Over the past 20 years, several Canadian and Quebec media outlets have had to close when their advertising revenues dried up. This includes many daily and weekly newspapers, radio stations and specialty cable channels. Television networks have had to significantly reduce their workforce.
And yet, Canadian and Quebec media are locally rooted and are essential contributors to the cultural and economic vitality of the communities they serve. They also fulfill the essential mission of defining our culture and, ultimately, our territorial unity.
This debacle is essentially due to the dynamic of the dominant who appropriates all the resources that characterize the digital age. However, this is not due to a lack of relevance of local media, as we will see below. Contrary to popular belief, this is not inevitable. Concrete actions can and must be taken immediately to reverse this worrying trend and thus solidify the bond that unites us.
The drift in Canadian advertising spending over the last 20 years is obvious. They are deserting local media to the point where, today, only 30% of Canadian advertising spending supports local Canadian media. Is it any wonder they are falling in droves! The rest, or 70% of Canadian advertising spending, is monopolized overwhelmingly by foreign social media.
Some have speculated that Canadian local media may have lost its relevance. However, their range is very robust. So, Canadians consume local Canadian media much more than the distribution of advertising spending suggests.
In the early 1960s, Parliament added a section to the Income Tax Act (ITA), known as section 19. This states that when a Canadian advertiser uses a foreign media, its expense is not eligible as a deduction for tax purposes. It’s what allowed the newspaper, radio and television industries to thrive for many years, and it still exists. But its application has not been extended to foreign digital media.
In March 2018, Friends of Canadian Broadcasting produced a document recommending that the application of section 19 be extended to foreign digital media (Let’s plug the gap! The deductibility of advertising on the Internet).
In August 2018, a report from the Senate Standing Committee on Transport and Communications (The tax deductibility of foreign advertising on the Internet in Canada) rejected this idea, arguing that it would impose an undue tax burden on Canadian businesses. This conclusion is clearly based on the hypothesis that the proposed measure would not produce the desired effect, that of repatriating advertising expenditures to Canada. This is a somewhat cavalier conclusion.
Until now, the Canadian strategy has been based on the creation of funds to support journalism and independent production by attempting to force, through Bill 18, foreign digital media to negotiate royalties with local Canadian media. for the use of their news. In reality, these initiatives are only marginally useful and do not compare to the size of advertising revenues that, if repatriated, would breathe new life into Canadian local media.
To provide a better perspective, the $100 million negotiated with Google represents a mere 1% of the $10 billion in Canadian ad spending lost to foreign digital media. And what’s more, the Canadian government has no control over the outcome of Bill 18 since it requires the consent of foreign digital media, which is the basis of the current blackmail on the part of certain actors of the foreign digital media and further accelerates the disappearance of local Canadian media.
The solution is to extend the application of section 19 of the ITA to foreign digital media, something a smart country like ours should have done 20 years ago. The implementation of this measure is entirely within the scope of the government, does not require the consent of foreign digital media and is easy.
This tool could be used in several ways. To begin with, the deduction for tax purposes of expenses incurred for the purchase of advertising on foreign digital media may be prohibited. And given the disproportionate amount of advertising dollars spent abroad, it may be necessary to add tax credits for the use of local Canadian media.
Canadian local media does not need or demand freebies from the Canadian government. But, if we can bring advertising budgets back to Canada, we have a chance to prosper. Why does this matter? Because if we stay the course with the current strategy, our artists and our journalists will receive peccadilloes, but their employers will be gone!