Weekend reads: The Postmedia Effect

A Q&A with Canadian media critic Marc Edge

Over the past few weeks here at Lean Out, we have been doing a series on the collapse of the Canadian media, seeking out perspectives on what has gone wrong — and where we go from here.

On the podcast, we’ve heard from two frequent commentators on the media, both based in Calgary: The Line co-founder Jen Gerson and Peter Menzies, a former newspaper publisher and a past vice chair of the CRTC, who has recently published a paper with the Macdonald-Laurier Institute calling for a national media strategy. (I recently sat on an MLI panel with Menzies on the future of the CBC.)

Today, we’ll be hearing from a media critic who’s published an exhaustively-researched new book on the Canadian media landscape. Marc Edge is based in Ladysmith, B.C. He’s a business journalist with a PhD in media economics, a university instructor who has taught in five countries, and the author of seven books. His latest is The Postmedia Effect — How Vulture Capitalism is Wrecking Our News.

You can read Edge’s recent op-ed in The Globe and Mail here, which provides helpful context for the below Q&A, with this summary of his analysis of Postmedia’s history:

[Hedge funds] had bought up the distressed debt of Canwest Global Communications on the bond market at prices reportedly as low as 5 to 10 cents on the dollar as it was facing bankruptcy. They then acquired its newspaper division — the former Southam chain, which would become Postmedia — at its bankruptcy auction.

Few other parties were able to step up, to be sure. So this newly bought asset now owed money to its owners, for a debt bought on the cheap. All the hedge funds had to do to cash in big was keep the company alive long enough to collect on their loans. A bond paying 12.5-per-cent interest bought for 10 cents on the dollar, after all, theoretically provides a return of 125 per cent a year. And when Postmedia struggled to make payments, the debt was refinanced on favourable terms for its holders.

Canada limits foreign ownership of newspapers to 25 per cent, but the hedge funds got around that by starting a publicly traded company in which their shares were limited in voting power. Control of the company thus resides in the Canadians who own 2 per cent of its shares, but the funds have outsized influence over who runs Postmedia and how much they are paid.

Former Postmedia chief executive Paul Godfrey worked furiously to keep the company alive and send interest payments south. He was paid well to do so. He first cut costs by centralizing production in Hamilton and shedding dozens of local editors. In 2014, he acquired Canada’s second-largest chain, Sun Media, to provide more runway. It was another purchase that exposed weakness in the Competition Act, which has regulators now clamouring for its repair. Mr. Godfrey then reneged on a promise to the Competition Bureau to keep separate Postmedia and Sun newsrooms in Ottawa, Edmonton, Calgary and Vancouver, where Postmedia thus owned both dailies in each city.

In the lightly edited conversation below, Marc and I dive into media consolidation, the history of Bill C-18, and lost public trust.

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TH: Marc, you have worked as a journalist, you are a media historian, you’ve been following the Canadian media for a quarter of a century — and you are a media critic for Canadian Dimension, a long-running independent forum for left-wing political thought and discussion. How would you characterize the moment that we are in in the Canadian media right now?

ME: I think we’re at a very pivotal moment in the transition from print to online. The only question is who makes it to the other side as a viable online publication, and who gets left behind. Some are making it very well, others not so much — and they’re trying to prevail upon the government to subsidize them, as they have for the past four or five years. And now, of course, they want Google and Facebook to subsidize them.

TH: On Michael Geist’s podcast, you called Bill C-18 “a slow motion train wreck” and “a lose/lose/lose scenario.” How so?

ME: You could see this coming for a few years. Ever since Rupert Murdoch started campaigning against Google and Facebook in the UK and in Australia, where he owns most of the newspapers. He accused them for years of stealing the content of his newspapers, which many people find rather laughable. But he has so much political power in Australia, through his domination of the press there, that he was able to prevail upon the government to pass a bargaining code which is similar to Bill C-18. So that’s what we’ve got going on here. And next, it’ll be in the UK for debate. And in the U.S. it seems to be rather stop-and-start.

I call this a lose/lose/lose because I don’t think the newspaper industry has thought this through, really. They will lose so much traffic if Google and Facebook stop carrying links to Canadian news stories that it will be a net loss for them. They won’t get any money out of them, plus they won’t get the traffic online. Online journalists, of course, rely much more heavily on Google and Facebook.

The platforms might lose a little bit of a utility. They benefit, of course, from the data that they gather on our activities online, from following us around. They’re able to tailor their ads much more closely; they perfected target marketing. So, like I say, I think it’s a lose/lose/lose. And, of course, [those who lose] most of all will be the readers. They lose some of their favourite ways to find Canadian news and they will have to be retrained.

TH: Your book, The Postmedia Effect, does many things; there’s many twists and turns to the story that you tell. But I just want to focus on one, which is the history of this legislation, which can be traced back to 2016. For readers, what is The Shattered Mirror report of 2017?

ME: Well, it’s a very interesting soap opera that went on. What happened was that Postmedia Network was formed in 2010 — out of the ashes of Canwest Global Communications, which had bought the former Southam newspaper chain from Conrad Black — and the hedge funds bought so much of the distressed debt of Canwest Global Communications. So they were able to take over its newspaper division, out of bankruptcy, in 2010. They own 92% of the shares of the company, despite the foreign ownership limits of supposedly 25%. Here, we have 92% U.S. ownership. Then a few years later, they bought the Sun Media chain, the second largest chain in Canada, mostly tabloid dailies across the country.

There were considerable fears, back then, in 2014, about diversity of ownership and opinion. They swore up and down that they would not merge the newsrooms of the newspapers where they owed both dailies — like in Vancouver, Edmonton, Calgary, and Ottawa. What happened? Of course a few years later, they merged the newsrooms. I was so mad that I went to see my local MP, Hedy Fry in Vancouver Centre, and she was as outraged as I was. A few weeks later, she commenced hearings in Ottawa. I urged her to try to achieve some reform in media ownership, as had been attempted decades earlier by the Davey Committee of the Senate and the Royal Commission on newspapers.

She was busy working on this when a parallel inquiry started up. The Heritage Committee, which Dr. Fry chaired, was supposed to travel across the country in 2016, but they didn’t have the funds in their budget. So, this was farmed out to the think tank Public Policy Forum, and they produced a report — which came out about six months before the report of the Fry committee — and painted quite a dire picture of the Canadian newspaper industry. I was quite critical of it at the time, but the more I looked into it, the dodgier it seemed. And it seems there were quite a few vested interests involved.

TH: What were those vested interests?

ME: The head of the Public Policy Forum, Edward Greenspon, soon began working with what I call the newspaper lobby to lobby for a bailout. Which resulted, in 2018, in the $595-million bailout that ends in the spring. It’s a good question exactly when Mr. Greenspon started working with the newspaper lobby. Because he became, all of a sudden, an ardent advocate for the bailout. Whereas he had been supposedly until then a neutral chronicler of the travails of the newspaper industry.

Some scholars — myself and Dwayne Winseck at Carlton, primarily — point to some of the foibles and the glaring omissions in his report, The Shattered Mirror. Which, despite all its flaws, was adopted as gospel by the newspaper industry. While the Fry committee report, which called for ownership reform, sank like a stone.

TH: The Liberal government’s initial response to [The Shattered Mirror] report and its recommendations was, through then-Heritage Minister Mélanie Joly, that it wasn’t interested in bailing out “industry models that are no longer viable.” Chapter four of your book describes in detail the lobbying effort that ensued, its key players, and its outcome. It’s worth reading that chapter in full. But briefly, for our readers here, can you describe the evolution of the Liberal government’s position from 2017 until now?

ME: Yes. It’s very interesting how it’s changed. Like you say, Minister Joly, who is the first of three or four Heritage Ministers who has worked on this file, claimed that the government wasn’t going to bail out Old Media if it wasn’t financially viable. Well, I think all the newspaper industry had to do was send her a copy of my 2014 book, Greatly Exaggerated: The Myth of the Death of Newspapers, where it shows that newspapers remain profitable because they’re highly scalable and can be made larger or smaller, quite quickly, as required. That isn’t quite true of Postmedia now, which has cut back so much on its content that it is in a crash dive and doesn’t look like it’s going to make it to the other side — except for federal subsidies or another bailout. If Google and Facebook aren’t going to bail them out, I think they’re facing bankruptcy again. If the federal government doesn’t bail them out, which I urged against. I think the only way to get rid of these hedge funds, which hold so much of the debt of Postmedia, is to let it go bankrupt. That way, the debt would be wiped out, and hopefully we could rescue some of the historic publications.

TH: Columnist and editor Terence Corcoran, writing in The Financial Post — [The National Post], of course, a Postmedia paper — called your book an “ideological” “smear job,” and believes that your views are wrong and a threat to press freedom. To quote Corcoran: “He is a meticulous researcher, documenter and footnoter, who manipulates and twists his fact-filled work through a warped and ignorant leftist understanding of business, newspapers, journalists, governments and media consumers.” What do you make of that criticism?

ME: I actually think it’s a great compliment to be attacked by The National Post like that. Of course, it’s the flagship daily of Postmedia Network. And talk about ideological, it’s about as far right as you can get. I state my theoretical perspective quite clearly in the book, I believe. I stand for good journalism and competition in media. And The National Post, it seems, they just stand for what’s best for business.

TH: Pulling back to look at the broader climate that we’re in right now, there was something that I was thinking about throughout reading your book. And that is that the left seems to be fundamentally split on this issue of what to do with the press. The establishment Liberal left — which I think many leftists would probably call “centrists” and not left at all, but who view themselves as left — seem to be focused on fighting Big Tech and “surveillance capitalism” and are willing to embrace a partnership between corporate media and government to do so. But the grassroots activist left, which is joined by many independent media, of all persuasions, view this issue differently. How would you characterize this opposing view?

ME: It was quite interesting to see the recent Angus Reid poll, where they found that most Canadians were against subsidizing news media. Most NDP supporters were in favour, and most Conservative supporters were against it, and many Liberals, it seems, were kind of in the middle.

People on the left, they’re less concerned about subsidizing news media. I always point to the Scandinavian countries, which their news media is heavily-subsidized, and yet they always rank at the top at the annual press freedom rankings. The concern for press freedom with government subsidies, I think is misplaced. You look at the CBC. A lot of people — of course a lot of conservatives — claim it’s far-left, but I think it does a fairly good job of doing balanced journalism. So there’s no reason that a subsidized press couldn’t do the same.

TH: I might disagree about the CBC [and balanced journalism], but I definitely want the CBC to be a fully functional and independent public broadcaster in our country. I think that’s really important. Another thing I think is important in this country is media criticism. And there are very few journalists covering the media in Canada right now, yourself being one of them. What do we lose when we don’t have active media critics in our news ecosphere?

ME: Yes, well, this is a big problem. I think the last full-time media critic was Antonia Zerbisias of The Toronto Star. Then she moved on to another beat and was never replaced. Of course, most newspapers have been downsizing and eliminating beats like the media beat. But even in the alternative press, there’s not too many of us who specialize in this. Of course Canadaland does a pretty good job and Blacklock’s Reporter casts a very close eye on the doings in Ottawa. But as far as I can tell, I’m about the only full-time media critic in Canada at the moment.

TH: I want to ask you about public trust. This is a problem that keeps getting raised throughout the conversation on Bill C-18, including in recent Senate hearings, in which we heard from Jen Gerson, who’s been on my podcast. [Trust] is something that people on the podcast talk about a lot, and it’s also something I hear from readers a lot. This is a really big problem. As someone who’s been following this industry for decades in this country, why do you think trust has plummeted in recent years?

ME: I think it’s because of the subsidies, starting in 2018. Ottawa started throwing money at the newspaper industry. First of all, it was $50 million in the Local Journalism Initiative, which the publishers kind of turned their nose up at, called it a “bandaid solution.” They howled and screamed and kicked their feet until they got a full bailout — the $595 million over five years, which, like I say, runs out in the spring. I think a lot of people look at that and see the press as being on the payroll of the federal government. I don’t think that’s quite true; I don’t think most journalists consider themselves to be on the payroll of the federal government. But this is a public perception. And, in many cases, perception is reality.

TH: Lastly, Marc, in your view, where does the Canadian media need to go from here? What does Canadian media need to do to regain public trust?

ME: I think we need to have a comprehensive strategy, federally, because communication is a federal responsibility — rather than this patchwork quilt of bailouts and subsidies. And I think we need to look to the future, which is undoubtedly digital. Whether there will remain print publications or not is unclear. But we need to plan for a digital future, and to find ways of helping publishers come up with a viable business model, to stand on their own without government subsidies. I think only then will we have a truly free and independent press in Canada.

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If you’re interested in hearing more, Marc Edge will be at SFU’s Harbour Centre on July 27th at 7:00pm Pacific, and the event that will also be streamed live on Zoom.

Stay tuned, next week we’ll hear more perspectives on the collapse of Canadian media, in a Q&A with Blacklock’s Reporter publisher Holly Doan.

And on the Lean Out podcast, Jennifer Richmond and Winkfield Twyman Jr. join me to talk about Letters in Black and White: A New Correspondence on Race in America.

See you next week!