Canadian Heritage Committee on Jan. 31st, 2017

[The Vice-Chair, NDP, Pierre Nantel]

Good afternoon. I call this meeting to order. I will chair the meeting in Ms. Fry's absence.

For technical reasons, I will speak English. In this way, the witness will hear what I have to say in his own language.

Mr. Greenspon, no worries, I'll speak English. It's no issue at all.

Thank you very much for your presence here. I can tell you, having gone through the report, that we are very grateful, since it's a very complete study.

We had prepared for you to speak for about 10 minutes, and obviously we may have tons of questions for you, but if you feel that you need to speak for longer than that, I think I'll let you go through your presentation, no matter the time, if people agree with me.

We have consent on this.

Please go ahead with your presentation. Thank you very much.

[Edward Greenspon, President and Chief Executive Officer, Public Policy Forum]

Thank you, et merci, Monsieur Nantel. I will say that you're a more generous chair than some, because I was told that I'd have five to six minutes, so my presentation will perhaps be shorter than 10 minutes and not longer than that.

In any case, I am pleased to be with you here today to speak about the “The Shattered Mirror: News, Democracy and Trust in the Digital Age”. I'm joined by two of my colleagues from the Public Policy Forum: Claude Lauzière, who is one of our policy leads at the Public Policy Forum, and Carl Neustaedter, who is our director of communications.

The Public Policy Forum is proud of its consultative process and of the report it produced.

But we're not the Standing Committee on Canadian Heritage, and so I think all people who care about the state of news in Canada have high hopes for your deliberations over the next while.

I am struck, as I'm sure you all are, by how increasingly important the questions of news and democracy look with each passing day. Last week we saw more layoffs at Postmedia. Over the weekend we were reminded of the importance in the United States of a free and strong press. The coverage of the terrible shootings in Quebec City speaks to the need for reliable news and the role of news in communities seeing themselves reflected in their communities.

I know that we do not have much time, and that you have had an opportunity to read the report, or the media coverage of the report. I will take five minutes or less to guide you through some of our twelve recommendations.

I'll spend one minute on analysis, and I'm happy to answer questions.

As you'll see, there's a long diagnostic section at the beginning of the report.

On the analysis, I think we've documented fairly convincingly not just the sharp decline of revenues in the traditional media, especially in newspapers and increasingly in local television, but the fact that there's an unsustainable acceleration of this downward trajectory. Perhaps more disturbing to me in our study was the absence of indicators that new digital-only news operations have the capacity to fill this growing democratic gap.

Several of our recommendations are, I believe, simple enough.

The first is rectify the perversity that Canadian companies are charged sales tax on digital advertising and subscription sales but foreign news companies are not. We believe that's simple enough to address, and 20 to 30 countries have already done so.

Two, address the lack of clarify that inhibits philanthropic organizations from investing in journalism in Canada.

Three, bolster the “informs” part of the CBC/Radio-Canada mandate in a world with not enough genuine news and increasing volumes of fake news.

Four, remove digital advertising from CBC.ca and Radio-Canada.ca. This is something that they have said they are open to as well now.

We say this not because we think this money will shift to Canadian publishers—which is a bit of a pipe dream, I think—but rather because we think it's good for the CBC not to be distracted from its core mission of serious news by chasing clicks and eyeballs, which has, we believe, more serious repercussions digitally than it has for television.

At the heart of this report is a modernization of section 19 of the Income Tax Act that would rebalance the playing field in favour of news organizations providing original civic news for Canadians. This has several elements, and I just want to go through these, because this is technical in some places. The committee is very familiar with these issues, so I think you will understand it, but I don't think it has been universally understood.

Number one is to extend section 19 to the Internet, a matter that often tends to be treated as a more simple thing than we believe it is. The original sections 19 and 19.1 were intended to change advertising behaviour. It is less likely that behaviour would be changed with regard to digital advertising, and therefore a different approach is required.

The second element is to address the new realities of international trade agreements—when I say new realities, I mean from the 1960s and 1970s ,when sections 19 and 19.1 were introduced—which don't allow public policy to be based on corporate nationality. We've chosen two new criteria: one, that a news organization is subject to taxation in Canada; and, two, that it meets a minimum threshold of journalistic investment in Canada.

Three, instead of either being able or not being able to deduct advertising costs under section 19, we've recommended moving to a 10% levy or withholding tax on distributors of news that fall outside of our section 19 criteria. This borrows from the approach of the long-standing cable levy.

I would say that the penalty of not being able to deduct under section 19 is not something that is used or has been used very often. As I said earlier, those elements were meant to change behaviour, and they did change behaviour. The Internet advertising world is a very different world, a much more complex world. We expect that maintaining those kinds of criteria would be very difficult to administer.

Fourth, we estimate that the 10% levy would produce revenue of $300 million to $400 million a year. This money would go to an arm’s-length future of journalism and democracy fund. We find this approach superior in many ways to tax credits. It generates money to support journalism and digital news innovation from the $5.5-billion digital advertising pie rather than from the government's treasury. The governance structure we have suggested for the fund would keep the government out of decision-making about where the money goes. These are critical points. I am a journalist, like some of you, and I want to keep the government as distant as possible from both supplying money to the fund and disbursing money to news organizations. This was a concern that came across in the public opinion research we did. I think it's a concern that the industry shares. We are trying to develop something that is independent of government once the structure is set up.

Why is this better than tax credits? Tax credits are more prone to politics, we believe, than our proposal. You can see this right now in Ontario, where the newspaper industry is lobbying to be reinstated in the Ontario digital media tax credit scheme. The newspaper industry should not be lobbying government any more than is absolutely necessary. I'd rather it be absolute zero, but certainly they should not be having something, losing it, and trying to get it back again. This is not good for an independent press. Tax credits also tend to reward equally those organizations that spend their money wisely and those with less stellar records of managing their enterprises.

I have been asked in recent days who would qualify for this fund. My answer is that any bona fide news organization can apply. We were very conscious not to be excluding either early-stage news companies that need help to grow or the established news companies that still provide the vast majority of news.

Beyond the application for funds, we hope that this new fund will be more creative than we can anticipate. We have suggested, as well as the application process, four initiatives that the fund would support.

One would be a badly needed local news initiative under the auspices of the Canadian Press, an underappreciated national asset with high standards and good infrastructure.

Two, we favour an indigenous news initiative to cover the institutions and debates of indigenous democracy, particularly on a local level. In our round tables across the country, we were struck by some very small indigenous news operations that were trying to hold indigenous governments to account in the same way that occurs here on Parliament Hill, but that were completely devoid of resources to be able to do it.

Three, we suggest a legal advisory service to bolster smaller news organizations in pursuing investigative journalism. These organizations tend to get chilled very easily by intimidation, and if they go down this route, it's very expensive. We want to create incentives so that they feel freer to pursue more aggressive lines of journalism.

Finally, we suggest that the funds support a research institute. In the course of our research—and I'm sure you've had the same frustration—there are just so many things that seem impossible to find out, particularly in Canada. We don't know how much fake news there is in Canada or where it comes from. We don't know what happens when a community loses a local news organization. We don't know where news originates, as opposed to where we access the news. We don't really understand very well the public attitudes to news, democracy, trust, and other kinds of essential information.

These are some of the pieces we are looking at. I'd be happy to answer your questions.

I was just at a public policy event at the Château Laurier. Steven Chu, the former energy secretary for the United States government, was speaking there. He cited a Chinese proverb that I thought was pretty good: it was that if you don't change directions, you'll end up where you were heading. I think where we're heading at the moment isn't very great.

Thank you.

[The Vice-Chair, NDP, Pierre Nantel]

Merci beaucoup, Monsieur Greenspon. Thank you very much.

We'll start the process of questions from both sides.

Ms. Dabrusin will be followed by Mr. Vandal, if I'm not mistaken.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

Thank you.

I want to start by clarifying who commissioned the public policy report. Can you clarify that for me, please?

[Edward Greenspon]

Yes. “Commissioned” is an interesting verb. I'll clarify this as well as I can.

We were asked initially if we might look into this issue by the department of heritage and by ISED. We said we were very interested in this issue and we would like to do this. We emphasized that we're not a consulting firm, that we are a think tank and a public policy forum, and that anything we would do we would be releasing publicly and that we would take ownership of our product.

In order to underline that point, we said that we would seek other sponsors for the project, so we found three foundations: the McConnell foundation, the Atkinson Foundation, the Max Bell Foundation—and I should say that, coincidentally, all three were funded by one-time newspaper money, when newspapers made lots of money—and four private sector corporations. We wanted to stay away from media corporations, but we found four publicly spirited corporations that were willing to finance this as well, which were TD, CN, Ivanhoé properties, and Clairvest investments.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

Perfect. Thank you.

I was really interested, because I was reading some of the pieces that were put out by journalists in response to this report. I was wondering if you could give me some feedback. Andrew Coyne, in an article, wrote about your report that “It is irreproachably responsible, admirably high-minded, and profoundly wrong.” It seemed, when I read through it, that his most essential concern was that he did not like the recommendation that there be public intervention, that there be that public funding piece. I saw that echoed in a few other articles as well. How would you respond to that?

[Edward Greenspon]

I think there were several journalists who went down that line.

First off, I'd say I don't like public intervention either, but I also don't like media that are losing their accountability and civic responsibilities and their capacity to do that kind of work.

I think that Andrew noted in parentheses in his article that we are friends. We've had this debate off and on for 25 or 30 years. I was familiar with his column. We went to graduate school together. I would just say that several critics, including Andrew, all worked at one time for Maclean's magazine. Maclean's magazine receives funds every year from the Canadian periodical fund. That doesn't seem to impair its ability to be editorially independent. What we are suggesting is much more hands-off than the periodical fund. Ipso facto, I think Andrew Coyne proves the point.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

We have three minutes?

[The Vice-Chair, NDP, Pierre Nantel]

You have four minutes left.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

I will pass it to you.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Thank you very much.

I am interested in your indigenous journalism initiative. You've actually put quite a bit of thought in there, “support and training structure for the coverage of indigenous...institutions”. I believe you are making the recommendation that this responsibility be embedded with APTN, which I'm very familiar with.

You also have this service being financed by the fund for the future of journalism and democracy. Could you tell me a little bit about this fund that you envision? Is it the same fund that you referred to earlier in your presentation? Could you talk a little bit about the entire initiative?

[Edward Greenspon]

It is the same fund. We are suggesting that although the fund would be open to applications—and we would expect applications both for providing more capacity in what we call civic-function journalism and for supporting digital innovation—we aren't in the business of picking which business models are going to win and lose, but I think history's moving in a particular direction, and it's obviously a digital direction. Beyond those two uses, for which organizations or independent journalists would apply to the fund as they would apply to granting councils—with suggestions that we hope would be more creative than any of us around the room are going to come up with—we suggested funding these four other initiatives. An indigenous news initiative is one of the four.

There's not enough coverage of local indigenous democracy or local indigenous governments in the country. APTN has a national mandate, by and large. It's an excellent news organization. We wanted these initiatives to have the benefit of the standards and the cultures of excellent news organizations, like the Canadian Press for the local initiative and the APTN for the indigenous news initiative.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Has there been any consultation with APTN in making this recommendation?

[Edward Greenspon]

Yes. We've had two conversations with APTN. Carl had a conversation with Jean La Rose and Karyn Pugliese, and I had a conversation as well with Jean La Rose.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Obviously this is something that they would like to follow up on.

[Edward Greenspon]

I don't want to imply that they're responsible for this suggestion, but I certainly didn't want to blindside them and hear that no, they think this is a terrible idea. I think they would be concerned about the details and how it would unfold, but they're certainly interested in it conceptually. They're aware of it and interested.

[Dan Vandal, Liberal, Saint Boniface—Saint Vital, MB]

Can you tell me more about the fund for the future of journalism and democracy? You estimate that the indigenous initiative would cost $8 million to $10 million annually. How large would this fund be on an annual basis, and how would it be financed?

[Edward Greenspon]

The estimates for 2016 showed $5.5 billion of digital advertising revenue in Canada. That was up from $4.5 billion in 2014. Of that, we would not be placing this 10% levy on those who pay taxes in Canada or those who invest more than 5% of their revenues into journalistic operations in Canada. I think we can probably safely say that something in the area of $3 billion to $4 billion of that $5.5 billion would be subject to this levy of 10%.

As I think perhaps the committee heard from other evidence presented here, in one of the quarters in 2016, according to a survey done by comScore, of 4.7 billion ad impressions served up in Canada, 82.4% were served up by Facebook and Google. Canadian publishers and broadcasters combined served up 11.5% of the ads in Canada.

In terms of the vast majority of that revenue, some revenue may shift, and we allow that some revenue may shift, but we don't expect a lot would shift, because this is not 1976. This is not moving from advertising on M*A*S*H on CBS out of a Buffalo or a Plattsburgh station to advertising on M*A*S*H on Global TV. It does not have the same simplicity of substitutability that we had back then. We expect that less would shift, and therefore more would be subject to levy. We estimate that $3 billion to $4 billion of revenue would be subject to levy.

If you stayed with the system as it works now, which some people have suggested, to just take away the deductibility, the deductibility effects are 26% on average across the country. We're suggesting 10%; 26% seems to us perhaps confiscatory, in some ways.

Perhaps my colleagues here would—

[The Vice-Chair, NDP, Pierre Nantel]

Thank you very much, Mr. Greenspon.

We'll go to Mr. Van Loan, please.

[Peter Van Loan, Conservative, York—Simcoe, ON]

When Canada was quite young, every journalistic publication, every newspaper, had a perspective. In fact, it went so far that in the campaign handbooks that the political parties provided to their supporters, there would be a list of the newspapers that were acceptable for them to read. The newspapers all came from a perspective.

Then journalism evolved a little bit. When I was in grade 2, we studied newspapers and we were told that it was all objective but that we should be careful not to believe everything we read. Then, a little bit later, they started introducing media literacy courses into schools, because you had to be able to learn to read between the lines and apply critical thinking and so on.

My point is that all these things evolve over time, and I think people have the ability to adapt to these evolutions and sort them out and find their way.

You say here in this report on page 3 in your opening stuff:

The ‘truth neutrality’ of the dominant digital platforms is incompatible with democracy.

I'd say that if somebody was writing 120 years ago, they would say the truth neutrality of all these printed publications was incompatible with democracy because they represented just one view or another, on the extremes.

It's not the technology that's at issue, in my view; it's how people choose to consume and want to consume. Wouldn't it be the case that what you're really talking about here is the public's literacy in the new medium, about how they are beginning to understand—as I think they do, and I don't think you give them credit for this—that everything has to be approached with skepticism? Increasingly, people do. I think I give them credit for that.

A lot of people who are accustomed only to the old traditional media perhaps don't have the same skeptical eye, but I put it to you that younger people do have it and are nicely adapted. Isn't it a question of adapting our media literacy as we evolve to this new technology? We're trying to put our finger in the dike and push a bunch of money through it to keep the old stuff alive. Why would it have any more impact on people than it has over the past several years when they were still fighting?

They're losing their revenue, perhaps. They're not being consumed as much. That model with those old traditional outlets is not working from a business perspective, but if people are looking for that kind of information, surely the same kind of people who seek it will begin to figure out who they want to trust and seek out that information in the new context. Aren't we just going through a dynamic transition? Isn't it the case that trying to make things the way they were and keep things the way they were through government intervention simply will never succeed?

[Edward Greenspon]

Thank you for the question, Mr. Van Loan.

I'd say that I'm first off sensitive to the history, having spent a good part of my career in George Brown's descendent newspaper. The days that you speak of have been referred to in the academic materials as the libertarian age of the press, in which truth and falsehood grappled in the way that John Milton described in “Areopagitica”.

We have some problems with that today. In those days there were 20 newspapers per community; now there are maybe one, maybe two, and some radio outlets.

[Peter Van Loan, Conservative, York—Simcoe, ON]

But as you say, there are 20 or 30 digital options.

[Edward Greenspon]

I'm going to come to that.

One of the problems with truth and falsehood grappling is that if you're in a filter bubble, you actually don't get exposed to the grapple very much. You get exposed to information that reinforces your views going in.

I think that the issue isn't.... I think you're pointing to a very provocative paradox that we're seeing. People have never had more access to news than they do today. That's clear and that's a very good thing, but there's also a drying up of the source of original news. There's more debate in digital form than there's ever been, which is good for democracy, and there's more opinion that's exchanged, which is good, but the source news that all this is based upon is shrivelling up. There's no science for this, I must say, but based on union data that we were able to gather, we estimate that one-third of journalism jobs have been lost since 2010. There are fewer reporters on the ground, day in and day out, working as professionals who report things.

There are more bloggers who might come across things, which again I think adds a level of vibrancy to the whole system. I actually hope to see the kind of world that you described, in which digital-only options were actually employing people not just to process information, comment on information, and be opinionated on information, but also to actually go out and find out things. It does exist in some places, but it's much smaller than what's been lost on the other side.

Finally, when I talk about truth neutrality on page 3, I'm not talking about a debate between, let's say, Fox and CNN, or whatever that might look like. What I'm talking about is what's patently true and debatable and what's patently false and not debatable, which pollutes the system, and people are having a lot of trouble discriminating. There's a lot of data—or rather, there's some very convincing data from Ipsos and Buzzfeed, which did some work together after the U.S. election, showing that people were very confused by the things that were patently false.

[Kevin Waugh, Conservative, Saskatoon—Grasswood, SK]

Thank you.

I did read most of your 103-page report. I asked the Library of Parliament, because many people who came to our committee over the last year wanted handouts. They want this, they want that. I have not been able to get my head around what you talked about in section 19, the advertising expenses that are incurred for the purpose of earning business income that can generally be deducted from the income as an operating expense. I tried to get that figure, but the Library of Parliament could not give me that figure. I would think it would be a rather large figure.

[Edward Greenspon]

Could you clarify for a second? By “that figure”, do you mean the amount that would be deducted?