Paul Godfrey’s call for government subsidies to newspapers a venerable idea
Journalists may not want to admit it but governments have long been in the business of subsidizing the news media.

thestar.com
May 16, 2016
By Thomas Walkom

Media supremo Paul Godfrey wants the federal government to subsidize the flagging newspaper industry. It’s not a new idea. Ottawa has been in the business of quietly helping Canadian publications for more than a century.

But it raises two questions. First, is it a good idea for the press to go hat in hand to Ottawa? Second, would the proposed new subsidies work?

Godfrey heads Postmedia, the biggest newspaper chain in the country. It’s a chain that’s unapologetically conservative in its politics.

Postmedia editorials routinely excoriate governments - and particularly Liberal governments - for wasteful spending.

So when Godfrey made his pitch Thursday to the Commons heritage committee, there were some - such as Toronto Liberal MP Adam Vaughan - who found it mildly ironic.

Still, Godfrey was well within the traditions of Canadian newspapering. Historically, publishers have had a complicated relationship with politicians.

On the one hand, many newspapers have been openly partisan. Indeed some, such as the Toronto Globe and its erstwhile rival, the Mail, were set up explicitly as political organs.

But at the same time, newspapers value their editorial independence. By the 20th century, when mass audiences were the goal, it was both insulting and bad for business to be seen as government’s pawn.

In his book Making National News, Ryerson University historian Gene Allen details the agonizing debates among publishers over the federal government’s handsome subsidy to their wire service co-operative, Canadian Press.

The subsidy was required in part because some Canadian publishers were unwilling or unable to pay the high rates charged by telegraph companies for transmitting news over the wire.

During the First World War, publishers also convinced Ottawa that a government-subsidized Canadian wire service would act as a pro-British antidote to news routed through the U.S.-based Associated Press.

At one point, Canada’s wire service was subsidized by both the British and Canadian governments.

Eventually, the subsidies ended. But the love-hate relationship between the press and government did not. Government was simply too useful to the business side of newspapering to be ignored.

In the early years, Ottawa rewarded friendly newspapers by contracting out government printing to them. Later, publishers lobbied for and won reduced rate postage for newspapers. At a time when many readers received their papers through the mail, this was a significant bonus.

Still later, publishers persuaded Ottawa to change the income tax system to favour domestic publications. Those businesses that advertised in Canadian newspapers and magazines could write the cost off. Those that advertised in foreign publications could not.

Known informally as the Maclean’s law, this rule proved of particular benefit to the newsmagazine of that name.

So when Godfrey suggested Thursday that governments tweak the tax system to favour Canadian publications over Facebook and Google, he wasn’t suggesting anything new.

He also called on the government to advertise more in Canadian newspapers, whether online or in print. And he urged Ottawa to set up a tax credit to subsidize newspapers that invest more in digital technology.

More than a small amount of self-interest was involved in the Godfrey pitch. Postmedia is burdened by almost $670 million in debt, including debt owed to the U.S. hedge funds that effectively own the chain.

It has engaged in savage cost-cutting. Godfrey warned there could be more.

But no newspaper is exempt from the wrenching changes linked to the growth of Internet giants, such as Google and Facebook. Torstar, which owns this newspaper, reported a $53.5 million net loss in the first quarter of 2016.

Would the Godfrey solution do anything to alleviate the diminution of local news, the topic the Commons committee was studying? I’m not sure it would.

Postmedia, which owns most small community newspapers in the country is already centralizing operations to cut costs. Southwestern Ontario’s weekly Lucknow Sentinel, for instance, no longer has an editor.

As far as Postmedia is concerned, the benefits of a new tax break might go directly to the hedge funds rather than local news.

Still, the suggestion that government step in and help out the news media is hardly alien in Canada. Much as we journalists may hate to admit it, this is part of our history.