approach to that.
I think the other question about Google and Facebook is whether they should take the responsibility of the publishers for the non-truth neutrality issues. When I was the editor-in-chief of The Globe and Mail, I was responsible for everything that appeared in The Globe and Mail, including letters to the editor. If a letter to the editor was defamatory, that was my responsibility as the editor-in-chief, and not the writer of the letter to the editor; and I believe it's a principle that if you publish something, you should be responsible for the quality of what you publish. That seems to me a fairly obvious fact that isn't obvious to everybody.
I purposely didn't want to go too deeply into that, because I feel that if this agency is set up, people are going to have to operate this agency, and they're not going to be me, and how they're going to make their determinations, I believe, will be based on precedents in other funds. Whether applications will be peer-reviewed as they are in academic councils, for instance, I'm not sure, but what concerned me most was the governance structure and that the governance structure be distant from government. I just commend, as I say, the Canadian Foundation for Innovation as a model the committee might want to look at in that regard.
You spoke also about the regional and local challenges. This is an incredible challenge, I think.
I don't want to invoke myself too much personally on the committee, but I'm actually not completely and totally and historically a metropolitan elite. I come from an immigrant family and I had my first news job in Lloydminster on the Saskatchewan-Alberta border. Then I went to the Regina Leader-Post, and I've worked in different sizes of media organizations. I understand in a city like Lloydminster—and there are a thousand Lloydminsters across this country—how imperative news is and how the transmission lines of the community occur through news and the community seeing itself and reflecting itself and knowing what's going on.
This would lead me in two directions to your answer. We cite in the report that Prince Albert, oddly enough, seems to have a very interesting portal type of operation that's built on the base of local radio. Some people may be familiar with it. That may be a replicable model, but it might need some money to try to scale it. Scaling is very difficult, and maybe the fund might help with scaling.
In the CP local initiative, we could start by putting something like 80 reporters out across the country to cover things that are not covered. Through this not-for-profit second service of Canadian Press, this material would be available to everyone: the local blogger, the local radio station, the local newspaper, start-up operations, whatever. It would be available to everyone and it would have high standards.
We believe that news is a public good, and if a community felt that they were losing this public good and they wanted to petition the CP local initiative to say their community needed news or a community group wanted to petition and said they'd like to contract for a reporter to cover their community, they'd have no control over it. They'd just pay a three-year subscription or something like that. These are things that would be measured.
I don't think there's any solution to a trustworthy flow of civic news in the country that CBC would not be part of. I also don't think it would be good to have too much CBC and too little anything else, because part of a democratic solution is diversity of voices and perspectives in assigning the news.
We say three things about the CBC. We say about its mandate, which is to inform, enlighten, and entertain, that the “inform” part, given what's happened in news, should be heavied up, if you will.
Second, we say that it should get out of the digital advertising area, because this is distorting to newsrooms across the whole system, since every day they get feedback on how many eyeballs saw a story, not on the quality of the journalism or the impact it might have had journalistically. It's pushing them in the wrong direction from where the CBC should be going.
Third, we say we should start thinking about, considering, and perhaps experimenting in a small way with what's called a creative commons licence, meaning that CBC's news material would be available to this much wider media ecosystem that Mr. Van Loan described earlier. We recognize that might sideswipe certain news organizations that are also doing an important job. We want to be careful not to create a moral hazard situation here, so we propose starting with the not-for-profit sector, which is a new sector of news, if you will, that's emerged over the last three to six years, and go down that road.
We think it's a good idea in some ways. Theoretically we believe it's a very good idea for what used to be a public broadcaster to be a public provider of high-quality information to the entire system, which is also having trouble discerning between high quality and low quality. However, we want to proceed cautiously on that because of the perhaps unintended consequences that could occur.