The nitty gritty of the Heritage Committee report

All the major recommendations the government must now consider.
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Taxing foreign news aggregators. Dropping online ads from the CBC. Supporting the growth of digital media divisions at newspapers. These are among the recommendations from the House of Commons Standing Committee on Canadian Heritage in a report released Thursday concluding a year-long study on the state of Canadian media and its effects on local communities.

Chief among the 20 recommendations in Disruption: Change and Churning in Canada’s Media Landscape is that the Minister of Canadian Heritage should explore ways to create a new funding model that is platform agnostic and would support Canadian journalistic content in the face of ongoing cuts from advertisers and changing reader habits.

(A breakdown of the report’s recommendations can be found below.)

The report said that the Government of Canada must implement new measures to support free and independent media and local news reporting. Noting that many witnesses told the Committee of challenges with eligibility criteria for funding based on media types, the Committee also found a need to promote Canadian content across all media, regardless of platform. (The Committee heard  testimony from more than 130 witnesses.)

Pierre-Olivier Herbert, press secretary for the Ministry of Canadian Heritage, said the government will deliver its position on this report (along with the many other recommendations it heard throughout its Cancon consultations) in September when Minister Joly releases her cultural policy framework.

Online advertising

The Committee recommends that the Government of Canada introduce a temporary five-year tax credit to compensate print media companies for a portion of their capital and labour investments in digital media.

The Committee also recommends that the Government of Canada amend the newspapers, periodicals and broadcasters sections of the Income Tax Act, extending it to allow deductions for digital advertising on Canadian-owned platforms. The Act currently supports Canadian newspapers by allowing Canadian advertisers to claim tax deductions for buying ads in domestic newspapers.

Previous reports by bodies such as Friends of Canadian Broadcasting and the Public Policy Forum have recommended different changes to this section, including no longer allowing advertisers to deduct advertising on non-Canadian news sites and subjecting ad buys on “non-Canadian” sites to a 10% withholding tax. The Committee’s report referenced both of the previous recommendations, and although it did not fully incorporate the two suggestions, it stated that tax incentives “offer interesting opportunities to support the print media in this transition period.”

MiC reached out to both Google Canada (which opposed the previous recommendation) and Facebook Canada for a response to the latest recommendation. Facebook Canada declined to comment.

Google Canada issued a statement from head of communication and public affairs Aaron Brindle, which neither endorsed nor opposed the recommendation and stated that Google is “a partner to the news industry.” He also pointed out that Google shares revenue with publishers and drives traffic to news sites.

The report notes that all representatives who appeared before the Committee pointed out the financial advantage that foreign-owned media have over domestic providers. Print and broadcast revenues dropped between 2005 and 2015 while online ad revenue exploded, moving to $4.6 billion from $560 million in a decade.

Meanwhile, by 2015, news aggregators such as Facebook and Google accounted for two-thirds of all online revenue, earning $760 million and $2.3 billion, respectively. The Committee is recommending the Government of Canada “level the playing field” by ensuring foreign aggregators that publish Canadian news and sell advertising directed at Canadians be subject to the same tax obligations as Canadian providers.

To assist new digital media companies as they find audiences and viable revenue models online, the Committee also recommends that Innovation, Science and Economic Development Canada provide start-up funding for such endeavours.

The report also recommends that the 5% tax currently imposed on BDUs to support Cancon production should be extended to broadband services, with Netflix called out as the main target.

The government has refused to consider the proposal. “Our [government's] objective was always to lessen the tax burden on middle-class Canadians, so we will not be introducing a tax on the internet,” said Herbert.

CBC

The Committee had two recommendations specifically for the CBC. Addressing arguments from media companies such as the Globe and Mail and Torstar that the pubcaster is competing for ad dollars online, the Committee recommends that the CBC eliminate advertising from its digital platforms. The Committee did not, however, say that the publicy funded broadcaster should remove ads from all of its platforms entirely, which the CBC itself had recommended during the hearings.

The CBC/Radio-Canada calls the recommendation to remove online advertising a “half measure that would weaken our ability to sustain our programs and services” in a written response opposing to the proposal. It goes on to say that the recommendation wouldn’t provide any of the advantages of being completely ad free, and would also undermine the pubcaster’s remaining ad revenue because digital and TV advertising are often sold together as a bundle.

In addition, the Committee also recommended that the CBC/Radio-Canada prioritize the production and dissemination of local news and programming by expanding its local and regional coverage across all of its platforms.

Updates to the Canada Periodical Fund

Changes to the Canada Periodical Fund were also recommended to the Department of Canadian Heritage, including making daily newspapers and free community dailies eligible for the program.

It also said the CPF should offer greater online magazine and newspaper distribution support, more support to Indigenous and minority print media and recommended a bigger CPF budget should its review lead to a need for an increase in recipients.

Diversity in media

Addressing the issue of diversity in Canadian media, the Committee has recommended that there be a new section in the Competition Act that deals specifically with news media mergers, ensuring a panel of experts test for a “diversity of voices” to prevent single-player dominance in any one media market.

It also recommends that existing ethics guidelines and press councils be applied equally to digital media.

The Committee also recommended the creation of an initiative that trains Indigenous journalists to cover Indigenous government institutions and other relevant issues for Indigenous media outlets across the country. This responsibility, it contends, could be embedded with the Aboriginal Peoples Television Network and be financed from programs supporting Canadian programming.

Conservative Party response

The Conservative party members of the Committee issued a dissenting report, saying higher taxes and government support aren’t the answer to the current disruption in the media landscape. It says that there is evidence that local news is being well-served by the changing marketplace, citing the example of loval Metroland newspapers remaining viable despite Torstar losing money at the Toronto Star.

It goes on to say the Committee’s recommendation to tax outlets that publish Canadian news will reduce the amount of local or Canadian content available online. It won’t level the playing field, the party says, but will cause people to avoid tax by ceasing to publish Canadian news.

“It is time for the government, and the Liberal majority of the Committee, to accept and embrace this new era, and give up on futile efforts to use government regulation, taxation, and subsidies to maintain the media landscape of the 1960s.” said the Conservative Party statement.

 

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