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March 25, 2019, 9:18 a.m.

A subsidy without a clear purpose doesn’t move the Canadian news industry forward

“It is obviously designed to assist traditional, general interest newspapers, but to do what? Keep them on life support and then what?”

Editor’s note: In Canada, the Trudeau government has pledged, controversially, to provide financial support for the country’s ailing news industry. Last week, the release of its annual budget outlined some of the plan’s specifics, which include a tax credit for companies employing journalists, tax benefits for those who subscribe to digital news outlets, and rules to make it easier to make tax-deductible donations to some newsrooms. To illustrate some of the debate around the topic, today we’re publishing three pieces by Canadian journalists, each of whom opposes the plan for distinct reasons. Below is a piece by Chris Waddell, a Carleton professor and longtime journalist for the CBC and The Globe and Mail; also be sure to check out the pieces by The Discourse’s Erin Millar and The Logic’s David Skok.

The federal budget has finally answered some of the questions about the Liberal government’s plans to subsidize the news business, which were first floated late last year. But the details revealed by Finance Minister Bill Morneau raises many more questions about Ottawa’s reasons for supporting journalism.

There will be a 25 percent refundable tax credit (up to $13,750 per employee) for those producing “original written news content.” Broadcasters, or any organization getting aid to publishers under the Canadian Periodical Fund, will not be eligible for the tax credit.

Eligible recipients must be public corporations with shares traded on a Canadian stock exchange and controlled by Canadians. If not publicly traded, the company must be 75 percent owned by Canadian citizens, incorporated and reside in Canada, with 75 percent of its directors being Canadian citizens and Canadians owning 75 percent of any trust or partnership.

Recipients must be general interest news publications not focused on a specific topic such as sports, business, entertainment or industry news. Yet it is precisely those specialized publications that are persuading audiences to pay for distinctive and high-quality information online that has depth and can’t be found elsewhere. The publications must also not be primarily promotional and must not have connections to any government or Crown corporation.

But there’s a lot we don’t know, starting with some basic questions that should be asked about any government subsidy: What is the objective? What are the results it is supposed to achieve?

It is obviously designed to assist traditional, general interest newspapers, but to do what? Keep them on life support and then what? Allow them to convert their print operations to digital? It’s notable that the budget did not designate eligible jobs as those directly related to digital transformation.

Printed newspapers do not have a long-term future and some historic titles in Canada have already made the switch to digital only. Will a subsidy help print newspapers return to the good old days of large profits? Is print circulation growing at any newspaper in Canada? These are all good questions to ask — and even better ones to answer before doing anything.

There’s lots more we don’t know. The problems of mainstream media have been coming for a long time. The immediate crisis is the collapse of print and digital advertising to the benefit of Facebook and Google, which can offer targeted ads that cost a fraction of print advertising and also gives advertisers specific audience data.

As advertising has disappeared, the audience must become the main source of funding for any news organization’s long-term survival. But circulation has also been declining everywhere for years and few people under 30 read newspapers and aren’t about to start. Where do those audiences get the information they used to get from newspapers? Are they satisfied? What do they miss? We don’t know. If nothing, subsidies won’t fix that problem.

Similarly, the second government proposal — non-refundable tax credits up to $75 for subscribers to digital publications that meet the same Canadian rules as for labor subsidies — doesn’t solve anyone’s problem. Boutique tax credits are bad tax policy. They don’t persuade people to do things they weren’t doing before. They overwhelmingly reward those who are already doing whatever the tax credit is designed to encourage. That’s why the Trudeau government killed the children’s sports tax credit and the transit pass tax credit introduced by the Harper Conservative government.

More importantly, subscription tax credits don’t address the problem. Public opinion research in recent years has consistently shown that only about 9 percent of Canadians are prepared to pay for news online. That’s because they see news available for free everywhere online and they have limited or no ability to differentiate between quality and commodity.

Lowering the monthly price of a subscription from $15 to $10 through a tax credit won’t change many minds about subscribing as long as the alternative for the audience is news for nothing.

The budget also lays out principles under which news organizations can become charitable institutions that would be able to grant tax receipts to donors. Time will tell if this is an effective idea. Historically in the United States, First Amendment rights and related media issues have received broad philanthropic support — often from families that made their fortunes in the newspaper business. There is no comparable history in Canada, where philanthropy has been primarily directed to social, cultural, and educational causes.

Finally, there is a large question that the Liberal government has consistently ignored: What about the public broadcaster? What role does the federal government see for CBC/Radio-Canada in all this? CBC/Radio-Canada has already moved aggressively into the digital world, competing with newspapers online for news, opinion and — most important to the private sector — online advertising dollars.

Does the prospect of competing against the relatively deep pockets of the CBC prevent entrepreneurs from launching news startups in communities across the country? Should government place fences around the activities of the broadcaster it owns?

Until we know the answers to all these questions surrounding subsidies for the media — why do it?

Christopher Waddell is a professor at the School of Journalism and Communication at Carleton University. A version of this story originally ran at The Conversation.The Conversation

Photo of Canadian flag by Gilad Rom used under a Creative Commons license.

POSTED     March 25, 2019, 9:18 a.m.
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