Catching up: the Last Week on

November 28, 2021

While the CRTC Rogers-Shaw hearing was the big show in town, elsewhere lots was going on in Mediaville:

The Platforms on the far side of the world. There were two interesting international developments concerning the issue of Google and Facebook paying for news content.

In Australia a group of small publishers are banging on the door to negotiate revenue sharing with Google and Facebook. Calling themselves the Public Interest Publishers Alliance, 18 niche and ethnic news organizations have applied for “collective bargaining” certification under the Media Bargaining Code that relaxes the usual rules against commercial collusion and allows them to bring Google and Facebook to the table. This follows on the recent developments under Australia’s Platform Bill in which Facebook has refused to bargain with the investigative news site The Conversation and ethnic TV broadcaster SBS.

Meanwhile, the Indonesian government is publicly speculating about following the Australian example by passing a Platform Bill. With a population of nearly 275 million, an Indonesian initiative will grab the attention of Silicon Valley and perhaps set an example for other non G-20 nations.

The Netflix Bill is back. The federal Liberals announced in the Throne Speech that Bill C-10 is back on the menu. Canadian Press published an article restricted to comments from opponents and critics of the last Bill that was ground to dust by Conservative filibusters in the Commons Heritage Committee and the Senate.

C-10 has rock solid support in Quebec and with the Bloc. The NDP supported C-10 last time but was vague in its election platform commitment, while MP Charlie Angus has made some spirited attacks that make the NDP approach to C-10 unclear for now.

#JournalismIs and the RCMP isn’t. The Mounties’ arrest, imprisonment, and release of two Canadian journalists covering the Wet’suwet’en blockade protest near Prince George, British Columbia was yet another leaden touch from a police force that respects neither freedom of the press nor recent judicial precedent making it very clear that journalists are not breaking the law while reporting on those who may be breaking the law.

The police force also appeared to have lied when issuing a statement that the journalists had not identified themselves immediately, contradicted by video evidence posted on Twitter.

Out of jail, photojournalist Amber Bracken made a couple of good points. While she was glad to be out of custody, she was uncomfortable taking the spotlight away from the land claim and Indigenous sovereignty issues she was covering. Secondly, she pointed out that news covered by financially-precarious freelancers is especially vulnerable to the RCMP’s tactics, she was just lucky that the editors of The Narwhal stuck with her.

Trolls Unmasked? In the media regulation Petri dish that is Australia, the Morrison government has announced legislation providing a legal process for anyone who believes they’ve been defamed by anonymous trolls on social media to compel the Platforms to unmask the troll or accept liability as the responsible publisher of the defamation. While this might be hailed as a victory over cowardly trolls, it appears to let the Platforms off the hook after a ruling by the Australian High Court imposing what lawyers call absolute liability on You Tube for defamatory comments posted to its site.

#SaveLocalNews: Aid to News Journalism Passes the US House of Representatives. A journalist subsidy similar to the Canadian program has been passed by the House as part of President Joe Biden’s two-trillion dollar Infrastructure and Climate Change Bill and is headed to the Senate.

The subsidy would apply only to local news and would pay $25,000 per journalist in the first year of a five-year program, then $15,000 subsequently.

The Wall Street Journal, a nationally focussed news site owned by Fox News, said the Bill “calls on the American taxpayer to subsidize Democrats’ media allies.”

The CRTC’s chickens come home to roost on Internet TV and Local News

November 24, 2021

Rogers is going to screw us on sports content, spokespersons for cable distributor Telus warned CRTC Chair Ian Scott on Tuesday. 

If the CRTC sanctions Rogers’ merger with Shaw and becomes the dominant Internet TV platform in English Canada it will be perfectly positioned to withhold must-watch sports events from the cable TV system altogether and broadcast them exclusively on its Internet platform Sportsnet Now, said Telus Regulatory VP Stephen Schmidt. The CRTC’s exemption of Internet broadcasting in the 1999 New Media Exemption Order allows Rogers to end-run the usual CRTC rules requiring broadcasters to sell programming to all cable distributors at a fair price. 

If Schmidt turns out to be right, that’s not the only example of the regulatory chickens coming home to roost.

Take local TV news.

If the merger goes through Rogers will claw back $13 million in annual funding from Shaw’s Global News stations in a dozen communities across the country: Vancouver, Kelowna, Lethbridge, Calgary, Edmonton, Saskatoon, Regina, Winnipeg, Peterborough, Kingston, St.John and Halifax. The $13 million is about 10% of Global’s budget.

Rogers will reinvest that $13 million in Rogers’ chain of four City-TV stations in Vancouver, Edmonton, Calgary and Winnipeg. 

An important explanatory sidebar: in 2016 the CRTC tinkered with some obscure but important rules governing the cable and satellite TV companies’ “Canadian content” obligations. 

The CRTC mandates a pool of roughly $400 million annually —5% of the revenue earned by regulated cable and satellite companies— to be divided among various content producers. The majority of it goes to the Canada Media Fund and similar “CanCon” funds to make Canadian film and documentaries. The rest goes to “local expression” which until 2016 was each cable company’s own hyperlocal community stations across the country. 

Source: CRTC Financial Summary 2020

The CRTC’s 2016 funding tweak gave major networks like Rogers and Shaw the option to re-direct some or all of their “community” funding to their own “local” stations providing daily news coverage in the same geographical market. That tweak was the Commission’s acknowledgment that the local news industry had been operating in the red for four straight years (today, it’s nine years running).

Rogers and Shaw chose their local news stations over community programming and re-directed those dollars: Shaw’s  boost to their declining revenues at Global News was $13 million. If the merger goes through, it’s gone, the equivalent of about 160 Global News salaries across Canada. It would be naive to think Global is just going to eat that $13 million. There will be less news coverage.

Yet there will be a $13 million windfall for Rogers’ City TV stations in four markets —Vancouver, Calgary, Edmonton, and Winnipeg— which will inherit the “community” funding from the former Shaw cable stations in those markets. 

The City stations are a distant third or fourth in viewership in each of those markets: in Vancouver they are 1/20th the size of the market-leading Global News. Rogers has not given the Commission even a hint of its hiring or programming plans to close that gap in viewership.

Short a cool $13 million, Global News can still apply to the Independent Local News Fund (ILNF) to mitigate that loss. 

The INLF was created by the CRTC in 2016, reallocating a sliver of the existing local expression funding called the Small Market Local Programming Fund, to help local news stations not owned by cable companies and therefore without access to the CRTC’s “community cable” funding. But that $20 million annual funding is already divided up among 20 independent stations such as Hamilton’s CHCH, Victoria’s CHEK, or Newfoundland TV. 

The $20 million pie will be divided into thinner slices for all and certainly won’t replace Global’s $13 million.

This is a perverse result for local news, but once again it’s the regulatory chickens coming home to roost.

In 2008 the Commission took the decline of local news seriously and added a 1% revenue tithe (on top of the existing 5%) on cable companies that flowed to all small and mid market local stations in Canada, almost $100 million annually. During the financial crisis the levy increased to 1.5%. But in 2012 the Commission decided to terminate the funding citing a post-crisis surge in advertising revenues which did not in the end materialize.

It wasn’t long afterwards that it became undeniable to the CRTC that the financial viability of local news was heading relentlessly downwards (See the graph at the top of this post). And so we got the aforementioned 2016 tweaks to local news funding which reallocated rather than increased the Canadian content funding expected from major cable companies.

Corus, which owns Global News along with a strong position in specialty TV channels, has a typical solution to the dilemma of local news: the CRTC should redivide the 5% Canadian content envelope yet again, this time taking money away from films and documentaries funded by the Canada Media Fund and giving it to the ILNF so there is enough money for all of the independent local stations once Global comes looking to replace its $13 million. The beefed up ILNF would have close to $50 million in the kitty.

Corus Submission to CRTC

Does this constant robbing of Peter to pay Paul seem as comical to you as it does to me?

There is a way through however. And that is Bill C-10. 

The Liberals announced in November 23rd’s Throne Speech that they will re-introduce their overhaul of the Broadcasting Act. The raison d’être of C-10 is to get Netflix and the other American Internet TV providers to either make their share of Canadian content or make payments to the “5% fund” we use for Canadian content, including local news.  Bigger pie, bigger slices.

C-10 is an opportunity to provide long term stable funding for local TV news and the government should seize it.

Correction: An earlier version of this blog stated that Rogers only intends to re-invest $7 million of Shaw’s $13 million community cable funds. In fact it intends to re-invest all of the $13 million at the four City-TV stations instead of the twelve Global News stations.

What’s at Stake in the Rogers/Shaw CRTC Broadcasting Hearing

November 22, 2021

The week-long CRTC hearing on the proposed $26 billion Rogers-Shaw merger that kicked off today in Gatineau has nothing to do with issue that commands the most public attention: cheaper wireless and Internet services.

CRTC Chair Ian Scott has no say on the merger of wireless and ISP assets: he only has to decide if the merger of cable, satellite, and broadcasting assets is in the public interest. It’s up to the Competition Bureau and also the federal Minister of Innovation, Science and Economic Development to look out for consumer interests in wireless and ISP.

What’s at stake this week is Rogers’ application to assume control of broadcasting licenses for Shaw’s cable and satellite properties in the western provinces and northwest Ontario.

Even though 80% of this $26 Billion deal won’t be adjudicated by the CRTC,  Rogers spokespersons couldn’t resist touting the importance of Rogers delivering on the national objective of faster broadband speeds and rural access over wireless and ISP. That’s technically irrelevant in this hearing as the many interveners in this hearing, like industry rivals BCE and Telus, are quick to point out.

Focussing on cable operations, the Rogers makes a great deal of the fact that a post-merger company with deeper pockets will accelerate the adoption of its Ignite IPTV service, the technology that delivers programming over broadband at much higher speeds with a customer-friendly control dashboard. Shaw cable subscribers will get better service and, the reasoning goes, be less likely to cut or shave the cord on their subscriptions. Since CRTC regulations require that five cents of every cable dollar be reinvested in the production of Canadian content and independent news stations, keeping cable customers happy is in the public interest contemplated by the Broadcasting Act.

Like any CRTC regulatory proceeding, the hearing draws industry competitors and content creators who raise a long list of issues.

The biggest objection is that a post merger Rogers will own a staggering 47% of the cable and satellite market in English Canada. 

Rogers points out that it has no presence in western provinces and north-western Ontario: it is merely stepping into Shaw’s shoes as a distributor in those regions. Viewers in each region will still have the same variety of cable options (usually just two) as they do now.

But merely continuing the current level of local corporate concentration isn’t the point, say those contesting the merger.

If Bigger Rogers can boast 50% nationally of the English Canadian distribution market, it will be even better positioned to play hardball when selling a place on the dial to independent specialty channels and, as the owner of the Sportsnet channels, do the same to rival cable companies like Telus in British Columbia and Alberta when selling popular sports programming. 

The Telus brief asks very bluntly: since media companies constantly play hardball with each other when making programming deals (they would know!), how can we trust Bigger Rogers not to screw over other cable companies when selling hockey broadcasts? 

Rogers believes it has the answer: the CRTC’s 2015 Wholesale Code requires all cable companies and programming services to make distribution deals that allow customers to view content with any provider, bargain fairly with each other over price, and submit to binding arbitration if they can’t agree. Unimpressed, Telus wants a much tougher Wholesale Code so Rogers can’t find creative ways around the rules governing fair pricing.

Rogers may also have trouble parrying some of the other concerns about fair bargaining between distributors and programming services in the new era of Internet streaming.

As Telus points out, the Internet TV market is unregulated thanks to the CRTC decision over 20 years ago to exempt “new media.” With this gaping hole in the regulatory net, Rogers could skirt the CRTC rules requiring it to make its hockey broadcasts available to every regulated cable company by withholding hockey from all cable outlets including Rogers…and then broadcast them exclusively on their unregulated Sportsnet Now streaming platform. In the US, Comcast just did that with a handful of baseball playoff games. Would Rogers be tempted to do it with Canuck playoff games (hypothetically speaking for now)?

Or what if Rogers, sitting pretty with half of the English Canadian cable audience, convinced Netflix to make an exclusive deal with them to put its app only on Rogers, the biggest Canadian cable platform? In response, Rogers says Netflix and the other direct-to-customer apps want to find paying customers on every platform they can and have no interest in making exclusive deals with only one Canadian cable company.

These aren’t the only big issues at stake this week, we’ll come back to them next time. 

News Publishers Break Ranks, Have Google and Facebook Won?

November 15, 2021

Pablo Rodriguez returns to the Heritage portfolio.

On October 27th the Toronto Star caved to Google by signing a take-it-or-leave deal on payment for news content appearing in Google. Six days later, it caved to Facebook too.

Don’t be too hard on Torstar owners Jordan Bitove and Paul Rivett: almost every other Canadian news publisher had knuckled under, months earlier.

It’s all down to the web giants’ global strategy countering national governments trying to make them share those unseemly profits earned from news content appearing on Google Search and Facebook’s Newsfeed. 

With the re-elected Liberal government promising Canadian voters to compel Google and Facebook to make a much bigger contribution to journalism, the Silicon Valley digital titans have been making pre-emptive agreements with financially desperate publishers. Getting the Star to join the Globe and Mail, Saltwire, Black Press, La Presse et al in cutting a deal (the details of which are shielded by non-disclosure agreements) on pay for content was a victory for the giants.

Postmedia CEO Andrew MacLeod now stands alone in holding out for a better deal through legislated measures. Let’s hope he has a winning game plan, because it’s starting to look like a long shot that the Liberals will get a Platform Bill through Parliament in 2022 and that the “market price” of pay-for-content hasn’t already been set as a fait accompli by the other Platform-publisher deals, which is the Google-Facebook game plan.

Only ten months ago in February 2021 it looked like Australia had whipped the American giants into line after Facebook’s failed capital strike which shut off its Australian Newsfeed for one week in an attempt to scupper the pending legislation creating a mandatory Media Bargaining Code. 

Australian PM Scott Morrison’s unflinching performance inspired sovereign countries around the world: Canada’s Heritage Minister Steven Guilbeault made it clear we were getting something much like the Australian model of “collective bargaining” between publishers and Platforms. 

If it weren’t for the Conservatives’ filibuster of the Netflix Bill last May, we might well have got the Australian solution through Parliament before the election call.

Instead we didn’t and Canadian news publishers were too desperate and too divided to wait any longer. They signed Google and Facebook’s offer sheets dictating which news content they would pay for and for how much.

The deals vindicate Google’s and Facebook’s triumphalist talking point which goes something like “we bring more value to news publishers through distribution than news publishers give back to us through advertising revenue, but here’s a little bit of cash to get everyone off our backs.”

At this point we might do well to revisit whether the Australian model is as good as it looked last February. This requires a bit of a drill down on the legislation.

To refresh our memories, the Australian Bill (An Act to Amend the Competition and Consumer Act) is intended to fix the imbalance in bargaining power between Platforms and news companies. It authorizes the government to create a Media Bargaining Code in which the Platforms are forced to negotiate with publishers and broadcasters mostly over pay-for-content, but also over secondary matters like changes to content-ranking algorithms. If negotiations aren’t successful, binding arbitration is available. That’s the key to correcting the imbalance in bargaining power and getting news organizations a better deal.

But none of that applies unless the government first exercises its discretion to enforce the legislation by “designating” a Platform. And the government won’t necessarily designate Google or Facebook —-this being the key amendment that Morrison surrendered to end the Facebook strike— if the Platform “has made a significant contribution to the sustainability of the Australian news industry through agreements relating to the news content of Australian news businesses (including agreements to remunerate those businesses for their content) [s. 52E (3)].

A significant contribution to journalism. Remember those deliciously vague words.

Having made deals with almost every major domestic news publisher and broadcaster in the month before the legislation was passed (again, the details including price are secret), the Australian government elected not to “designate” either Google or Facebook.

Fast forward a few months: Facebook (but not Google) refuses to negotiate with two small but well established domestic news organizations, the non-profit investigative news website The Conversation (which has parallel news organizations in seven other countries including Canada) and the Special Broadcasting Service, a public broadcaster providing multi-ethnic news and documentary programming not unlike Canada’s OMNI News.

The Conversation’s CEO Lisa Watts said “I think they’ve just sought to avoid arbitration by sealing several multimillion dollar deals with major influential media companies and they feel they’ve done enough to avoid it.”

Rod Sims, the scrappy Competition Bureau chief responsible for potentially recommending to the Australian government that it “designate” Facebook under the still-suspended Media Bargaining Code, is not happy. He publicly hinted he might ask the government to designate Facebook and force them to negotiate with all legitimate Australian news organizations, not just the one’s they like. 

So far, Facebook isn’t blinking: its existing deals with other publishers and broadcasters might mean it is already “significantly contributing to journalism” without paying a dime to two news organizations that without question meet the eligibility requirements under the yet-to-be-imposed Bargaining Code. 

It’s worth noting the legislation does not say that Facebook has to get a deal with every legitimate news organization to avoid designation and arbitration.

Here in Canada, the new again Heritage Minister Pablo Rodriguez  (it’s his second tour of duty) is due to table a Platform Bill by Christmas, according to the Liberal election promise.

We will see then if the Australian model has lost any of its lustre for the federal government or whether Rodriguez will instead propose a conventional news fund in which the government sets the ground rules for recognizing legitimate news organizations and the price of “a significant contribution to journalism.” 

Howard Law

September 17, 2021 – How Google and Facebook Should Pay for Journalism

September 15, 2021 – The Global Battle Between Parliaments and Platforms

September 11, 2021 – How Facebook and Google Monetize Your Privacy

September 1, 2021 – The Rise of Google and Facebook and the Decline of Canadian Local News

Whistleblower rips the lid off Facebook’s Online Harms

October 8, 2021

Somebody had to say the emperor had no clothes. In the end it was Frances Haugen, a 37-year old career data scientist from Iowa who worked for Facebook’s version of Internal Affairs, the Civic Integrity Unit.

What she found at Facebook should not have surprised anyone: her understaffed unit was dramatically incapable of dealing with the gusher of dangerous content posted to Facebook and Instagram including revenge porn, incitement to murder and political violence, political polarization, and vaccine disinformation. Meanwhile a white-listing protocol exempted celebrities and elected politicians from Facebook’s few rules on harmful posts.

Senior Facebook leadership, including CEO Mark Zuckerberg, deflected and suppressed the Integrity Unit’s reports, even keeping their celebrated Oversight Board in the dark. Eventually Zuckerberg disbanded Haugen’s unit and reassigned its self-policing responsibilities to operational divisions of the company.

Haugen was the source of thousands of internal documents proving her point, information that once leaked formed the basis of investigative news reports in the Wall Street Journal and CBS’s 60 Minutes, and now have become the key allegations in a series of complaints she has filed to the US Securities Exchange Commission. In the name of protecting investors in a publicly traded company, the SEC and Congressional sub-committees are about to give Facebook a political migraine that just won’t quit.

For political news junkies and journalists, the significant chapter in this story is the 2018 tweak that Zuckerberg made to Facebook’s News Feed algorithm.

Zuckerberg was worried about stagnating growth in audience time spent on the platform, which directly impacted advertising revenue for the $1 trillion company. The algorithm tweak pushed downwards on less sensational news content and upwards on clickbait-style “engagement” content that earned likes, comments and shares. Whatever got an emotional response, says Haugen.

As political actors and news publishers discovered soon after, the Zuckerberg tweak fed an appetite for uploading polarizing content, especially on political issues and campaigns. According to Haugen, political parties warned Facebook that the new algorithm was driving them to emphasize divisive and polarizing content in order to compete for voter attention on Facebook.

Haugen was also mortified by Facebook’s role in developing countries where the incitement of political violence and genocide, and the open recruitment of assassins by drug cartels, was running unchecked, either because of inadequate staffing or because the moderators did not understand the language of the posts.

Another one of her complaints exposes Facebook’s whitelisting practices, consisting of moderators flagging problematic posts in their AI-driven monitoring program, and then giving celebrities and incumbent politicians preferential treatment on take-downs or warnings.

There is no shortage of outrageous whitelisting anecdotes to choose from. There was the deliberate delay in removing soccer star Neymar’s revenge porn posting in retaliation against an accuser, causing her nude images to be shared 54 million times. Zuckerberg personally gave race-baiting US President Donald Trump a free pass on inciting murder with his 2020 post “When the Looting Starts, the Shooting Starts.”

And Haugen found a way into almost every American parental conversation, revealing Zuckerberg’s plan to mitigate an aging Facebook audience by on-boarding young girls to its Instagram app. The Civic Integrity Unit warned Zuckerberg that the celebrity-driven culture of perfected body images was fueling teen eating disorders and depression. He did nothing.

For Canadians who suffered through the C-10 Netflix Bill debate this spring, note the key take-away from the whistleblower’s revelations: it’s Facebook’s algorithm that decides what content gets pushed or buried on their platforms, for better or worse. The much denounced provision in C-10 requiring Netflix to tweak their algorithm in favour of Canadian content seems benign by comparison.

The whistleblower’s story has legs and, in Canada, we can expect it to find its way into the discussion of the Liberal government’s pending legislation to regulate Online Harms, promised by Christmas.

Haugen’s complaints illustrate in a most public way the prevalence of severe online harms and Facebook’s lousy job dealing with it.

But they also raise the important public policy questions of how to regulate a wide-open global communications platform full of the best and worst of what humanity has to offer.

More on that, in our next blog.

Part five. How the Platforms Should Pay for Journalism

September 17, 2021

If the next federal government makes Google and Facebook contribute to Canadian journalism, the big question is how.

The Liberal election platform is aggressive: in the first 100 days of a new mandate, Ottawa will legislate the same collective bargaining regime between the Platforms and news organizations as was adopted in Australia.

The Conservative platform touts a royalties-for-news scheme adopted in France and recently tabled by the Tories in the Senate. Newsmedia Canada estimates the Platform payment per journalist in Australia at about $CDN 50,000 compared to $7500 in the French scheme. The CPC platform references “best practices” from both countries.

None of the major political parties are advocating for a News Fund similar to the many we already have in Canada supporting weekly newspapers, newscasting by independent television stations, and journalist salary subsidies for daily newspapers. The Heritage Canada consultation on Platform contributions to journalism showed interest in a News Fund, but the consultation has apparently been eclipsed by the election promises of both the Liberals and the Conservatives.

Without a doubt, the “Australian model” is by far the most successful effort by sovereign nations to challenge the power of Big Tech.

It legalizes collusive bargaining groups of news organizations and forces Google and Facebook to negotiate a fair deal on payment for news with each group. No deal is done until each news group gets one, so the Platforms can’t engage in divide and conquer tactics, picking favourites or stonewalling other publishers. And most importantly, fair payment is guaranteed by access to final offer (so-called “baseball-style”) binding arbitration.

The policy virtue of the Australian model is unambiguous: the Platforms must pay for news content.

Like any journalism media, the Platforms draw readers and advertisers with the promise of good material, whether you read it all or not. Accordingly, the Australian legislation requires the bargaining parties (and arbitrators) to take into account the direct value of a news organization’s content that gets read, but also the indirect value of content you pass over and decide not to read. This applies both to Google’s Search results and your scroll through Facebook’s News Feed.

The Australian model also has some practical advantages over other solutions. Once legislated, the negotiations between news organizations and Platforms are completed in a few months or less. The bargaining and arbitration regime doesn’t involve government so it doesn’t attract swarms of critics and opportunists denouncing government meddling in the media.

Newsmedia Canada believes the Australian model will deliver up to $620M annually to news publishers, compared to $95M per year from the federal government’s aid to journalism program. More than a band-aid, that kind of cash injection should mean more reporters and more coverage.

Yet despite the Australian model’s advantages, there are limitations and flaws.

The exclusive focus on paying for news content —-ignoring the Platforms’ dominant monopoly over the advertising revenue that historically paid for news – invites the Platforms to engage in hair splitting over the value of the news they monetize.

While the Platforms blinked in Australia and settled with news organizations to avoid arbitration (a rebuttal to skeptics of whether the Platforms profit from news content), they may still choose to fight it out at arbitration in Canada. Throwing the future of Canadian journalism into the hands of an arbitrator is a high-risk gambit considering the public interest in a solvent business model for journalism.

Another limitation of the Australian model is that the negotiated deals are shielded from public view (unless the government legislation says otherwise) and provide no rules about what kind of journalism is being aided. In a private commercial deal, the news organizations can spend their cash on anything they like. Including executive compensation.

In other words, what’s lacking in the Australian model is the primacy of the public interest in an informed citizenry, the justification for government intervention in the first place.

The straightforward way to put the public interest first is with a News Fund, distributed to news organizations on a transparent basis, with Google and Facebook paying their share at a government-fixed tariff.

We did something exactly like that in 2019: the federal assistance to news journalism legislated by the Liberals enacted a $14,000 per journalist wage subsidy for all professional written news organizations, otherwise known as aid to Qualified Canadian Journalism Organizations.

Despite the politicized hysteria about government intervention in media, the end of democracy and so on, the highly transparent QCJO program is a success for the news organizations that qualify (which excludes broadcasters), though not enough money to stem the loss of news coverage. In the intervening two years since 2019 you may have noticed the complete absence of scandals or complaints about the program’s administration. If the newly subsidized Press has suddenly gone soft on the ruling government, no one has been able to point that out.

There are other public news funds too. In 2017 the CRTC mandated a $20 million per year subsidy for struggling local news stations. The Independent Local News Fund is financed and administered by the industry’s cable companies. No scandals, no complaints.

There is also the long-standing Canadian Periodical Fund providing modest subsidies to magazines and community weekly papers, funded and administered by Heritage Canada. Again, no scandals, no complaints.

Ditto the federal Local Journalism Initiative set up by the federal government in 2017 and administered by News Media Canada. With a modest $10 million per year, the LJI creates 342 temporary journalist positions in the most under serviced local communities. No scandals, no complaints.

Primary in all of these News Funds is the public interest. Clear and transparent rules are set for what kind of news journalism deserves public support. Either taxpayers or companies finance it at contribution rates set by regulation, and government is accountable for the integrity of its administration.

In fact, there is an opportunity at this point in our history to combine a number of these funds into a publicly accountable, arms-length super-news fund with mixed private-public funding from governments, Google, Facebook, our Canadian cable companies, and philanthropic donors.

In addition to the public interest of keeping news organizations alive, a News Fund model that mandates contributions from Google and Facebook has the added benefit of holding the Platforms accountable for the monopoly harm of hoarding advertising dollars and failing to share them reasonably with Canadian news media. This is something the Australian model doesn’t do.

And what’s interesting about creating a News Fund to mitigate the harm caused by the Platforms’ monopoly over digital advertising is that as a matter of public policy we are already half way there.

One of the Liberals’ 2021 Budget measures that flew below the political radar was a Digital Services Tax on foreign tech companies, set for now at 3% of their Canadian revenue. Scheduled to become a $900 million contribution to federal coffers by 2025, the DST is explicitly a “digital audience” tax. Big Tech, which includes Google and Facebook as the third and fifth wealthiest members of that elite club, is required to pay the government for gathering and monetizing the private data of Canadian citizens.

You will have quickly deduced that the DST money, even the share paid by Facebook and Google, doesn’t go to Canadian media. It goes to the federal government. But, a willing Ottawa could earmark at least part of the DST for a News Fund, just as it earmarks a CBC Parliamentary grant.

The DST may or may not be a permanent feature of federal landscape, though both the Liberals and the Conservatives support it. For now, the Ministry of Finance is describing it as an interim measure until international talks on a minimum corporate tax for offshore businesses reach an agreement. At that point, the DST would lose its unique character as an audience tax.

Advocating for a News Fund and a media-dedicated DST may end up amounting to no more than an interesting policy debate. Neither the Liberals nor the Conservatives seem to be interested for now. Like a lot of things in play during this federal election, we are going to have to wait until the next Throne Speech to see whether the next government is going to hold the Platforms to account and save local news.

And if this hadn’t been dragging on for the last five years you could almost be patient. As Canadian news organizations continue their financial decline, the question may not be how, but now.

Part four. Online News Content: The Global Battle Between the Platforms and Parliaments

September 15, 2021

Google and Facebook don’t want to pay for news. They are fighting on every front to defend their digital empires from legislatures and regulators around the world.

There are many theatres of battle in this contest between sovereign governments and the Platforms, not just paying for the news they monetize. There’s privacy abuses, online disinformation, and market power over digital advertising and the treasure trove of data underpinning it.

Google and Facebook know they’ll be regulated eventually. But they want it on their terms which don’t include putting limitations on their market power over advertising and consumer data or paying for news. From their jurisdictional Alamo in Silicon Valley where they remain taxed but unregulated, the Platforms play the long game.

The first challenge to Google and Facebook emerged in the European Union (EU), the obvious staging ground for legislatures governing a market of 450 million citizens and holding a keen sense of cultural sovereignty.

In 2014 the Spanish government ordered Google to compensate news organizations for using news snippets in their Search product. In response Google flamboyantly pulled its Google News service from Spanish market and it’s still not available in that country. A similar German effort also failed.

Yet different tactics often bring different results. The EU competition authorities and justice ministries turned to slapping the Platforms with lawsuits.

It got results. In 2017 the EU fined Facebook $US 122 million for misleading the public and governments over the impact of its $14 billion acquisition of WhatsApp in 2014.

The EU gave Google a hiding as well with three fines totalling $US 10 billion to punish abuses of market power in online advertising, search engine results, and its Android operating system.

On taxation, EU governments were irked by the Platforms’ avoidance of corporate income taxes thanks to domiciling in the United States and exploiting offshore tax havens. So in 2018 Great Britain passed a Digital Services Tax of 2% of revenue earned in the UK by companies like Google and Facebook on the grounds that the digital giants should pay the government for monetizing its citizens’ personal data (Canada recently legislated a 3% tax to come into force in 2022).

Perhaps mindful of the Spanish failure in 2014 to force the platforms to compensate news organizations, it was not until 2019 that the EU returned to this fight by passing framework legislation enabling member states to force Google and Facebook to offer richer licensing agreements with news publishers for their content.

France did so in 2019. But its approach, based on the notion of copyright in news content, played into Google’s hands over hair-splitting arguments about whether news headlines and snippets are “content.”

The needle really moved in 2020 when the Australian competition authority made sweeping recommendations to Prime Minister Scott Morrison. His Conservative government indicated they were receptive to a making the Platforms pay for news.

A coalition of Australian news publishers and television broadcasters —-including billionaire Newscorp CEO Rupert Murdoch— persuaded Morrison’s government to dispense with the copyright approach and get to the heart of the matter: the unequal bargaining power over compensation for news content creates an unacceptable market externality: the impoverishment of newsgathering.

I will do a deeper dive into the Australian model in our next and final blog in this series, but the crux of the legislation legalizes collective bargaining by groups of news companies with each of Facebook and Google, significantly with the leverage of binding arbitration if a deal isn’t reached.

It is binding arbitration that changes the publisher-Platform content from a might-makes-right contest to one based on reason, even if a precise formula for valuing content — which would likely produce a bottom-line payment to publishers in excess of what the Zuckerberg and Google CEO Sundar Pichai were offering to pay —would ultimately be left for an arbitrator to decide.

Faced with legislation, Facebook tried Google’s Spanish power play: in February 2021 CEO Mark Zuckerberg pulled the plug on Facebook’s news content for its 12 million Australian users. But Australian PM Morrison didn’t blink. Zuckerberg folded. The blackout had lasted a week.

After the Zuckerberg blackout failed, the prospect of arbitration was so daunting that by May both Facebook and Google struck deals with different bargaining groups of news companies.

As of today, the Australian legislation is the high-water mark of the sovereign legislatures’ regulation of the Platforms.

Back on the Platforms’ home turf, the American government has lagged: perhaps because the Big Tech companies Google, Amazon, Facebook, Apple and Microsoft represent 15% of the stock market’s capitalization, or perhaps because of the usual Congressional paralysis. The Platforms don’t lack for political enemies on either side of the aisle.

Political paralysis or not, Congress could hardly ignore the Cambridge Analytica scandal. When Facebook’s data-gathering prowess was made available to Cambridge Analytica, the right-wing political consultants used Facebook’s data profiles on 87 million Americans and Britons to feed political actors in the 2016 US Election won by Donald Trump and the UK’s “Leave” forces in the Brexit referendum of the same year.

The fall out of the Analytica scandal in Washington was that in 2018 CEO Zuckerberg had to prostate himself before Congress and the Federal Trade Commission (FTC) fined him $5 billion.

Meanwhile the FTC also filed an anti-trust suit against Facebook for its earlier take-overs of Instagram and WhatsApp that had consolidated the social media market in Zuckerberg’s hands. That suit was recently booted by a circuit judge but has been re-filed by the Biden administration.

Google is also the subject of a raft of anti-trust suits from 48 US states against its market consolidation in Search and display advertising.

But other than legal sparring and big fines, there is no apparent prospect of US Congress regulating the Platforms.

Here in Canada the agitation for a fair deal between Publishers and Platforms goes back years, but it didn’t advance as a significant political issue until the federal Liberals committed to it after the 2019 election.

The charge is being lead by publishers belonging to News Media Canada with vocal support from Unifor and the Friends of Canadian Broadcasting.

It looked like Heritage Minister Steven Guilbeault might table a Platform Bill in the Spring of 2021, probably modelled on Australia.

But Guilbeault’s timetable was derailed by the Conservative Party’s successful filibuster of the Netflix Bill C-10.

The consequence of the filibuster, combined with the impending dissolution of Parliament in advance of the September election, meant that publishers reasonably concluded an Australian-style Platform Bill was at best another year or two away.

Google and Facebook, which had just lost an important battle in Australia, smelled the publishers’ desperation and quickly struck deals with a handful of breakaway publishers from the Newsmedia coalition. The deals do not compensate publishers for any content —including Google’s Search and Facebook’s News Feed —except stories which the Platforms’ agree to post in their special news tabs. The Globe and Mail signed on, however the major two newspaper chains Torstar and Postmedia did not.

The deals are a big win for the Platforms who are surely desperate to recover from the blow they suffered in Australia before US Congress gets any ideas.

Still, the contest in Canada between the Platforms and media companies is far from over.

The Liberals’ campaign for re-election includes a Platform Bill. The Conservatives’ election platform supports some form of it.

If that political support remains in place after an election, the next question will be what shape a Platform Bill would take. More on that in our next blog.

Part three. How Facebook and Google Monetize Your Privacy

September 11, 2021

“Web Giants hoard mountain of cash” isn’t news.

The Platforms Google and Facebook do make a lot of money: in 2020 Google raked in $USD 182 billion for an operating profit of $41 Billion. Facebook took in $86 Billion revenue and $32 Billion in profit.

To give you a sense of scale, Canada’s biggest news organization, Bell Media recorded $USD 2.4 Billion in revenue and a net profit of $0.6 Billion in pre-pandemic 2019.

Big companies throwing their weight around isn’t big news.

But unregulated foreign-owned communications companies holding monopoly-scale power is news: We were reminded of that in 2020 when CEO Mark Zuckerberg pulled the plug on Facebook’s Australian users for a week in retaliation against proposed government regulation.

And like all powerful companies with dominant market power, the Platforms impact not only their customers and competitors but also the public good. Remember the 1989 Exxon Valdez oil tanker spill on the Alaskan coastline? Or green house gases circa 2021? What economists antiseptically call the “externalities” of bad corporate behaviour really means that citizens suffer the collateral damage and the corporation may or may not pay for it.

In the case of Google and Facebook, their chief externality has been to corner the market on media advertising, the golden goose that used to pay the bills for news journalism, a public good that keeps our democracy alive. Making it worse, Facebook hosts disinformation on its Platform.

Western democracies want to do something about it. But so long as US Congress sits idle on the market power of the Platforms, the options for other sovereign nations are limited.

One of the tactics employed by other governments is to challenge the Platforms on anti- competition grounds. In the UK, which has a more powerful regulator than Canada, the Competition and Markets Authority (CMA) published a 437-page report in July 2020. It concluded the Platforms has captured overwhelming market power and are in many cases abusing it. The CMA recommended regulatory interventions into many aspects of the Platforms’ business practices.

At the core of the Platforms’ market power are parallel monopolies in digital communications: Google’s search engine and Facebook’s News Feed.

Google owns a cool 95% of the global search engine business. Facebook, with its purchases of Instagram and WhatsApp, controls 70% of the world’s social media traffic.

The Platforms have been wildly successful in their bargain with digital consumers: in return for the Platforms’ tracking and accruing digital data in every nook and cranny of your every day life, you get an array of free digital products which, in this day and age, most people can’t seem to do without.

Again, advertisers and ad dollars are the golden goose. The Platforms’ ability to build rich data profiles on hundreds of millions of people allows them to sell custom-fit demographic audiences to advertisers at reasonable prices (Google ran an experiment for publishers in 2019 showing that ads not guided by consumer data fetched only 70% of the price of the usual data-guided digital ad).

As you can see, the Platforms’ monetize your private daily life. This is not news to most of us.

But their secret is this: they need interesting content that draws you to their products in the first place. News is not the number one draw, but it’s a big one. Just think how often you go to Google Search looking for breaking news, or even old news. Think about how frequently you scan your friends’ Facebook shares as part of your daily take on the news.

It doesn’t end with Search or News Feeds of course. The Platforms have branched out, growing their digital empires into an ecosystem of complimentary digital products that are mostly free and feed their voracious appetites for your personal data.

Google has about 270 digital products in Search, advertising, video broadcasting (YouTube), personal communications, publishing, maps, business analytics, and so on. Unless you’ve been secluded in a log cabin since 2002, you’ve used a lot of them. Each time you give your personal information to Google, you add to their treasure trove of data.

Facebook has expanded too: it owns not only Instagram, WhatsApp, and Messenger, but also a host of complimentary digital freebies like Facebook Live, Facebook Marketplace, the list also goes on.

Besides building their profile on you with basic personal data, the Platforms consume your daily digital life through your searches, browser visits, phone location systems, online shopping, e-mail, messaging, likes, and comments. In other words, everything about you. And you pretend not to mind (or you would rather not know).

In the digital world, data is everything, because it’s what gets monetized if advertising is in play. The Platforms’ golden data goose just keeps getting fatter.

What’s worse, the Platforms occasionally abuse their stewardship of your data. In 2013, Facebook’s third party app Open Graph allowed Cambridge Analytica, a right wing consulting company, to build data-driven “psychological profiles” of millions of Facebook users and their contacts. They used this private data to fuel disinformation campaigns during the 2016 US election and the Brexit referendum. When a Cambridge Analytica employee blew the whistle in 2018, Facebook CEO Zuckerberg was forced to apologize to the US Congress and paid a $USD 5 Billion fine to the Federal Trade Commission.

Under the leadership of its far more likeable CEO Sundar Pichai, Google is an even bigger data gorilla than Facebook. Its abuses, as documented by the CMA Report, are on the advertising side of the business rather than the user side.

In addition to having captured 95% of advertising in Search and roughly half of the entire digital advertising business around the world, Mr. Pichai also does a brisk business in display advertising through Google Ads and, for good measure, controls about a third of the “open display” advertising market.

Open Display is a marketplace for publishers to sell ads on their web pages to advertisers through “real time” auctions of ad space. The auctions are triggered when you open a web page, instantly offering your data profile to be matched with a suitable ad. This speed of light auction is conducted through a commercial chain of computer servers known as “the Ad Stack.”

Surprise, Google holds the dominant ownership position in this Ad Stack at every link in the server chain. In fact, Google is the dominant provider in both the supply (publisher-side) and the demand (advertiser-side) links in the server chain, providing a surely irresistible opportunity to favour its own business interests over any given client at any given time, for millions of ads each day.

You get the picture: the Platforms are the global data juggernauts and they don’t always play nice.

For news publishers the implications are as follows.

First, the publishers clearly can’t compete with the Platforms for data-driven advertising dollars. As print advertising winds down—at about 10 to 20% every year— the news publishers’ dilemma only gets worse.

Second, the Platforms’ monopoly control of two indispensable platforms for drawing news consumers —-Google Search and Facebook News Feed— means that negotiations to pay for editorial content between thousands of individual news publishers and the monolithic Platforms is hopelessly lopsided in favour of Google and Facebook.

True, spokespersons for Google and Facebook are fond of arguing that they drive viewer traffic to publisher websites that can be paywalled to earn money.

There is merit to their argument, but it’s of little consolation to publishers who are struggling to convince you and I —-life-long addicts of free or subsidized news content that we are—- to start paying full tariff for it. Nor do the Platforms acknowledge they have cornered the market on the ad dollars that used to pay for news.

It’s notable that the British competition authority recommended a number of market interventions to mitigate the harms that the Platform monopolies inflict on their own customers and would-be competitors in digital products. As for the publishers, the CMA struggled to identify any market corrections that might mitigate the “externality” of bankrupting or otherwise impoverishing news journalism.

In other words, the news publishers will never acquire the data resources allowing them to compete for ad dollars with the Platforms through some intervention by competition authorities. There is no unscrambling this omelette.

Unless of course…the CMA could have grabbed some headlines with a recommendation as dangerous as it is taboo: the Platforms could re-unite news content and advertising dollars by getting into the journalism business themselves.

Just imagine mergers of media companies with data companies to provide a so-called level playing field between global giants. Perhaps a marriage between Fox and Facebook. And another between Google and the New York Times. And just imagine Steve Bannon or Rupert Murdoch as CEO.

If that doesn’t make your blood run cold, check for a pulse.

Our next blog poses the question: what if anything can sovereign nations do to save their news media.

Part Two. The Rise of Google and Facebook and the Decline of Canadian Local News

September 1, 2021

News journalism – especially professional and fact checked journalism – is essential to democracy. It is a public good. But that doesn’t mean there is a financial model to support it – anymore.

For decades a robust financial model paid for news. The model was ads. Lots of ads. Our written and broadcast media enjoyed the mercenary patronage of advertisers looking for customers. Thanks to them, we never paid more than a sliver of the cost of our news. We still don’t. 

Many Canadians don’t know that for a century the costs of reporting the news was subsidized 80% to 100% by advertisers, depending on whether you got it from newspapers, radio, over the air TV, or cable. Our news was free, or at least highly subsidized by advertisers.

In the new digital environment, those advertisers have flocked to Google and Facebook thanks to their mass audience and laser targeting of users and buyers.

But our appetite for news hasn’t let up. Canadians devour it online, especially on our phones. Unfortunately, professional coverage of news, especially local news, has shrunk as advertising revenues and journalist employment have declined. Picture how thick your local newspaper was 30 years ago compared to today, how many fewer local stories can you find now.

The unravelling of this business model for local news was documented in grinding detail by the Public Policy Forum’s 2017 report “The Shattered Mirror.” If you’ve been following the annual reports of Canadian news organizations since then – it’s only got worse. This chart shows how the advertising market share of written and television news organizations, compared to online advertising, flipped on its head in a decade. 

Another chart shows us that the Platforms Google and Facebook have 75 % of the online pie, news websites have about 6 %: 

Written journalism generates the lion’s share of original reporting in this country and it’s been hardest hit by the Platforms’ success. From a peak in 2012, advertising revenues for Canadian news publishers have steadily declined to half of what they were.

Meanwhile Google’s ad revenues have doubled and Facebook’s have quadrupled. In the same time frame, newsroom staffing shrunk by one-third, diminishing the capacity to cover local news. Television news is going in the wrong direction too. According to job data collected by Unifor, the TV union, newsgathering staffing is down 20% since 2014. The decline in newsgathering employment matches the same trajectory in broadcaster earnings: CRTC data reveals that “conventional” broadcasters (i.e. excluding subscriber-pay channels) have reported an average 8% loss since 2012. 

Radio is highly dependent on local advertising but prior to the pandemic boasted a 20% profit margin, apparently weathering the Google / Facebook storm, thanks to its captive audience in automobile commuting. Radio is an indispensable platform for informing the public. Always thinly staffed, radio is known for its “rip and read” re-caps of original reporting done by newspapers and TV.

Unfortunately, radio got hit with a 50% loss in advertising during the pandemic. In a sign of the times, Bell Media news talk stations in Montreal and Toronto laid off most of their reporters in early 2021.

What the last decade has shown is that the loss of the advertisers’ subsidy of newsgathering is not being replaced. And so, we cast about for a solution.

Subscriber revenue is the logical replacement for the loss of ad revenue. Unfortunately, the typical news consumer is used to getting free or low cost news and resists paying for it.

The few success stories in expanding subscriber revenues are mostly limited to smaller niche publications with highly loyal and affluent news consumers. For the mass audience, the only North American digital news organizations that have succeeded in building a thriving subscriber-pay business model are the Washington Post and New York Times. Obviously, they are national newspapers with limited local or regional coverage. Even more obviously, they play in the largest wealthy country on the planet, with a mass market of 340 million Americans.

It’s a legitimate question whether a Canadian news organization can duplicate that subscription success in a country of 35 million. The leader of the pack, the Globe and Mail, hasn’t achieved the same success as the Times or the Post although it may be within reach. Note the Globe caters to a well educated and affluent demographic, not a truly mass audience and diverse citizenry that needs to consume news in order to make a democracy work.

The Toronto Star has met with mixed success increasing the number of paid subscribers, and tellingly Torstar’s new owners are aggressively turning to their non-media assets to generate profits that might cross subsidize its newsgathering.

The National Post has turned up the volume on opinion journalism in hopes of attracting more paying subscribers, but Postmedia is not breaking out the profit-and-loss for the Post in its quarterly reports.

And these are the news organizations vying for a paying national audience. There are few if any examples of a successful pay-subscriber model in local metropolitan markets, cities and towns.

The fate of local news is only slightly less grim in television. There are fewer independently-owned stations still on-air and they are struggling. The CRTC threw them a lifeline in 2017 by creating the Independent Local News Fund: a modest $21M industry subsidy tithed from Canadian cable companies that goes to stations like CHEK TV Victoria, CHCH Hamilton and NTV in St.John’s.

Unlike independent stations, national networks like Bell Media CTV, Quebecor TVA and Corus’ Global News have the opportunity to mitigate the loss of ad revenues through internal cross-subsidies within their broadcasting operations to keep local TV news afloat. For example, some local network stations in big metropolitan areas – like Global News in Vancouver or CTV in Toronto – make money, allowing their parent networks to sustain broadcasting in smaller markets with fewer local advertisers. But as TV ad revenues dwindle, there is less profit to cross subsidize sister stations.

An even bigger pool of cross-subsidies for local news is the cable subscription revenue taken in by the major broadcasting networks’ profitable sports and entertainment programming. But even these profitable TV operations are declining. That’s because Internet TV has disrupted the decades-old model of Canadian TV networks buying the Canadian distribution rights to hit American programming and retailing them to Canadian viewers at a profit – that pays for local news.

As TV migrates from cable to Internet, Netflix and the growing ranks of foreign owned Internet TV streamers like Disney Plus and DAZN Sports have cast aside the Canadian re-sellers and market their movies, shows and sporting events directly to Canadian audiences.

Not surprisingly, the Canadian TV companies’ revenues and profits are falling in response. That is one of the biggest reasons Canadian TV networks and other public interest groups supported Bill C-10, the Netflix Bill that was stopped by the Conservative Parliamentary filibuster this Spring. The purpose of C-10 was to compel foreign-owned Internet TV companies to contribute financially – as our domestic media companies do already under the Broadcasting Act – to Canadian content in news, sports and entertainment programming.

As we head into the federal election, our news organizations continue to gasp for air. Newsrooms have shrunk. Subscriber-pay models have yet to succeed in written journalism. Internal subsidies haven’t stopped the decline of television local news. And the cause, maybe the culprits, are Facebook and Google. More on them in the next blog post.