Part two: The Rise of Google and Facebook and the Decline of Canadian Local News
News journalism - especially professional and fact checked journalism - is essential to democracy. It is a public good. But that doesn’t mean there is a financial model to support it – anymore.
For decades a robust financial model paid for news. The model was ads. Lots of ads. Our written and broadcast media enjoyed the mercenary patronage of advertisers looking for customers. Thanks to them, we never paid more than a sliver of the cost of our news. We still don’t.
Many Canadians don’t know that for a century the costs of reporting the news was subsidized 80% to 100% by advertisers, depending on whether you got it from newspapers, radio, over the air TV, or cable. Our news was free, or at least highly subsidized by advertisers.
In the new digital environment, those advertisers have flocked to Google and Facebook thanks to their mass audience and laser targeting of users and buyers.
But our appetite for news hasn’t let up. Canadians devour it online, especially on our phones. Unfortunately, professional coverage of news, especially local news, has shrunk as advertising revenues and journalist employment have declined. Picture how thick your local newspaper was 30 years ago compared to today, how many fewer local stories can you find now.
The unravelling of this business model for local news was documented in grinding detail by the Public Policy Forum’s 2017 report “The Shattered Mirror.” If you’ve been following the annual reports of Canadian news organizations since then - it’s only got worse.
This chart shows how the advertising market share of written and television news organizations, compared to online advertising, flipped on its head in a decade.
Another chart shows us that the Platforms Google and Facebook have 75 % of the online pie, news websites have about 6 %:
Written journalism generates the lion’s share of original reporting in this country and it’s been hardest hit by the Platforms’ success. From a peak in 2012, advertising revenues for Canadian news publishers have steadily declined to half of what they were. Meanwhile Google’s ad revenues have doubled and Facebook’s have quadrupled. In the same time frame, newsroom staffing shrunk by one-third, diminishing the capacity to cover local news.
Television news is going in the wrong direction too. According to job data collected by Unifor, the TV union, newsgathering staffing is down 20% since 2014.
The decline in newsgathering employment matches the same trajectory in broadcaster earnings: CRTC data reveals that “conventional” broadcasters (i.e. excluding subscriber-pay channels) have reported an average 8% loss since 2012.
Radio is highly dependent on local advertising but prior to the pandemic boasted a 20% profit margin, apparently weathering the Google / Facebook storm, thanks to its captive audience in automobile commuting.
Radio is an indispensable platform for informing the public. Always thinly staffed, radio is known for its “rip and read” re-caps of original reporting done by newspapers and TV. Unfortunately, radio got hit with a 50% loss in advertising during the pandemic. In a sign of the times, Bell Media news talk stations in Montreal and Toronto laid off most of their reporters in early 2021.
What the last decade has shown is that the loss of the advertisers’ subsidy of newsgathering is not being replaced. And so, we cast about for a solution.
Subscriber revenue is the logical replacement for the loss of ad revenue.
Unfortunately, the typical news consumer is used to getting free or low cost news and resists paying for it. The few success stories in expanding subscriber revenues are mostly limited to smaller niche publications with highly loyal and affluent news consumers.
For the mass audience, the only North American digital news organizations that have succeeded in building a thriving subscriber-pay business model are the Washington Post and New York Times. Obviously, they are national newspapers with limited local or regional coverage. Even more obviously, they play in the largest wealthy country on the planet, with a mass market of 340 million Americans.
It’s a legitimate question whether a Canadian news organization can duplicate that subscription success in a country of 35 million.
The leader of the pack, the Globe and Mail, hasn’t achieved the same success as the Times or the Post although it may be within reach. Note the Globe caters to a well educated and affluent demographic, not a truly mass audience and diverse citizenry that needs to consume news in order to make a democracy work.
The Toronto Star has met with mixed success increasing the number of paid subscribers, and tellingly Torstar’s new owners are aggressively turning to their non-media assets to generate profits that might cross subsidize its newsgathering.
The National Post has turned up the volume on opinion journalism in hopes of attracting more paying subscribers, but Postmedia is not breaking out the profit-and-loss for the Post in its quarterly reports.
And these are the news organizations vying for a paying national audience. There are few if any examples of a successful pay-subscriber model in local metropolitan markets, cities and towns.
The fate of local news is only slightly less grim in television.
There are fewer independently-owned stations still on-air and they are struggling. The CRTC threw them a lifeline in 2017 by creating the Independent Local News Fund: a modest $21M industry subsidy tithed from Canadian cable companies that goes to stations like CHEK TV Victoria, CHCH Hamilton and NTV in St.John’s.
Unlike independent stations, national networks like Bell Media CTV, Quebecor TVA and Corus’ Global News have the opportunity to mitigate the loss of ad revenues through internal cross-subsidies within their broadcasting operations to keep local TV news afloat.
For example, some local network stations in big metropolitan areas - like Global News in Vancouver or CTV in Toronto - make money, allowing their parent networks to sustain broadcasting in smaller markets with fewer local advertisers. But as TV ad revenues dwindle, there is less profit to cross subsidize sister stations.
An even bigger pool of cross-subsidies for local news is the cable subscription revenue taken in by the major broadcasting networks’ profitable sports and entertainment programming.
But even these profitable TV operations are declining. That’s because Internet TV has disrupted the decades-old model of Canadian TV networks buying the Canadian distribution rights to hit American programming and retailing them to Canadian viewers at a profit - that pays for local news.
As TV migrates from cable to Internet, Netflix and the growing ranks of foreign owned Internet TV streamers like Disney Plus and DAZN Sports have cast aside the Canadian re-sellers and market their movies, shows and sporting events directly to Canadian audiences.
Not surprisingly, the Canadian TV companies’ revenues and profits are falling in response. That is one of the biggest reasons Canadian TV networks and other public interest groups supported Bill C-10, the Netflix Bill that was stopped by the Conservative Parliamentary filibuster this Spring.
The purpose of C-10 was to compel foreign-owned Internet TV companies to contribute financially - as our domestic media companies do already under the Broadcasting Act - to Canadian content in news, sports and entertainment programming.
As we head into the federal election, our news organizations continue to gasp for air. Newsrooms have shrunk. Subscriber-pay models have yet to succeed in written journalism. Internal subsidies haven’t stopped the decline of television local news.
And the cause, maybe the culprits, are Facebook and Google. More on them in the next blog post.