Transcript: Jen Gerson

The Canadian journalist joins me for a state-of-the-nation special on our media

If you listen to this podcast, you know that the Canadian media is in serious trouble. In recent weeks, that crisis has intensified, with wave after wave of bad news for the industry. Bell Canada laid off 1300 staff. When this was episode was recorded, merger talks between the two biggest newspaper publishers were ongoing — negotiations have since broken down. Add to that, in the wake of controversial new legislation, Bill C-18, Google and Facebook announced they would remove links to Canadian journalism from the platforms. (Though, just as this episode closed, Heritage Minister Pablo Rodriguez announced the government was drafting regulations that would set a cap on what Google and Facebook would be required to pay to our news industry.)

Given all that’s going on, my guest this week is here to help me unpack these developments — and to think through the state of our press, from lost public trust and pandemic mistakes, to the rise of independent outlets and the future of the CBC.

Jen Gerson is a Calgary journalist, a contributing columnist at The Globe and Mail, and co-founder of The Line. She’s currently writing a book about moral panics. This is an edited transcript for paid subscribers. You can listen to the interview for free here.

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TH: Jen, welcome to Lean Out.

JG: Thanks for having me.

TH: It is great to have you on. I am a subscriber to The Line and, as you know, I'm an admirer of what you do there. And I have to say, just off the top, that watching you and Matt Gurney build the outlet really helped me when I was still in the mainstream media. I could see The Line working. I could see the impact — widening the Overton Window. And it did also help inspire me to go to Substack, since you demonstrated it is a viable option. So, thank you for that.

JG: I think the advice I gave you at the time was don't necessarily expect that this is going to make you rich. But if you get into the market soon enough and you ride this particular wave, there's an opportunity for you. I think that you've amply taken advantage of that opportunity. I also said, “Don't worry about the haters. At the end of the day, the only thing that really matters is the work.” I think that, also, you have amply demonstrated that you are willing to do the work, and you do a lot of really interesting conversations on this podcast. So, good for you.

TH: Thank you so much. I was really excited to have you on at this particular moment because there is so much going on in Canadian media right now, and I wanted us to have a conversation, journalist to journalist, that I feel would benefit the listeners. Because I don't think the public always fully understands the ins and outs of what's going on in the media — a point that you've made in the past. Right now, we're in a particular moment. There has been mass layoffs from Bell Media. There is a possible merger between two big media companies here in Canada, Postmedia and Torstar, and there is new legislation, the Online News Act, Bill C-18. For listeners in other countries, can you paint a picture of the environment we're working in right now?

JG: Well, there's an old saying about going broke. Someone said: How did you go broke? The answer was, “Slowly, slowly, and then all at once.” That's what's happening here. We've been going broke in Canadian media slowly, slowly for 20 years now, and now we're going broke all at once. It's all collapsing simultaneously. The last two weeks for media news has been off the chain. Bell is a major player in journalism. Not only have they laid off 1,300 staff across, I think, their Bell Media division, but they have now asked the regulator — they are subject to the Canadian regulator called the CRTC, because, of course, they gain access to public broadcast airwaves. As a result, they're subject to the Broadcasting Act, which requires that they spend certain amounts of their revenue on programs of national interest. News, awards shows, local Canadian content, that kind of thing. They've now gone back to that regulator and said, "Please, can we spend less money on news? There's no money in this. We're losing money in this division." Bell Media is a bit of an interesting example because, of course, its parent company, BCE Inc., is a hugely profitable enterprise. Because not only do they manage broadcast airwaves, but they're also a major telecom company in a country that has a telecoms oligopoly. So, they make billions of dollars per year, but their media division isn't necessarily pulling the weight. They've now gone back to the regulator and said, "We don't want to continue to lose money in this particular sector. We want to spend more money on programs of national interest that cost less to produce." Award shows, dramas, that kind of thing. That's on top of a couple of years of successive layoffs and downgrades across the broader broadcast market.

The newspapers are in the shit. The only newspaper that we think is probably doing okay is The Globe and Mail. The Globe and Mail has got a new New York Times/Washington Post kind of model here in Canada, where they're a respectable national outlet. This allows them to command a significant fee in terms of subscription revenue and also, they're privately held. They're privately owned. So, we don't actually know how much money they're gaining or losing, but they're privately held by a very wealthy company here in Canada, and we presume that that wealthy family is going to continue to basically allow it to potentially lose money in order to subsidize the public good they serve. All of the other newspapers, on the other hand, are completely fucked. Torstar is one of the major chains; Postmedia is one of the major chains. Traditionally, these would be the chains that would provide national newspapers but also the local newspapers. It's not just the National Post. It's also the Toronto Star. It's the Calgary Herald. It's the Vancouver Sun. It's the Montreal Gazette. We've seen, since I used to work at the Calgary Herald about 10 years ago, that these publications are … zombies, is maybe the word I'm looking for. Very few staff are running these newspapers. A lot of these newspapers have merged with their former competitors, and then been reduced further. Much of the content that’s produced in these local papers is now centralized. So, not only are the papers put together — when I say put together, are laid out, so the actual layout of the pages is all centralized in Hamilton — but now, increasingly, so much of the actual content that is produced and gathered is highly centralized in order to maximize efficiencies. The distinction between a Calgary Herald and an Edmonton Journal is now very nominal.

On top of that, Postmedia, a long-standing chain, has probably 30 years worth of legacy debts and problems that have been compiling. That company has been in and out of various forms of bankruptcies and restructuring since time immemorial, certainly well before I got into journalism. When I got into journalism, it was Canwest. Before that, it was the Conrad Black papers. After I took a job at the Calgary Herald, they were just merging into becoming Postmedia. It's internal speculation as to how much longer they can continue on their current path. Not only are they dealing with the large macroeconomic issues around journalism, but they also have significant amounts of debt. They're owned in part by an American hedge fund company. I think the general sense is the hedgies are stringing this entire zombie operation along in order to make their debt payments. Because they traditionally have paid exorbitant rates of debt on outstanding capital, and as a result, it has behooved the owners not to actually run these companies as journalistic endeavors, but rather to run them as thinly as possible in order to force them to pay back their extremely high debt rates. That's their business model. That's how they stay afloat. Torstar, I think, is in a slightly better situation debt-wise, although I'm not going to pretend to be an expert on the numbers. I'm not the person you're going to go to for financial accounting. But I think they're slightly better off. But their long-term trends, in terms of the revenue they're bringing in, are now collapsing so dramatically that the once unthinkable prospect of Torstar and Postmedia, the two major chains, are now talking about a merger. We can get into that if you like, but I'm just trying to set the scene.

Then on top of all of this, you have a federal government that says it wants to save journalism. That is its stated goal and mandate. In order to do that, they've passed something called C-18, which is loosely modeled off of the Australian legislation, which would have required companies like Google and Facebook to pay media outlets for sharing the links to those media outlets. Essentially, a link tax. Now, the Australian model was an interesting story that we could get into in greater depth, but Canada essentially tried to mimic that model. But they tried to mimic that model in a way that was a little bit harsher than what Australia did. And as a result, Facebook and Google have now said, "If you're going to force us to pay for links, which presents potentially an uncapped liability to us, because we don't control if other people post your links — or you're going to assign a basically a false value to your links — the correct business response for us is to simply stop providing your links." They warned throughout the process of C-18 being negotiated and going through the various democratic processes. They did warn, Facebook especially, "You do this and we're out. We're not going to give you a blank check." Funnily enough, they actually were much more amenable to something like a tax, or a journalism fund, or something like that. Because that would give them a certain degree of financial stability that they could plan around. But they were like, "Look, if you're just going to pass this thing that says that we have to pay some undisclosed, undisputed sum of money to these media outlets overseen by the government, and we can't control what those amounts amount to, then it's a no-brainer from Facebook's perspective." Facebook said, "News makes up 3% to 5% of our overall feed. We don't care, we'll cut you out tomorrow. There's no value-add here for us, if this is what you're going to force us to do." Google was a bit more circumspect about their approach, and their business model. What they do is very different. I can get into that in greater detail if you like. Again, this is a bit of an onion episode; every pathway you want to look down, it just gets more and more convoluted. Google was a bit more circumspect. But this week they announced, "We've been looking for certain reassurances from the Minister that we weren't going to be signing up for some kind of uncapped liability, that there was going to be some exemption path which allowed us to negotiate these voluntary deals and wasn't going to force us into these other types of bad deals. We didn't get those reassurances. So we're out." They announced this week that they would no longer be surfacing Canadian news links for Canadian users. What that means, if you're a Canadian user, is that if you are looking up a topic, say Chinese foreign interference, and you Google that topic, no Canadian news links are going to get surfaced. You can still go to theglobeandmail.com, or you can still go to the National Post, you can still look for news that way. But no Canadian news is going to be surfaced on a Google search.

TH: But American ones will.

JG: Because, of course, America is not subject. It also means that if you're an American, and you're searching for a Canadian topic, Canadian news results will come up for you because you are in America. But they're not going to be coming up for Canadians. Essentially, we're fucked. I don't know what else to say. Facebook cutting Canadian news out … And this, by the way, doesn't just apply to people who hope to benefit by C-18. Because I co-founded a company called The Line, and we made it very clear, we have no desire to participate in any of these schemes. We believe that the future for our company is going to be subscription funding. And there may be some other funding models there for us, but it's not going to be coming from government funding, nor is it going to be coming from this weird, faux, market-based solution that isn't a market-based solution because if it were a market-based solution, the government wouldn't need to force these companies to do it. We're not going to participate in it. But that doesn't matter, because we're still news. In order for Facebook and Google to pull themselves out of the scope of the legislation, they're just going to have to stop sharing all of it. So, it fucks us all over. Not only is Postmedia and Torstar in their attempt to try and save themselves not going to successfully save themselves, they're going to fuck everyone else in the process. And to make matters even better, it doesn't actually preserve them in any way. It's a bad scene. Now, there are a lot of people who were saying, "Hey, Facebook and Google are just bluffing. This is what they did in Australia. This is part of a negotiation process." There is some truth to that, but it's not as much as people would like to believe. I think that as things stand today, Canadian media ought to prepare for at least a temporary shutdown of traffic from Facebook and Google. Facebook is survivable; Google is not. I've seen charts that say something like 75%, in some cases, of organic traffic is coming from Google. Imagine losing half your traffic to your new site overnight. The switches go off. I don't think that a lot of Canadian media really get how existentially bad that will be for them. I think they're just starting to get it. The prospect of that happening is so bad that a lot of people are still in denial about it being a possibility. So, in that scenario, bad decisions and bad strategy is being enacted. It's bad. It's all bad. I don't know what to say.

TH: It really is something. Peter Menzies has a piece today that just came out titled, “How the government accidentally pushed the news industry into the abyss.”

JG: Yes, and not just pushed the news industry into the abyss. Because it would be one thing if they had pushed some of these zombie companies, which is what I would describe Postmedia and Torstar as. I mean, they're not sustainable companies. There's no path to sustainability as far as I can see here. It would be one thing if they allowed some of those companies to collapse. That, in and of itself, would be bad and would lead to probably a 10- to 15-year interregnum period where something would have to be created to replace it. So, that would be bad enough. But with the way that we're doing it now, we're not just fucking over Postmedia and Torstar. We're now fucking over everybody. Not only are you screwing over the companies that are probably doomed anyway, you're screwing over all of the companies that could potentially be equipped to replace them after their collapse. So, good job, everybody. Well done.

TH: And this comes, as you pointed out, in a recent piece from the editors at The Line — “The mainstream media is not dying because you don't like it” — this all comes in the context of a collapse of the advertising business model.

JG: This is something that people don't understand. A lot of people cheer on the collapse of media, for reasons that are both valid and invalid. But one of the things that they assume is it is because we suck so badly. Nobody is reading us anymore. Nobody is watching us anymore. That is just demonstrably false. We may suck so badly, but believe me, we're being read. You look at the numbers that an article can pull today, and you compare it to the number of eyeballs that an article could reach in the absolute business heyday of journalism, and it's multiple times larger. A piece now can get a million eyeballs. That couldn't happen in the '80s or the '90s. A piece now can go viral and achieve global international recognition and notoriety in a way that simply could not have happened back when we were flush with cash. The actual number of people reading any given outlet is way higher than anything we could have dreamed of previously. What's changed, and what people don't understand, is that most media outlets are not in the business of producing journalism for profit. They're in the business of producing journalism to gain readers they can sell to advertisers.

Most journalism traditionally has been free or very low-cost. Because you, the reader, your eyeballs were what was being sold. You didn't necessarily know that, and the journalists who produce the content saw you as being the client or the end product. But the people who are actually running the business, making the money, understood that the actual product was the reader, not the other way around. And this didn't just start with Google or Facebook, by the way, this is another misconception. What really fucked over newspapers was the rise of Craigslist. A third, in some cases up to half of advertising, but typically a third of advertising was typically coming from those small, low-cost classified sections that used to bulk up these newspapers. It wasn't the big national ad spends that would happen across the country. It was 1,000 people in your local community advertising their local garage sales, or advertising a job, or sale. That is what used to make up a significant bulk newspaper revenue. When the Internet happened, you had a lot of short-sighted newspaper executives across the board, who looked at this and said, "This Internet thing is a fad. We don't need to react to this." They had a couple years where they could have had some foresight, and said, "Oh, shit, this is going to eat us. We best create our own version of Craigslist." But they didn't. They just didn't. They said, "This is a fad. This will go away. We are the kings of the universe and always will be." They didn't respond. As a result, Craigslist ate them, and then Kijiji. And there's a third of your revenue. Basically, it's been all downhill from there. Social media starts to come into play later in this collapse than people often realize. Social media comes into play, and what Facebook can do, and Google can do, that newspapers cannot is that they can offer dramatically better-targeted advertising for a much lower cost. So, newspapers can now no longer compete for ad space or for ad spend, which is actually what kills us. Because what happens is that something like Google comes along, they have so much information about each and every user, that it becomes a matter of flipping a couple of switches on the algorithm for them to promise a potential advertiser the most beautifully targeted audience that humans can conceive of. That audience has a much higher probability of spending money on that particular product than someone who goes to a newspaper and says, "I'm going to spend $100,000, and get a bit of advertising across all of the newspapers, in order to get in front of people's noses."

The other thing that people don't like to talk about is that the Internet really revealed one of the underlying lies that underpinned print advertising. It used to be that if you put an ad in a newspaper or a magazine, the general assumption was 2% of people who saw that ad would respond to it in some way — pay for something, look it up, go look at your product in person. Something like a 2% response rate was what all of these companies used to advertise for, or say that they could achieve. So, if you had a newspaper that went out to 100 people, the assumption was you were actually reaching 2 people with your ad. If you have a million people, your ad rates are calculated accordingly. What the Internet did is it provided us real-time feedback on how effective ads were, and they did this through being able to quantify click-through rates. This is something that a print ad just can't do, because of course it's a print ad. But a click-through rate reveals what an engagement rate on a piece of advertising actually is, and it was way lower than 2%. It was way lower than 2%.

So, not only could these advertisers provide far more focused advertising to far better audiences at a fraction of the rate — because of course, they have no overhead, they're just paying for server space. So they can use algorithms and targeted technologies in a much more effective way, but then they can also demonstrate what the actual value of their advertising is because they're providing click-through rates and now they're providing things like cookies. Essentially, you look at a product from an influencer you see on YouTube, you click on the product, that product page inserts a cookie onto your browser, and then if you purchase that product anytime in the next two months after you see it, that influencer gets a commission of the sale. They have metrics that are so much more precise and detailed than anything any print organization can offer. Essentially, the Internet took these advertising monopolies that journalists traditionally had and blew it out of the water. We can't compete. That's what's collapsed the business model, and it's collapsed right across the board. Yes, I can talk about how poorly managed Postmedia or Torstar or any of these companies are. Yes, bad business decisions were made, absolutely. Lack of responsiveness, lack of foresight, lack of leadership — all of these companies are guilty of this. But the reason why the business model has collapsed across the market has been essentially for the same macro reasons. The best business minds in the 1990s and 2000s probably could have made better decisions, and probably these companies would be better positioned than they are today. But the best business minds in the world couldn't replicate the heydays of the '70s and '80s. That ain't coming back.

TH: I think you've done a really good job of painting a picture of the moment that we're in right now and the pressures on journalism in this country. We could probably go deeper into each one. But given the fact that this is the state the industry is in, I want to talk about a few of the big issues that have come up in the last year or so, and try to unpack those. The first one is trust in media. We know that trust in media is at its lowest point in seven years. The dominant view from the legacy press, as best as I can tell, seems to be that this trust has been lost as a result of social media.

JG: "Not our fault. They did it to us."

TH: Yes. I tend to think this has more to do with journalistic mistakes, particularly during the pandemic, from a feeling from the public that the media has become too ideological, and a response to the post-Trump approach of journalism that seeks to influence public opinion. What is your sense of why trust in media has been lost?