[Recorded by Electronic Apparatus]
Thursday, October 19, 1995
.1531 
[Translation]
The Chair: Order, please. We will continue our consideration of Bill C-103.
Our first witness is Mr. Jean Paré, Vice-President of the Association québécoise des éditeurs de magazines. Welcome, Mr. Paré.
Mr. Jean Paré (Vice-President, Association québécoise des éditeurs de magazines): Ladies and gentlemen, I would like to thank you on behalf of the Association québécoise des éditeurs de magazines for having invited us to the committee today. I am not used to speaking before parliamentary committees and I'm not familiar with the process. Please forgive me if I don't follow the procedure and feel free to call me to order.
I represent the Association québécoise des éditeurs de magazines, which was founded in 1989, exactly 200 years after the creation of the first Canadian magazine, the Halifax Magazine, and two years before the creation of the second Canadian magazine, the Magazine de Québec.
Ladies and gentlemen, you represent Canadian consumers and voters, their interests and those of our country, and I would like to raise a problem which greatly concerns the 53 French magazines which are members of our association. We have been discussing the issue for the last four to five years without finding a solution.
Our members firmly support Bill C-103 and ask the government to adopt it as soon as possible. The matter has been dragging on long enough, and the delay in implementing the principles underlying Canadian legislation in this area has probably already cost the Canadian magazine industry a lot of investments over the last 30 years.
At a meeting yesterday, I mentioned that since the issue of split runs, which we are discussing today, came up, almost no new Canadian magazines have been launched despite a robust economy and despite the fact that Canada's magazine industry has been very healthy over the last 20 years. It seems that the industry's growth has been slowed, if not halted, by this issue. Why should people create new magazines which might fall on hard times because the government refuses to implement our laws and the spirit of our laws?
This is why AQEM fully supports the position of the Canadian Magazine Publishers' Association as expressed in the brief which will be presented shortly.
I am also a member of the CMPA and I represent the AQEM within the CMPA. I know what my colleagues will say, in particular Ms Maureen Cavan who will speak on behalf of the CMPA. So I do not want to waste your time by repeating their arguments.
We support their position and their brief except for one sentence which I will quote. It reads as follows:
- The English Canadian magazine industry is in a precarious...position.
This is not an American phenomenon. It does not pertain to our southern neighbours. Today, giant publishers are French and they already have a foot in the North American market. They represent very strong competition; they are German, Italian, Belgian and Swiss. These are the people we have to deal with.
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The Canadian and Quebec magazine industry not shares not only one border, but because of the globalization of markets, organizations, and technology, all the borders of the world, whatever the language of the owners. French Canada is the second biggest French-language market in the world, ranking higher than Belgium and Switzerland. In fact, the Canadian market is bigger than the aggregate markets of the 40 other member countries of the French language community, excluding the two countries I just mentioned, and France.
I would also like to note, and this is not in my brief, that the magazines I receive in Montreal from Paris and Brussels are very different from the same ones I would buy in Paris. The magazines have been stripped of French, Swiss or Belgian advertizing. They are simply waiting for a small window of opportunity, for a minor authorization, for a small exception to fill the pages of their magazines with the advertizing which currently allows our magazines to be published.
The Europeans are polite, they are waiting at the border and have not tried to enter the country through a side door. But they are there and they are very powerful. Those businesses are 5, 10 and 20 times bigger than ours. More than 20 million Canadians read Canadian magazines, news magazines, general interest magazines, women's magazines, special interest magazines and professional magazines.
But very few of these 20 million readers - and maybe a few of you who have the responsibility of defending Canadian legislation - realize that the great majority of these magazines they read with interest and which they value, would not exist without the enlightened decisions taken by successive governments in Canada in the last 30 years to level the playing field for Canadians in the international market and ensure fairness in competition. I don't know how the word équité will be translated into English, but I would say ``fairness'' is the right expression.
The proof is in the pudding. Before the adoption of the legislation and regulations about 25 years ago, our industry did not exist. The magazine I edit will be 20 years old in 1996. Its first edition was published in September 1976. At the time, there were only three French-language magazines in Montreal. Today, there are 300, including 57 which are members of our association. These members are the biggest, the most important, and, quite frankly, the best magazines.
So when the magazine L'Actualité was founded, only three of the 57 magazines which I represent today were on the market. The combined annual circulation of the magazines that existed in 1976, 20 years ago, was only 6 million copies. Today, the combined circulation of all 57 members is 80 million copies a year, that is, 15 times more than before. And if we add the non-members, which would bring the total to approximately 300 magazines, the total circulation is 138 million copies. Therefore, it is strikingly obvious that the laws passed 25 years ago have trigerred investment in these businesses. We thank the governments of the time for having taken such enlightened action.
The evolution of the magazine industry was quite similar in English Canada, but I will let my colleagues from the CMPA explain that to you. One could think on hearing these figures that it is a robust and profitable part of the communications industry. Not at all. Ninety percent of all Canadian magazines are not profitable and they would not exist if not for the help of a few larger profitable magazines which support all the others in the hope that they eventually will become profitable. In our industry, hope is stronger than greed.
That small number of profitable magazines must live with profits which are on the average under 10%, and sometimes less. That's 10% when there is no recession. This is much less than what is considered a minimum south of the border, where magazines profits are always over 15%, and sometimes even reach 20, 25 and 30%.
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Between 60% and 75% of the revenues of our magazines come from advertizing. A reduction of 10% of the advertizing market, whether because of competition or a recession, would probably mean the disappearance of most of the Canadian magazine industry.
Our industry insists on maintaining and safeguarding the conditions created in the past 30 years which were made necessary because of the small size of the Canadian market. The Canadian market is one tenth of the American market. Similarly, the French-Canadian market is one tenth of the market in France. So we are in the same position with respect to our French competitors as Canadians are with respect to their American competitors. The French are very fond of us in Quebec. They like us the way I like oysters and chocolate: they want to eat us up!
The situation is worse for the French-Canadian market, which is only one third the size of the English-Canadian market. Language is not a protection. That is the illusion I would like to destroy, the cliché I would like people to forget.
The publishing giants do not all publish only in English. Our competition comes from Germany, France and Britain, as well as from the United States. In the area of business and professional magazines, our competition today comes from Holland and Britain. These are giant companies; they own hundreds of publications.
Personally, I'm involved with three successful publications: L'Actualité, Châtelaine and Le Bulletin des agriculteurs. In Quebec, that's what we call a chain.
In France, a chain means hundreds of publications. The same is true in the United States. And some of these smaller publications are sometimes larger than the Canadian ones with the largest circulation. They publish in all languages. They adapt their contents in downsized, thinner editions, in an attempt to skim off advertizing revenues in as many markets as possible, not only in Canada. These international publishers are now in the process of discovering us, just as Christopher Columbus discovered the Aboriginal peoples.
Bill C-103 does not introduce anything new; nor does it change the rules of the game. It preserves and protects them. It merely consolidates the present situation, and does not change the existing business conditions for our colleagues in other countries, at least not until they try to use a loophole in the legislation to get around its intent.
Bill C-103 does not add new protection for magazines. Rather, it increases the ability of the government of Canada to ensure that the letter and spirit of its laws are respected.
This Bill is for the country as much as it is for publishers. Indeed, present legislation forbids the transportation into Canada of split-run editions of foreign magazines by truck, by train or by plane. In all logic, it is difficult to claim that electronic transportation is not transportation.
If electronic transportation were not transportation, you would allow us to transport funds illegally outside the country by electronic means. I know for a fact that that is not the case.
The legislation and regulations consolidated by Bill C-103 is an intelligent package. This body of legislation, which made possible the birth and development of the Canadian magazine industry, was put in place after many studies and public inquiries, all of which were unanimous in their findings.
Few sectors have been studied so much and so carefully, and all the recommendations have been similar, from the O'Leary Commission, to the Tassé-O'Callaghan Task Force, not to mention the Kent Commission, the Davey Commission and many other such committees. Nothing has happened since that time to show that these recommendations are obsolete. Nothing has been written, either recently or in recent years, there has been no study or report that calls into question the conclusions and recommendations of these numerous public commissions. It would be difficult to understand why public authorities would suddenly jeopardize an industry that is so important politically, culturally, socially and economically. This would be pure improvisation.
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In the past, the government and public organizations have not enforced this legislation as carefully for our French-language magazines as for English-language magazines. A number of European publishers have tried, without much success, mostly because of a lack of experience, I think, to produce Canadian editions of their magazines and have sold advertizing illegally in Canada. We did not try to defend ourselves against this, because we had not been in existence very long, and because we had no association, not because this practice was not harmful to us.
I would like to point out that magazines are probably the most Canadian of all the media. I think they are more Canadian than our daily and weekly publications, and probably more than radio and television as well. No daily in Canada has a sister publication in the other language; they are all independent.
Except for the CBC, all TV networks are independent, whether they broadcast in French or in English, and they are owned by francophone and anglophone groups.
Only the magazine publishers, not just my company, but almost all of the major magazine publishing firms, have made the effort to create twins, what I call siamese magazines, with editions in both languages under the same or different names. These magazines are read from coast to coast. I am thinking of publications such as ``Coup de pouce'', in Montreal, and Canadian Living, in Toronto, TV Guide in Toronto and TV Hebdo in Montreal, and Maclean's in Toronto and L'Actualité in Montreal. And of course there are the two Chatelaines in the two cities, but the content of the two editions is very different.
I would just like to point out that not only do these magazines accurately reflect the profound essence of Canada -
The Chairman: Excuse me, Mr. Paré. How many minutes are left in your presentation?
Mr. Paré: Four or five.
The Chairman: Since Mr. Paré said that his presentation was the same as that of the CMPA, could we not hear both before we begin asking questions? The two witnesses could appear together. Agreed?
Is that all right with you, Mr. Paré?
Mr. Paré: I will speed up and move on to the last paragraph of my text.
The Chairman: It doesn't matter to us, because we are here at your service and to learn from you. However, with your permission, we will hear from the CMPA before asking you our questions.
Mr. Leroux (Shefford): Does Mr. Paré agree, or would he prefer to answer our questions himself?
Mr. Paré: I think I may have taken up a little too much time. I would be pleased to answer your questions immediately or later on; it doesn't matter to me at all. However, I would like to talk about my final paragraph.
The Chairman: Certainly. Please continue.
Mr. Paré: The importance of our industry goes beyond any figures. I was going to tell you about the 6000 indirect jobs and the 4200 direct jobs that we have in Montreal in magazines alone, but I think the importance of our industry goes beyond this.
Foreign magazines are excellent, but they are foreign. With a few exceptions, I think I can say that no profile or interview of any member of this committee, or of any of your colleagues in the House of Commons or Senate have ever appeared in these numerous foreign magazines. They are just waiting for a moment of inattention from you to come and invade our market.
I doubt that anything said here in this room would ever appear in any of these foreign magazines, unless they were defending their own interests.
In supporting Bill C-103, we don't want to reduce the free flow of goods - which is total at the moment - nor the free flow of information. On the contrary, we are all for it, and that is precisely why we want to protect it.
There is no freedom of expression without the means of expression. We could lose the means of expression if we were subjected to unfair competition from publishers who pay no salaries or fees to Canadian artists and authors.
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We would thus see the destruction of our means of expression, and consequently a reduction of our freedom of expression. We don't want to go back to the sixties. Thank you.
The Chair: Thank you, Mr. Paré. Please stay at the table. I will ask those who represent the Canadian Magazine Publishers' Association to come forward.
[English]
Appearing with us as well, from the Canadian Magazine Publishers' Association, are Diane Davy, chairman of the board of directors; Catherine Keachie, president and chair; Maureen Cavan, publisher of Harrowsmith and vice-president of Telemedia; James Warrillow, chairman of McLean-Hunter Publishing Limited; and Jeff Shearer, chair of CMPA's political affairs committee.
Ms Maureen Cavan (Canadian Magazine Publishers' Association): Thank you, Mr. Chair, and good afternoon, hon. members.
I am a vice-president of Telemedia Publishing, publisher of Canadian Select Homes and Harrowsmith magazines. I'm also a member of the political affairs committee of the Canadian Magazine Publishers' Association, and it is on behalf of the CMPA and its 350 member magazines that I'm here to speak to you today.
The Chair: Before you begin, Ms Cavan, do you agree with Mr. Paré that your positions are identical?
Ms Cavan: Yes.
The Chair: Thank you.
Ms Cavan: I have a rather large delegation with me here today, and it is meant to impress you with the solidarity of our position across the industry. Our position on this bill is simple and clear: We support Bill C-103. The measures in this bill are vital to the survival of the Canadian magazine industry.
From a government policy perspective, there is nothing new in this bill. The measures it proposes are simply updated enforcement mechanisms for a thirty-year-old Canadian policy against split-run publishing. They are measures recommended by a federal task force that examined the question of split runs for more than a year. They are measures that have been extensively studied by the ministries of heritage, finance and trade. The Canadian magazine industry, the federal task force, and the federal ministries have all determined that these measures are the simplest, least intrusive and least expensive options in the effort to uphold Canada's policy against split-run advertising editions.
It is an understatement to say that these measures have been exhaustively studied. It is not my intention to walk you through those studies because I'm certain you have seen the analyses, the rationales, and the statistics. Instead, I would like to briefly address two important misconceptions about this bill and about our industry, misconceptions that have been used in the arguments against this bill.
As you know, Canada has on the books regulations designed to prohibit split-run advertising editions, but those regulations contain a loophole, one that is being successfully exploited by Sports Illustrated. It is a loophole that, if left unplugged, will certainly be exploited by hundreds of other American magazines in a position to follow Sports Illustrated's profitable leads.
The existing regulations are designed to stop split-run advertising editions from physically crossing our border. Sports Illustrated got around those regulations by electronically beaming their issues to a Canadian printing plant. The existing customs tariff therefore went untriggered.
This is where we run up against misconception number one: Since Canada does not have its own sports magazine, the Sports Illustrated split run isn't hurting anyone. This isn't just about Sports Illustrated, though. If the loophole is not closed, we will see an influx of American split-run editions and split-run editions from other countries around the world that do compete for the same readers as existing Canadian magazines.
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It is important, please, to remember that Sports Illustrated has been available to Canadian readers for over twenty years. It is not a new Canadian magazine, and even on the Sports Illustrated question, this misconception - that in the absence of a sports magazine, Sports Illustrated isn't a threat - betrays an even greater misconception, that split runs are about competing for readers. The split-run question is not about readers. It is about advertisers.
The advertisers pursued by Sports Illustrated are the same advertisers pursued by magazines such as Saturday Night, Maclean's, Chatelaine, Equinox, Harrowsmith and Canadian Living, and an advertising dollar spent on the split-run ad edition of Sports Illustrated, or any other split run, is an ad dollar diverted from a Canadian magazine. Sports Illustrated has no direct Canadian competitors for readers, but it has dozens of direct competitors for advertisers.
The English-Canadian magazine industry and indeed, as Jean pointed out, the entire Canadian magazine industry, is in jeopardy. The English-Canadian industry, however, is in a precarious and globally unique position. We share a language and a border with the world's most culturally aggressive country. Our counterparts to the south enjoy access to the world's largest homogeneous market, a market more than ten times as large as ours.
Our news-stand system, a system that developed to serve the needs of American magazines long before Canadian publishers were in a position to compete, favours magazines with mass circulation, so only a handful of Canadian titles can be found there. As a country, we have never put up barriers to restrict the reading rights of Canadians, so U.S. magazines flood our markets.
The CMPA is not complaining on this point. We are more than willing to compete for readers with magazines from anywhere in the world. But it's a tough battle. Because of economies of scale, the unit cost of American magazines is typically half that of Canadian magazines. American magazines dominate our news-stands, which allows them to set the standard when it comes to cover prices. We know from extensive studies that consumers expect their Canadian magazines to cost no more than their American magazines. While those cover prices leave room for an American publisher to turn a profit, Canadian magazines sell on the news-stand at a loss.
We still manage to compete successfully for readers, though. We are world leaders in subscription sales. We work hard at converting those no-profit news-stand sales into marginally profitable subscriptions. It's a fact that where a Canadian option exists, Canadian readers choose Canadian magazines. So Canadian Living and Chatelaine outsell Good Housekeeping and Family Circle. Canadian Business and Report on Business Magazine outsell Forbes and Business Week. And Maclean's outsells both Time and Newsweek. But the truth remains that while on an individual basis, Canadian magazines outsell their individual American competitors, collectively those competitors outsell us. Why? There are simply so many more of them.
While Canada may support a handful of domestically produced business or women's magazines, our news-stands are flooded with dozens of U.S. competitors in each publishing category. While Canadian magazines have managed to capture about half of the overall magazine market, when it comes to news-stands, more than 80% of the magazines filling the racks are American. It is, however, a situation the Canadian industry is willing to work within because we do not believe, in any sense, that readers' access should be restricted.
So why should advertisers be any more constrained in their choices of advertising media than readers are in their choices of reading material? Advertising is the lifeblood of the magazine publishing industry. It accounts for some 65% of the revenue of Canadian magazines. Without those advertising dollars, there would be no Canadian magazine industry.
Canada has committed itself to maintaining a domestically produced and owned magazine industry. A magazine is not just another product that could be produced as well anywhere in the world. It might not matter much, for instance, whether your cellular phone is made in Canada or Japan. If the product is good and the price is reasonable, a Japanese-made cellular phone is much the same as a Canadian-made cellular phone, but a magazine is different.
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Canadian magazines reflect Canada: our people, our places, our politics, our culture. No foreign magazine can or will cover Canadian issues from a uniquely Canadian perspective. Time after time, government after government, Canada has affirmed the importance of that unique Canadian perspective by taking steps to ensure that Canadian magazines have at least a fighting chance.
Canadian readers opt for Canadian magazines because they want to read about other Canadians, but advertisers are far less choosy. If a publisher can deliver readers at a low price, it is of little concern to most advertisers whether that publisher is delivering them in a Canadian magazine or in a foreign magazine. However, Canada has decided that Canadian businesses, which enjoy numerous benefits from their Canadian location, should be encouraged to spend their domestic advertising dollars in domestic advertising vehicles.
The government has not gone the route of disallowing advertising in foreign media, just as it has not gone the route of making foreign magazines more expensive to readers by imposing a magazine tariff. Instead, it has opted to disallow advertisers from claiming expenditures for domestically targeted advertising in foreign media as a tax-deductible business expense. Since 1965, Canadian has prohibited split-run editions from entering our country.
What is wrong with split-run advertising editions? These additions recycle editorial content that has already been paid for in the magazine's domestic and usually - in English Canada - American market. They then resell the advertising space to Canadian advertisers. These additions typically incur no or very low editorial costs for the split run. As a result, they are able to undercut ad space prices in Canadian magazines because their costs are so much lower. In any other industry this would be called dumping. For split-run advertising editions, the Canadian market is gravy, but for Canadian magazines, which must recover all of their costs in the domestic market, the Canadian market is the main course.
This is what it all boils down to. The split-run question has nothing to do with whether Canadian magazines can compete for readers. It is entirely a question of whether Canada, given its shared language and open border with the United States, is going to have a domestically produced and controlled magazine industry.
Canadian magazines have no trouble competing for readers but we cannot compete with split-run advertising rights that are based on negligible costs. It is advertising that pays the bills. No advertising means no magazines, no matter how much Canadian readers may want them.
A second major misconception that has been waved like a red flag throughout the split-run debate is that the proposed measure in Bill C-103 will trigger a trade war with the United States. I certainly can't predict what Mickey Kantor will or won't do, but I will say this much. The measures proposed in Bill C-103 are fair, scrupulously fair. There is no exemption in this bill for Canadian magazines. So Canadian-produced split runs are targeted right alongside American and other foreign magazines in this regard.
The Americans won't have to retaliate in kind because the government has already imposed a kind of self-retaliation in this bill. In fact, in the spirit of supporting the fairness of Bill C-103, my own magazine Harrowsmith Country Life will cease sharing editorial content with its sister title in the U.S. effective with the passage of Bill C-103. We do so willingly to secure the future of indigenous Canadian magazine publishing and to reintroduce stability to our industry.
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[Translation]
The Chairman: Would you please excuse me. Mr. Paré, when must you leave?
Mr. Paré: I have booked a plane leaving at 6:15 so I will have to be leaving at around 5:30.
The Chairman: Agreed.
[English]
I'm sorry; please continue, Ms Cavan.
Ms Cavan: That's okay.
Bill C-103 does not propose a new policy on split-run publishing. It simply proposes new enforcement measures for a long-standing Canadian policy opposing split-run publishing.
This bill plugs a loophole in our existing regulations. It effectively removes the profit potential of split-run editions by imposing an 80% excise tax on advertising revenues generated by the split-run edition. It is not a consumer tax.
This bill will have no impact on the free flow of information across our borders. American and other foreign publishers are welcome to continue sending their magazines into Canada unimpeded across our tax- and tariff-free borders.
The main editions of Sports Illustrated and other U.S. magazines are as welcome in Canada as they have been for decades. Should they wish to include Canadian editorial content in their Canadian editions, they are welcome to.
Bill C-103 is fair. It is effective. It does not entail setting up a costly monitoring bureaucracy. It is the least intrusive option in upholding Canada's long-standing policy against split-run publishing and it is vital to the health of a Canadian-produced and controlled magazine industry.
The issue here is not whether Canadian magazines can compete for readers; we can and we do. The issue at the root of Bill C-103 is putting an end to unfair competition for scarce advertising dollars.
If split-run advertising editions are permitted to maintain their unfair advantage, it won't much matter whether Canadians want to read Canadian magazines. It won't much matter whether Canadians want to read about each other or want to see their concerns and perspectives reflected on the pages of their own magazines, because without access to our domestic advertising market, many Canadian magazines will die and Canadian readers will be left with magazines like Sports Illustrated's so-called Canadian edition - magazines peppered with Canadian ads but woefully lacking in Canadian content.
You might see the odd Canadian face in the pages crowded with American personalities and issues, but you'll see it through the eyes of an outsider - a foreign writer, a foreign photographer, a foreign editor - who does not understand who we are, who does not understand our distinctly Canadian take, and who doesn't much care. We'll have foreign publishers like absentee landlords, stopping by just long enough to pick up the cheques but never getting out of the car to explore the neighbourhood or talk to the tenants.
This government can ensure that doesn't happen. We urge you to support Bill C-103.
Thank you.
The Chair: Thanks, Ms Cavan.
Since the loophole has existed for two and a half years, why haven't more split-run editions come into Canada?
Ms Cavan: I think there's a wait-and-see attitude, Mr. Chair. Everyone south of the border recognizes there may be legislation here and they aren't willing to take the risk Sports Illustrated has taken.
The Chair: There's not much cost to doing it, is there?
Ms Cavan: If you start up a business and have to close it down, it may not be a cost, but there is a cost to perhaps your reputation or your business.
The Chair: But you've always contended it's not a very big business to start up, it employs very few people, and all it does is employ a few Canadian printers who are already there anyway.
Ms Cavan: I think Jean Paré mentioned in his speech that other publishers have perhaps been more polite.
[Translation]
The Chairman: Mr. Paré, you have said that this bill would not bring about any great change. However, it does change at least one thing, that is the right of Sports Illustrated to exist in Canada. Is that not so?
Mr. Paré: I do not think that Sports Illustrated had the right to exist in Canada. It is simply playing on words to say that the possibility of beaming information across the border gives it that right. What could not be done directly in the past is now being done in an indirect way.
What is worse is not the sudden existence of a foreign magazine; rather, it is the precedent. If the doors were opened wide, I believe that the publishers of this magazine could develop it further. It is not in their interest at present to cause worry to Canadian owners. If they were successful, they would be widely imitated by other American publishers, and other important French or German publishers.
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Already, some of our competitors are printed in Germany, in French.
The Chairman: Sports Illustrated has asked us to shut the door to everyone else.
Mr. Paré: There are a lot of people across the country who, at one point in time, interpret legislation in an abusive way and would like us to apply the same principle to them.
The Chairman: Thank you, Mr. Paré. We will now begin with questions from Mr. Leroux.
Mr. Leroux: Mr. Chairman, I would like you to give the floor to the Reform Party or the Liberal Party. I will be following up later.
The Chairman: Thank you, Mr. Leroux.
[English]
Mr. Solberg.
Mr. Solberg (Medicine Hat): Thank you very much, Mr. Chairman. I would like to welcome everybody here today.
I have a question following on Mr. Paré's remarks, remarks other members have indicated they're in agreement with. It's simply this. Mr. Paré has pointed out that barriers have been in place in Canada for the last thirty years preventing other magazines from coming in and pursuing advertising dollars here and that the magazine industry is struggling right across the country in Canada. We have heard also that Canada's a very small market. It's difficult to make a go of it here. We've also heard that other countries are very outward looking in their pursuit of advertising dollars, in that they are knocking on our doors and trying to get advertising dollars from us.
So we have a situation in which the smallest country in the group is trying to put up barriers and remain within itself, and we have the big countries, which have the big markets, going out and trying to get dollars from Canada. To me that seems rather odd. Wouldn't it make more sense for the small countries to go out and pursue the advertising dollars in the big countries, such as we see in other aspects of the Canadian economy?
Mr. Paré: There are two things. First, Canada has not put up barriers to the importation of magazines. In fact -
Mr. Solberg: I didn't say that. I said pursue advertising dollars.
Mr. Paré: In the second part of your sentence.... If you visit a news-stand in Montreal, you will realize that the number of different titles for sale is much larger here than in the United States or in France or in Germany, because we've access to all Canadian magazines, all American magazines, all French magazines, and so on. The Benjamin distribution company in Montreal, which distributes our magazines, has 4,200 different products on the shelves. So Canada is playing the openness game totally.
Now to the second part of your question, which is whether it would make sense for small countries to play the globalization game, if that were a possible opportunity, if that were a possible strategy, we would probably see that New Zealand, Denmark, and all sorts of small countries like those would be giants in the magazine world, because not having a large domestic market, they would rely more on the international market and they would be the international players.
But that's not the way it works in real life. In real life, the people who can afford to extend a product line at very little cost and then cream the market are the ones who already have circulations of 4 million, 5, 6, 10, 12, 15, 17, and 20 million, at home. That's what we're talking about.
Mr. Solberg: But you mentioned Belgium, Sweden, and Switzerland as well; they're providing tough competition for you.
Mr. Paré: In fact, most of the competition for us would be coming from France. In specific markets it could come from Switzerland a bit; not so much Belgium, because they're very distinct and specific. It could come from Germany.
For example, right now I am trying to put together a project for a very important magazine, a very specialized magazine; a high-quality, luxury magazine. My main competitor in French on the Montreal market - already a year ago they sold 18,000 subscriptions; maybe it's a bit lower now - is a German publisher, publishing in French. For them, the French edition in France is just a spinoff from the German company, which sells over 1 million copies. They are already aboard a very fast car and there's no way I can catch up with them.
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Mr. Solberg: What I hear the magazine industry in Canada saying, though, is that in every other aspect of the economy we've seen Canada go out and compete in the world, compete head to head, not just for admiration of the product but for dollars. We've seen that in industry after industry and they've done extremely well.
As a layman, I see many opportunities for Canadian magazines to do extremely well in the largest market in the world, certainly the most wealthy market in the world, the United States. To me it makes all the sense in the world. To see a magazine such as Sports Illustrated based in Canada.... I'm talking about a Canadian-owned sports magazine like Sports Illustrated. Why can't we have a magazine here that reaches the whole North American market? I don't understand that.
Mr. Paré: Because mice are more interested in elephants than elephants are in mice.
Mr. Solberg: But isn't it really a question of our outlook? The mice have done extremely well in the other aspects of the economy.
Mr. Paré: Yes. A football is a football is a football, but a magazine is about something else.
Mr. Jeff Shearer (Canadian Magazine Publishers Association): The strength of Canadian magazines is the fact that they are about Canada. Our niche is our own country.
Mr. Solberg: Then let's let Canadians decide that.
Mr. Shearer: Excuse me. If we chose to in fact export our own magazines around the world, we'd have to change them into international magazines and thus lose the very raison d'être we've had for developing a Canadian magazine market.
Mr. Solberg: So you're saying that the Americans don't have to change to come here but we have to change to go there.
Mr. Shearer: That's correct.
Mr. Solberg: Can you explain that to me? A moment ago Ms Cavan was commenting on Canadian content. Can she tell me what constitutes Canadian content when it comes to sports in particular?
Ms Cavan: In terms of readers?
Mr. Solberg: Canadian content.
Ms Cavan: Canadian content is coverage of Canadian personalities and Canadian sports activities.
Mr. Solberg: Well, what is a Canadian sports activity?
Ms Cavan: I suppose you would call any team in Canada Canadian content, but the sports market of interest is a North American area of interest. That's why Sports Illustrated does it so well and that is why we cannot have a separate Canadian sports magazine to compete with that.
We do compete in the U.S. market; we do so quite well and we do go head to head. My own company has a publishing division in the U.S., and we publish an American magazine called Eating Well. We do very well when we publish American products for American markets and Canadian products for the Canadian market, and there is a difference. We can and we do work in the United States market and we will continue to.
Mr. Solberg: You made two points there. Let me go back to the sports content for a moment.
Isn't it a fact that we have an integrated North American professional sports market now? To me it seems very hard in an area that's as specialized as sports or any one of a thousand other speciality interests, from collecting coins or stamps to sewing to whatever.... These things aren't specific to a particular culture.
All these types of interest can be handled by a magazine, providing they speak the same language, I suppose, no matter where it comes from in the world. Really Canadians will make the decisions about what their culture is, not governments or magazine publishing organizations.
Ms Cavan: The fact is, Mr. Solberg, that Sports Illustrated existed for many, many years before there was a market that might have enough of an interest in sports in Canada to provide a reader market for a Canadian sports magazine.
Sports Illustrated is able to spend a tremendous amount of money on collecting the information and the photography they do to publish their excellent product for the North American market. For a Canadian company to find the capital to operate at that level when it's already being extremely well done by an American competitor is fanciful dreaming. There are very few American competitors for Sports Illustrated. No one else in the U.S. has even been able to successfully be a direct, head-on competitor for them.
.1620
Mr. Solberg: I understand that, but the fact is that in other areas such as high technology, Canada does extremely well competing against the big bad Americans, the big bad Japanese and all these other people out there who have tonnes of money and huge markets. I would argue that magazines such as Sports Illustrated and these specialty-type magazines aren't culture specific.
When you talk about general interest magazines, and certainly Maclean's would be one where culture is extremely important, they are going to cream the competition the other way because Canadians don't want to read about American politics the way they read about Canadian politics. As long as politicians are wasting their dollars in Canada, or whatever the case may be, they will want to learn about that, so they are going to want to read the magazines that provide that information. Isn't that correct?
Ms Cavan: I think you're trying to differentiate between general interest and specific interest magazines and somehow draw a line between what is of cultural interest and what isn't, and differentiate legislation that way.
Mr. Solberg: I'm not interested in making legislation; I'm quite interested in not doing it, frankly.
Mr. James Warrillow (Canadian Magazine Publishers Association): If I may join this discussion for a moment, I don't think anybody here would disagree with you. Some of the best golf magazines are American, and I don't want to publish a second-rate golf magazine in Canada.
The issue is not about whether or not we can produce magazines that people want to read. The issue is about advertising. These American, German or French magazines would collect if they were allowed to have split-run editions.
Mr. Solberg: I understand that.
Mr. Warrillow: These advertisers are not specific to the interests you are talking about. The Sports Illustrated magazine does not just have sports advertising. We're talking about car advertising, liquor advertising, and general advertising that would otherwise go in domestic magazines. Without that advertising revenue in the domestic magazines we can't do the job we're doing today. If we can't do the job we're doing today, readers won't read us.
Mr. Solberg: I understand that.
Mr. Warrillow: It's not that we want to stop people from reading golf magazines or Sports Illustrated.
Mr. Solberg: I apologize if I'm leading you to believe I'm making that argument. The argument I'm trying to make is that somehow we've set the magazine industry aside and made it different. In other sectors people go ahead and compete head to head around the world, and do extremely well in making money.
Mr. Warrillow: Yes, because they product a widget that doesn't have a culture.
Mr. Solberg: But we have a specific advantage in Canada when it comes to producing things about our own culture. We have a big advantage already. We don't need legislation then.
Mr. Warrillow: We don't need legislation to stop people from reading about other people's cultures. We're very happy for people to read whatever product they want from anywhere in the world. That is not the issue. We do not need protection for our magazines from circulators from anywhere in the world. The issue is purely split-run advertising editions.
Mr. Solberg: Doesn't it tell you, though, how successful you are in terms of reading our own culture here? Can't you judge that by the revenue you're making as well?
Mr. Warrillow: Yes.
Mr. Solberg: Isn't that the ultimate arbiter? Why in the world do we need to have legislation to effectively lock out competition that I think will actually improve magazines in Canada? Why do we need that if people are the ultimate arbiters in deciding which magazines are good and which ones actually respond to the Canadian culture?
Mr. Paré: If we want consumers to choose, I think they should always choose. They need to have a choice. They can't choose if there is only one kind of magazine in the news-stand. They can't choose Canadian magazines if Canadian magazines have been driven underground. It is not just a matter of culture; I don't think we have to fear about our culture. It's a matter of communication between citizens about who we are.
Recently two Canadians finished first and second in Göteborg, Sweden, in the 100-metre sprint. In our magazines we learned about the winners. In the American magazines they learned about the losers. That's the contribution of Canadian magazines to Canadian life.
Mr. Solberg: Of course.
Mr. Paré: In theory I might need 1,000 calories in my school lunch to stay alive and be a success in school, but not if a bully steals my lunch. That's what it's about.
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Mr. Shearer: Perhaps I could put one more business perspective on the challenge that has been mentioned about the launch of American magazines.
As I remember, in the sixties Sports Illustrated spent over $17 million in launching that magazine in the United States and it took seven years before it even began to see a profit. Since then, other sports magazines in the U.S. have started up. They've come and they've gone. There has been only one major successful sports magazine in the United States.
We, as publishers and business people, have chosen a market in which we in fact can compete and in which we can afford to launch products that are successful and meet our market needs. We don't do so very profitably, but we do it with enough success that we have built a very vibrant magazine industry in this country. There are over 500 consumer magazines. Most people are surprised and amazed to hear that, because, as Jean says, we're more underground. You don't see us on every news-stand, but we're there.
On the question of whether or not we can simply import it easily, as we can with our high-technology communications, we can't. We'd have to change that product dramatically or start new magazines internationally. That is a unique characteristic of Canadian magazine publishing - in fact, of any magazine publishing business, and we are a small country.
There are economies of scale and there are market challenges that we, as magazine publishers in this country, face that you wouldn't face if you were in Germany, Japan, or France and looking at the world market. We apologize that we can't make a bigger dent in world magazine sales, but we can't.
What we can do and what we are asking for is an acceptance of a long-standing policy that says, at least when it comes to advertising split runs, that there will be some understanding that if they were to occur in this country, that would truly challenge the one magazine market in which we have been successful.
Mr. Solberg: I'll conclude by saying that I think you people are far too pessimistic. I'll leave it at that for now.
Mr. Campbell (St. Paul's): As we look at a piece of legislation that's designed, in essence, to plug a loophole, I suppose it's inevitable that we will range over the whole question of culture and cover a lot of ground that many of you who have been in this industry for a long time have been through over and over again. As we ask some questions to help us understand this latest chapter, I hope that you'll bear with us and educate us.
It may be that many of us agree with the end but perhaps not the means and we want to understand if this is in fact the least intrusive and best way of accomplishing the goal that we may share.
Starting with the issue of Canadian magazines abroad - and I found this Canadian magazine catalogue, which a number of us have been leafing through as you've been speaking, to be very useful - a number of you spoke, but perhaps inadvertently failed to focus on the tremendous international content in many of the magazines listed in the catalogue. Ms Cavan, in particular, spoke about the Canadian perspective and the Canadian viewpoint, but if I read the description in here of a number of magazines, Equinox for one, it is that:
- Equinox explores the puzzles and mysteries of our world and its inhabitants. Let Equinox help
you understand who we are and how things work. Explore the wonders of human cultures and
human behaviour; visit wild kingdoms and untamed frontiers; learn about scientific
breakthroughs and cosmic wonders.
- That's more than Canadian. It goes well beyond Canada.
In fact, as I look through here, almost every one of the magazines listed in the catalogue - and it's an impressive list and I read some of those - has overseas distribution. You have subscriptions overseas. I just want to give you a chance to comment on that, because you spoke as if this were a small industry just catering to Canadian tastes so we can learn about ourselves, but in fact it's much more than that, isn't it?
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Ms Cavan: We all have some distribution overseas. Mostly they are Canadians living in other countries who prefer to still receive their Canadian magazines by subscription in those countries. It's very small.
Mr. Campbell: But surely architects and designers want to read Insite and people involved in circumpolar research want to read Arctic, and they would be among your readers as well.
Ms Cavan: I can't speak to those magazines. Perhaps Catherine can.
Ms Catherine Keachie (President and Chair, Canadian Magazine Publishers Association): Mr. Campbell, are you suggesting we ought to be able to sell in bigger numbers outside our own country?
Mr. Campbell: My question grows out of what Ms Cavan said in suggesting a justification for the help the industry gets through this legislation, which is part of a broader policy, which is we need a Canadian perspective that wouldn't be served by foreign magazines. I'm just asking how you square that with the fact that many magazines here don't do that. They do something else, which is highly desirable, I might add.
Ms Keachie: Well, of course we're talking about a perspective. Canadian magazines cover everything in the world. We are by no means restricted to Canadian writers, Canadian subjects, or Canadian themes, but it's all from a Canadian point of view, which is a help.
We're as likely or willing to write in the pages of our magazines about Bosnia or about flora and fauna in South America as any other magazine is, if we think our readers would be interested. There's no difficulty. We're not trying to be narrow and exclusive about what our magazines cover. We would not be a grown-up and very real and vibrant magazine industry if that were the case.
What we seemed to be discussing earlier was export. One would like to think we could export to our nearest neighbour, because they're so near by. After all, just as we are one extra stop of the truck for American magazines, they are just one extra stop for us, so you'd think we could export into it. If we could, we would be doing very well, and so would Britain if it could export to the U.S.
Mr. Campbell: But you do.
Ms Keachie: Well, Barry, in a small way. For instance, my colleague Diane Davy, of Owl and Chickadee magazines, produces superb, absolutely superior children's magazines. They've done quite well, and Diane could speak to that, but still, it's a tiny magazine in the U.S.
Ms Diane Davy (Chair, Board of Directors, Canadian Magazine Publishers Association): That's right. Our home market is Canada. We use Canadian writers, illustrators, etc. Our closest readers are Canadian children, but yes, ours is an international magazine.
Mr. Campbell: I know the magazines of course, not that I read them, but my children do. I read them with my children.
What is your circulation in the United States?
The Chair: The children explain them to Barry.
Mr. Campbell: That's right.
Some hon. members: Oh, oh.
Ms Davy: Actually, Owl and Chickadee are other examples of magazines that are in French and English. There are Hibou and Coulicou too.
We do solicit subscriptions in the United States, but it's not our home market. That is, it is an add-on market for us. In the same way that subscriptions come to Canada from American magazines, subscriptions do go there too.
Mr. Campbell: What percentage would be U.S.?
Ms Davy: It's about 30%.
Mr. Campbell: That's very high, I would think, for a Canadian magazine.
Ms Davy: Yes, and we are probably unique.
Mr. Campbell: But you're also an excellent magazine.
Ms Davy: We're also non-ad-bearing and not quite facing some of the same problems, though. I must point that out.
Ms Keachie: Like clean water from Canada, superior bottled water, so are our children's products apparently, but there is a certain difficulty. We're still busy taking over our own market, facing an extreme disadvantage.
Mr. Campbell: All right. I didn't want to spend too much time on it. I wanted to make sure you made the point, because you left us thinking it was strictly a Canadian product for Canadian readers only.
Mr. Shearer: But it would be a mistake if we left you for even a second with the thought that 30% isn't unique throughout the entire industry. For Maclean's, Saturday Night, Equinox or any of hundreds of magazines, it wouldn't be more than 1%.
Mr. Campbell: I understood that.
Mr. Shearer: And that 1% would be among expatriates and people who have a unique relationship with Canada. It's because of the editorial nature of our magazines and the perspective we have.
Mr. Campbell: One could also draw distinctions between news magazines, sports magazines, magazines in the design and architecture area, children's magazines, dance magazines, and so on.
Before the chairman cuts me off to allow time for my colleagues, I want to ask two other quick questions.
.1635
Ms Cavan, again, you spoke about advertising dollars and having a little trouble. I wouldn't assume that if a Canadian advertiser could not advertise in Sports Illustrated, the advertiser would take those dollars and put them in Chatelaine. I assume that the advertiser puts it in Sports Illustrated intending to reach a certain readership.
Ms Cavan: That's correct.
Mr. Campbell: Would you just speak to that?
Ms Cavan: Certainly.
Mr. Campbell: You left the impression that they would put it in other Canadian magazines instead.
Ms Cavan: Or other Canadian media. It's certainly a Canadian media dollar that is going into Sports Illustrated and it may be part of a print campaign.... It is part of a print campaign budget because, obviously, it's a print page. Therefore, that makes it available for Canadian magazines to carry the advertising. But it would be a dollar from the Canadian media advertisers' pool and various advertisers, at times are in print, at times are in television. Their dollars can be accessed by the print media, given that the print media sells its advantage and benefits.
Mr. Campbell: If the chairman will allow me, that leads me to my last question. It is related to the one I just asked.
Given that and your concern that we find the least intrusive method, and you think this bill is the least intrusive way of effecting this result, I'm wondering - and we are all hostages of our background and our experience - why predatory pricing law, trade remedies, dumping law wouldn't suffice and be an even less intrusive way to deal with what you assert is happening in the case of Sports Illustrated.
Ms Keachie: I could try to speak to that perhaps, but you may well have gone over this with the officials in the Department of Heritage earlier. I think anti-dumping legislation was looked at and explored by the task force on magazines that studied this entire issue so exhaustively and decided that it didn't work. I think you might be wise to ask the people from Heritage exactly why they ended up deciding to try to use the tax system rather than anti-dumping legislation on this issue. I think it had to do with the fact that advertising doesn't seem to be goods in the same way.
Mr. Campbell: I can see that. I have a little more trouble with the competition law and predatory pricing because you seem to have described exactly the case that those provisions are designed to address, the unfair use of your market power in the ways that you described. So I am wondering if anybody has anything to add to that.
Mr. Shearer: We were told at the time by the experts that there was a technical difference in terms of how you define dumping. Dumping, to us, means selling something in a foreign country for less than you sell it in your own country.
Mr. Campbell: That's right.
Mr. Shearer: Clearly, Time Warner does this with Sports Illustrated. They sell a page in Canada for $6,000 to $7,000 and for that same circulation in Florida they sell it for $12,000 and they sell it in New England for $11,000. So they're clearly doing it. The technical definition of dumping, we were told, may not measure up to this situation.
Mr. Campbell: Does anyone have anything to add to the issue of competition law, predatory pricing, as a remedy?
Ms Keachie: You will have to ask the legalists who explore these. Perhaps Mr. Tassé could enlighten you on that.
Mr. Campbell: Thank you. That's been very helpful.
Mrs. Stewart (Brant): I would like to use the line of questioning that Mr. Solberg used with both previous witnesses. I am paraphrasing - you may have to help me, Monte, afterwards - but he was concerned that this legislation was in fact going to act to the detriment of Canadian publications such as Harrowsmith. I guess I find it passing strange that he didn't ask you that question, Ms Cavan, given that you're here, so I guess I'll ask you that.
There's a concern that without allowing split runs, it is going to have an impact on your ability to broaden your marketplace, particularly into the United States.
Ms Cavan: I've already announced here today that we will cease and we do so willingly in the spirit of the legislation because we understand it should be fair. We prefer to operate in a fair market and it is therefore mirrored in both countries as to how we will operate in each other's country.
We have no issue with that. We have found to our preference that we will operate in the U.S. as an American magazine. For the small gain we have - and there is some gain - from operating with some sharing of editorial with our sister title, we are much more inclined to protect our entire industry here and be fair in the process.
.1640
Mrs. Stewart: Given that we talk again and again about Sports Illustrated and we know in fact they began their split run here on March 26, 1993, and the issue was about advertising, and you are an association responding to the needs of your membership, can you tell us specifically what happened after March 26 with the advertising dollars that were presumably spent in those other publications for the target group? Have you tracked that specifically?
It's been a brute trying to figure out whose numbers I'm going to look at for advertising page costs. Since that is our target here, and you're the association, I'd like to know what -
Mr. Warrillow: It's a very difficult question to answer directly, but I will give you a few pieces of information that may help to clarify it.
Knowing this might come up, I had our finance division have a look at Maclean's for me today. So far 64% of the advertisements we've had in Maclean's this year didn't appear last year. In other words, it's a constantly evolving marketplace. So it's very difficult to track an advertising dollar and say that dollar belongs to Maclean's magazine and it's being transferred somewhere else; or that dollar was in Maclean's, went to Sports Illustrated, etc., and we lost it. It's very difficult to track specific dollars.
I had a look at the advertisers in Sports Illustrated. I was looking at the list in the plane, coming up today. There are advertisers such as Ford, MicroSoft, VISA, Jeep, Remy Martin brandy, IBM, UPS, and yes, Reebok and Foot Locker. But most of those advertisers are advertisers that would also consider Saturday Night magazine and Maclean's magazine - in fact, Time magazine in Canada - as logical places to advertise.
So most of the advertising.... In fact, in this particular issue of Sports Illustrated, 31 out of 39 pages would be advertisers you would find equally in Sports Illustrated, Maclean's magazine, Saturday Night, or in fact Time magazine. So it's a flowing marketplace, with advertisers looking for value and looking for opportunity wherever they can find it, rather than looking specifically at the environment, which I think has been more of the arguments made. In fact, only 8 advertisers out of 39 were actually advertising sports-related products in the issue I was looking at.
Mrs. Stewart: But specifically - because I really want to know the impact of this - you're Maclean's, you're Saturday Night, the two magazines that should be able to say to me that as a result of March 26, we lost.
Mr. Warrillow: In the latest industry figures, the figure for the last twelve months is $2.4 million. That's the value on a one-time advertising basis of the advertisements that appeared in Sports Illustrated in the last twelve months. If you just take Sports Illustrated Canada -
Mrs. Stewart: How many of those would have been in Maclean's otherwise? Your account representatives must know when they don't get an advertisement that -
Mr. Shearer: Jim and I looked at this particular issue of Sports Illustrated just before and said between the two of us - and we know what advertisements we carry - which of these advertisements in fact would also be carried...or more....
You know, advertisers don't buy one advertisement in one magazine. They'll buy a schedule of three or four advertisements. Maclean's does carry Bailey's, and so does Saturday Night; and we do carry Compaq, as does Maclean's. American Express is carried in all our magazines. Crown Royal is carried in all our magazines. We went through this, and of the 25 advertisements, only 3 were for us...advertisements we didn't have a chance of getting.
Mrs. Stewart: This is Sports Illustrated?
Mr. Shearer: This is Sports Illustrated, Canadian edition.
Would 100% of these dollars have gone into Canadian magazines? I would say, in my own judgment, 99% of them would have gone into Canadian magazines; 99% of them.
Mr. Warrillow: If I were talking to my sales manager, I would say 100% of those dollars should be in our magazines. If I want to be really objective and try to be very honest in my reply, I would say $2 million of that $2.4 million would be in Canadian magazines if it weren't in Sports Illustrated Canada. In other words, I suspect there might be a few hundred thousand dollars' worth of advertising in the last twelve months that was new to the market and that would have perhaps been used for advertising in the cinemas or outdoors or wherever, because it's specifically sports related.
.1645
Mrs. Stewart: So $2 million out of $2.4 million would have found a home in another magazine.
Mr. Warrillow: That's a guess, based on our assessment.
Mr. Paré: Advertising budgets don't expand in relation to the number of opportunities to spend. They expand in proportion to revenue or because there's a new competitor. The vice-president of marketing doesn't say, hey, here's a new magazine, a great new opportunity to spend more money. Marketers have a set budget and ask themselves how they will spend their budget. They choose the least expensive alternative on the condition it's pretty good for them. Or they test the market. However, the money they spend here is taken from there.
Mrs. Stewart: That's precisely my point. It is a set amount of money -
Mr. Paré: Yes.
Mrs. Stewart: - and I would have expected after March 26 that your membership would have been screaming at you saying, my God, we've just lost a $100,000 account and guess where it went? It doesn't sound to me as if that's what happened.
Mr. Paré: And in 1994 it was a smaller amount of money. I don't remember the number of percentage points, but in the Canadian market advertising budgets went down by something like $20 million.
Ms Cavan: I also think the advertisers would not have taken $100,000 out of any one other magazine and placed it all in Sports Illustrated. There were pockets of dollars shifted around through their advertising campaigns to go into Sports Illustrated, so that across the industry magazines were hurt on a smaller basis. Across the industry it was two million dollars' worth of funding.
Mrs. Stewart: Thank you.
[Translation]
The Chair: Mr. Leroux, please.
Mr. Leroux: Ladies and gentlemen, I have listened to you and see that the basic question is the following: Are we able to preserve our culture, be it our Canadian or our Quebec culture, from that of our neighbour who is far more powerful than we are?
Mr. Paré, in your presentation which I found very interesting, you say that Bill C-103 doesn't offer anything new, and the Chair asked you a question.
I would like you to tell us once again what the consequences of not adopting this bill would be?
Mr. Paré: The reason I say Bill C-103 doesn't offer anything new is that it takes us back to the situation we were in before someone found a way of circumventing the legislation.
What would be the consequences of a sudden opening of the magazine market? Today it is magazines, but tomorrow it would be other publications, such as daily or weekly newspapers, and in the end it would be radio, television and all the media. Once you start to pull one thread in a sweater, you can say goodbye to the whole sweater!
The consequences would be the following. All foreign publishers and media will be looking to see what Canada does when one magazine makes a breakthrough. They will say: ``That's working well. The magazine is making money.'' If Canadians do not react, you will see a second, a third, a fifth, a tenth and then a twentieth magazine appear. Suddenly, the resistance of Canadian magazines will drop considerably because they will have been financially weakened, both in terms of circulation and advertizing income. As foreign magazines become stronger, so Canadian magazines will become weaker. You are on a slippery slope here; once you start, you cannot stop.
Second, there is another point which has not been raised but which I would like to bring up. I refer to a level playing field, with everyone following the same rules. During my 20 years as a publisher, it often happened that I and some other publishers would be approached by a foreign publisher who would say to us: ``I have some magazines, beautiful pages already printed with recipes, sewing, gardening and many other activities. I will sell them to you at a low price.'' I have already paid for it. I'll sell you the film for printing these pages. I'll sell you the articles at $25 dollars each. As far as I'm concerned, this is a cherry on the sundae. It doesn't cost me a cent.»
.1650
We didn't buy them. We have not produced magasines here with cheap foreign content. First because we wanted to cater to our readers with Canadian content, and second, because the law prohibits us from doing so.
Canadian legislation prohibits Canadian publishers from undiscriminately purchasing low-cost foreign content, filling the publications with it and producing second-hand magasines.
As you can see in this type of situation, a foreign publisher is trying to do what we do not have the right to do.
Mr. Leroux: Do you think that Bill C-103 goes far enough and adequately protects publishers?
Mr. Paré: The previous legislation went far enough, so long as people did not find ways of curcumventing it. According to the Minister of Canadian Heritage, Bill C-103 probably goes far enough. If someone were to find other loopholes, then our elected representatives would have to look into the situation.
Mr. Leroux: Thank you, Mr. Chairman.
The Chair: Thank you, Mr. Leroux.
[English]
Mr. de Jong (Regina - Qu'Appelle): Mr. Chairman, I do have a few questions and some observations.
Some of my questions have been answered previously. I was concerned because, as you point out, it is dumping. Sports Illustrated, the split run, is really a dumping, for all intents and purposes. I was interested in why the government didn't pursue it from that point of view. I think that has been answered.
I wish my friends from the Reform Party would look at it as really trying to establish a level playing field and trying to correct dumping by the Americans. But I'm afraid my friends from the Reform are so enamoured of the Americans that they can't see them dumping all over us on this one.
Mr. Grubel (Capilano - Howe Sound): Bull.
The Chair: Mr. de Jong, are you dumping on the Reform?
Mr. de Jong: I'm trying not to, Mr. Chairman.
Mr. Grubel: I call it bull. I'll give you an answer later.
Mr. de Jong: We're happy that Bill C-103 did not grandfather, though certainly previous legislation has grandfathered, and there are split editions, are there not, in Canada. For the record, can you tell us who they are and what percentage of the advertising dollar they generally take up?
Mr. Shearer: Our major one is Time magazine. As a weekly magazine they garner an extraordinary amount of advertising revenue, and they are directly competitive with a number of other weekly magazines.
Ms Keachie: Are you asking for dollars?
Mr. de Jong: Yes; or some percentage.
Mr. Shearer: In the last twelve months they attracted $22 million in advertising.
Ms Keachie: That's Time alone.
Mr. de Jong: What percentage of that would be of the total Canadian advertising dollar for magazines?
Mr. Shearer: It's $395 million, so about 5%.
Ms Keachie: But of consumer advertising.
Mr. Warrillow: That's of the 62 magazines which in effect make up the national consumer magazine advertising market. That's not all the magazines at all. It leaves out an awful lot of magazines that carry some advertising. These are the main competitive magazines in Canada, 62 of them.
Mr. Shearer: If you put that into perspective with the fact that there are 35 magazines with large circulations in the States, if all 35 of those magazines had 5% of the market....
Ms Keachie: That is, 35 are in a position to do similar split runs.
Mr. de Jong: Are there any other magazines that do split runs?
A witness: Reader's Digest.
Ms Keachie: There have been some attempts to introduce split runs, but they've turned around because it was a tariff-item situation.
I keep getting calls from New York law firms refusing to say whom they are representing, asking what's going on with the legislation. So there's a sort of waiting game, a great interest among American publishers for when this ``legislative limbo'', as they call it, is going to be over so they know whether or not they can enter our market. Of course most of the U.S. magazines that have been effectively kept from doing this by tariff item 9958 for the last thirty years have been polite and have respected Canadian policies and haven't tried to get around it. But now that one American publisher has succeeded in getting around the tariff item, there's an atmosphere of, well, why can't we do it too?
.1655
So there is distinctly interest, and we notice that American magazines' efforts to sell subscriptions into Canada have seen some changes recently. Subscription prices for U.S. magazines to Canadian subscribers have recently been taking a downward trend. Call us paranoid, but we fear that they're starting to prepare to get more readers so they can sell advertising to Canadian advertisers.
Mr. de Jong: Would the other magazine that also enjoys a split run be Reader's Digest?
Ms Keachie: Yes, of course.
Mr. de Jong: So Time magazine and Reader's Digest are the two major ones.
Ms Keachie: Yes, but Reader's Digest, as you know, has a special status, a distinct status, and, under section 19 of the Income Tax Act, is considered to be Canadian for purposes of our tax law.
Mr. Paré: One of the differences is that, contrary to those split runs, Reader's Digest has over 600,000 jobs in Montreal. They have real people sitting down there doing real work for the consumer.
Mr. de Jong: In the past I've heard as well, from some of the editors and writers of Reader's Digest, some question as to really how much Canadian content is in there.
Ms Keachie: They don't have 600,000 jobs in the magazine.
Mr. Paré: No, but -
Ms Keachie: Six hundred thousand?
Mr. Paré: Six hundred jobs. Did I say ``thousand''? I meant 600 jobs.
Mr. de Jong: If Bill C-103 does not pass, do you think Canadian publishers will invest in the Canadian market?
Ms Cavan: We have not done so for the past two years because of the uncertainty. It's a scary thought.
Mr. Grubel: Do Switzerland and Austria have laws prohibiting split runs for German magazines, Belgium for French magazines, and so on throughout Europe?
Ms Keachie: I had a discussion with a lot of bureau chiefs of European dailies recently, who were all in Canada for some conference. They were discussing our odd cultural protection, which they seemed to think was rather dandy. They were talking about how cleverly Canada had managed to succeed in maintaining some kind of protection for culture.
The representative of a Swiss daily was there. They were quite interested in section 19. I said, ``You must understand this, because it must be so difficult for Switzerland to maintain any magazines of its own, with the Italians reading Italian and the French Swiss reading French, etc.'' This journalist said, ``Yes. That's why we have no magazines of our own. We're left with dailies, because it's not really possible to maintain Swiss magazines.''
I haven't checked this out, but I would be happy to. In fact, I'm very curious about the truth of his statement that Switzerland has given up on trying to have magazines of its own because of the split runs from Germany and Italy.
Mr. Grubel: I'm very surprised by that, because the Swiss culture is known as being very strong and vibrant.
Ms Keachie: I'm sure it is.
Mr. Grubel: And it's very interesting, then -
Ms Keachie: But they can't stay alive without advertising.
Mr. Grubel: I'm surprised, then, that we would really have to fear if we didn't have our own magazines, because Switzerland and Austria and all these other countries, which for some reason or whatever don't have split runs or don't need the protection, seem to have very strong, surviving cultures. Can you explain that to me?
Ms Keachie: So you're suggesting that we don't really need Canadian magazines? Is that correct?
Mr. Grubel: I heard that the reason for this obvious outright protection is that our culture would not survive. You have just told me that in Switzerland and all the other European countries there are two possibilities: either they have split runs and they survive or they don't have split runs but even under those circumstances their culture survives. Can you explain to me why, in Canada, if we did not have an independent magazine industry our culture would not survive?
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Ms Keachie: I think you make a good point -
Mr. Grubel: Thank you.
Ms Keachie: - and of course we would continue to have a culture in Canada. It's just that Canadians would find it much more difficult to read about themselves.
For example, in the area of magazines we would have to depend on Time magazine to tell us about what's going on in our own country, or depend on the newspapers, which are very important and very good, although, mind you, they do carry a great deal of wire copy. It would be all the more difficult for Canadians to read about anything other than our neighbour to the south.
Mr. Grubel: That's just the way the world works. There are certain things that are tougher than others. There are all kinds of things I would like to have more easily. Your argument about the Canadian public is that Canadian culture would be threatened if we didn't have it, but you're telling me that the European countries have somehow survived.
Ms Keachie: This entire issue of whether or not a country of Canada's size, divided into two primary language groups, does get to have its own magazines is very much a question. We have the talent, the readers, and the technology, as they say, but the question is if we can keep enough of our own advertising dollars to maintain an industry of our own.
Mr. Grubel: I understand. It's strictly a protectionist argument cloaked in the cultural mantle. This is the conclusion I reach because on the basis of pure logic when you said that even a country as small as Switzerland - proportionately the German population's smaller than that -
Forgive me, I think we've had our rhetoric. May I please turn to one last, brief point?
The Chair: Yes, quickly.
Mr. Grubel: When I hear you talk about Americans coming up and offering a new product and saying, hey, the fixed investment on that product.... I'm now using language that is used for automobiles, shoes, high-tech products, etc. When they come to a Canadian potential buyer, they use exactly the same language. They say, see, this was a $1 billion investment to develop this product and now I can sell it to you really cheaply. Right?
Throughout history protectionism in the world has developed on the basis of that argument. Ladies and gentlemen, in the post-war years everybody in the world said everybody could play that game because they, too, could develop products and make big investments in them.
We have people here all the time telling us how great and successful Canadian industry is in developing certain things. Then they can sell them and take advantage of economies of scale in the United States. In fact, they wouldn't develop them if they couldn't sell them in the United States, and it is exactly the same story.
Everyone in the world got together in the post-war years and said they were all poorer because when they developed those products and could not spread the amortization of the fixed investment over the world as a whole, everyone had higher living costs and lower productivity.
It applies to every product in this world. I would suggest that by cloaking yourself in that thinking - and you succeeded with the nationalists - you have robbed the world and Canadians of the opportunity to have higher living standards.
I want to go on record with this argument. This is a logical supposition.
Mr. Shearer: I can't speak for the globalization of trade and what's happened since the Second World War. But I will say that companies like Time Warner, who told you yesterday they were not pricing their product in any kind of unfair competitive pricing and were not in any way pricing their ads below those of Canadian magazines, are wrong.
These people are saying they're not selling their ads for a lower price in Canada than they are in the United States. That is unequivocally wrong. They are, and moreover, they're selling them in Canada at less than we can sell them for and we can prove it.
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I'm not sure what you're arguing in respect to how an international company behaves in another country, but if they were telling you one thing yesterday, we'd like to tell you today that they are not in fact selling advertising in this country at a rate that is competitive with Canadian magazines. They're selling it for less.
Mr. Grubel: With all due respect, sir, these are exactly the reasons advanced by the American lumber industry, which, because we are underselling them, is throwing up barriers that we scream to high heaven about. This is a normal activity. I don't know what the facts are, whether you want to call it dumping. People who have studied this subject are saying that all dumping legislation should be gotten rid of because of those kinds of problems. Dumping regulations should be gotten rid of, but that's a separate topic.
The Chair: There are a lot of people who have studied whether Elvis Presley's still alive, too, Mr. Grubel.
Mr. Grubel: On what you just said, we are hearing in the United States and in their Senate hearing that we have evidence that American lumber producers are doing exactly the same thing. The game can be played by everyone in the world. The consumers are all worse off for playing this game and I abhor this kind of game being played. I just want to be on record.
I don't know why I'm trying to convince you. I'm not going to convince this gentleman and probably not the other side, but you ought to hear that there is another viewpoint on that subject. We're all worse off.
Mr. Campbell: Mr. Chairman, I would just like to clarify something if I might.
The issue in softwood lumber cases that have gone on for a decade is one of subsidy, not dumping. Furthermore, the argument to eliminate dumping laws without a full stop there was to have them replaced by competition laws or anti-trust laws in the United States. I just want to clarify those points.
The Chair: Possibly another avenue for action by us is to preclude this type of lumber from going into split-run editions.
I have distributed to our witnesses a copy of a letter from Osler, Hoskin & Harcourt received by us this morning showing the costs of advertising. This is an issue you raised, Mr. Shearer.
Do all members have a copy of this letter and do you wish to comment on those figures? It looks to me as if they are trying to make the case that their advertising prices are at or above those of comparable circulation Canadian magazines such as Harrowsmith and Equinox.
Mr. Shearer: Yes, we would like to respond to that.
If you all have this letter, I'd ask you to write in one more column right beside Sports Illustrated Canada and right beside Harrowsmith. It's true that if you only evaluated a magazine buy based on its circulation, you might conclude that they were roughly competitive. But no advertiser ever buys on circulation alone; in fact, circulation has become a much less important criterion for buying advertising.
What is really the key driving rationale for picking one medium and measuring its efficiency is readership, and readership and circulation are vastly different things. A magazine may have one copy in circulation and may produce two readers for every copy or it may in fact produce five or ten or thirteen readers per copy.
There is a large measurement service in Canada that in fact provides data on the audiences of all magazines in this country for advertisers to help choose their magazines and to evaluate their efficiency. When we use the surveys that are available, we know that in fact it's not Sports Illustrated's circulation of 125,000 that is the key, it's what readership they can produce from that circulation.
We know from studies in the States and also a study that was done very recently in Canada that Sports Illustrated has over 700,000 readers in Canada, even though they only have 125,000 in circulation. That 700,000 in fact is if you take the page rate and you divide it into the big number; that gives you the efficiency. If you do that for Sports Illustrated and then you do that with Harrowsmith, you find that in fact they are not even close to being competitive. Harrowsmith is about a third as efficient as Sports Illustrated is.
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The Chair: Perhaps I could ask you to get back to us in writing -
Mr. Shearer: We will.
The Chair: - at your earliest convenience because we will be concluding this matter fairly expeditiously.
We've run over time. Just one last very brief point, Mr. Solberg.
Mr. Solberg: Further along on this, when we were talking before about the effect that Sports Illustrated has had on the revenues of the magazine industry, I didn't hear whether or not your ad revenues have been going up or going down as an industry and how this works in relation to the American industry as well.
Mr. Warrillow: The only figures that are public are figures based on one-time advertising. Based on one-time advertising rates, we're very pleased to report that there has been some growth in the Canadian market in the last year, probably about 4% growth in terms of volume of advertising in the last 12 months. This is a reflection of an improving economy in the Canadian market. That is after a period of time when we've seen some decline.
Growth rates in the United States are very much higher than they are in Canada. In fact, last year when the Canadian market was still suffering, the U.S. market showed some real growth and this year is showing growth again.
Interestingly, it was just reported today that in the first nine months of 1995 revenues for Sports Illustrated in the States were reported as $395 million against the total Canadian magazine industry in the last 12 months of $395 million.
Mr. Solberg: Is that Sports Illustrated international?
Mr. Warrillow: That's Sports Illustrated in the States in the first nine months of this year.
The Chair: Thank you, Mr. Solberg.
Could I ask one last question? The task force that recommended this legislation said that Sports Illustrated should be grandfathered for the number of publications it was publishing, i.e., about seven a year or something.
Ms Cavan: Seven in the year.
The Chair: What do you think of that recommendation as opposed to what our bill is doing?
Mr. Shearer: I think it would be rewarding them for finding a loophole that they knew was against the spirit, the intent, and the history of Canadian legislation as it relates to the Canadian magazine industry.
Ms Keachie: Further, might I say, it gives a very odd message to the other American companies who would like to do the same thing but have respected our policies thus far.
The Chair: Thank you on behalf of all members for your very important presentation to us.
[Translation]
Thank you very much, Mr. Paré.
[English]
Thank you very much.
We'll take a two-minute break before we come back with our last witness.
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The Chair: I call the meeting back to order.
Appearing before us, from the Institute of Canadian Advertising, is John Sinclair, the president.
Welcome, Mr. Sinclair.
Mr. John Sinclair (President, Institute of Canadian Advertising): Thank you, Mr. Chairman.
Mr. Chairman, hon. members of the committee, ladies and gentlemen: I am the president of the Institute of Canadian Advertising. Thank you very much for your invitation to present the views of my industry to this committee.
I'm here today to support the provisions contained in Bill C-103. My presentation is a brief one, about six minutes in length, and I would be pleased to answer any questions at its conclusion.
My organization, the Institute of Canadian Advertising, is the national industry association for advertising agencies in Canada. It was founded in 1905. Members of our organization operate advertising agencies in all parts of Canada. Their prime function is to create advertising and to buy media for their clients.
Advertising developed by our member agencies provides communications to promote a range of goods and services, information programs, retail outlets, and governmental agencies across this country.
ICA member agencies place about 70% of all national advertising media in Canada. This amounts to the purchase of about $5 billion of media annually. These purchases are done in all media: television, radio, newspapers, outdoor and, of course, magazines.
My personal and professional interest in Canadian magazines has always been quite high. It was my privilege, in 1993 and 1994, to serve as an advisory member of the task force on the Canadian magazine industry.
The provisions of Bill C-103 are of vital interest and concern to the 4,000 employees of ICA member agencies. If the matter of U.S. split-run magazine editions is left unattended by the Government of Canada, it will inevitably lead to fewer Canadian magazines, and in the long term will lead to fewer jobs in the marketing departments of Canadian companies and fewer jobs in the Canadian advertising agency industry, the industry I represent.
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Many important observations were contained in the report of the Task Force on the Canadian Magazine Industry, as submitted to the heritage minister in 1994. I'd like to revisit one section, which says:
- Canadian magazines are an essential part of Canadian cultural development.
- They allow us to see ourselves and the world through Canadian eyes.
If left undeterred, split-run magazines will appear quickly on the Canadian marketplace and will trigger a series of domino-like events, some quick and some over a period of years, to the detriment of this country. It is these events that would certainly threaten the health of the advertising agency industry in Canada.
That series of events can be summarized by a sequence of four points.
One, split runs appear in Canada, competing for the already stretched advertising dollar.
Two, Canadian magazines would slowly begin to disappear, jobs thereby being lost and culture being hurt.
Three, Canadian advertising departments in multinational corporations would inevitably move their advertising decisions out of Canada. Advertising decisions and advertising purchases would be made in the U.S., even for media coverage in Canada. This means jobs would be lost in those Canadian advertising departments.
Four, advertising agency assignments would be consolidated on a North American basis, and advertising campaigns would be created and administered from New York or Los Angeles instead of Toronto or Montreal. The Canadian economy would again be affected in an adverse way and jobs in advertising agencies would be lost.
It is my belief and that of ICA members that Canadian magazines are a vital part of our cultural fabric. The proposed legislation will preserve that cultural importance and will in the long run preserve jobs in the Canadian advertising industry in addition to jobs in the Canadian magazine industry.
It is critical that all necessary steps be taken by this government to prevent the manifestation of split-run publications coming into Canada.
Thank you.
Mr. Solberg: Thank you very much, Mr. Sinclair.
Your group of agencies doesn't sell any ads for Sports Illustrated Canada at this point, I gather.
Mr. Sinclair: They would in part purchase ads in Sports Illustrated Canada on behalf of their clients.
Mr. Solberg: So in other words, at this point they're making money because of the fact that SI is here.
Mr. Sinclair: The responsibility of the advertising agency is to invest its clients' advertising budget in the most efficient manner possible. If Sports Illustrated came in with attractive efficiencies, which they do, it's the responsibility of my agencies to take advantage of those efficiencies to help extend the value of their clients' businesses.
Mr. Solberg: So obviously that's good for the agencies and it creates jobs, I would imagine.
Mr. Sinclair: No, it's neither good nor less than good. The job of the advertising agency is to invest x dollars on behalf of their clients. They would invest it in Sports Illustrated or other magazines or other media. As it is, it neither creates jobs nor costs jobs.
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Mr. Solberg: You're concerned that advertising agencies would lose out because marketing decisions would be made in the United States. Is that the idea?
Mr. Sinclair: That's correct.
Mr. Solberg: Why is it you don't believe you can compete with the United States advertising agencies?
Mr. Sinclair: I think if I were sitting in New York or Los Angeles or Tampa, I would ask, why do I need a Canadian advertising agency when all the magazines in my product advertising mix are North American magazines? I can make that call from here in the U.S. No local Canadian media expertise would be necessary to make that decision.
Mr. Solberg: Why wouldn't all the advertising agencies be in New York even today?
Mr. Sinclair: Many of my member agencies are multinational organizations that operate an agency in Canada but are part of a multinational network with offices in the United States and many other countries in the world.
Mr. Solberg: So the advertising agencies are already spread throughout the world and obviously that suits them very well. They do it for reasons of efficiency and they do it to serve their customers in the best possible way. Sports Illustrated is really proposing the same thing in Canada, presumably to serve their customers as well. Don't you see a bit of an irony in that?
Mr. Sinclair: No. In fact, it's quite different, because we're talking about the advertising dollars of Canadian companies. They would, if siphoned off by decisions made in the U.S., hurt Canada, hurt Canadian advertising departments, and hurt Canadian advertising agencies.
Mr. Solberg: If companies can advertise in Canada at cheaper rates, isn't that good for Canadian advertisers, if indeed that's what it's going to lead to, as is alleged by people in the magazine publishing industry?
Mr. Sinclair: In the short term I might accept that argument, but it would inevitably lead in the long term to our industry being quite severely adversely affected.
Mr. Solberg: If they were able to advertise more cheaply, wouldn't they have more money to spend on something like advertising?
Mr. Sinclair: No, they would not. The advertising budgets, the advertising dollars, are limited, and if you -
Mr. Solberg: So they would have the money for increased profits. Their profits would be larger then.
Mr. Sinclair: No. Experience has taught me that the advertising budget is established -
Mr. Solberg: Yes, I understand. You made that argument. But you're saying if they can advertise more cheaply -
The money goes somewhere. If it doesn't cost more for advertising, then obviously they have increased profits. Isn't that correct?
Mr. Sinclair: No, I would argue that the advertising budgets are a fixed amount, relatively speaking, but if the purchaser of the advertising can reap more efficiencies out of their purchases, that's not going to change the advertising budget.
Mr. Solberg: Okay. So they're reaching more people. One of two things happen. They reach more people, and reaching more people is good for advertisers, obviously.
Mr. Sinclair: I guess it is.
Mr. Solberg: Really, if you're looking out for your advertisers, wouldn't you want them to reach more people for their advertising dollar?
Mr. Sinclair: I don't quarrel with the efficiency argument. I acknowledge the overflow editions would probably produce better efficiencies for Canadian advertising dollars in the short term. In the long term, however, it would just wipe out the industry that is involved: magazines, advertising departments, advertising agencies.
Mr. Solberg: We have heard this argument in other industries as well, of course, that when we enter into a free trade type of situation entire industries would be wiped out. But it really hasn't been the case. Would you agree with that?
Mr. Sinclair: Yes, I would, and if I said it would wipe out our entire industry, that's an exaggeration. It would adversely affect those industries.
Mr. Solberg: The point I'm making is that advertisers can certainly benefit out of this whole situation. That there may be some rationalization in the Canadian magazine industry I think is what you're saying.
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If we use what's happened as a result of the free trade agreement and different trade negotiations that have gone on, I think it's quite true that in the end Canada has done extremely well by these trade agreements, that we've seen lower-priced goods come into the country and our trade with the United States has improved significantly.
Isn't that true?
Mr. Sinclair: I can't speak with any authority about other industries, but if the forecasting that I'm laying out for you is true and it takes jobs out of my industry, I don't regard that as a benefit to our industry, or to this country.
Mr. Solberg: I think you've established why you're making your argument, then. It's really to protect your industry, and it is a protectionist argument. Isn't that correct? It's not necessarily out of concern for Canadian advertisers.
Mr. Sinclair: I wouldn't use your words, but I don't disagree with your point.
Mrs. Stewart: I'm interested in a comment you made with reference specifically to Sports Illustrated and its efficiency. The indication was that yes, indeed, as an advertiser, the experience is that the magazine does offer cheaper advertising.
Can you substantiate that for me? Can you explain that? We've been looking at numbers, and certainly when they were here yesterday, the delegation from Sports Illustrated were quite adamant that they are very competitively priced and that, because they have to pay for delivery, printing - and I don't know what the third piece was - of course they have these costs and they have no advantage over our Canadian marketplace at all.
Mr. Sinclair: I've certainly heard that information before. My sources of information would be of two types.
One is from the member agencies in my association, from the media departments of those member agencies in particular.
Because I was a member of the task force itself, we certainly had submissions and discussions on that very point.
Those two sources are consistent in sending the message that says that Sports Illustrated for Canada was offering better efficiencies, that its rate card wasn't followed, that the prices offered were in fact better than, lower than, rate card ones. I can't substantiate that without any doubt, but I've been hearing it so consistently over that two-year period that I think it's quite correct.
Mrs. Stewart: What is the value to the Canadian economy from the advertising business?
Mr. Sinclair: It depends on how you measure it. Jobs in our industry number slightly over 4,000. We, through our agencies, place $5 billion or $6 billion worth of advertising in media. Ninety-five percent of that would go to Canadian media outlets.
Mrs. Stewart: And what is the percentage that would go to magazines?
Mr. Sinclair: I can't give you that number. I'm sorry.
Mrs. Stewart: But it would be significant?
Mr. Sinclair: It would be significant, yes. I'm told that it is 6% of that spending.
Mrs. Stewart: Six percent of that total figure.
You talked about the downsizing of the industry. What are the projections for the industry should split runs be allowed? As you admitted, it wouldn't be totally wiped out. What does the industry project?
Mr. Sinclair: We have not done any specific projections of that type. We're forecasting that in the long term there would very definitely be, probably very gradually, a movement of the advertising industry in total - advertising decisions, advertising agencies - out of this country. There has been some manifestation of that tendency already. We're forecasting that it would continue, and a split-run situation would probably accelerate that. It would not take place in months; it would be years, but we're knowledgeable enough about our industry and the way advertising departments think and make decisions to have confidence that it would very definitely be the long-term effect.
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Mrs. Stewart: Thank you.
The Chair: Thanks, Mrs. Stewart. Mr. Grubel, did you wish to add anything?
Mr. Grubel: No, thank you.
The Chair: Mr. Sinclair, in a brief to us several years ago, the preceding witnesses indicated to us that for 1991 the magazine industry advertising revenue was $567 million. Today, they told us that last year it was only $395 million, a drop of 25% over that period of time.
How has this impacted on your particular members?
Mr. Sinclair: I missed the last part of the question, Mr. Chairman.
The Chair: How has this 25% decline over a four-year period impacted on your members?
Mr. Sinclair: My assessment would be that there would be relatively minor impact on my member agencies. That would be related to the fact that our agencies are charged with the responsibility of working in all media. It's possible - I'd have to review the numbers - that if the magazine industry revenues were decreasing in that period, perhaps daily newspaper and, more than likely, television revenues were increasing so that the media spending through our agencies would be more level. Our agencies buy in all media.
The Chair: Thank you very much, Mr. Sinclair, on behalf of all members. We appreciate your contribution to this important question.
We will adjourn until next Wednesday at 7:30 in the evening. Our last witness will be the Canadian Bar Association, after which point we will go to clause-by-clause consideration of this bill.
Thank you.
This meeting is adjourned.