Okay, thank you.
Good morning from Edmonton, Alberta. My name is Duff Jamison. I am the president and CEO of Great West Newspapers, which publishes 18 newspapers in Alberta. In my role as government affairs chairman, I am representing the Alberta Weekly Newspapers Association today, and I have with me Dennis Merrell, our executive director.
Community newspapers seem to be flying under the radar in the discussion about print media's future. Although they look and feel the same as our larger metro daily cousins, we have some unique qualities that differentiate us.
Print advertising remains the mainstay of any newspaper model, daily or weekly. Community newspapers rely primarily on local businesses, community organizations, schools, and local government, and somewhat less on national advertising and classifieds, which were once the major revenue streams for the dailies. I'm not suggesting that national advertising isn't important; it most certainly is, and this category for us and for the dailies has experienced the greatest decline over the past years.
The majority of community newspapers tend to free distribution and total market coverage. As a result, distribution of advertising inserts has become an important and reliable revenue stream for all of us. Community newspapers generally serve market populations of less than 100,000, and the majority would be well under that. We are the original hyper-local guys providing the primary source of local news for our residents in a very cost-effective means for local advertising.
Our once or twice per week frequency also distinguishes us from our daily cousins. Our news is rarely of the breaking-news variety, and our readers seem comfortable with the fact that it's not available in print every morning. They need and want to know what's happening in their community, but they don't demand it the minute it happens. When it is important to get the story out quickly, we are all quite capable of doing that on our digital platforms. We may lack the digital horsepower of, say, The Globe and Mail, but we're certainly not in the dark ages either.
Free content—the nirvana of the digital age—is old news in the community newspaper industry. Although many paid subscription weekly newspapers remain in small markets, in the larger markets we've long delivered community news free to our residents, paid for by our advertisers wanting total market coverage. Paid circulation dailies, on the other hand, have experienced a significant decline in print penetration as subscribers drop off because national and international news is so freely available online.
The real secret sauce of a successful community newspaper is operating like it's community owned. It's not an arm's-length operation, as can be the case in a daily, but is in the trenches as active participants in our communities, a service club of sorts, really. I often tell our local politicians and community leaders that, like them, we are in the business of building stronger and healthier communities for everyone. We are fully integrated into the community, leaving no doubt in anyone's mind that we have the best interests of the community in mind. When done right, the newspaper earns credibility and respect among its readers and their support when we criticize leaders and institutions that we feel have let the community down.
What is the current picture for community newspapers? Print advertising revenues, far and away the largest source of revenue for Canada's community newspapers, are in decline. Digital advertising revenues tied to our news reporting remain insignificant simply because community newspaper websites and social media feeds do not generate the traffic required to cover the reporting costs. It's not even close today, and we don't think it will be in the foreseeable future.
There are opportunities in providing advertising services on non-print or digital platforms: social media, search, and geo-targeting, and community newspapers are pursuing them where they see benefits for their communities and their customers. It's still to be proven, however, whether a small market can generate sufficient digital profits to support local journalism, and I have to admit that the idea of operating a secondary business to support the news reporting functions of the primary business doesn't feel quite right.
Subscription and newsstand revenues are an important source of revenue for a declining number of paid circulation community newspapers. However, with circulations of less than 5,000 and subscription rates of about $50, these also fall well short of covering reporting costs. Paywalls help to protect this revenue, but also reduce online traffic and digital advertising revenue with it. It's very difficult to see a point at which print advertising revenues will not be the major revenue contributor for even paid circulation community newspapers.
There's no reader revenue in a free paper, and most community newspapers in Canada are not paid for, leaving them to rely entirely on advertising to pay the cost of reporting the local news.
These papers tend to be in larger markets, often on the periphery of metro areas also served by dailies and other media. For that reason, no Canadian community newspaper has been able to maintain a paid circulation in the metro markets. We also require total market coverage to satisfy the market penetration needs of our advertisers, both in print and in inserts.
Not often mentioned in the discussion is that many local advertisers and organizations remain dependent on local media to reach local residents and consumers. In most communities under 100,000, print media deliver the largest audience by far. Although most small businesses have websites, Facebook groups, Twitter feeds, etc., it has proven very difficult to build any real mass of followers. Therefore, without the market penetration of local media, most would find it extremely difficult, if not impossible, to reach the vast majority of local residents.
On top of their marketing needs, these businesses have their own challenges brought on by globalization and the digital revolution. Online competitors, among them Amazon and mega-retailers like Walmart, threaten the very viability of these local businesses, which are the foundation of advertising support for community papers. Just as is the case with local media, government, and a well-functioning democracy, the threat to local media's long-standing symbiotic relationship with local advertisers goes much deeper than print media's problems.
Community newspapers, like all media, must compete for the readers' time. We know that time is finite. Time spent on digital devices is made up by reducing time spent on other activities, including reading, watching TV, listening to the radio, etc. Unfortunately, it is not always productive time—things like Candy Crush, Pokémon, and cat videos come to mind—yet somehow publishers must navigate through the clutter to deliver the local news.
Most worrying of all is that it seems fewer and fewer people really give a damn. It brings to mind the old saying that they won't miss us until we're gone. In our affluent western societies, for the most part, people are content with their lives and disengaged from politics to a large extent. Their complacency—and for some, disenchantment—is evidenced by low voter turnouts and lack of interest in joining community and civic organizations created to build better communities. It is unlikely that the general public has given much thought to a world without media watchdogs.
Does government have a role? It probably does. Here are some ideas we should all think about.
The federal government could replenish its print advertising budget. While local governments remain solid advertisers, federal and provincial advertising has nearly dried up. A decade ago, the federal government spent 47% of its ad budget on newspapers: 28% on dailies and 19% on community, ethnic, and aboriginal weeklies. In the 2014-15 fiscal year, it spent 7% in total on newspapers: 1% on dailies and 6% on weeklies. In that same period, the spending on Internet companies rose from 6% to 28%. Most of that money went to U.S. firms, such as Google.
Simply having the federal and provincial governments make a serious commitment to include community newspapers in advertising budgets would go a long way toward supporting local journalism. As the publisher of the Rainy River Record in Ontario said to a CBC reporter this week about the closure of his paper next week, the government's decision to pull its advertising budget from newspapers and spend it on social media has made a big difference.
The tax system is another source or possibility. Is there a role for the tax system, as suggested in a recent Quebec report and advocated by some groups appearing before the Canadian heritage committee? Could Canadians buying subscriptions to Canadian media claim tax deductions on the same level as they do for donations to political parties, a 75% rate? Is there a way for the federal government to encourage Canadian companies to spend their advertising dollars here? This could be in the form of tax credits or penalties for using foreign firms, as we see in the Foreign Publishers Advertising Services Act. The Income Tax Act limits non-Canadian legacy media, but this has not been applied to digital enterprises. Tax incentives could be created to encourage investment in newspapers and other local media. Instruments could include—