The following article was published today in the Canadian Journal of Communication
ABSTRACT
Background: The Canadian government allocated $595 million in subsidies over five years to news media in 2019, but the bailout was based on questionable data. Financial losses were exaggerated; a think tank report was criticized for using data selectively; data from a university research project differed sharply from annual industry counts; and job loss figures were disputed.
Analysis: Hard data can diverge markedly from soft data accepted in pursuit of policy outcomes.
Conclusions and implications: A second campaign under way on behalf of entertainment industries could yield a bailout several times larger than the first. Closer scrutiny should be exercised of media narratives and offered data. An independent media research centre should collect and verify data for policy purposes.
Keywords: Mass media; Media economics; Media policy
Introduction
Increased consolidation of Canadian news media in 2016 brought renewed calls for ownership reform, but a campaign by industry stakeholders—including publishers, unions, consultants, and lobby groups—instead resulted in a $595 million federal bailout announced in 2018. The campaign was based in large part, however, on data that bore little resemblance to statistics kept by government agencies, financial reports filed with stock market regulators, and even the annual newspaper count conducted by the publishers’ own industry association, which mysteriously ceased for a year. Some data offered by the Public Policy Forum (PPF) think tank seemed to have been conjured out of thin air. Other data were gathered by academics using questionable research methods and diverged markedly from industry statistics. Individual datasets—circulation, financial, and employment—have been challenged separately by scholars. This article seeks to consolidate available data in order to test claims of yet another “crisis” in Canadian media. It takes a political economy approach to critically examine the use of data in persuading the federal government to ignore any need for ownership reform and instead provide financial assistance to news media outlets, a large proportion of which are foreign-owned. It utilizes financial analysis placed in historical and institutional context, in addition to the simple comparison of data sets. It finds considerable discrepancies between the data used to promote government assistance to media and more regularly collected data.
Literature review
Newspaper publishers have a long history of misrepresenting their fortunes in order to gain regulatory advantage. Ben Bagdikian (1973) first identified what he called the “myth of newspaper poverty” (p. 19) from his inside knowledge as a former senior editor at the Washington Post. “American publishers have always felt obligated to pretend that they are an auxiliary of the Little Sisters of the Poor,” Bagdikian (1973) quipped. “This was always amusing, but now that so many papers are owned by publicly traded companies which have to disclose their finances it is taking on the air of slapstick” (p. 20). Newspaper chains grew in the sixties by raising capital on stock markets, but selling shares to the public required them to regularly report their earnings. Those willing to comb through the quarterly and annual reports, noted Bagdikian (1973), found that a typical metropolitan daily made a profit of 23.5 percent in 1970 and 23.2 percent in 1971, even during a recession. Bagdikian (1983) expanded on his thesis in his classic book The Media Monopoly, in which he described profitability as the “best kept secret in American newspapering” (p. 11). Publishers relied on the poverty myth, he noted, in successfully lobbying for an anti-trust exemption in the 1970 Newspaper Preservation Act, which legalized local duopolies (Bagdikian, 1983).
Bagdikian’s suspicions had been aroused a few years earlier when a senate committee in Canada (1970) forced media companies to open their books and described what it discovered as “astonishing” (p. 47). Canadian newspapers, the senators found, made profits ranging from 23–30 percent, which was “almost twice as profitable as owning a paper-box factory or a department store” (Canada, 1970, p. 47). Their report noted the irony. “An industry that is supposed to abhor secrets is sitting on one of the best-kept, least-discussed secrets, one of the hottest scoops, in the entire field of Canadian business – their own balance sheets” (Canada, 1970, p. 63). Hugh Martin (1998) similarly examined the financial statements of publicly traded U.S. newspaper companies from 1984–1994 and found they averaged 15–17 percent profit margins prior to the recession of the early nineties before dropping for a few years and then recovering to their previous levels. Despite the recession, he noted, all but one company earned profit margins greater than 9 percent. Martin (1998) noted that newspaper companies “earned excess profits throughout most of the study period. … Critics who accuse newspapers of protesting too much about their financial situation may have a point” (p. 512). A 2012 study found that U.S. newspaper coverage of their own industry during the 2008–2009 recession exaggerated the scale of any crisis and relied “too heavily on the views of newspaper publishers and too little on empirical data,” thus “creating a false impression that the whole industry is ‘dying’’’ (Chyi, Lewis, & Zheng, 2012, p. 316). The study found that coverage contained “over-amped drama” and even “tabloidization,” with more than a quarter of stories containing death imagery. “Newspaper journalists often fail to contextualize their reports with a comprehensive understanding of the economics of their industry” (Chyi, Lewis, & Zheng, 2012, p. 316).
The recession of 2008–2009 also brought claims of a crisis in Canadian media, but critical scholars pointed to data that showed otherwise. CTVglobemedia, the short-lived “convergence” partnership between the CTV network and the Globe and Mail national newspaper, cut jobs and threatened to close stations, claiming it had lost $100 million the previous year. Kelly Toughill (2009), however, uncovered financial statements that showed the privately owned company instead made a profit margin of 9.7 percent in 2008. Dwayne Winseck (2010) examined financial statements of the country’s eight largest media companies from 1995–2009 and found all remained profitable. Economic data, he added, showed that the media economy in Canada was actually expanding. Marc Edge (2011) analyzed the annual reports of several major Canadian media companies from 2006–2009 and found that they recorded profit margins of 16–33 percent. Edge (2014) studied the financial statements of all 16 publicly traded newspaper companies in Canada and the U.S. from 2006–2013 and found that none suffered an annual loss on an operating basis, despite an historic drop in their revenues. Most recorded double-digit profit margins throughout, or more than twice the historical average for Fortune 500 companies of 4.7 percent (Tully, 2010). Some approached 20 percent despite revenue drops of about a third in the U.S. and a quarter in Canada. While newspapers were no longer as lucrative as they once were, they proved able to cut costs almost as rapidly as their revenues fell and were thus unlikely to go out of business (Edge, 2014). The public perception was that newspapers were dying, however, because more than a dozen chains went into bankruptcy and some declared annual losses in the hundreds of millions of dollars. Ironically, however, the chains that went bankrupt were among the most profitable but had simply taken on unsustainable levels of debt in order to make acquisitions. They were usually reorganized under new ownership by their debt holders, but all continued publishing. The enormous losses that some newspaper companies reported were only on paper, as accounting rules allowed them to deduct the reduced value of their businesses from their annual earnings as a “write-down” on asset value (Edge, 2014).
