Federal government media fund will stop innovation in its tracks

A controversial media bailout plan came under fire again on Monday in the House of Commons. THE CANADIAN PRESS IMAGES/Lars Hagberg

What will it take to make the A-list in Canadian media? Answer: the government’s blessing.

As per the spring budget, a cabinet-appointed group will put together a list of “qualified Canadian journalism organizations” eligible for tax breaks and payroll subsidies, and whose subscribers will also benefit from a tax credit of up to $75 a year.

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This week, the Senate held hearings on just what this would mean for media — and as reported by Blacklock’s Reporter, the testimony is not reassuring.

“The rules themselves allow for the publication of a list of qualifying journalism organizations,” said Trevor McGowan, director general of tax legislation. “It would allow for, say, the Canada Revenue Agency to have a list saying here are the organizations that qualify for the digital tax credits. You could go to that list.”

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And the qualifications will be determined by the state. “The government will decide whether or not to change certain criteria,” said Maude Lavoie, Finance Canada director general of business tax programs.

All this, neatly tucked into the omnibus Budget Implementation Act, where it won’t receive separate debate or scrutiny. That concerned Conservative Senator Raynell Andreychuk, chair of the foreign relations committee.

“To me, it’s very dangerous ground, and it shouldn’t be through a tax credit,” she said. “It should be wide open as a debate for Canadians, whether this is the way to support a freer press, a press that’s struggling against bloggers and the new internet systems, tweets and whatever else. I think it’s a bigger national debate than a question tucked into a tax bill.”

(As a broadcaster, Corus Entertainment, the parent company of Global News, would be excluded from the funding criteria.)

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It should be a huge debate — and yet it’s receiving little attention. That’s likely because the forum for discussion – the media — is the very community that stands to benefit from the government’s largesse. From 2020 to 2024, news organizations “primarily engaged in the production of original written news content” will be eligible for a total payout of $360 million. Publishers can claim a 25 per cent payroll tax credit on salaries up to $55,000. That’s a juicy $13,750 per newsroom employee, retroactive to Jan. 1, 2019. For papers hungry for cash, and journalists hungry for jobs, that’s a lot of incentive to stay silent.

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And that’s the problem, particularly on the eve of a federal election. Who’s going to bite the hand that feeds them — especially if they depend on a cabinet committee’s good graces to be on “the list”? Worse yet, since that list will be public, it will encourage readers to subscribe to its publications. It’s like a preferred providers list — except here, the commodity is news. And the implications for press freedom are enormous.

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If a journalist uncovers the next SNC-Lavalin story, will his or her newsroom let them break it? If an investigative unit uncovers corruption in government, will it see the light of day? Will whistleblowers and anonymous sources trust the media to keep them confidential — or even to publish their stories?

“In the countries I’ve worked, survival for a lot of people to get their information meant they had to go to the government,” Andreychuk said. “Sometimes we look the other way and we wake up and find there is manipulation of the press.”

A list is also a barrier to competition — and could ossify the Canadian journalism landscape. Since the available funds are not endless, the list could not be either. Those initially on the list could exhaust the funding pool, creating a huge barrier to new entrants, who would neither be able to compete for talent (because listed publications would have salary subsidies, and could pay more) or attract subscribers (because they could get a tax break from a listed competitor). So forget about starting up the next Huffington Post. Or, more likely, a publication with a different political slant from the government of the day.

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On the other hand, the list itself might be very short. According to the budget bill, organizations “carrying on a broadcast undertaking” will not qualify for the tax credit. But what does “broadcast” mean today? In 2019, every print newsroom is also a broadcaster of sorts. Video is an integral part of the news mandate: internet sites are replete with video clips augmenting print stories, and vice versa. Would this disqualify publishers — or would it create a backchannel for “broadcasting” online to be exploited by savvy news organizations? Either outcome means that instead of focusing on producing quality content, the news business will be focusing on how to qualify for government aid instead.

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And what happens in 2024, when the aid is supposed to end? You can bet your bottom dollar it won’t. News organizations, media unions, journalists in fear for their jobs — all will lobby the government of the day to keep the cash flowing. And in fear of their wrath, the government probably will.

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This is the wrong approach. News organizations need to find new ways to monetize their content to survive. And they are doing so. Some are eschewing government help and focusing on advertising and increased reach.

Others, like the Globe and Mail and Toronto Star, have set up paywalls. Forbes Magazine is reporting that “micropayments” — allowing readers to pick and pay — might be the way of the future.

All of these must be explored as potential avenues for media. Government subsidization of the “news” would stop innovation in its tracks. If necessity is the mother of invention, subsidies are the murderer. And it will be the government wielding the axe.

Tasha Kheiriddin is the founder and CEO of Ellipsum Communications and a Global News contributor.


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