Can the CRTC solve the riddle of local TV news?

July 26, 2024

The CRTC has launched its long-delayed proceeding to sort out what to do with the Independent Local News Fund.

The ILNF is an $18 million per year subsidy for broadcasts of original local news. It supports 19 independently owned television stations in 13 markets located in small cities (but also Hamilton and St.John’s). Here’s the latest distribution report from the Canadian Association of Broadcasters:

The $18 million comes from a CRTC “local expression” tithe on Canadian cable company revenue, precisely 0.3%. A recent regulatory filing by those stations acknowledged that the subsidy underwrites a staggering 70% of news production costs.

The CRTC created the $20 million ILNF in 2016: until then a smaller $10 million per year fund had been available only to small market broadcasters, regardless of corporate ownership.

Alas the CRTC’s approval of the Rogers-Shaw merger in March 2022 upset the ILNF apple cart. In selling to Rogers, Brad Shaw cut loose his family’s debt-laden Corus Entertainment property, including its 15-city Global News chain. That meant Global lost the annual $13 million in special news funding owed by its former parent cable company.

On the other hand, as a newly “independent” broadcaster, Global had a slam-dunk claim to a share of the $18 million ILNF fund. But based on its size, Global would be entitled to at least half the fund, beggaring the other 19 stations.

Faced with that regulatory conundrum, then CRTC Chair Ian Scott shrugged and said, in so many words, we’ll get around to that later, thanks.

Two years later and here we are. At least two important things have changed. First, Corus and Global stand on the brink of insolvency or else some Houdini-style refinancing. Second, the CRTC has just ordered online streamers to pony up 1.5% of annual revenues for the ILNF, approximately $42 million annually. In theory, the ILNF is now flush.

At least two important things have not changed.

The first is that television remains the top distribution platform for Canadian news journalism.

The second is the economics of local news broadcasting. Canadian conventional television (i.e. local stations that belong to either major networks or independent owners) has been unprofitable since 2012 and more recently in 2023 operated $423 million in the red (a thirty per cent loss margin). Meanwhile, stations spend $379 million on news production. According to a data tabulation prepared by Statistics Canada for Communications Management Inc., 84% of stations lose money, regardless of ownership. These are the inconvenient facts.

The Commission plans a big rethink of local news funding some time in 2025 but in the meantime, they are going to figure out the ILNF. It seems to be avoiding the simple solution which would presumably be thus: subsidize Global stations in the same manner as the other 19 stations. The injection of cash from the online streamers permits that.

Instead, the Commission is ruminating big changes to the distribution of the news production subsidy.

The first question is whether online news broadcasters —those without a CRTC license governing over-the-air television signals— could become eligible for the ILNF. The possibility of admitting registered Internet broadcasters suggests a proliferation of applicants to the ILNF, even American-owned in theory. It also raises the brain-teasing question of whether the video-heavy news websites run by licensed broadcasters are eligible too.

The second question posed by the Commission is whether ILNF dollars should be prioritized for French language news and for “rural, remote and underserved communities.” Up until now, ILNF funds have been dispersed on the basis of independent ownership status. Out of curiosity about the potential definition of “rural, remote and underserved communities,” I put together the spreadsheet below (ILNF recipients in red). Feel free to respond to me with corrections:

Finally, a third very taboo question is not asked: what’s an “underserved market” after Pierre Poilievre’s Conservatives follow through on their promise to close English-language CBC television stations?

The riddle of news production subsidies will not be easily solved by the Commission, especially in the context of this new proceeding for the ILNF. 

Television news is part of a larger news ecosystem, including online, print, and radio. Support for news journalism consists of several overlapping federal and provincial government programs, public broadcasting, Google’s licensing payments and CRTC levies. As well, the eligibility criteria is not uniform: for example television news websites are ineligible for federal dollars. 

The Commissioners have their work cut out for them.

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