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June 11, 2019

Can government bail out media?

Scott Stockdale

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Canada is going through the worst cultural crisis in the postwar period and if the government doesn't come to the rescue of failing, television and newspaper and film companies we may, in the not too distant future, be a country without Canadian news or films, according to Richard Stursberg, author of Tangled Green: A Canadian Cultural Manifesto for the Digital Age.

Mr. Stursberg, who had a long career in leading Canadian institutions such as the CBC and Telefilm, has become concerned about the challenge posed by companies like Netflix and Amazon to Canada's cultural ecosystem.

Speaking on a recent episode of TVO Ontario The Agenda, with moderator Steve Paikin, Mr. Stursberg said major cultural institutions such as newspapers, magazines, and television have collapsed in Canada.

“You know that in the newspaper business now we've lost over 200 newspapers in the course of the last ten years.  They have been chopped by 50 per cent. All the major television broadcasters, CTV, Global, City, they're all losing money. All the big papers are losing money. Post Media is losing money.”

He added that it's only a question of time, depending on how much cash these companies have, before they find themselves in insolvency.

And Mr. Stursberg said an unfair tax advantage whereby foreign media companies are operating in Canada tax free has helped create a situation where substantial advertising revenue in Canada goes to American companies such as Facebook, Amazon, Apple, Google and Netflix, - a group of companies often referred to at FANGS.

“They come. They set up in Canada. All the Canadian media companies obviously pay taxes. They have drained, between Facebook and Amazon, they have drained 50 per cent of the media advertising market out of Canada and redirected the money now to Silicon Valley.”

If these American companies paid the same taxes as everybody else and were required to have make the same contribution to Canadian content as everybody else, there would be a lot more Canadian programs being aired. With regard to Canadian content rules, if Netflix had to operate by the same rules as Canadian companies, Mr. Stursberg said they would had to have spent $230 million on Canadian content last year.

“If the CRTC and the government would say, 'Yes, yes, absolutely, we should treat them the same as Canadian broadcasters,' then that's what they would have to pay.”

Because advertisers are allowed the same tax deductions for advertising – a business expense - on Google or Facebook as they get for advertising on Canadian media, the tax laws help send advertising revenue to these American companies at enormous loss to the Canadian government, Mr. Stursberg said.

“If you were just to clear off the HST issues and these questions as to what qualifies in tax terms as a legitimate business expense, it would drop almost a billion dollars to the bottom line of the government. This is a major tax issue as well as a fairness issue.”

Because many of the proposals Mr. Stursberg has outlined in his book have already been implemented in jurisdictions such as the E.U. And the U.K., - to name a couple - he said he finds it very surprising that there's very little discussion of these issues in Canada – especially because, historically, Canadian governments tried to protect Canadian culture.

“But the thing that's really puzzling to me about all this, Steve, is historically there was a bipartisan consensus. And historically we have always said that if we want to preserve a distinct culture in Canada, we have to have a bipartisan consensus on how we're going to deal with the United States, particularly where it comes to these kinds of issues.”

Meanwhile, judging by the financial dire straits Canada's media companies are in, with few if any operating at a profit, it appears to Mr. Stursberg that in the not-too-distant future we won't have any Canadian media at all.

“If we don't do anything, then look at their finances. Then there's little doubt that they don't have a lot of time to last. I mean, it's difficult to see exactly how much cash they have on their balance sheet; but that's basically it. Every quarter they lose money, so how much cash they have on their balance sheets; and when that runs out its over.”

He notes that many countries around the world subsidize their media companies and he uses that example of France, which he said subsidizes news companies by over a billion Euros per year; one of the results being that Paris has 15 newspapers.

However, rather than just giving the news companies money, Mr. Stursberg proposes in his book that the Canadian government offer them tax credits.

“Tax credits should apply only to the people who are actually producing the news, so the tax credits are labour-based. It means that you get a certain percentage of the costs of labour brought down by the government. But the labour that's involved is only journalists, editors, photographers, videographer, layout artists – those people, not the executives and not the sales force and that's exactly how we do it for TV and movies.”

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