Canada remains a Wild West digital frontier where American behemoths reap billions.
The Justin Trudeau government has been unduly deferential to Facebook, Google and other American technology giants. It’s said that the same government may be mulling over ways to regulate them. If so, there is a lot of catching up to do.
The European Union and other nations, including Australia, have already legislated or are contemplating laws to reduce the competition-killing market domination of these American technology corporations. Governments also aim to protect the privacy of consumer data and curb on-line hate and disinformation campaigns that fuel culture wars and undermine democracies.
Canada remains a Wild West digital frontier where American behemoths reap billions, collect no sales tax, pay little or no federal or provincial taxes, create little or no infrastructure, employ few Canadians beyond a sales force, and roll over Canadian companies. The Canadian newspaper industry has been hit particularly hard.
Print media is not the only sector whose business model was broken by technology. But its precipitous decline has been aided and abetted by the federal government.
Ottawa lets the Facebooks and Googles offer products and services free of HST, giving them an unfair advantage over Canadian competitors. Canadians must pay the sales tax when placing an ad in, say, The Globe and Mailbut not on American digital platforms.
Ottawa allows tax deductions on ads placed on Facebook, (Google-owned) YouTube, Netflix and other foreign internet sites. Such deductions were meant only for ads placed on Canadian newspapers, radio and television, not foreign-owned media.
Ottawa does not provide copyright protection for Canadian newspaper content, which is routinely used by the digital giants. They don’t do any journalism themselves but use purloined content to generate advertising revenues for their businesses. According to a recent dossier on digital advertising in Canada, such platforms vacuum up at least 75 percent of the estimated $6 billion yearly digital revenues in Canada.
In the last decade, Canadian newspaper revenues have tumbled by half — from $2.8 billion to $1.4 billion for daily newspapers, and $1.3 billion to $750 million for community newspapers.
Newsrooms have been shrinking or shutting down. As many as 244 have closed or merged since 2008, leaving “news deserts” in 181 communities.
As credible news coverage withered, disinformation or fake news filled much of the void, mostly on platforms offered by Facebook, YouTube, Reddit and others, which have taken little or no responsibility for their content.
Some regard this state as a post-truth world in which segments of the public lose the distinction between fact and fiction, providing fertile ground for populists and demagogues.
As John Hinds, head of News Media Canada, says: “The antidote to fake news is real news.” Unfortunately, fake and false news are free, whereas journalism — reporting, investigating, checking facts, editing and publishing — is costly. Newspapers, however, were loath to ask for help. Being indebted to government was antithetical to their editorial and financial independence. Circumstances, however, forced their hand. Once too rich and proud to seek assistance, they became too desperate not to.
Newspapers asked Ottawa for copyright protection and to partially underwrite newsrooms. A House of Commons committee made the same suggestion, as did Public Policy Forum, an Ottawa think tank that looked into newspaper woes in the new digital landscape.
But the Trudeau Liberals rejected the proposals outright. “Our approach will not be to bail out industry models that are no longer viable,” said Culture Minister Mélanie Joly.
Good principle — in the abstract.
Criticized for its stance, the Trudeau government offered a two-part solution.
First, it allocated $10 million a year for five years to support local news in under-serviced areas. That paltry sum is not sufficient for saving existing newsrooms.
Second, the government went cap in hand to Facebook and Google, asking them to support more trusted, local journalism and stem the tide of fake news. The government seemed oblivious to the absurdity of asking the chief spreaders of fake news to fix fake news, and the killers of trusted, local journalism to resurrect it.
Even the Competition Bureau and the federal Privacy Commissioner, both ostensibly independent of government, have been treating the American giants with kid gloves. In contrast, Carolyn Wilkins, deputy governor of the Bank of Canada, has shared concerns about the Google-Facebook duopoly. Facebook has 20 million users in Canada and YouTube reaches 70 per cent of Canadians monthly.
Lately, Facebook and Google have offered grants to universities and others for various journalism projects, and they have promised to be more vigilant about foreign interference in elections and hateful content.
The initiatives seem designed to mitigate rising public outrage and, crucially, avoid government regulation and taxation.
Meanwhile, newspaper owners are giving up.
Power Corp., owned by the Desmarais family, recently let go of La Presse, the venerable Montreal daily that has long been the leading voice of federalism in Quebec. The paper will become a non-profit organization to qualify for tax-deductible donations and government subsidies, if and when they come.
The Thomson family of Toronto, the other billionaires in the newspaper business, have kept the Globe and Mail afloat against high odds. It remains to be seen for how long.
The Quebec provincial government has been more sensitive to the plight of the media than the federal Liberals. Last year, it gave $10 million in interest-free loans to Le Devoir and other French newspapers.
Quebec also led the charge against Joly’s decision to let Netflix operate outside the framework of the Canadian Radio-television and Telecommunication (CRTC). Joly settled for a promise of $100 million a year for five years for Canadian content. Netflix has five million subscribers in Canada and revenues of $775 million a year. Were it regulated by the CRTC, as other broadcasters are, it would probably have to spend more — and would also have to prove to be doing so.
There would be no need for the government subsidies for newspapers or for newspapers to compromise their independence if only Canada would stop acting like a banana republic, selling out its own citizens and trusted institutions to American corporations that contribute little to the Canadian economy or democracy.
This story was originally posted on the Centre for International Governance Innovation website, and is republished here with permission of the editor.