Mr. Speaker, I rise to join in the report stage debate of Bill C-103 and to stand in support of those members on this side of the House who were speaking to this bill.
I want to begin by giving a bit of my background as an educator and as someone who has enjoyed and is very concerned about the Canadian magazine industry. A task force on this industry was established in March 1993 with a mandate to recommend the update of existing policy instruments and to propose new measures in support of the Canadian magazine industry, which so many of us have enjoyed and are enjoying.
Since 1965 there have been two legislative measures in place to support the Canadian magazine industry: the Income Tax Act section 19 and the customs tariff code. The objective of both of those measures was to ensure an adequate flow of advertising revenues to support a vibrant Canadian periodical industry. These instruments of public policy have in large part been successful. However, technological developments in an increasingly global trading environment have meant that those two measures in place for almost 30 years are no longer completely adequate to meet the policy objective for which they were designed.
The first thing the task force had to do was learn about the industry. I would like to take this opportunity to give some background on the industry to put this bill in perspective to see whether the Reformers would appreciate some of the aspects of the bill that we are supporting on this side of the House.
The task force commissioned two reports. One prepared by Informetrica Ltd. examined the economic environment within which the Canadian magazine industry operates. A second, prepared by Lee Anderson of Carleton University, analysed the Canadian advertising market with particular reference to the Canadian magazine industry. The Informetrica study provided some basic information on the economics of periodical publishing, its products, markets, and cost structure.
In 1991-92 the Canadian industry produced 1,440 magazines, with revenues totalling more than $846 million. The Canadian magazine industry is one of the most important media pipelines between the generators of Canadian information, ideas, and views and the Canadian public.
In 1990 more families participated in buying magazines, both Canadian and foreign, than any other cultural activity except perhaps the buying of newspapers. Compared to 1978, the percentage of households buying magazines increased by 10 per cent, to an average of 69.8 per cent.
The domestic market is measured by Statistics Canada. Statistics Canada estimates that there are more than three million subscriptions to U.S. periodicals not included in the trade data. In 1991 Statistics Canada information presents one view of the size of the market and the Canadian magazine publishers' share of that market. Using these measures, Canadian publishers account for 54.8 per cent of the total domestic market.
One area of difficulty, of course, is that subscriptions ordered by Canadians directly from the U.S. and mailed from the U.S. to Canadians are not counted by any of the existing statistical systems. The value of magazines imported is the value at the border, with no real measure of the advertising contained therein. Therefore, with adjustments, an alternative measure based on circulation revenue suggests a Canadian publishers' share of about 25.5 per cent of the domestic market.
Although editorially rich and diverse, the Canadian industry is not on strong economic footing. We do not have to go very far from the House to recognize this. The 1991 statistics show that more than half of Canadian magazines had no operating profit. The average operating profit for the industry as a whole was only 2.4 per cent. In any business that is really not good.
Despite the strength of our mix of editorial content and diversity and the size and profitability of Canadian magazines, they are still very much limited in terms of their potential for revenue. The issue here is one of relative market size and economies of scale.
Magazines have two clients, the reader and the advertiser. The building blocks of a magazine are circulation, editorial content, and advertising. The larger a periodical circulation, the more advertising it can attract. The greater a magazine's advertising revenue, the more it can afford to spend on editorial content, which in turn makes the magazine more attractive to consumers and increases its
circulation. Circulation is crucial to advertisers and therefore crucial to a magazine's advertising revenue.
The Informetrica study reported that circulation revenue accounted for $245 million or 29 per cent of the total revenue of Canadian magazines in 1991 and 1992. Magazines can be circulated on news-stands or through subscriptions. For Canadian magazines, approximately 10 per cent of English-language and 27 per cent of French-language magazines are sold on news-stands. By contrast, 89.3 per cent of all imported consumer magazines are destined for news-stands. That is not to suggest that the government or the domestic magazine industry are interested in restricting the access of foreign magazines to our news-stands. These statistics are merely presented to demonstrate the competition Canadian magazines are up against on news-stands.
Subscriptions are the main source of circulation revenue for most Canadian magazines. A large subscription base provides a publisher with stability, helps in scheduling production units, and is particularly important for cash flow, since most subscriptions are paid in advance or early in the subscription period. I am sure that most of us who have subscribed to magazines know that we hear from the magazine far in advance of the expiry date of the subscription.
Advertising revenue is a lifeline of the Canadian magazine industry and crucial to the survival of Canadian magazines in an indigenous Canadian magazine industry. Sixty-five per cent of all revenue of Canadian magazines is derived from advertising. An adequate advertising revenue base is essential to the economic foundation of periodical publishing in Canada.
Without a healthy Canadian magazine industry Canada's policy objective of ensuring that Canadians have access to Canadian ideas and information through Canadian periodicals cannot be met. Policy instruments that have been in place since 1965 are designed to achieve that purpose. Encouraging magazine advertisers to reach Canadian consumers through Canadian magazines and periodicals is as important today as it was 30 years ago.
The advertising study commissioned by the task force showed that magazines have experienced more annual declines in advertising dollars than any other medium in Canada. Television's rise as an advertising medium over the 30-year period is perhaps the most significant trend behind the declining share of magazine advertising revenues.
Magazines tend to be disproportionately affected in economic downturns through drops in circulation. Whereas people will continue to watch TV, they would cancel their magazine subscriptions to save money and have cash flow. That affects the entire industry.
The bottom line is that the amount of money spent by advertisers to reach the Canadian consumer is not likely to grow. Therefore, within the Canadian advertising market it is extremely unlikely that the share held by periodicals will increase.
The two studies that were commissioned demonstrate very clearly the precarious situation the Canadian magazine industry finds itself in. This is a point I want to underscore, the precarious situation the Canadian magazine industry finds itself in. It must compete in a market that is dominated by imported magazines and it must compete for advertising revenues.
The consequence for the Canadian magazine industry and thus for Canadian cultural development will be very serious if we do not take the necessary steps to maintain the structural support necessary to continue to meet the government's longstanding policy objective for Canadian magazines of ensuring that they have adequate access to advertising revenues.
The measures in Bill C-103 are designed to support the Canadian magazine industry so that it can conduct business and be competitive. It is simply an extension of Canada's longstanding policy against split runs. The measures strive to plug a loophole in the tariff item so that the exploitation by Sports Illustrated Canada over the last two years can be dealt with. However, Sports Illustrated Canada got around the measures by electronically beaming the magazine to a Canadian printing plant.
I know that the members across the way are speaking in support of Sports Illustrated. I want to make clear that these measures in the present bill are in no way designed to limit Canadian access to foreign publications. Canadians will still be free to read whatever they want, including an imported edition of Sports Illustrated. Our borders remain open to the millions of copies of American magazines that are bought here each year. The best way to support the Canadian magazine industry is to adopt measures that will encourage original content, regardless of the country of origin.
We do not want a kind of recycled editorial material that is commonly dumped in split runs. We must continue to finds ways-