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By Paz Gómez
Research associate
Frontier Centre for Public Policy

Over the years, the legacy press has gone from arrogance to hysteria as social-media firms eat up its advertising lunch. Rather than adjust to modern trends, the once-feared fourth estate is now begging from the institution it’s supposed to watch.

Canadian newspapers have joined global efforts to force Google, Facebook and other platforms to subsidize a moribund business model. This spring, outlets such as the Toronto Star, Globe and Mail, and Winnipeg Free Press penned a letter requesting that federal government impose a fee on social media for displaying news content. The move follows similar measures in France and Australia.

More than 250 Canadian news outlets have shut down in the last decade as tech giants have amassed online traffic and digital-advertising revenue. Local journalism has suffered the largest blow, with 171 media organizations in 138 communities folding between 2008 and 2017.

The pandemic, so far, has driven 50 publications out of business and destroyed 2,000 media jobs.

Government aid, though plentiful, has not been able to contain the hemorrhage. As part of its relief package, Ottawa provided struggling newspapers with a 75 percent wage subsidy for three months. It has also funneled $30 million through COVID-19 awareness campaigns.

In 2019, at the request of the Canadian news industry, Ottawa allocated a $600-million lifeline to media outlets, including refundable tax credits for digital subscriptions and charitable tax incentives for non-profit journalism.

Last year, the federal government announced plans to monitor and prevent misinformation on social media. However, in the face of a public backlash, Prime Minister Justin Trudeau backed down in February from a move to regulate news content and require media licences.

The Internet changed everything

Arguing that social-media platforms profit on content produced by journalists, the letter’s signatories claim the forcible redistribution of the tech giants’ advertising revenue is a fair and “long-term” solution.

This view reveals a failure to understand the roots of the problem. Social media account for more than half of advertising revenue not because of news content but because of their superior marketing tools. They reach larger audiences than newspapers and get very precise data from users: demographics, interests, hobbies, political leanings and so on.

Businesses and creative agencies value this information, as it allows them to personalize advertising and allocate budgets more efficiently.

In particular, Google and Facebook’s competitive advantage relies on the stake they hold on other parts of the digital-media supply chain: email, search engine, video streaming and instant messaging. Critics point out a lack of antitrust regulation has led to a duopoly.

The transformation of advertising predates Google and Facebook, however. If anyone is to blame, it’s the Internet, which has enabled cheap dissemination of information and disrupted other industries such as record labels and postal mail. Google and Facebook have just perfected online marketing by providing solutions to thorny issues such as ad blockers and targeting inaccuracy.

Newspapers have lagged behind, betting on the sheer force of their brands, subscription channels, loyal customers and political patronage. Unlike the music industry, which adapted to the disruption of Napster and similar file-sharing platforms, the letter-writing media companies believe society owes them sustenance.

One reason tech giants have been able to grow whereas media companies have cratered is differing cultural and legal environments. While Silicon Valley fosters experimentation, legacy newsrooms cling to rigid norms and traditions.

In Canada, a myriad of regulations, taxes, and subsidies have protected several industries from competition for too long, holding back innovation. The World Economic Forum argues that Canada needs more legal flexibility to foster new technologies and business models.

Canada’s news industry, with some exceptions, has yet to reinvent itself in the digital age and find a sustainable path. Piggybacking on social-media platforms is not it.

And relying on government as a major source of revenue will only create dependency and undermine the public’s already eroding trust in mainstream journalism.

The moment media was waiting for

Not all hope is lost. Due to the closure of businesses and events, social-media giants will face annual revenue declines for the first time in their history. Facebook ad prices are at record lows; on average, they have dropped from 35 to 50 percent. Google displayed no paid ads for hotels and restaurants in April.

Despite their finely-tuned tools, social-media platforms have struggled with screening problematic ads such as violent and fraudulent content. Canadian authorities might accelerate content restrictions and impose monitoring burdens on Google, Facebook, and other platforms.

If they’re smart, Canadian media-industry leaders can take advantage of the current scenario by emphasizing the calibre of their content.

Social media, however, won’t disappear tomorrow. The newspaper industry in Canada has two choices: make a lowly living through continuous government bailouts or take a deep look at its own failures, convince the public they’re worth paying for, and retake their position as valuable observers in civil society.

Paz Gomez is a research associate with the Frontier Centre for Public Policy.

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