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What’s going to happen next with Canada’s Online News Act?

Federal policymakers are still dealing with a Meta news ban, and a media industry on the ropes. How do we save Canadian journalism?

February 8, 2024

8-minute read

The Online News Act came into effect in December 2023 and rang in the new year 2024 with some unfinished business.

The Meta news throttle continues. The company’s public messaging is that it would restore Canadian publishers’ access to its platforms if the federal government exempted Facebook and Instagram from the Act with no obligation to pay compensation. Meta’s previous $20 million worth of voluntary compensation payments—in the form of local journalism bursaries—are gone. A number of commentators have said that the loss of online distribution privileges will impair Canadian news publications, especially start-ups.

Google, for its part, will not throttle news, and instead will pay $100 million annually into a fund for Canadian media organizations.

Another loose-end is the impact that C-18 may have in other jurisdictions that are showing halting progress towards a bargaining code—the United Kingdom, the United States, California, Brazil, and others. If the European, Australian and Canadian legislation tips political momentum for a similar law in the United States, that might have implications for Meta’s ongoing news throttle in Canada or even the amount of compensation paid..

Yet another long-term question mark is the future impact of artificial intelligence large language models (AI-LLM) such as ChatGPT on news organizations. All of the Big Tech companies are pursuing this market where they will directly compete with news organizations. In competing with news outlets, the AI-LLM applications will be ingesting their online news content, with or without licences or compensation. The current version of the Online News Act does not address this scenario.

But the business immediately at hand is how Google’s $100 million is to be divided among Canadian news organizations. The September 2023 draft regulation contemplated the value of an individual news outlet’s compensation varying up to 20 per cent above or below the median compensation of all agreements.

“The intent of the criterion,” said the government’s summary, “is to promote equity across news agreements while preserving a degree of flexibility.” The very flexible 20 per cent tolerance for unequal but “equitable” outcomes offered deference to how platforms and publishers might value news content and its distribution differently for some news publishers than others; in other words, a rebalanced market for news.

However, the Minister reversed the 20 per cent rule in the final regulation in December 2023 because the government went in an entirely different direction once it had to work with a smaller pool of platform money. The regulation offered Google the choice of making a series of deals with different publisher groups—in which case the new regulation required “like for like” compensation outcomes—or a single agreement with a consortium of publishers in which case the compensation would be meted out on a headcount of employed journalists.

So far, so equal. Except that the government made a bold move to severely limit the amount of compensation payable out of the $100 million to the public broadcaster CBC ($7 million) and broadcasting companies like CTV, TVA and Global ($30 million), leaving $63 million for online print publishers. That means that the final distribution of the $100 million will look approximately like $20,000 per journalist for print publishers, $7,300 for broadcasting companies, and $2,900 for the CBC and Radio-Canada.

Heritage Minister St.-Onge characterized this outcome as “accounting for the dynamics of the news industry.” In briefing the press on the regulation, a ministry spokesperson elaborated that the dependency of print publishers on the Big Tech platforms is “more pronounced.”

Not done yet, in a calibrated policy move the government increased the direct federal subsidies to print publishers under the QCJO program—where broadcasting companies are ineligible—by raising the subsidy from 25 per cent to 35 per cent of journalist salaries and raising the cap from $55,000 to $85,000 in annual salary. Combining Google money and QCJO subsidies, print publishers would be reimbursed up to $50,000 per journalist salary. In Québec, an additional provincial subsidy raises it further.

By juicing the QCJO program, the federal government was making weight for the print publishers’ disappointed expectations of up to $81 million from an Australian-like payout previously projected by the PBO and the loss of the existing $20 million in Meta licencing payments (not to mention the lost distribution value of Facebook traffic referrals to news websites). It is impossible to measure how 570 different print publishers might have gained or lost from the final outcome of Bill C-18 and the bump to the QCJO program. As a baseline, the existing voluntary compensation from Google and Facebook is believed to have been unequally distributed among print publishers.

The numbers are confidential anyway. In this kind of information vacuum it becomes difficult to pass judgment on how print publishers fared under Bill C-18, but it is hyperbole for some critics to call it “an epic miscalculation” by the government.

The broadcasting companies, on the other hand, were aggrieved at getting the short end of the stick. The CBC’s claims to compensation for their news content fell easily to the pragmatism of the day, given the financial security of its Parliamentary funding. As for the private broadcasting companies, it’s reasonable to assume that the Heritage Minister believes that Bell, Rogers and Québecor can afford to keep producing its many local newscasts at a loss (as they have for the last twelve years). That is of little solace to the 35 independently owned local television stations.

For television companies, contending with Google and Meta was the second occasion in which they have had to grit their teeth while their free content is monetized without compensation by wealthy news distributors. The advertising-dependent broadcasters fought for years to compel cable and satellite companies to pay “retransmission fees” for the broadcasters’ over-the-air transmissions pulled off their television signal towers. The cable companies turned around and billed their customers every month for that programming and shared none of it with local broadcasters.

Unlike in the United States, Canadian copyright law denies broadcasters any property rights in their “local signals.” Broadcasters pushed hard for -USstyle retransmission fees that might have been worth $1 billion in annual payments from Canadian cable companies, but in 2012 a narrowly split Supreme Court denied the CRTC the authority to levy such payments due to copyright rules.

The Canadian Association of Broadcasters were no more thrilled with St.-Onge’s division of the Google spoils, pointing out that “television” news available on broadcasting and online platforms is by far the biggest source of Canadian local news. Yet Google is gatekeeper to 40 per cent of web traffic to CTV News, the country’s most popular news website.

The television companies nevertheless have one last shot—as the CRTC implements the Liberals’ other internet bill—Bill C-11, the Online Streaming Act—it is considering proposals to create a news subsidy for television and radio stations with contributions levied from Netflix and a host of foreign video and audio streamers now entering the orbit of Canadian regulation.

We can say one thing about the outcome of Bill C-18—with the government’s deliberate intervention in the distribution of the $100 million of Google compensation to news organizations and its boost to the QCJO financial aid to journalism, we have travelled a very long way from Rod Sims’ crisp policy idea of creating a rebalanced marketplace in which to capture the net value exchange between platforms and publishers.

A proper post-mortem of legislating the Online News Act would have more information at its disposal. What we can say is that when the bill’s results are benchmarked against the Australian outcomes, there is far less money for news publishers in Google’s $100 million and Meta’s non-contribution.

The aggregate Australian figure of $190 million CDN was scaled up to $329 million by Canada’s Parliamentary Budget Office—$329 million for a Canadian population of 40 million is roughly proportional to $190 million for an Australian population of 26 million. Clearly $100 million is not $329 million. As for the bottom-line outcomes of the Google and Meta deals with French publishers remain undisclosed and unavailable as benchmarks.

It might have been different if not for Google and Meta deciding that the Canadian bill provided too much momentum for legislative efforts in the US and the UK. It might have been different if the platforms had not made the strategic assessment that Canada was a small enough country to defy, having failed to arm itself with an “or else” fail-safe mechanism in its legislation. It might have been different if the Conservative opposition had stuck to its previous support for a bargaining code.

The public debate over the bill—and rescue planning for an impoverished news industry—is far from over. What will not change is the profound risk of a collapse in news reporting that is essential to democracy and, on the other hand, the indefinite state-directed sponsorship of an independent press that is unrecognizable from the world in which advertising revenue once comfortably supported journalism. It may seem clinical to reduce such matters of deep principle to the calculus of “risk,” especially risks that are difficult to measure and only darkly predict. But they are risks.

It would not be fair to say the federal government has no plan to manage these risks, no strategy for news. But, as is typical in public policy, the current situation is at best a collection of overlapping regulatory initiatives and at worst a triaged scramble to sustain journalism.

In December 2023, Members of Parliament sitting in the House of Commons Heritage Committee agreed to hold hearings in the new year to study the crisis in news media. The carefully worded language of the resolution reflects MPs’ determination to save journalism without managing journalism.

Initially, polls ran strongly in favour of the government forcing Big Tech platforms to share revenue with Canadian news publishers. But that support took a hit when the platforms introduced consequences in the form of Meta’s blackout of news and Google’s threat to do the same.

From that sequence of events, an observer could conclude that a firm majority of the public favours state action to aid news journalism—provided it doesn’t cost us more. This is not unlike previous polling showing public support for sensible policy goals like supporting “Canadian content” in media but paired with strong opposition to the notion that consumers foot the bill for that. Even a public policy as banal as charging sales tax on Netflix subscriptions barely garnered majority support in polling.

News journalism is a public good—both in the sense that Canadians value its importance, but also in the sense that Canadians prefer to consume it without paying. Mass media’s iron grip on the advertising market allowed for free or nearly free news content for decades until it was disrupted by waves of market fragmentation beginning in the 1990s. Today, only 15 per cent of Canadians pay for online news. If local news weren’t included by CRTC fiat in the basic cable TV subscription, we might discover something equally discouraging.

The biggest obstacle, then, to a successful public policy in news journalism might be our stubborn desire that someone else pay for it.

How we devise a national news strategy while conceding that reality is our task. I was pleased to read a valiant attempt at this by Peter Menzies and Konrad von Finckenstein who, in And Now the News, come down decidedly against direct subsidies (except for CBC with a refreshed mandate) and in favour of tax incentives supporting reader subscriptions and enterprise innovation. Responding to their report, Ivor Shapiro and myself didn’t endorse phasing out subsidies, but we did offer support for creating new policy tools and putting them to the work.

If federal MPs really desire a national discussion of a news strategy, let’s give it to them.

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