The ad war: How to overcome the Canadian journalism problem 

The news industry is ever-changing. And according to Christopher Waddell, a professor emeritus and former program director for journalism and media production and design at Carleton University, traditional media outlets might be forced to adapt to a world that no longer wants newspapers. 

In fact, the community print media industry is approaching market failure, according to a recent report and open letter to Prime Minister Justin Trudeau released by News Media Canada, a trade association for news organizations, on June 9. 

Canadian news outlets are having profits undercut by big tech companies’ control over the online advertisement market. As a result, Canadian media outlets are producing less content, leaving important issues unreported by reliable sources. Without the government intervening, journalists must find a way to recoup lost advertisement revenue, or drastically overhaul how Canadians report the news.

Journalism’s money problem

One of the biggest challenges Canadian news organizations face today is not receiving the entirety of the revenue made from advertisements on their online articles, according to Daniel Bernhard. Bernhard is a spokesperson for FRIENDS of Canadian Broadcasting, an advocacy group that works to protect Canadian media and journalism. 

“We have a phenomenon now where the people who produce the news don’t get paid for it and the people who get paid for it don’t produce it,” Bernhard said.

Advertising revenue and subscriptions are the main source of income for news outlets, according to the report by News Media Canada.

“It used to be the case that journalism was financed by advertising—media companies would sell ads and they convert that money into news,” Bernhard said. “Now, all the ads go to Google and Facebook.”

Canadian media companies are relying more and more on advertising revenue from the internet for their funding as time progresses. In 2019, internet advertisements made 58.1 per cent of all advertisement revenue for Canadian media companies—a far cry from the 8.9 per cent it accounted for in 2006, according to a series of reports by News Media Canada and the Interactive Advertising Bureau of Canada.

But while online advertisements are becoming a bigger and bigger slice of the revenue pie, the whole pastry is crumbling.

Eighty per cent of the advertising revenue Canadian publishers would make from the internet is going to Google and Facebook, according to an open letter by News Media Canada chair Jamie Irving.

Because news organizations are relying more heavily on online advertisement revenue than ever before and tech companies control that revenue, publishers across the world are suffering, according to News Media Canada. 

Google controls the “ad tech stack,” according to News Media Canada’s report. This means Google acts as a middle-man selling advertisement space, allowing the tech company to control the prices of and the profits from advertisements online.

“I think it’s very important that this distortion in the ad market be corrected,” Bernhard said. “It’s an artificial distortion and we need to fix it, or at least redistribute some of the money, so that journalism can continue to happen.”

A suffering Canadian news ecosystem

Despite calls from groups representing Canadian news and broadcasting organizations, the Canadian government has not brought legislation to the House of Commons to prevent tech companies from profiting off of Canadian content.

The House of Commons had its last sitting on June 23 and adjourned until Sept. 20. If an early election is called this fall, government action to protect Canadian media companies could be put off until 2022. 

The possible delay in action could have severe implications.

Canadians will not be able to get reliable reporting on as broad a range of issues from traditionally trustworthy news organizations if Canadian media outlets lose funding, according to Waddell.

“We’ve seen [Canadian media] attract fewer reporter positions, fewer editors positions, fewer people and generally covering a less broad range of things, so the industry is contracting in that respect,” Waddell said.

David Larose, a spokesperson for the Department of Canadian Heritage, wrote in an email to the Charlatan saying that the department recognized the issue in the news industry.

“The health of the Canadian news and information ecosystem is at risk,” Larose wrote. “With Canadian news outlets and journalism jobs shrinking and disappearing, the diversity of available news sources is impacted.”

Bernhard said the loss of revenue by Canadian publishers threatens the public’s access to reliable information from trusted sources.

“As a society, we should be particularly concerned about new publishers because their work is vital to the functioning of a healthy democracy,” Bernhard said.

Paul Deegan, CEO of News Media Canada, agrees. Quality journalism is essential to upholding democracy by keeping the government and other large institutions accountable in Canada, he explained. The loss of advertisement revenue for publishers means less quality information will be available for Canadians about Canadian issues. 

“If you look at democracy and the important role that journalists play, they’re a critical element in terms of holding people to account,” Deegan said. “Real news costs real money … It is expensive to produce news.”

The agreements and legislation in the works

While the Canadian government has not put forth legislation to protect Canadian media, it announced a $1.9 billion commitment to help the Canadian arts, culture and media sectors recover from the COVID-19 pandemic on June 28. 

According to a government statement, this includes $10 million over two years to help Canadian media companies hire journalists from underrepresented communities and $10.5 million to support the production of local news across Canada.

Google has also announced a commitment to supporting local news publications around the world through Google News Showcase. News Showcase is a “licensing program to pay publishers for high-quality content for a new news experience,” vice-president (product management) Brad Bender said in a statement.

The program is part of Google’s commitment to ensuring publishers can continue to report on the news and profit from content, according to Bender.

According to Masthead, eight Canadian news organizations including the Globe and Mail and Black Press Media have signed confidential agreements with Google for their News Showcase feature. This means Google will pay the news organizations for articles that would normally hide behind a paywall and display them through News Showcase. The deals will also allow media companies to sell advertising on their articles.

“Market actions that increase support to the news and journalism sector should be encouraged,” Larose said. “But negotiated agreements struck with select news organizations may not replace the need for [more long-term] solutions that would address the needs of the sector as a whole.”

Bernhard said he was critical of these deals because they come before the government can put in place legislation to ensure these deals are fair. 

“In an environment where Facebook and Google have exceptionally greater bargaining power than the people that they’re dealing with, the ultimate results will favour Google and Facebook,” Bernhard said. “Whereas in a system where the bargaining power is much more even, the final deals will be more even.” 

A Google representative could not be reached for comment in time for publication.

News Media Canada recommended for Canada to pass legislation similar to Australia’s Competition and Consumer Act 2010.  

This act expanded intellectual property rights to ensure platforms cannot display content without paying for a license and creating a formal process for media organizations to negotiate with tech companies.

It also ensures that those companies must either reach a licensing deal with news organizations within three months or enter a mandatory arbitration process to negotiate a deal, the outcome of which must be accepted. 

Bernhard said the Australian model will ensure fair negotiations and agreements between local news and big tech companies. 

“[Australia’s legislation] prevents Google and Facebook from setting the rules of the field on their terms and empowers publishers to get a fair price for their products,” Bernhard said. 

The Toronto Star recently reported that Heritage Minister Steven Guilbeault said he hoped his department would have legislation to protect Canadian media industry organizations by mid-summer 2021, yet no such legislation has entered the House of Commons. 

The only change the department put forth this summer is Bill C-10, which was under review by the senate. The bill would allow the government to regulate online content in cases of discrimination and mandate streaming services make a variety of French and Indigenous languages available on their platforms.

The bill does not address journalists’ struggle for advertisement revenue online, but according to Larose, the federal government is researching how to remedy the issue with legislation.

“[The department wants] to ensure that any benefit derived by digital platforms from hosting Canadian news content is fairly shared with Canadian news creators and media,” Larose wrote in an email. 

Bill C-10 did not pass through the senate before adjournment on June 29.

A look ahead 

Not all industry professionals believe the government needs to step in to save contracting media companies. Waddell said the contraction of Canadian media companies forces news organizations to adapt and innovate their content to meet newer consumer needs. 

“Clearly there’s something wrong with the product that’s being produced because the public is not as interested in it as it once was,” Waddell said.

While traditional news media organizations suffer a large loss in advertising revenue, Waddell said smaller, more niche and in-depth journalism producers thrive because they are creating content people are willing to pay for through subscriptions.

“There are smaller news organizations that are actually growing and doing quite well but those tend to be organizations that are more narrowly focused on one or two themes or issues and are not trying to give an audience everything,” Waddell said.

While the fall of traditional news media might make way for new forms of more thorough journalism, Waddell said the loss of a public forum is still an issue.

“News organizations used to be the place where people exchanged ideas and argued things out and decided what was appropriate public policy,” Waddell said. “It’s harder to have debates about general interest and public policy questions with niche audiences that don’t care so much about them. [Canadian journalists] haven’t figured out how to deal with that yet.”

Waddell said one option to protect Canadian journalism is for the government to introduce a digital services tax on companies such as Google and Facebook. Then, if necessary, the government could choose to use that revenue to aid publishers.

“I think [big tech and media organizations] should be treated as two separate things. If the tax that Google or Facebook pays goes into general revenue, then the government can decide what it wants to do with it,” Waddell said.

Whichever plans are implemented, Bernhard said the government needs to strive to protect Canadian journalism.

“It’s an essential mission,” Bernhard said. “When your toaster breaks, you don’t get toast. When journalism breaks, you don’t get democracy, and that is a big problem.”

---

Featured graphic by Sara Mizannojehdehi.