Supporting news and journalism: the Canadian experience

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June 22, 2020

Technological developments have resulted in massive disruption to existing business models for news and media content worldwide, with the proliferation of platforms and content, collapse of traditional revenue streams, and the competitive threat from international social media platforms, such as Facebook and Google.

In particular, private sector journalism has been affected by massive reductions in revenue and resources. In its 2019 Digital Platforms Inquiry, the Australian Competition and Consumer Commission (ACCC) found that local and regional journalism was particularly at risk, with 15% of Australian local and regional newspapers closing over the ten-year period from 2008-09 to 2017-18. This trend has continued, with News Corp Australia announcing in May 2020 that a number of their local and regional mastheads will be closed, moving others to digital-only. New media journalism is not immune from these developments, as we have seen with Network 10 closing its 10 Daily news and entertainment website and BuzzFeed shutting down its Australian operations.

The role of public journalism is well recognised in democratic societies, engaging citizens in public debate and informing decision making through all levels of government.

Several countries have recognised the potential impact on society of reductions in public interest journalism, and have implemented various forms of support for encouraging the production of news content. While initially such initiatives focussed on print media, as audiences shift to digital platforms, programs are evolving to embrace new media, as illustrated in Canada.

Since 2010 the Canada Periodical Fund (CPF) has supported Canadian print magazines, non-daily newspapers and digital periodicals in the creation of Canadian content. It has three components:

  • Aid to Publishers (ATP) – operational funding to eligible print magazines and non-daily newspapers in proportion to how many copies they sell. Publishers can use the funding to support the creation of content, production, distribution, online activities or business development for eligible periodicals. With an annual budget of CAD71.3 million, in 2019-20 ATP delivered funding to 403 magazines and 326 newspapers, including 17 indigenous publications, 73 ethnocultural publications, and 22 official-language minority publications.
  • Business Innovation (BI) – funding for innovation and business development projects undertaken by eligible small and mid-sized printed magazine and digital periodical publishers (CAD1.5 million per year). Over the financial year 2018-19, this component provided funding to 88 projects, including 14 ethnocultural publications, 17 export projects, and 8 digital startup publications.
  • Collective Initiatives (CI) – funding for projects of eligible non-profit organisations designed to increase the overall sustainability of the Canadian magazine and non-daily newspaper industries (CAD2 million per year).

Recognising a shift in readership from print to digital platforms, in February 2020 the Canadian Government announced plans to modernise the ATP and BI components of the fund, increasing the program’s emphasis on digital media (Exhibit 1).

Exhibit 1: Modernising the Canadian Periodical Fund [Source: Canadian Heritage]

Current funding year (2020-21) Modernised program
Rewards print circulation Shift to rewarding investment in editorial and journalistic content and reaching readers, regardless of the distribution channel, to be implemented gradually over five years from 2021-22 to 2025-26
Focus on print for ATP New ATP component for digital-only from 2021-22
Focus on small and mid-sized magazines in BI Allows a broader range of periodicals to apply for BI from 2021-22
Annual BI budget CAD1.5 million Annual BI budget increased to CAD2.5 million from 2021-22

The CAD595 million package of taxation measures announced in the Federal Government’s 2019 Budget aims to provide further relief for Canadian journalism over a five-year period.

  • Journalism Labour Tax Credit – Eligible Canadian journalism organisations may obtain tax credits for 25% of qualifying labour expenditure for newsroom employees, to a maximum tax credit of CAD13,750 per employee per year, from 2019 onwards. There is no cap on the total amount of qualifying labour expenditure.
  • Qualified Donee Status – From 2020, eligible non-profit Canadian news organisations can apply to become tax-exempt ‘qualified donees’. This aims to encourage philanthropic activities, by enabling individuals to claim tax credits or corporations to claim deductions for donations to such organisations.
  • Personal income tax credit for digital subscriptions – Individuals subscribing to eligible digital news subscriptions receive a 15% personal income tax credit in the years 2020 to 2024, up to a maximum annual expenditure of CAD500.

These initiatives follow the five-year CAD50 million Local Journalism Initiative (LJI) announced in the 2018 Budget, which provides funding for eligible Canadian media organisations to hire journalists or engage freelance journalists to produce civic journalism for underserved communities. As at April 2020, 168 reporters have been engaged through LJI.

While the programs have attracted some criticism, such as insufficient support for start-ups and the amount of resources needed to prepare funding applications, these initiatives still do not address the elephant in the room – the underlying competition problem facing news organisations, namely international news aggregators that provide free online content and capture a massive share of advertising revenue, yet pay no local taxes on those profits. The 2020 Federal Budget, delayed due to COVID-19, is expected to announce a digital service tax, similar to that imposed in France, on international digital service companies.