Canadian Heritage Committee on Nov. 15th, 2016

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

If digital ad revenue isn't enough to maintain operations....

Mr. Crawley, you mentioned a subscription service, and that you have 150,000 subscribers but it's declining.

Presumably you don't have subscribers, VICE, for the millennials.

Do you have a sense of the age of your subscribers and the drop-off rates going forward?

[Phillip Crawley]

Sure. The print subscribers, yes, are in a slow decline, but digital subscriptions are in a rapid growth. People are paying for digital-only access. A lot of people choose to have both. They would like to be able to read print as well as digital, and that's another subscription offer. We like that. We like the fact that people want to access content on a variety of platforms. We assume that there will be new platforms not yet thought of that we will have to be serving within the next several years. We just have to keep pace with the technology.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

In the minute I have left, Mr. Crawley, Mr. Lilley had mentioned a little-to-zero role for government. If we add up visual ad revenue and print revenue as it declines, and you take your subscriber base and that increase in digital subscriptions, what is the role of government, then, in terms of funding? You mentioned at the outset the U.K. and perhaps funding very local operations that are unable to make a sustained market presence. Do you see that being the role, or is there a role for government support across the board?

[Phillip Crawley]

I think there is a role for government to...the comments of my colleague Mr. Lilley here, there is a role for less regulation than sometimes you might want to apply.

Let me give you an example. Newsletters are a very popular, addictive form of content delivery that we now have success with: political newsletters, business, personal finance. People get into the habit of reading them every day. However, one of the things that's being worked on at the moment is new rules, potentially, on CASL, on effectively spam. I've looked at those rules. Inevitably they are being drafted by lawyers. They are hugely cumbersome. They would not help the creation of newsletters.

I just think we have to be real about the business issues here. You can devise all kinds of provisos around how people might receive spam, but effectively if it stops you also developing and reaching customers with newsletters, in my mind that's not a good thing.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

I'm out of time.

[The Chair, Liberal, Hedy Fry]

Mr. Breton.

[Pierre Breton, Liberal, Shefford, QC]

Thank you.

How much time do I have left, Madam Chair?

[The Chair, Liberal, Hedy Fry]

You have about two and a half minutes.

[Pierre Breton, Liberal, Shefford, QC]

Great, thank you.

I will start with Mr. Martineau.

In my constituency in Granby, there is a different business model, at radio station M105. The model has been developed in the form of a cooperative. We are very proud of it in Granby and I believe that the business model works well. The station apparently gets a lot of listeners. For the people, it is a way of getting information about what is happening locally in all kinds of areas. I will have an opportunity to meet the new managing director soon.

Could you tell me about the future of radio in general, in Quebec and in Canada? When Mr. Nantel asked a question earlier, your answer was that advertising revenue is going down year after year. That is a concern, given that your living depends on advertising to a considerable extent.

[Pierre Martineau]

Let me give you a very striking example. In September and October this year, there was $600,000 less in radio advertising in Quebec City than last year. That involves a dozen or so radio stations. Is that a question of the economic climate? Will the situation be the same in the coming months or is it simply temporary? I do not know.

You are asking me an extremely broad question and my answer is simply that it is all about the survival of the fittest. Unfortunately, the others will disappear.

You also brought up that station in Granby that, in a way, can be called a community station. I believe that the model really is a good solution for smaller communities. My younger son works for one of those stations in a small market, in Joliette, actually. In that case too, the station works extremely well. Ratings are very good. The station broadcasts local information. I think that, in small communities, it has a lot going for it.

As for the future of radio, I think the situation is going to be favourable as long as conventional radio can be received in cars. However, when Internet radio appears in cars, which should not be long, we will have to ask the question again.

[Pierre Breton, Liberal, Shefford, QC]

Thank you.

Mr. Dumas, could you repeat the figures you mentioned earlier? You did not speak for very long and things moved along quickly. Mr. Nantel said the same thing, I believe.

The regions seem to have less and less weight in the media landscape. I find that a concern. Could you remind us of the figures and tell us what you feel the repercussions will be?

[Jean-François Dumas]

I will be able to email you all the figures in a few hours. You can distribute them to your colleagues.

[Pierre Breton, Liberal, Shefford, QC]

Thank you.

[Jean-François Dumas]

In connection with what Mr. Martineau said, radio plays such an important role in the regions that it has become the main information vehicle there. That is not so nationally. So radio plays a very important role in the regions. It is essentially what creates the media dynamic in the regions.

Let me go over the data that we were talking about earlier. Actually, 88% of regional information has disappeared in the last 15 years. For example, it really is a great concern to see that, across Canada, the media interest in all francophones outside Quebec has a space that is the equivalent of the horoscope. That is 49%—

[The Chair, Liberal, Hedy Fry]

Mr. Dumas, excuse me, but we have gone to eight minutes now. You have been asked by the committee to send particular things to the clerk on some issues, so could you send that regional breakdown when you do so?

[Jean-François Dumas]

Yes, of course, Madam.

[The Chair, Liberal, Hedy Fry]

Mr. Gruzuk, you were also asked to send particulars to the clerk. Would you please do that as well? We will be looking forward to distributing it to the committee.

I have one quick question. You talked about the fact that The Globe and Mail has been moving forward and doing quite well, that while actual print newspaper is decreasing, your digital reach is increasing. However, you then pointed out that small devices don't give you the same kind of revenue that larger devices do. If the trend is to small devices, does that negate the idea that your digital reach will improve, or will it decline?

[Phillip Crawley]

It's more to do with the ad revenue rather than the reach. People's preferences for reading on those devices won't change; we just have to be better at delivering. We're working constantly to improve our speed. On a device like that, if you don't capture people's attention in the first second or two, they go to something else. The ability for us to serve our content on those mobile devices as fast as we can, in a way that is acceptable to the customer, is really what we're all about.

[The Chair, Liberal, Hedy Fry]

What will that do to your revenue stream?

[Phillip Crawley]

We will find better ways of doing it, which will help the advertising revenue. However, as you know, the big global players soak up a lot of that digital revenue anyway. We're playing for much smaller percentages of the pie.

[The Chair, Liberal, Hedy Fry]

Thank you very much.

I want to thank the witnesses for being here and presenting to us. I'm sorry we didn't have more time to explore some of the things that I know we all want to explore with you.

Committee, we will take about two minutes for one group to leave and our next witness to come forward.

[The Chair, Liberal, Hedy Fry]

We will begin the second round.

We have one witness. From Google Canada we have Mr. Gingras, the vice-president.

Mr. Gingras, thank you for coming. I want to tell you how this works. You have ten minutes to present, and then there is a round of interactive questioning. I will give you a heads-up when you have only two minutes left.

Please begin. Thank you.

[Richard Gingras, Vice-President, News, Google]

Thank you very much.

Madam Chair, you used the more authentic pronunciation of my name. I am Québécois by heritage. I can only apologize, however, that my facility with French is not good enough for today's hearing.

I'm vice-president of news at Google. I oversee all of our Google news products in our different consumer experiences as well as our publisher partnerships.

At the beginning of my career in the 1970s, I worked for the Public Broadcasting Service, PBS, under Hartford Gunn, its visionary founder and president. There I was involved in several pioneering technology efforts, including the creation of the PBS satellite network and building the first interactive information service using broadcast teletext.

Along the way, Hartford taught me a key lesson that has guided my career and that I believe is particularly relevant to our discussion today. He said:

Richard, if you want to influence the evolution of media, focus on the technology. Technology changes the rules of the game. It reconfigures the playing field. If we can stay on the cutting edge of technology, and apply that technology to good and proper use, we can have an enormous impact on what we do and what we achieve with media.

Given the extraordinary changes in the last 25 years, Hartford's guidance seems prescient to the point of being obvious, and is largely why we are sitting here discussing the future of local news today. The ubiquity of the Internet has changed the business of everything.

Media is at the forefront of this change. People are consuming more news and information than ever before, and more content is being produced than ever before. The open ecosystem of the web has enabled many new voices, from news sites to job-listing sites to Wikipedia, from a million blogs to a billion social posts. It has also enabled traditional media, like The Globe and Mail and the Toronto Star, to reach global audiences.

The Internet has brought great value to users around the world. It has brought impressive new opportunities for expression and commerce. It has also brought challenges to businesses and media companies born in the pre-Internet era that now must adjust their products and strategies to the new and different opportunities of this new digital world.

Google has had the good fortune to develop popular products based on the open web. Throughout the day, Google Search is used to seek the right answer to queries in the web's one-billion-website corpus of expression. Google sends billions of users to news publisher websites every month. Google's ad platforms are used by millions of publishers, large and small, to help drive revenue and grow their businesses. Google is a company born of the web and is fiercely dedicated to maintaining the web's openness, richness, and diversity.

We believe that Google and publishers share a common cause. We both value and depend on an open platform for free expression and knowledge. We both want to connect people to information. But the open Internet challenges us and our understanding of the economics of information. Take the example of a large city newspaper in the United States in the 1990s, a two- to five-pound bundle of newsprint with a tremendous value proposition to its readers: local and national news, a fashion section, a lifestyle section, an automotive section, and classifieds. In 2016 every section of that newspaper is faced with the competition of a rich array of web-based offerings in each and every category.

With more than 75,000 sources in Google News, for instance, including almost 2,000 Canadian sources, of which about one third are French, local news remains a market differentiator. The local section in Google News surfaces content from regional newspapers to hyper-local blogs that otherwise wouldn't appear. Google News includes a “local source” tag to showcase local coverage of major stories, coverage that's relevant to those local communities.

But what is the business model? We need to unlock new revenue streams and new business models. In Halifax, there is the example of Local Xpress, a news site founded by the journalists of The Chronicle Herald who've been out on strike since January. The site is dedicated to local news. In under a year it has grown tenfold, achieving a peak of 300,000 page views per week. It uses free collaborative tools like Google docs, and is monetizing and growing its news offering. Born out of labour strife, the managing editor now describes Local Xpress as one of the most future-forward enterprises in the Canadian media landscape.

Google is committed to helping publishers succeed. The future of Google and the future of news go hand in hand. We want publishers to grow their businesses and be able to succeed on their own terms. We have developed our entire business on creating value in the ecosystem for publishers. We do this by driving revenue. Globally, we shared more than $10 billion with our publishing partners on display advertising revenue of $15 billion. That's roughly 70% of the revenue directly into the pockets of publishers. We lead and support publishers through initiatives that tackle key issues addressing the industry, like mobile latency and ad blocking.

It was those two issues that led Google and three dozen publishers from around the globe, as well as technology providers, to develop a collaborative effort called the accelerated mobile pages project, or AMP. Research shows that 53% of users abandon a site if it takes longer than three seconds to load. The web today is not instantaneous, and it needs to be. Advertising on the web is too often not respectful of the user's experience, and it needs to be. On average, AMP pages load in less than a second. We've seen AMP adopted by Canadian news organizations and 700,000 domains around the world. We're only a year into this effort, but Canadian publishers are sharing data of increased audience loyalty, and we're seeing strong indications of how AMP can grow revenue.

The digital revolution has changed how we communicate, how we express ourselves, how we learn about the world around us. Yes, there are challenges, but I and my colleagues in the room today are passionately optimistic about the future of news. There are so many new tools and capabilities to take advantage of. There is so much impressive digital work being done that one can easily conclude, as I have, that we are in the early days of a renaissance of journalistic creativity.

Let me conclude by saying that I am eager, Google is eager, to continue to collaborate, to work together, to drive innovation and the experimentation that is so important to building long-term success.

I thank you for the opportunity to speak to you today, and I'm happy to answer your questions.

[The Chair, Liberal, Hedy Fry]

Thank you very much, Mr. Gingras.

I just wanted to point out to the committee that in the room are Jason Kee and Aaron Brindle, who are also here to answer questions, depending on what the questions are.

Before we begin, Mr. Gingras, I want to tell you about the question and answer period. We will enter into a seven-minute round in which everyone will ask you questions and you will answer. That's included in the seven minutes, so as I always say, I'm hoping that everyone will be crisp with their questions and their answers. Thank you very much.

I will begin with Mr. Seamus O'Regan from the Liberals.

[Seamus O'Regan, Liberal, St. John's South—Mount Pearl, NL]

Thank you.

Thank you very much, Richard. Thank you for taking the time to be here. It was really felt to be important by the committee that Google be represented here. With much of the ground we've covered, all roads seemed to lead to you, and to Facebook particularly.

To set the stage, of course—these are things that you know but others may not be aware of—Alphabet, Google's parent company, is now the world's largest media owner, and increasing. It is 136% bigger than Disney, which is second, and bigger than Disney and Comcast in third combined. As well, 12% of all global media spend is through Google and Facebook. So it's a lot of money. That seems to be the issue for many of the newspaper owners, even the ones who appeared here only a few moments ago.

I guess this is what we're trying to get our heads around. What's interesting is that this is not a Canadian problem, per se. America is unique in very many circumstances. However, when we compare ourselves more accurately to countries in Europe, Australia, or New Zealand, we see very common things coming from their parliaments as well.

A report just came out the other day from the Media Reform Coalition and National Union of Journalists. They want to make Google and Facebook fund public service reporting in Britain. They said:

...Google and Facebook are not only amassing eye-watering profits and paying minimal tax in the UK, they are also bleeding the newspaper industry dry by sucking up advertising revenue. As national and local newspapers try to cut their way out of trouble by slashing editorial budgets and shedding staff, journalistic quality is becoming a casualty. Public interest journalism in particular has been hit the hardest as newspapers are being lured into a clickbait culture which favours the sensational and the trivial.

I can tell you, as a national reporter, I was often brought into clickbait and the need for that in order to maintain eyeballs on the more serious matters that might be on our program.

The report went on:

In the light of this, we propose a 1% levy on the operations of the largest digital intermediaries with the resulting funds redistributed to non-profit ventures with a mandate to produce original local or investigative news reporting.

I have no idea; I'm reading this out loud, and I have no idea if that's the answer. Whenever I see “1% levy”, I don't necessarily think that's a good thing, but I do have to ask you that question. As you said, and it seems we're at this turning point, we're at a renaissance of journalistic creativity.

On the other hand, David Simon, the creator of The Wire, when he appeared before Congress on this issue, said we are heading towards a golden age of political corruption because there are no small newspapers covering municipal politics where decisions are made on property, where decisions are made on development. That's his big concern.

Help me, in the limited time we have here, to square that circle. I also would really appreciate it if you could tell me—I mean, this is stuff you've heard before—what answers or what agreements you have come to with other jurisdictions, the European Union and otherwise.