Canada’s $50 million journalism fund seen as too little, too late

The Canadian government has pledged to create a fund that will dispense $50 million over the next five years to support local journalism in Canada, but many observers say it is too little money, and comes too late to make much of a difference to the country’s struggling media industry. The pledge was made as part of the federal budget that was handed down late Tuesday afternoon.

Erin Millar, co-founder of a digital-only media outlet called Discourse Media, says she was afraid at first that the budget proposal was going to be a bailout for failing media entities like The Toronto Star and Postmedia—which owns daily newspapers in most of Canada’s major cities, including Toronto, Ottawa, Montreal and Vancouver—but doesn’t think the fund qualifies because it is so small.

“If you gave $5 million to Postmedia or the Star that would be gone by lunch,” Millar said in an interview. “So if it’s not a bailout, the next question you have to ask is whether this money is going to actually have any impact or not. And is this all going to newspapers, or is there going to be some going towards new digital startups? We just don’t know.”

The government has yet to provide any details about the funding, but sources who have been involved in the decision-making process say the money may go to The Canadian Press, a wire service owned by several large publishers including Torstar and The Globe and Mail, so that it can hire reporters in local markets. This was one of the proposals made in a report from the non-profit Public Policy Forum that was commissioned by the government to look into the future of news.

“If they spend it directly on hiring journalists in local markets, that’s better than supporting a dying business model I suppose,” Millar says. “But it’s not really an investment in the future because those journalists will go away when the money goes away.” What is most depressing, she says, is that “I feel like it’s going to be all the same people in charge of handing out that money—it’s like the same 12 people who were there when things went bad are still controlling the discussion and all the money.”

Discourse has built a 20-person operation in three years based in Vancouver and Toronto, with reporters in several smaller markets in BC and Saskatchewan. “The only reason I was able to do this is because I was willing to put my house on the line,” Millar says. The company—which had $750,000 in revenue last year from subscriptions and donations—has raised $350,000 through a share issue and $250,000 from a private investor, and Millar says it is close to closing another $400,000 funding round.

Jeremy Klaszus, founder and editor of a Calgary-based journalism startup called The Sprawl, said that he hopes none of the funds the government has promised will go to existing media outlets like Postmedia. “They have relentlessly devalued local journalism,” he said in an interview. “The thought of them getting any kind of support for local journalism is a bit of a joke.”

Writer and editor Selena Ross says she is encouraged by the fact that the government seemed to be focusing on under-served communities rather than bailing out existing media businesses. “I think the focus on under-served communities is really good to hear because it eliminates places that are covering Toronto or Ottawa or these major cities,” she said in an interview.” There are some places in Canada that are medium-sized and small towns that are in really dire straits.”

Ken Whyte is the former editor of the National Post, a national daily newspaper owned by Postmedia that was created in 1998 by erstwhile media mogul and Conservative pundit Conrad Black, and is also a former senior executive with Rogers Communications, one of Canada’s largest cable companies. He says he would rather the government had done nothing instead of creating the $50 million fund, because it is too little money to make a difference to the industry, and comes too late to be of any use.

“They’d be better off not doing anything,” Whyte said in an interview. “There’s three problems with what they’re doing—the first is that there’s no amount of money that they’d be willing to spend that’s going to save print journalism. If they wanted to do that they’d just be writing endless cheques to support a product no one wants. The second reason is that to the extent they try to prop up old businesses, they interfere with the birth and growth of new media outlets, and third, there’s a sizeable constituency out there that doesn’t trust the mainstream media, and will trust it even less if it’s subsidized by the government.”

John Hinds, president of an association of newspaper publishers called News Media Canada, said in a statement that his group is concerned that “the amount announced is far too little to address the growing challenge of providing local news. The association had been proposing that the government remake the Canadian Periodical Fund (which supports the print magazine business) and give it $350 million in funding.

According to Hinds, the Canadian journalism industry has lost more than 16,000 jobs in the past decade, as publishers have been forced to cut staff and other costs in order to keep pace with plunging advertising revenues. Postmedia has been the victim of deep cuts due in part to high levels of debt, incurred when the company was restructured after going bankrupt in 2010. A number of US-based hedge funds, including Golden Tree Asset Management, acquired a large stake in the company.

As in the US, local media markets have been hard hit by cutbacks, with many municipalities losing their only newspaper due to closures. Postmedia and Torstar—which owns the daily Toronto Star newspaper as well as a chain of small weeklies—recently did a deal in which they swapped ownership of more than 40 small newspapers, and the vast majority of them were subsequently shut down.

The government also said in the budget that it will make it easier for existing media organizations to seek non-profit status, so that they can accept donations from the public and from charitable foundations. Canadian law currently doesn’t allow media companies to define themselves as non-profit, which makes it difficult for them to get contributions from foundations and other benefactors.

“If it’s non-profit status, all that really does is confirm that these things don’t make money any more, and allows them to go out and beg with a certain amount of dignity,” says Whyte. “So instead of issuing shares, Torstar could go out and ask for donations, and people might be more likely to do that if it wasn’t a commercial enterprise and their money wasn’t going to pay Torstar dividends. If they want to do that they can go ahead I suppose, it might be incremental revenue but it’s not going to save the model.”

Klaszus said he is interested in the possibility of changes to non-profit rules, because that would make a tangible difference to his ability to raise money for his startup. “The part that catches my interest is making it so media organizations can get foundation support, which is really hard in Canada right now.”

Ross said the non-profit changes are “a huge, huge move and will actually make a much bigger difference in the long term, because it will allow organizations to restructure a little bit and try and find if there are foundations or people or maybe even ongoing crowdfunding that would work for them. It could turn into a longer-term thing or it could help tide newspapers over until they sort out their financial problems.”

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