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The CBC’s Place and Role in the Networked Media Universe

Today I participated in a panel debate at the Manning Centre’s annual conference. It’s a big conflab that attracts a whose who list of the Conservative Party and party faithful.

The question we debated was, “Is it time to pull the plug on the CBC?” I debated the question with James Baxter from iPolitics and Brian Lilley, a co-founder of Rebel Media and all about town commentator for various conservative-type talk shows, publications, etc.

So, should we pull the plug on the CBC? I said no! What follows is a slightly tidied up copy of my talking notes.

Main Arguments for how to think about the CBC, and why we need it:

  1. Over the last three decades, the CBC has become a much dimmer star in a much larger internet- and mobile wireless-centric media universe;
  2. it is still important — just a lot smaller than it once was;
  3. the CBC should be put on better footings with respect to funding, its mandate and independence from the government of the day;
  4. However, I also wonder if focusing on the CBC is like looking at things through the wrong end of the telescope?
    • Broadband internet and mobile wireless are now central to our whole way of life, economy and society, including the media, the CBC and journalism.
    • We can no longer talk about the CBC, journalism or ‘the media’ without talking about internet & mobile phones.
    • Mobile phone rates, data caps, broadband access, fibre-to-the-doorstep, and common carriage are as important as the CBC to most CDNs – in personal terms (intimacy @ a distance), social terms (access to knowledge, entertainment, opportunities, others), and $ terms (CDNs spend $5 on bandwidth for every $1 on media content).

I leaned on two main sources for my talk: Noam (2016). Who Owns the World’s Media. New York: Oxford University Press and, of course, the data sets and reports from the Canadian Media Concentration Research Project that I direct.

Argument #1: CBC is a small fish and a vastly bigger pond

It has shrunk greatly over time against the backdrop of a vastly larger media landscape, as Figure 1 below illustrates. 

Figure 1: CBC vs Network Media Economy, 1984-2015, (Total $ millions)

cbc-v-nmeSource: Canadian Media Concentration Research Project (2016).

The role of the CBC has been dwarfed by a handful of developments:

  1. Wholly new media have been added to the media universe: e.g. mobile phones, broadband internet access, pay TV, OTT, online gaming, social media, search engines, the hosting, buying and selling of stuff – ebay, Amazon, kijijji.
  1. The media universe is becoming ever more internet- and mobile wireless-centric, hence why I talk about the “network media economy” — carriage is king, not content;
  1. The size of the network media economy quadrupled from $19 billion in 1984 to $75 billion today;
  1. Canada’s media economy is not small but one of the twelve biggest in the world;
  1. The Canadian media economy has not only become much bigger and more complex but also become more concentrated since the turn-of-the-21st Century (although with important exceptions, such as, and crucially, internet news sources, radio and magazines). Among other things, Figure 2 below shows how the CBC’s place within the Canadian media economy shrunk between 1992 and 2015.

Figure 2: CBC place in the Network Media Universe, 1992 vs 2015

 1992media-cos-1992 2015

media-cos-2015

The CBC is now a pygmy amongst giants. It’s share of the total media economy dropped from 5% in 1980s and early 1990s to less than half that amount today.

Based on revenues in Canada, Google is now bigger than the CBC, while Facebook is about half its size.

What also stands out is the extent to which a handful of companies stand at the apex of the internet and media landscape: Bell, Rogers, Telus, Shaw, Quebecor. Bell dominates with nearly 30% of all revenue, while the big five account for just under three-quarters of all revenue; that figure was 64% in 2000 and 60% in 1996.

High levels of media concentration are not unusual, however. Summarizing the results of a thirty-country study, Eli Noam observes that media concentration is often “astonishingly high” around the world. Canada is no exception.

Canada does stand out, however, in terms of the extent to which telephone companies and ISPs own all the main TV services and most radio services in Canada, except for the CBC. The “Big 5’s” share of the total TV market — Bell, Rogers, Telus, Shaw and Quebecor — has grown from 54% in 2008 to just under 80% in 2015 (78%). This combination of carriage and content is called vertical integration; Canada has some of the highest levels of vertical integration in the world, and this is not a good thing. It matters because:

  1. Having come to own content, telcos increasingly want to act as gatekeepers (publishers) to the internet rather than as gateways (common carriers). CBC has been excluded from Videotron’s Unlimited Music offering, for example, where wireless subscribers get access to a selected catalogue of streaming music services without the use of them counting against your monthly data caps. All telcos would like to do this. Bell’s Mobile TV offering tried to do much the same before being slapped down by the CRTC and the Federal Court of Appeals;
  2. Telcos’ content holdings in TV, radio, online and print are trinkets on their much larger corporate edifices. They don’t care much about media, content or journalism other than that they hope this “content” stuff will help them sell mobile phone and internet subscriptions – the real engines and profit centres of their operations;
  3. Signing up for mobile wireless and broadband internet services in Canada is very expensive relative to the forty countries that make up the EU and OECD, as is the price of data. Data caps are also used widely and set at low levels after which punishing ‘overage charges’ kick in – as if we are using ‘too much internet’.
  4. As a result, markets for fibre-based internet access are underdeveloped while mobile wireless and broadband internet uptake is lower than it could be;
  5. Regulatory capture – governments have been unwilling to steal their spine to deal with such realities. The revolving door between industry and government does not help. The Harper Government went part way down the path needed to bring about more competition but the Liberal’s approval of Bell’s takeover of MTS last week effectively throws the last government’s pro-telecoms competition policy under the bus. CPC leadership candidate Maxime Bernier probably knows this file best amongst all of the party’s leadership candidates, but his plans are uninspired and too closely linked to those of the telcos.

Instead of railing against the CBC, these kinds of issues should be higher up on our list of priorities. The industrial media age of the 19th and 20th centuries is giving way to the internet-based society of the 21st Century. The choices we make now will shape what happens for decades, and perhaps longer. We need to get this right.

Besides getting a better measure of the CBC’s diminished place within the digital media marketplace, we also need to realize that the CBC is kept on a very short leash by a several political constraints, four to be specific:

  1. Funding levels for the CBC are low by international standards – less than half the average and about a sixth of the high-end of the scale. The figure below illustrates funding levels per person in Canada versus other OECD countries, using 2014 data from all of the other countries but 2016 data for Canada to capture the increased funding put into the CBC by the Trudeau Government.

Figure 3: Public Service Media Funding/Person: Canada vs Select OECD Countries, 2014

funding-for-psm

Source: Nordicity (2016). Analysis of Government Support for Public Broadcasting. London, UK & Ottawa: Nordicity.

  1. Short-term annual funding cycles opens the CBC up to political influence through budgeting – should have five- or ten-year cycles instead;
  1. Lack of independence from the government-of-the-day in terms how the CEO and Board is appointed – Conservative or Liberal;
  1. As a recent article by DeCillia and McCurdy shows, the 467 instances of media coverage of the CBC that they examined between 2009 and 2014 highlights the extent to which the CBC faces an overwhelmingly hostile press that typically casts it as threat to commercial interests rather than taking up its place within a democratic society.

However, despite being hemmed in by business interests on one side and political constraints on the other, the CBC still manages to do some things remarkably well:

  1. Investment in original journalism and Canadian content. While the CBC accounts for just a fifth of all TV and radio revenue, it is accounts for a third of investment in original TV/radio journalism, news and information programs and a quarter of all spending on TV and radio content production in Canada. It also maintains 9 foreign news bureaus while the private sector has cut to a bare minimum.
  2. The CBC TV audience has declined but still garners 10% audience share and is still a significant TV news source (8% in English regions, 18% in QC).
  3. CBC radio services are much loved (national audience share of ~20%), and its streaming music services are popular;
  4. Trust for the CBC is high and has stayed fairly steady over time (CBC Annual Rpt, p. 34) whereas trust for traditional media has fallen (e.g. ¾ of Anglophones and 4-out-of-5 Francophones see it as fair and balanced, and reasonably diverse while trust levels for traditional media fell from 71% in 2012 to 58% at start of this year) (Edelman Trust Barometer);
  5. The CBC has been an early adopter of digital technologies, the internet and mobile apps. Well before 2008, the CBC was making its archive of programs, streaming services, TV episodes, print and audiovisual news and commentary available via its website, apps, and on iTunes, YouTube, etc. – all for $33 a year (3rd lowest amongst 18 comparable OECD countries) (Nordicity, 2016, p. 44). The commercial companies did not start in earnest until 2010, but they are still dragging their feet to this day.
  6. The results show — the CBC is the #1 source of online news for Canadians, as the Figure below illustrates.

Figure 4: Top Internet News Sources in Canada, 2015

avg_monthly_unique_visitors_2015

Source: ComScore Long Term Trend, September 2012 — September 2015, Total Canada, News and Information Category.

While the CBC is the number 1 internet news source in Canada, it is crucial to stress that it does not dominate the internet news environment. People get their news from many internet news sources — old (e.g. CBC, Postmedia, Toronto Star, CTV) and new (e.g. iPolitics, Huffington Post, Buzzfeed), domestic and foreign (e.g. BBC, Yahoo!-ABC, the Guardian, New York Times).

But before adopting a rose-tinted vision of things, however, there are several reasons for caution:

  1. Most news organizations are short on money, trust and full-time journalists. New internet news ventures like iPolitics are groping their way to survival. The “crisis of journalism” is real, as the Public Policy Forum’s recent report The Shattered Mirror: News, Trust and Democracy states – but not of the magnitude or for the reasons it suggests. Against the backdrop of a heightened state of flux, the CBC offers a steady, reliable and well-trusted source of news.
  2. New online journalistic ventures like iPolitics, Canadaland, The Tyee, Ricochet Media, etc. are important to their own niche audiences, but none of them crack the top 60 most popular internet news sources.
  3. While trust in traditional media is weak and declining it is lower yet for ‘internet-based’ media (sometimes undeservedly so). In contrast, a large majority of Canadians — 75-80% — trust the CBC. As such, it helps fill the ‘trust gap’ and since democracy rests on trust, we can say that the CBC’s makes a positive contribution to democracy.
  4. The economic base of the media no longer depends on advertising revenue but subscription fees: broadband internet, mobile phones, cable TV, Netflix, Spotify, etc. Subscription revenue now outstrips advertising revenue by a 5:1 ratio.
    • Advertising spending has flat-lined since 2008 and fallen on a per capita basis in the last three years This is not because of the rise of the internet, Google and Facebook but the sluggish economy. What’s left is increasingly going to the internet. Google and Facebook, in turn, dominate internet advertising not because they are vampire squids sucking the lifeblood out of journalism and ‘old’ media but because they are better at doing what the mass media used to do best: delivering audiences to advertisers. Figure 5 shows how advertising revenue tumbled for most media after 2008, and even slowed for internet advertising.

Figure 5: The Impact of the Financial Crisis on Advertising Across Media, 2004-2015

financial-crisis

Source: Canadian Media Concentration Research Project.

  • Advertising-funded mass media are in trouble not because of the CBC, but because (a) total advertising $ are stagnating or in decline; (b) pay-per media are expanding; and (c) the internet is better at delivering audiences to advertisers. The general public has never paid the full cost of general news services, and likely never will. Consequently, journalism and ‘general media services’ have always been subsidized by either advertising, wealthy patrons, propaganda in authoritarian regimes or the public purse in democratic countries.
  • Given this baseline reality (i.e. unwillingness to pay), the market does not and cannot fully support the kinds of general journalism and media services that Canadians want and democracy needs. This is not to denigrate the market, but recognize its limits. Filling in the gap between what the market offers and what people want and democracy needs is the raison d’être of the CBC. As the bottom of the advertising subsidy falls out from under some media and journalism, what kind of subsidy will rush in to fill the void: (1) rich sponsors; (2) propaganda; or (3) the public purse? My vote is for the CBC.

What is to be done?

  1. Stop looking through the wrong end of the telescope; the CBC plays a smaller role in a larger and more internet- and mobile wireless centric media universe;
  1. The CBC needs to be put on a stronger footing by:
  • Clarifying that its mandate includes offering services across all digital media;
  • More than doubling its budget to bring it into line with the average of the OECD countries and eliminate advertising from its TV and online services;
  • replace current annual funding cycles in favour of five- or ten-year cycles to help shield it from political influence and allow it to plan appropriately;
  • make the appointment of its President and Board more independent from the government-of-the-day;
  • dial-down the anti-CBC hyperbole in the press and some political quarters.

Valuing journalism and quality media is not a zero-sum game but a virtuous circle that benefits all: strong spending on PSM occurs alongside greater personal willingness to pay for news (Norway, Sweden, Denmark, Finland & the Netherlands), and is positively tied to very high rankings on free press indexes and strong democracies.

  1. Deal with the reality of high levels of media concentration and sky high levels of vertical integration in Canada because:
  • telcos don’t care about content;
  • telco-ISPs are pushing hard to become gatekeepers (publishers) in relation to the open internet rather than gateways (common carriers).
  • lower the high prices for mobile wireless and broadband internet services and data and curb the use of data caps, as if somehow people use “too much internet”. Taking these steps will help increase the adoption and use of mobile wireless and broadband internet services;
  • will help to decrease the problem of regulatory capture stop the spinning revolving door between industry and government – regardless of who or which party is in power.
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Shattered Mirror, Stunted Vision and Squandered Opportunities

Two weeks ago, the Public Policy Forum published its report on the state of the news media in Canada: The Shattered Mirror: News, Democracy and Trust in the Digital Age. It’s an important report, and needs to be taken seriously.

The report’s portrait of the state of journalism in Canada is grim: advertising revenue has plunged in the past decade – due, it claims, to the internet, and to Facebook and Google especially; daily newspapers have been closed, merged or pared back during the same period; many local TV stations face a similar fate; well over 12,000 journalism jobs have vanished; fake news is pouring in to fill the void; and the social ties that bind us together are fraying. All of this adds up not just to a crisis of journalism but a potential catastrophe for democracy writ large, the report intones.

In the report’s view, throughout the 20th Century advertisers, audiences and news organizations shared a mutually beneficial three-way relationship: advertisers got cheap access to large audiences, journalists got paid, and we got our news for next to free because advertisers footed the bill. This literally was the “free press”, and by lucky happenstance, democracy was the better for it.

That’s all coming undone now, though, say the wise counsel of mostly senior journalists and journalism professors huddled around the Public Policy Forum’s new CEO, Edward Greenspon (and former Globe and Mail and Bloomberg News senior editor) who led the development of this report. They conclude with a dozen recommendations designed to turn back the tide. The cornerstones of their policy proposals aim to redirect advertising revenue that is currently flowing into the coffers of Silicon Valley-based internet giants like Google and Facebook back to Canada. Another group of policy recommendations aims to use a proposed new Future of Journalism and Democracy Fund to boost the capacity of professional journalism taking root in emerging digital news ventures and First Nations journalism organizations.

I think that the exercise is potentially useful, and that there’s no need to shy away from the idea that the federal government can adopt supportive policies to bolster journalism and help a democratic culture to thrive. However, this report is badly flawed. All along the way it cherry-picks evidence and gooses the numbers that it does use to make its case. There is also an acute sense of threat inflation that hangs about it. The extent to which Google, Facebook, Silicon Valley and “the Internet” are made the villains of the piece is both symptomatic of how the report tries to harness such threats to preordained policy ends and a framing that undermines the report’s credibility.

The Shattered Mirror also dodges four fundamental issues that hobble both its analysis and policy recommendations:

  1. Media concentration and the unique structure of the communication and media industries in Canada;
  2. The impact of the financial crisis of 2008 which, even though its epicentre lay elsewhere, has resulted in a lacklustre Canadian economy ever since. This resulted in a sharp drop in advertising that slammed ad-funded news media and from which they have never recovered, and likely won’t;
  3. Advertising is no longer the centre of the media economy, and receding ever further from that role by the day, so hinging a policy rescue on recovering so-called lost advertising is out of step with reality and likely to fail;
  4. The general public has never paid full freight for a general news service and likely never will. Thus, it has always been subsidized, and as the bottom on advertising revenue falls out that source of subsidy will have to be replaced by another if we really are concerned about getting the news we deserve – trying to wrestle money out of Google and Facebook (the report’s central policy proposal) won’t cut it. The proposal to apply the GST/HST to them, with some tweaks, so as to make it apply to all forms of advertising and to earmark these newfound tax revenues to original Canadian content, could help and is, thus, one I support.

Finally, I am skeptical about the “real news versus fake news” frame that girds the report. The language about “vampire economics” is overwrought. Such things give a tinge of moral panic to the report, and taints the analysis and policy proposals. Unless otherwise cited or linked to, the data sets underlying the discussion can be downloaded under Creative Commons principles from the Canadian Media Concentration Research Project’s Media Industries Database. A PDF version of this post is available here.

Chronicling the Crisis: the Public Policy Forum Makes its Case

As the Public Policy Forum documents, advertising revenue has plunged for daily newspapers, and is beginning to fall for television. Addressing “classified advertising” specifically the report states that “three-quarters of a billion dollars a year in reliable revenue vaporized in a decade” (i.e. 2005-2015). Daily newspaper display advertising revenue totaled $1.8 billion in 2006; a decade later it had been cut in half. Altogether, total daily newspaper advertising revenue has plunged by 40% — from $3.3 billion in 2006 to an estimated $2 billion this year. Community newspaper revenue has fallen by $407 million since 2012 (pp. 17-19). Will the last journalist please turn out the lights?

According to The Shattered Mirror, a similar fate is beginning to beset TV. Profits have plunged from 11% for “private stations” in 2011 to -8% last year, for instance (p. 24). Another study by Peter Miller and the Friends of Canadian Broadcasting that hangs about The Shattered Mirror report but which is not cited, worries that, economic trends, and what it sees as a series of wrong-headed decisions by the CRTC, could lead to another 30 local TV stations going dark by 2020.

Newspaper circulation has also been cut four-fold from just over 100 newspapers per 100 households to half that amount in the mid-1990s, to just eighteen last year. The paid daily newspaper as we have known it for the past century could be extinct in five years, the Public Policy Forum report warns (p. 15). And as those implications come to pass, fake news is pouring in to fill the void, desiccating the social bonds that tie us together as a nation, as a people, and as a democracy.

Figure 1 below illustrates the point with respect to declining circulation.

Figure 1: The Vanishing Newspaper: Newspapers sold per 100 households in Canada, 1950-2015, projected to 2025

figure-1-vanishing-newspaper

Source: Public Policy Forum (2017), The Shattered Mirror, p. 15.

In addition, twelve thousand journalists and editorial positions have been lost in recent decades, according to figures cited from the Canadian Media Guild. Unifor and the Communications Workers of America also report another 2000 or so positions lost as the massive shift in advertising revenue to the internet guts Canada’s news rooms.

The lost revenue at the root of this carnage, however, the report argues, has not vanished but migrated to the internet. In fact, internet advertising has sky-rocketed from half-a-billion dollars a decade ago to $5.6 billion last year, states the report. This ‘shift’ has benefitted a small number of internet giants based in Silicon Valley, while depriving Canadian news media of the money they need to survive.

The report is emphatic that the free-wheeling early days of the internet have been eclipsed by the rise of a few foreign digital media giants and a process of “vampire economics” whereby those giants, and Facebook and Google in particular, are sucking the lifeblood out of “real news”. As the report states, the internet giants are getting an incredibly “sweet deal”: “leverage the news others finance and grab the advertising that used to finance that news” (p. 31). But as Facebook and Google get rich, journalists, news organizations and, yes, us and democracy are being robbed blind. The report is explicit that only once this lost advertising revenue is brought home, will all be well: the so-called crisis of journalism will be solved and democracy saved.

Some of that money flowing south needs to be clawed back and the two behemoths need to learn to show more respect for the news content that they have used to build their empires, the report stresses. Not only do we need to do this, we can do it if policy-makers gather up the political will needed to change the Income Tax Act to make advertising on Canadian internet news sites tax deductible but not foreign websites (as has been done for newspapers and broadcasting since 1965 and 1971, respectively). GST/HST should also be applied to foreign internet companies that sell advertising and subscriptions in Canada, e.g. Google, Facebook and Netflix. These measures would cost little and raise $300-400 million that could be used to fund public policy initiatives to strengthen professional journalism (p. 84). In addition, Facebook and Google must be made to play an active role in stemming the tide of “fake news” flooding into our country while giving priority to Canadian news sources. In other words, they must be made to act more like responsible publishers (p. 97).

Tunnel Vision, Goosing the Numbers, and “Off Limits”

Advertising-supported journalism is not the ‘natural order of things’.

The case that the authors of The Shattered Mirror make about the severity of the crisis of journalism is impressive at first blush. Ultimately, however, it is neither convincing nor credible.

Its fixation on advertising revenue, for instance, assumes that it has always been an integral part of the natural journalistic order of things. It has not. Advertising revenue soared from being less than half of all revenue to account for between two-thirds and 90% of revenue at big city newspapers in the US and parts of Europe between 1880 and 1910, and in Canada two decades after that (Sotiron, 1997, pp. 4-7). While the advertising-supported model of journalism carried the day during the ‘industrial media age’ for much of the 20th Century thereafter, there is little reason to believe that it will or even should have an eternal lock on being the economic base of the media forever into the future – the Public Policy Forum report’s wishful thinking notwithstanding.

Moreover, while advertisers tied their fortunes to the commercial media model for close to a century, they had no special love for the media or the journalistic functions they perform, per se. Instead, they did so because it was the most cost-effective way to meet their needs. New and better means to deliver up audiences to advertisers at a much lower price have been developed since and, unsurprisingly, businesses have reached for the newest tool in their toolbox: the internet. This is an uncomfortable truth that the report refuses to acknowledge, and thus to engage with. Not even King Canute could turn back that tide, and nor should we want him to even if it was possible. We have to find a better way to pay for the news for just this reason and also because, for the most part, Nasreen Q Public never has been willing to pay for a general news service.

Advertising is being eclipsed by “Pay-per” media.

Advertising is also becoming a smaller and smaller part of a bigger and bigger media economy. It has long been eclipsed by the “pay-per model”, or subscriber fees, where people pay directly for the communications and media they use. Subscriber revenue outstripped advertising by a 5:1 margin for the ‘network media economy’ in 2015 (see here for a definition of the ‘network media economy”, p. 1). “Pay-per media” are now the economic engine of the media economy. The Shattered Mirror, however, does not seem to recognize this and thus examines the problems facing journalism through the wrong end of the telescope, e.g. advertising.

Take TV specifically. The report states that “TV revenue is start[ing] to drop”. The statement is true for advertising-supported broadcast TV, but not for TV as a whole. Subscription revenue for specialty and pay channels, OTT services like Crave TV and Netflix as well as and cable TV now account for three-quarters of all revenue, and for the most part continue to grow. Annual funding for the CBC makes up the rest, i.e. just over 5%. The Shattered Mirror draws general conclusions about the supposedly sorry state-of-affairs for TV writ large based on a small as well as diminishing part of a larger vista. The advertising-supported part of TV accounted for less than half of all revenue in 2015 (e.g. 42.6%). It is in trouble, but again this is a fraction of the whole picture.

In addition, blaming “the internet” ignores other potential explanations for the problems that do exist. Why, for example, is broadcast TV not in dire straits, and in some cases making a bit of a comeback in the US and some other countries (see FCC and Ofcom, for example)? The report does not bother to ask, let alone explore such realities, for reasons that will become clear in a moment (hint, it has to do with media concentration and the unique structure of the media and communication industries in Canada, issues that the report explicitly eschews).

Having left out the fastest growing and biggest segments of the media economy – the ‘pay-per’ segments – and painted a picture of rapacious foreign internet giants stealing away advertising revenue from Canadian news media organizations, the report ignores another fundamental fact that does not fit the story it wants to tell: advertising revenue across the entire economy has stagnated for close to a decade. Moreover, per capita advertising spending dropped from $371 per person in 2008 to $354 in 2015 – the last year for which a complete set of data is available. TV advertising specifically has stayed flat in absolute terms while falling from $102 per person in 2008 to $94 last year (see here). That said, however, and unlike the report’s claim to the contrary, total TV revenue continues to grow, and indeed revenues for specialty and pay TV as well as OTT services have soared over the years based on subscriber revenues, albeit with slow growth in some aspects of some of these services in the last year or two.

In addition, the report’s claims regarding the steep decline in “private station” profits from 7.3% to -8% between 2011 and 2015 is misleading (p. 16). The statement implies that it applies to TV in general but in fact refers only to the smallest and shrinking part of the TV landscape: commercial broadcast TV. Operating profits for pay and specialty TV — the biggest and still growing segment of the TV landscape — were 20.8% in 2015, however. For cable TV and radio, they were 19% (see CRTC here, here and here). Meanwhile, operating profits at Bell Canada Enterprises’ media arm were 25% in 2015 and an eye-popping 40% for the company as a whole – four times the average for Canadian industry (Statistics Canada). Figure 2 below illustrates the point.

Figure 2: Bell Media Operating Profits, 2015

fig-2-bell-profitsSource: BCE, 2015 Annual Report, p. 130.

Parenthetically, it is also important to note that Bell is the biggest, vertically-integrated TV operator in Canada by far, accounting for roughly 30% of all TV revenues and 28% of total revenue across the network media economy. Ignoring conditions at a company with this clout across the media economy is negligent, but also part of a tendency in this report to selectively invoke a small part of the picture to fill in a portrait of catastrophe of a larger kind. In terms of the rules of rational argument, this pattern is a type of spurious reasoning called an “indexical error”. The report is chock-a-block full of such examples, which lends to the impression that the report’s authors are goosing the numbers.

Let’s consider a few other claims made about collapsing circulation and the “vanishing newspaper” and the scale of journalistic job losses, before turning to its willful refusal to deal with fundamental considerations about how the unique structure of communication and media industries in Canada directly bear on its topic but which are wholly ignored.

The Vanishing Newspaper?

These examples are not innocent. They are part of a process of “threat inflation” with the aim of buttressing the case for the policy recommendations on offer. Much the same pattern can be seen in the report’s depiction of circulation trends for daily newspapers. Now, make no mistake about it, the picture cannot be spun as a good news story. That is not my point. Looking at the issues from different angles and a more measured and nuanced view reveals that that things are far from rosy, but they are not the catastrophe that The Shattered Mirror makes them out to be. The reasons why things are as bad as they are also demands a richer and more multidimensional explanation than the ‘single-bullet’ explanation the report offers: blame the internet (and Facebook and Google). To illustrate the point, let’s return to Figure 1 above, which is repeated below to make the job easier.

Figure 3: The Vanishing Newspaper: Newspapers sold per 100 households in Canada, 1950-2015, projected to 2025

figure-1-vanishing-newspaper

The message of the Figure 3 is clear: newspapers have undergone a precipitous decline, and could vanish altogether soon. Indeed, already by 2015, the number of newspapers sold per 100 households was one-quarter of what it was in 1975. By this measure, the relentless decline and seemingly inevitable outcome look really, really bad – catastrophic even.

Now, let’s expand our measures to look at things from four additional angles: (1) total number of newspapers sold per week per person; (2) total number of newspapers sold per week per household; (3) total circulation; and (4) by revenue – shown for both total revenue and just advertising revenue. My numbers start in 1971 because that is the earliest date for which I could gather data fit for the task, but as far as I can tell that has no impact on the main point. And just to make my main point clear, it is that the Public Policy Forum’s Shattered Mirror report has selectively chosen a measure that paints the worst-case scenario rather than a nuanced, multidimensional picture of a situation that is bad enough that it doesn’t need to be exaggerated. In other words, I am depicting a strategy of policy argumentation that I call “threat inflation”.

Figure 4, presents two sets of data, one for the number of newspapers sold per week per person and another for the number of newspapers sold per week per household – both for the period from 1971 to 2015 (the latest year for which figures are available).

Figure 4: Per Household and Per Capita Decline of Daily Newspapers Circulation in Canada, 1971-2015

fig-4-circulation-decline-per-hhld-capita

Sources: Newspaper Canada; Statistics Canada.

Figure 4 confirms that newspaper circulation has been in long-term decline and there appears to be nothing on the horizon to turn that around. If we care about newspapers because they are one of the main sources of original journalism – as I emphatically do – this is a ‘bad news’ story. Yet, while the decline shown in Figure 4 is obvious – indeed, circulation was cut in half over the period covered on the basis of total copies per week per household – that is half the rate depicted by The Shattered Mirror. The difference is likely due to the fact that the number of people per household has declined over time, so fewer people per household means fewer newspapers in each house even before we take declining circulation into account — versus the “vanishing newspaper” scenario.

Now, let’s look again from the vantage point of circulation per capita shown in Figure 4 above. It also shows that circulation levels have declined steadily since 1971, but by only about 35% versus the four-fold collapse The Shattered Mirror depicts. This is what I mean by threat inflation: choosing methods and numbers that inexorably lead to the worst-case conclusion.

Now let’s look at things from the vantage point of total newspaper circulation because if you’re in the journalism business, a key consideration has got to be not how many daily newspapers you can sell per person or per household but in total. Figure 5 depicts the trend over time.

Figure 5: The Rise and Fall of Newspapers Circulation in Canada, 1971-2015

fig-5-rise-fall-of-newspaper-circ

Sources: Newspaper Canada; Statistics Canada.

Figure 5 shows that, in terms of sheer volume, newspaper circulation continued to rise until 1990 (versus falling steadily from 1950). It has fallen since, albeit in fits and starts. And obviously, against a population that has swelled from 22 million to nearly 36 million over the timeframe covered, circulation is shrinking in relative terms, which is the point of the earlier figures. Yet, the point is once again that this is a ‘bad news’ story but not a catastrophic one, and the fact that circulation peaks in 1990 and then goes down in fits and starts thereafter also raises interesting questions about timing that are ignored by the Public Policy Forum report, again likely because they don’t fit the tale of doom and gloom that it is mobilizing, but which I will return to below.

Now let’s turn from circulation to revenue data to see what things look like from this vantage point. Figure 6 does that based on stand-alone advertising revenue and all sources of revenue (advertising, subscription and other, including digital/internet).

Figure 6: The Rise and Fall of Newspapers Revenue in Canada, 2000-2015

fig-6-rise-fall-of-newspaper

Sources: Newspaper Canada; Statistics Canada.

As Figure 6 shows, advertising as well as subscription and other sources of revenue continued to rise for newspapers into the 21st Century. Indeed, while circulation was in decline regardless of the measure used, revenue continued to climb. Revenue peaked in 2008 at $3.9 billion and $4.7 billion, respectively, for advertising and ‘total’ revenue measures — a crucial point in time for reasons that will emerge in a moment. Revenue has plunged since, with newspaper advertising revenue falling to $2.3 billion (a drop of 40%) and total revenue to $3.2 billion (a drop of 32%) in 2015. This is bad.

Thus far, none of the measures reviewed leads to a ‘good news story’, but each of them in their own way change the magnitude, timing and potential causes of the problem. Of utmost importance is that there is no downward spike in the fortunes of the press on any of these measures that coincides with when the internet takes off, either in its dial-up phase in the mid- to late-1990s or when broadband internet took centre stage in the early-2000s. Given this, the internet – and Facebook and Google – cannot be the villain of the piece that The Shattered Mirror (and so many lobbying the government from the “creator” and “cultural policy” groups) makes it out to be.

In fact, this is not news. While such claims are common, that they are wide of the mark is well known. One of the world’s top media economists, Robert Picard of the Reuters Institute of Journalism at Oxford University, for instance, has made this point for much of the last decade. I have too with respect to Canada and across the world. That neither circulation nor revenue dives downward with the arrival of the internet cuts to the heart of the central claim in The Shattered Mirror. Yet, like so much of the evidence that does not fit its “sky-is-falling-because-foreign-internet-giants-ate-Canadian-news-media’s-lunch” rhetoric, this evidence doesn’t make the cut. If all of this is correct, we must also change our diagnosis and policy proposals accordingly.

Alternative Explanations: Stagnating Advertising Revenue and Vanishing Jobs

Not only does newspaper revenue not spike downwards with the advent of the internet, the onset of economic woes for advertising supported media do not coincide with the time frames that the Public Policy Forum report identifies, typically 2005 or 2006 for newspapers and ‘recently’ for TV. The upshot of its misdiagnosis is to effectively carry on with the ill-fated case its authors want to make while avoiding another possible – and I believe far better — explanation for the woes they describe: the impact of the financial crisis in 2008 and economic instability that has followed ever since.

Figure 7 below illustrates the point by showing a sharp downward kink in revenue for nearly all the media sectors it covers since 2008. This reflects the impact of the global financial crisis on the media economy. At this point in time, advertising revenue falls for total TV advertising revenue, broadcast TV, newspapers, radio, out-of-home advertising and magazines. The impact even hits internet advertising and pay TV services, as their revenue growth flattens temporarily before rising again a year or two later.

Figure 7: The Impact of the Financial Crisis and Economic Stability on Media Revenue (millions$), 2004-2015

fig-impact-of-financial-crisis-on-ad

Sources: IAB.canada 2015 Actual + 2016 Estimated Internet Ad Revenue; TVB (2016). Net Advertising Volume, CRTC Communications Monitoring Report.

Total advertising revenue fell by 7% from $11.6 billion to $10.8 billion. It rose again the next year to recover the lost ground but unevenly. Tellingly, however, advertising revenue has fallen from $371 per person in 2008 to $354 on a per capita basis in 2015, and from $102 per Canadian to around $94 for TV– as indicated earlier.

The recovery that has occurred has taken place in fits and starts and has been very uneven across different media sectors. The long-term effects of that appear to be three-fold. First, it has gutted newspaper advertising revenue. Second, it has propelled the shift of the economic base of TV from advertising to subscriber fees. Third, amidst the upheaval, the internet has consolidated its place at the centre of advertising revenue. It now accounts for more than a third of all advertising revenue (36.2%) in a stagnating pool of advertising money.

Again, none of this is a mystery, except to those who work the policy apparatus here in Canada, and there is no mention of it in The Shattered Mirror or indeed in any of the policy reports being wheeled into action by the myriad of groups vying to shape the outcomes of Heritage Minister Melanie Joly’s Canadian Content in a Digital Age review. Beyond this cloistered community, however, the fact that the fate of advertising-based media turns tightly on the state of the economy – and indeed, is something of a canary in the coal shaft for it – is reasonably well known and discussed by media economists from across the political spectrum. This has been the case for many, many years (see, for example PicardGarnhamMiegeVogel but also any media economics text). That the subject is not even broached by the Public Policy Forum’s report is a measure of the extent to which it ignores evidence and ideas that don’t fit the story it wants to tell, and of a piece with its methodological tactics throughout the report.

In sum, it is a mistake to focus on a ‘silver bullet’ explanation of complex issues like the one before us. The fixation on the negative impact of the internet and the two villains of the piece, i.e. Google and Facebook, is misplaced. In short, advertising revenue has taken a nose dive because the economy has been shattered not because Tyrannosaurus Digital Media Rex Google and Facebook ate the news media’s lunch.

A Catastrophic Loss of Journalists?

Just as the data with respect to declining circulation and lost revenues in The Shattered Report is circumspect, so too are the figures that it cites for the number of journalist and editorial positions lost over the years partial and incomplete. The report says that between 12,000 and 14,000 such positions have been lost over an indefinite period that sometimes stretches back to the 1990s but with a stress on recent events. The figures cited are based on a tally of headlines announcing such cuts and more systematic record-keeping by the Canadian Media Guild, Unifor and the Communications Workers of America. I have no doubt that the human impact of the losses they document are real and severe.

However, there are two short-comings of the data presented. For one, it is based on headlines and record keeping that do a great job chronicling jobs lost but a poor one at keeping track of those gained. Second, Statistics Canada data depicts a wholly different picture. The report needs to at least explain why the Statistics Canada data offers a less satisfying account of the conditions than the sources it relies on. It does no such thing. In fact, and once again consistent with a pattern, the authors ignore this data completely.

According to Statistics Canada data the number of full-time journalists in Canada has not plummeted. In fact, it has crawled (stumbled?) upwards from 10,000 in 1987 to 11,631 in 2015. Figure 8 below illustrates the point.

Figure 8: Journalists vs the PR, Advertising and Marketing Professions,
1987-2015

fig-8-of-journos-vs-pr

SourcesStatistics Canada (2016) Employment by occupation: 1123 Professional occupations in advertising, marketing and public relations and Statistics Canada (2016). Employment in Journalism occupation, by province. Custom LFS tabulation. File on record with author.

While this is a small increase, it is an increase all the same, and counter-intuitive as well. Things that are counterintuitive beg you to explore why they are so. Also consider that after years of a sluggish economy in the early-1990s, and extensive consolidation and cut backs in the latter part of the decade, the number of working journalists fell to a little over 6,000 (1998). If we take that as our base, the number of working journalists has nearly doubled since and, consequently, the period looks more like one of modest growth rather than a catastrophe.

Of course, this small increase should not be over-played. It has occurred against the backdrop of a media economy that has quadrupled in size. Even if the number of journalists has stayed relatively steady rather than collapsed, this still means that their numbers have shrunk relative to the size of the media economy. In other words, similar amounts of journalistic resources in a much bigger media pie constitutes a relative decline. This is cause enough for concern without the hyperbolic rhetoric that The Shattered Mirror leans on.

In addition, whatever modest growth has taken place has been vastly out-paced by the number of people working in the PR, advertising and marketing professions. Whereas there were four people of the latter type for every journalist in 1987, by last year, the imbalance had swelled to 10:1 — a triumph of the persuasion professions over journalism, which again is cause enough for commentary and concern. Yet again, the Public Policy Forum’s report is silent on the point.

My point, once again, is not to assert that the Statistics Canada data is definitive on the matter of journalistic and editorial job losses. Instead, it is to highlight how selective The Shattered Mirror report is. The pattern is one where evidence that fits its grim vision of the current state of journalism in Canada is highlighted while that which cuts across the grain is either downplayed or ignored completely.

Blindspot: the Media Concentration Problem

The Shattered Mirror also gives short shrift to the idea that media concentration and the structure of the communication and media industries might be a significant factor giving rise to the woes besetting the news media, except for the highly concentrated nature of internet advertising. As Greenspon told J-Source, media concentration is just not “the existential risk to media that it was for a number of years”. However, the report is more than willing to turn the screws on Facebook and Google’s dominance in the one market — online advertising – where they undoubtedly and overwhelmingly do dominate, while simultaneously turning a blind eye to high levels of concentration in several media markets and in terms of vertical- and diagonal-integration across the telecoms-internet and media landscape in Canada.

By The Shattered Mirror estimation Facebook and Google account for two-thirds of all internet advertising spending in Canada. It also shows that internet advertising has become more concentrated over time, not less: the top ten companies took 77% of all internet and mobile advertising revenue in 2009, but by 2015 that number was 86%. The top twenty companies accounted for 90% (pp. 31-32). There is evidence that these levels are growing. I agree with this part of the report’s analysis, not surprisingly since it draws heavily on data and estimates from the Canadian Media Concentration Research Project that I direct.

The same claims have been circulated by those who have advised or influenced the direction of The Shattered Mirror. Ian Morrison, the head of the Friends of Canadian Broadcasting, summarized the key claims being made as follows, for example:

Based on data from the Canadian Media Concentration Project [sic] at Carleton University we estimate $5 billion of Canadian advertising goes to foreign-owned internet companies such as Google and Facebook . . . . With the Interactive advertising Bureau projecting $5.55 billion in overall internet advertising revenue . . . for 2016, we estimate that almost 90 percent of what Canadian advertisers spend on digital ads will leave the country.

In an interview with the Globe and Mail’s Simon Houpt, Greenspon asserted that Google and Facebook alone “take in about 85% of digital ad dollars” – although that number conflicts with others elsewhere in the report. However, the numbers do seem to regularly get mixed up, so that it is not quite clear if we are talking about just Facebook and Google or some ‘other’ foreign internet giants as well.

My main concern is that claims that foreign-owned internet companies will take $5 billion in projected internet advertising revenue for 2016 – or 90%, and that Google and Facebook alone account for up to 85% of the total — out of Canada are stretching the available data beyond what can be reasonably supported. They build estimate upon estimate, jump through hoops, and draw questionable inferences to come up with these figures (see pp. 30-31).

The CMCR Project data estimates with reasonable confidence that, combined, Google and Facebook accounted for about $3.1 billion, or two-thirds, of a total of $4.6 billion in internet advertising revenue in 2015 – the last year for which final figures are available. There’s some room for adjustment either way. Based on what we do know the figures touted in The Shattered Report and elsewhere do not seem credible, even if repeating them in one venue after another seems to have given them an aura of holy writ.

This is especially troubling because the estimates offered not only extrapolate from the limited base of what we do know but serve as a springboard to The Shattered Mirror’s #1 Policy Recommendation:

Policy Recommendation 1: Change the Income Tax Act to make advertising on Canadian internet news sites tax deductible (as has been the case for newspapers and broadcasting since 1965 and 1971, respectively) while applying a ten percent withholding tax for advertising on foreign websites. The key aim is to open a new “revenue stream of $300 to $400 million that would be used to finance a special fund” much along the same lines as the existing levy on cable TV companies is used to fund Canadian content (pp. 83-84).

At a bare minimum, if their numbers are off, so too are these estimates.

Overall, the path to this policy recommendation and the proposal itself is flawed for a handful of reasons. For one, as just indicated, the available evidence is insufficient to support the report’s #1 policy proposal. Second, even if the numbers were right (or close), both the analysis and the policy proposal ignore the structural shift in the economic base of the media from advertising to the pay-per model described earlier, while assuming advertising has and should forever form an integral part of the natural order of the news media. Third, it appears to swap the bad idea of an ISP tax levied against wireline- and mobile wireless internet access providers (which, not coincidentally, are Canadian) for a “platform levy” applied against ‘foreign digital platforms’, e.g. Google and Facebook. If this is correct, the bait and switch on nationalistic grounds is objectionable on its own.

The bigger problem, however, is that the recommendation seeks to take an approach that has been applied to limited (single) purpose broadcasting distribution systems for the past half-century and apply it to general purpose internet platforms that host, store and facilitate a dizzying and ever expanding array of content, applications, services and uses. And it does so in the name of supporting a narrow range of content – “real news”, as the report calls it – that constitutes a tiny sliver of what people use and enjoy these platforms for. Whether applied to ISPs or digital platforms, the idea that the multitude of uses that people make of the internet should be harnessed to promoting journalism (or Canadian content generally) – no matter how important – is objectionable. In terms of a common test applied to free speech cases, while the goal being sought is legitimate, the means being promoted to achieve it is akin to a sledge hammer when what we need is a scalpel.

Finally, while the report does a good job of documenting the extent of the internet giants’ dominance of the online advertising market, both the analysis and proposal exaggerate the extent to which Google, Facebook and other ‘foreign internet giants’ influence reaches across the media landscape in Canada. By ignoring the latter, the effect is to minimize the extent to which media concentration and the uniquely high levels of vertical and diagonal integration between telecoms-internet service providers and other key areas of the media, especially television, have given rise to homegrown problems rather than the debilitating “vampire economics” imported from afar (the following paragraphs draws heavily from a series of CMCR Project reports: see here, here and here for more details and elaboration).

How to Look at Media Concentration

Using what I have learned as the “scaffolding method”, it is essential to look at the state of competition and/or concentration in one media sector at a time, group the different sectors together into reasonable clusters such as “content media” (e.g. newspapers, TV, radio, magazines, etc.), “connectivity media” (e.g. internet access, mobile wireless, etc.) and “internet media” (e.g. search, internet advertising, social media, browsers, etc), and then group everything together so as  to get a view of the network media economy in its entirety. One must also look at trends over time, and in comparison to other parts of the world.

The Shattered Mirror report does nothing of the sort, and so it paints a picture sloppily with a broad brush, declaring that media concentration is not a problem when it feels fit to do so, but a worrying concern where that suits its purposes, i.e. in the areas that Google and Facebook dominate. Ultimately, there is no overarching sense of how everything fits together, and so the image drawn is arbitrary, and wholly dependent on the whims of the observer.

So, let’s try to get things straight in a minimal amount of space in what is already a long post. Google and Facebook do dominate internet advertising and the general trend with respect to concentration in this specific media market is up – as stated above. However, once we scaffold upwards from there to get a sense of how internet advertising fits into the whole media economy, we can see that it accounts for just 5.9% of a total $78 billion in revenue in 2015. Google and Facebook were the 6th and 14th biggest media operators in Canada in 2015, and had estimated Canadian revenues of $2.3 billion and $757.5 million, respectively. They accounted for 3% and 1% of all revenue across the media economy.

By comparison, the biggest player, Bell Canada, had $21 billion in revenue from its telecoms and TV operations in 2015. This was 28% of all revenue across the whole media economy, and nearly twice the size of its largest rivals: Rogers and Telus. It ten times that of Google and more than 25 times the revenue of Facebook. Thus, while certainly impressive, Google and Facebook don’t quite cut the imposing figure that The Shattered Mirror makes them out to be once placed in context.

When we look at specific media sectors and across the media economy as a whole, four observations about concentration levels in Canada stand out:

  1. They are generally high (with the exception of radio and magazines);
  2. They have gone up since the turn-of-the-21st Century (except modest dips from still high levels in the past five years for mobile wireless and cable/IPTV TV);
  3. They are not unusually high by comparative international standards but that’s mostly because, as one of the most authoritative sources on the subject states, media concentration around the world is “astonishingly high” (Noam, 2016, p. 25 and especially chapter 38, pp. 1307-1316);
  4. Canada is unique, however, in its high levels of vertical and diagonal integration.

In terms of vertical integration, Canada stands unique amongst countries insofar that telecoms operators own all the main television services, except the CBC. The scale of vertical integration more than doubled between 2008 and 2015, as the “big 4” – Bell, Rogers, Shaw (Corus) and QMI – expanded their stakes into mobile wireless, internet access, television distribution and more traditional areas of the media such as TV and radio. The “big 5” television groups – Bell, Shaw (Corus), Rogers, Quebecor and the CBC – collectively owned 217 television services in 2015. They accounted for 86.2% of total television revenue, up from three-quarters in 2008. Their TV operations include Canada’s major TV news outlets, from broadcast TV networks like CTV, Global, CityTV and TVA, as well as cable news outlets such as CTV, BNN, the Canadian franchise for the BBC, CablePulse 24, and so forth. The big four vertically-integrated telecoms giants are central to the news ecology in Canada. The Shattered Mirror gives no sense of this.

Beyond this, there are three other reasons why the unique structure of the media and communications industries in Canada are not peripheral, or anachronistic, but central to the study of news.

Lush Profits, Thin Journalistic Gruel

First, similar to the conditions at Bell that we saw earlier, Shaw, Rogers and Quebecor had operating profits of 42%, 38% and 37%, respectively in 2015 — roughly four times the average for Canadian industry. Shaw’s operating profits for its media division (including Corus, which is jointly-owned and controlled by the Shaw family) of 33% — even higher than those of Bell (25%). Operating profits at Rogers and Quebecor’s media divisions were a more modest 8.3% and 7.3%, respectively – a little lower than the average for Canadian industry. These observations are at odds with the story of doom and gloom that permeates The Shattered Mirror. The situation ranges from ho-hum at the media divisions of Rogers and Quebecor to fantastic at Bell and Shaw. While there is a difference between their focus on television news versus newspapers, which are increasingly ‘sticking to their knitting’, the fact that they are among the top news sources for Canadians furthers the point that they should be at the heart of the matters before us rather than pretty much excluded altogether.

Journalism and Data Caps: Reducing Dependence on the ‘Vampire Squids’ (i.e. Google and Facebook)

Second, these vertically-integrated companies also own all the main distribution networks (e.g. mobile wireless, wireline, ISPs and BDUs). Consequently, instead of wireline cable and telephone companies competing with wireless companies for control of customers’ access to the internet, TV and beyond, they have dominant stake on both sides: e.g. wireline and wireless. This is known as diagonal integration.

The last stand-alone mobile wireless company in Canada – Wind Mobile – was acquired by Shaw in 2016. By contrast, in many countries there are stand-alone, ‘maverick’ mobile network operators such as T-Mobile or Sprint in the US, or 3 in the UK.

Diagonal integration is important because it dampens competition between rival networks. Where it looms large, subscription prices for internet access and mobile phones tend to be a lot higher, data caps much lower, the application of zero-rating to some content and services but not others is more extensive, and ‘excess use’ charges very steep. Recent studies show that the cost of mobile wireless data plans is very high and data caps low in Canada relative to the EU28 and OECD countries (see Tefficient, 2016, p. 12; Rewheel, 2016, The state of 4G pricing – 1st half 2016 DFMonitor 5th Release).

These structures of ownership and the practices they engender can also transform carriers into editors, or gatekeepers. In doing so, it makes them more like broadcasters and publishers rather than common carriers (an idea that is similar to but not the same as what is now commonly referred to as Net Neutrality). The heavy reliance on relatively low data caps and expensive overage fees by all the telecoms-internet and media giants – Bell, Rogers, Shaw and Quebecor — in Canada constrains what and how people consume the news, watch TV, listen to music, communicate with one another over the internet and mobile devices, buy stuff, consult online health and education resources, and work.

As an integral part of human experience, and the critical infrastructure of the economy, society and journalism, this is an enormous issue. Many of those pushing for a renewed sense of cultural policy have called on the government to leverage these conditions by zero-rating Canadian content (i.e. exempting it from data caps) while applying data caps to everything else. Doing so is an explicit call to gerrymander control over the pipes to tilt the field against ‘foreign content’ in favour of Canadian content. Imagine, however, if data caps were far more generous and prices more affordable. Then, Canadians could freely access content of their choice, including news which, as The Shattered Mirror shows they value greatly (even if unwilling to pay for it), without worrying about going over their restrictive monthly data caps and paying a punishing price because of that.

This would have great value for news organizations as well. They would benefit in two ways. First, news organizations would enjoy a less obstructed pathway to where their audiences increasingly get their news from: their smartphones. Second, they would avoid the non-negligible costs of designing their online news offerings for platforms such as Google’s AMP and Facebook Pages.

Google AMP and the news sites that use it are explicitly designed for mobile wireless access, for example, where the cost of data is high and the use of data caps by mobile wireless operators prevalent and a lot lower than the desktop Internet. Based on this, Google’s AMP strips down webpages and services so that results load nearly ten times as fast, thereby saving on data charges.

The costs of designing for Google AMP, however, are considerable and a whole new sub-industry of designers with specialized technical and journalistic skills is being called into existence to service the need, and charging accordingly. The roster of the ‘big brand’ news organizations that have signed up to these efforts speaks volumes about who can afford the additional burdens, financial, technical, human or otherwise: eg. the CBC, Postmedia, New York Times, Wall Street Journal, the Guardian, Financial Times, Vox, Atlantic.com, to name the most prominent.

At the end of the day, the central question remains: does any of this work? Nobody knows.

Nonetheless, these platforms are fast becoming an integral part of the news ecology, and they are also part of the problem of news providers having to give up control of their content and operations to internet companies. By dealing with the high-levels of vertical and diagonal integration in Canada that are at the root of restrictively low data caps that magnify the cost of uniting audiences with journalism to begin with, the happy upshot could be to lessen journalism’s excessive dependence on the ‘vampire squid’ internet giants like Facebook and Google that the Public Policy report rails against.

Blowing up the Bottom Line: The High (Social) Cost of Media Concentration

Perhaps one of the most important reasons that it is folly to willingly turn a blind eye to high levels of media concentration and the peculiar structure of the media industries in Canada is because the costs of bulking up have had devastating impacts. The cost of bulking up that have led to where we are have not been negligible and were built atop dreamy-eyed visions of convergence from the late-1990s until the turn of the century. At the time, the valuations of media assets soared but such visions of the future failed while saddling media enterprises with unsustainable debt levels that were payable at interest rates that sometimes ran as high as 18% in the case of Canwest, for example. This took place precisely when all-hands-on-deck were needed to deal with the rise of the internet and changing audiences’ behaviour. Many of these ventures failed and wiped out billions in capital. A few highlights will help to illustrate the point.

Sun Media, for example, was acquired by Paul Godfrey at a total value of just under $400 million in 1996, with a few small papers added in exchange for the Financial Post the next year, and then flipped to Quebecor in 1998 for $983 million – double the original value in two years. Quebecor then acquired regional newspaper publisher Osprey for $517 million in 2007. All-in-all, the combined value of Sun and Osprey was nearly $1.5 billion. They were sold back to Godfrey and Postmedia in 2015 for $316 million — $1.2 billion in the value of the capital behind the newspapers wiped out, while onerous debt payments continue to hang like an albatross around the biggest chain of newspapers in the country until the present day.

So, too, with the Southam newspaper chain. Conrad Black consolidated ownership over the chain in 1996 for around $1.2 billion, then sold them to Canwest four years later for $3.2 billion. However, Canwest went bankrupt and the papers were sold to Postmedia in 2010 in a highly leveraged deal for $1.1 billion — the same as when Black gained control decade-and-a-half earlier. Last year, Postmedia was worth $56 million — a loss of a billion dollars in market capitalization in five years (also see Bruce Livesey’s National Observer article and Marc Edge’s new book on the meltdown of journalism within the Postmedia empire, and more broadly).

At the height of the turn-of-the-21st Century convergence craze, Bell acquired CTV and the Globe and Mail. Together with the Thomson family it created Bell Globemedia, with Bell holding a 70% ownership stake in the entity and the Thomson family the rest. The capitalization of the new company was $4 billion. Bell Globemedia floundered from the beginning, however, and Bell exited the business in 2006. The venture was renamed CTV Globemedia and recapitalized at a value of $1.2 billion – a loss of nearly $3 billion (BCE AR 2006, p. 84). Of course, Bell reacquiring CTV in 2011 for $1.3 billion.

Collectively, roughly $6 billion in market capitalization was destroyed and precisely when the country’s biggest media companies should have been focusing attention, investment and whatever other resources they could muster on dealing with the rise of the internet and, somewhat later, the smartphone, and changes in how people were using the media. This is to say nothing of the extraordinary wave of lay-offs and job cuts at these outlets, and the labour strife that accompanied such processes. The Public Policy Forum’s report gives us a whiff of the costs in terms of journalistic and editorial jobs lost, but nowhere does it connect the dots. Of course, having ruled these issues “off-limits”, what should we expect?

Inner Circles, Cloistered Views and Missed Opportunities

That The Shattered Mirror, as it’s lead author’s post release comments indicate, willingly walked away from these issues is stunning, and naïve. In doing so, it walks away from an impressive body of research from around the world that says that these issues are important, extraordinarily complex, and foundational to understanding the emerging digital media environment.

While I am happy that the authors plucked from some of our flagship reports (see here and here), I am disappointed that they only picked the juicy parts that fit into their vilification of Facebook and Google and the “vampire economics” that they say rules the highly concentrated internet advertising market in Canada while turning a blind-eye to all the other data and discussion in our report. Interested readers will also find much value in the work Eli Noam, a Professor of Finance and Economics at Columbia University and editor, most recently, of Who Owns the World’s Media, a thirty-country survey done by as many research teams covering three decades that looks at the issues in front of us with an open mind, and some stunningly important conclusions – many of which are counter-intuitive and at times seems to run at cross-purposes to one another. Robert Picard of the Reuters Institute of Journalism at Oxford University is another excellent media economist who looks at these issues with an open mind, as is Gillian Doyle, among many others.

That the report refuses to engage with media concentration and the peculiar structure of the media is not surprising given that many of those surrounding its lead author, Edward Greenspon, in the development of this report have not just sat back and taken arm chair academic views on these matters but have been leading cheerleaders for the processes of consolidation in Canada that have got us to where we are. So why look in the mirror? The industrious reader can consult the list of acknowledgements to sort out who is who and draw their own conclusions.

Given all this, that media concentration wasn’t on the agenda is not surprising. It’s still a pity, though, because the issues are serious. By taking the course that it has, the report has also squandered an opportunity to build on the momentum that has been building in regulatory circles at the CRTC, Industry Canada and even the Competition Bureau. For the past several years, each of them have been using many of the policy levers at their disposal to address media concentration and counter some of the abuses of dominant market power present in several media markets – abuses that are no longer mere allegations but established legal facts. That the Public Policy Forum has taken the stance it has is a missed opportunity, not just in terms of building on the momentum that already exists amongst regulators and policy makers, but also the incredible amount of research and writing that many scholars, public interest and consumer groups, citizens and others have poured into these activities.

Final Thoughts and a Few Policy Proposals

The effort fails in terms of the analysis conducted for all the reasons set out above, and because the prescriptions counselled draw from the past and will be a drag on the future. Its analysis fixates on a dwindling part of the media, namely media that are subsidized by advertising, as if they are a part of the natural order of things and should be so forever. As both an empirical and a normative matter, this is simply not the case.

In the real world, however and as we have seen, the media economy is increasingly internet- and mobile wireless centric. For better or worse, subscriber fees and the “pay-per model” have become the driving force. The report fails to deal squarely with the idea that the underlying subsidy that has been provided by advertising for a good part of the 20th Century is stagnating, and by some measures in decline (per capita), and that the part of the advertising revenue that does remain is going to Facebook and Google not because they are venal but because they are more efficient at doing what the ‘legacy media’ used to do best: deliver audiences to advertisers.

That was always a bit of a Faustian bargain, and still is. There is no reason why we should pull out all the stops to try to bring it back. It won’t happen, and advertising subsidized media raise their own prickly problems, not least of which is it is never really the audience – us – that are the main parties calling the shots. Given the extent to which it is wedded to advertising, it is also not surprising that the report acknowledges but shies away from another undeniable fact that is inseparable from the points raised here and which is key to understanding journalism: the general public has never paid for a general news service. This has not changed (see here and here, for example).

Forgetting also that there has never been any true love between business and the advertising-supported media model — just a marriage of convenience — the report keeps alive the innocent fable of how the mutually beneficial relationship between advertisers, journalism and audience brought us “the free press” and how we must wrestle this back from the “vampire economics” of Silicon Valley. No, that won’t work, no matter how much the report gooses the numbers and argues in favour of its proposal to impose a withholding tax on the advertising and subscriber fees of ‘foreign digital platforms’. Nor should it. The invidious distinctions between Canadian media versus those from the world beyond our borders that it draws is based on warmed over cultural nationalism from the 1960s and 1970s, and this, too, should also raise an eyebrow.

The idea that we should harness society’s whole communication infrastructure – increasingly the internet – to foster a small sliver of activities that people use it for is also backwards. As said earlier, in the past, this may have been an acceptable idea because a limited purpose broadcasting distribution network was leveraged to support a single activity: broadcasting. Means were directly related to ends, and this made sense, even against the tough standards of free speech. Yet, today, we are in a different place where Canadians are being asked – incessantly – to harness a multi-purpose and general communication infrastructure (the internet) that already supports a vast array of activities that continue to expand in terms of diversity to a narrow, albeit incredibly important, range of activities.

The Shattered Mirror is not a forward looking report in these regards. It largely ignores questions about how the availability and control of distribution infrastructure (rather than just “digital platforms”) fundamentally effects the shape of the news media overall. To the extent that it does, the recommendations trot out the familiar calls for an ‘ISP tax’ to fund journalism that is so beloved by resurgent cultural nationalist groups (rather than the capacious language of “general intelligence” and “the people’s correspondence” that informed the universal postal system during the founding days of American democracy). They seem to see Minister Joly’s review of Canadian Content in the Digital Age as a once in a lifetime chance to entrench policy tools designed a half-a-century ago for ‘the industrial media age’ forever by applying them holus bolus to the emergent internet and mobile wireless-centric communications and media universe of the 21st Century. Nothing could be less helpful.

As I have tried to make clear above and every time I write on these matters, I am an enthusiastic supporter of the idea that a viable democracy needs good journalism, and that the culture of a democratic society needs arts, knowledge, media, public libraries, schools, science, archives, and a whole bunch of other things. We need a big view of culture, and we need to pay for it accordingly. So here are a few of my big ideas:

  1. Bite the bullet and accept that the general public has never paid full freight for a general news service and that, consequently, it has always been subsidized by advertising, “the state” or rich patrons. The question is how to do that today in a way that is fair, independent, effective, and accountable? The report goes part way in this direction with its Policy Recommendation #3 to change tax laws to encourage charities and philanthropists to step into the breach and invest in original news. I agree, but also think we need to dig deeper along the lines suggested below.
  1. Apply the HST/GST to all advertising expenses and subscription fees without discrimination based on medium or nationality, and earmark the funds generated for a “Future of Journalism and Democracy Fund” of the type the Public Policy Forum envisions (Policy Recommendation #5), but make the fund even broader to support other kinds of original Canadian content creation, from films, TV drama, video games, music, archives, etc. Consolidate the CanCon funds I say, and take a very big view of what CanCon is.
  1. Bolster the CBC across its mandate to inform, enlighten and entertain versus The Shattered Mirror’s emphasis on the first function (its Policy Recommendation #10). Do this because a ‘platform agnostic’ public media service not only informs people but plays a key role in cultivating new talent across the arts, and exposing artists to the audiences they need to go on to become bigger commercial successes. In line with these ideas, unshackle the CBC from any suggestion that its sails have been forever tied to the listing mast of the broadcasting ship. It should also be funded accordingly and in line with median levels of government support for public media in OECD countries (versus at the lower ends of the scale) (a modified version of the Public Policy Forum’s Recommendations 11 and 12, but without the restrictive focus on the CBC’s “informing” function).
  1. We can no longer think about journalism and the media without thinking about broadband internet and mobile wireless. In an ever more internet- and mobile wireless-centric media universe, this is essential. The “founding fathers” in the US stressed the essential role of a free press to democracy (as The Shattered Mirror notes), but they also went much further by subsidizing a universal postal system to bring “general intelligence to every man’s [sic] doorstep” to the tune of tens of billions of (current) dollars a year in the 19th Century to achieve that aim. So, too, must we integrate our thinking about broadband and mobile wireless policy with content, journalism and news together today (on postal history and news, see John).
  1. This means emphasizing the importance of common carriage and universal broadband internet. It is essential to not impose the publishing or broadcasting models on society’s communication infrastructure. Mobile wireless and internet access providers should be gateways not gatekeepers. This will help ensure that news organizations and all forms of media, cultural and personal expression can have unfettered access to those with whom they’d like to share an experience, an idea, a story. It will also help to reduce journalists and news organizations from their growing dependence on Google, Facebook, Apple, etc. for the reasons outlined above. Universal broadband internet service should also be funded accordingly by raising the subsidy from its current level of roughly $2 per person per year to a figure, by way of suggestion, between the $5 per person per year that Sweden invests to promote universal broadband internet uptake and the $33 per person per year that we currently invest in the CBC. The report is silent on these issues but by implication, it is hostile to them.
  1. Crush the idea that appears from time-to-time in the report that Facebook and Google should be treated like publishers. They are not. Similar to how the development of modern capitalism depended on the creation of the limited liability corporation so too do broadband internet and digital platforms that host, store and distribute huge amounts of other people’s content require the concept of the limited liability ‘digital intermediary’ to operate at scale. Google, Facebook, and the others that facilitate commercial and cultural intercourse over the internet are already treated this way by the law, and they should continue to be treated as such, without being ‘above the law’, or worse enrolled by governments using beyond the rule-of-law tactics to tackle a myriad of evils, whether stamping out child pornography, mass piracy, terrorist propaganda, counterfeit goods, etc. Where the interest is great, the law needs to swing in behind the power that these intermediaries have by dint of the fact that they stand mid-stream amidst the torrent of internet traffic.

The fact that intermediaries are increasingly being enrolled by governments to undertake these tasks without proper legal underpinnings, however, has already created problems enough (here, here and here). Calling, as this report does, to enroll ‘digital intermediaries’ like Facebook and Google to suppress “Fake News” is similarly fraught with problems. That this is so is readily evident in Facebook’s ham-fisted approach to enforcing its “community standards” that have led it to censor, for example, the Pulitzer Prize winning “napalm girl” photo of Kim Phuc running naked away from a village just after it was bombed by the US during the Vietnam War and when it has taken down or otherwise blocked access to images of, for instance, the famed Statue of Neptune in Bologna, the Little Mermaid Statue in Copenhagen, Evelyne Axell’s Ice Cream and Gustave Courbet’s Origin of the World. Illma Gore’s sketch of Donald Trump in the nude has also been banned from the site (see here).

While the desire to stamp out ‘fake news’ may seem especially appealing at the moment, there is good evidence that despite the fact that “fake news stories” were plentiful in the 2016 US election, the effects are probably not as strong as many seem to think. As the new “Social Media and Fake News in the 2016 Election” study by Hunt Allcott and Matthew Gentzkow from New York University and Stanford University, respectively, finds, this is because even though Americans use social media a lot, only a small portion of them – 14% — relied on social media as their “most important source of news” during the election. Instead, TV was the main source of political news by far. Even those who did get their news from social media, and were therefore exposed to fake news that favoured Trump over Clinton by a wide margin, very few could remember “the specifics of the stories and fewer still believed them”, observes a Poynter Institute summary and commentary on the study being recited here.

Ultimately, we need to see this report for what it is: the latest in an unending firehose of reports from well-heeled think tanks across the country, including the Friends of Canadian Broadcasting (here, here, here), the Fraser Institute, the MacDonald Laurier Institute and the C.D. Howe Institute that cover much the same ground. All of them respond to and in one way or another try to influence Heritage Minister Melanie Joly’s call for a top-to-bottom review of cultural policy, dubbed Canadian Content in a Digital World. That she has stimulated such interest is to her credit. However, the extent to which these reports are flooding the ‘marketplace of ideas’ with tired old ideas is a problem that I hope she and the good folks at the Department of Canadian Heritage – the cultural policy sausage factory, if you will – recognize them for what they are, and deal with them accordingly.

The Shattered Mirror also complements the Canadian Heritage Parliamentary Committee’s unfinished survey of similar terrain, and a series of recent decisions by the CRTC that are intended to shape the future of TV, broadband internet and mobile wireless services in this country: (1) its trilogy of Talk TV decisions; (2) its universal broadband internet service, and (3) several others that go to the core of the increasingly fibre and mobile wireless internet infrastructure that underpin the entire communications and media landscape upon which more and more of our economy, society and our day-to-day lives depend.

This report has nothing to say on the full sweep or specific details of these matters but lines up with those complaining bitterly about the CRTC’s new found willingness to take on media concentration and the perils of vertical and diagonal integration. The extent to which they do so and pine to keep industrial-era media policies — tweaked to bring them up to ‘digital speed’ — forever is a measure of how backwards such stances are and really just how much they see things through a rearview mirror. We deserve better, and let’s hope we get it.

Jeff Bezos Buys the Washington Post: The New Philanthropy, or Power and the Press in the New Gilded Age?

Jeff Bezos, the CEO and controlling share-holder of internet giant Amazon bought the newspaper last weekend that broke the Watergate story, published the Pentagon Papers (along with the New York Times) and, in June of this year, helped to break the story on the NSA’s mass surveillance practices: the Washington Post. He paid $250 million for it, 1/100th of his net worth ($25.2 billion) in 2012.

Most commentators appear hopeful that Bezos will use his enormous personal wealth — he is the 12th richest person in America and 19th in the world — and business acumen to turn the floundering Washington Post around and chart a renaissance for the beleagured press in the United States more generally. Most seem to think that he will operate the paper in a way that is consistent with the traditions and requirements of a free press.

Indeed, in the press release announcing the deal on Monday he said that is exactly what he will do:

“I understand the critical role the Post plays in Washington, DC and our nation, and the Post’s values will not change . . . . Our duty to readers will continue to be the heart of the Post, and I am very optimistic about the future.

Donald Graham, the CEO and Chair of the Board at the Washington Post Company, summed up the mood in the press release announcing the deal:

”Jeff Bezos’ proven technology and business genius, his long-term approach and his personal decency make him a uniquely good new owner for the Post”.

Bezos also undoubtedly won favour in the executive suite by agreeing to bring several senior executives at the Post with him to the new company he will set up independently of Amazon: Katharine Weymouth, the current CEO and Publisher of The Washington Post (and heir to the Graham family that currently holds the dominant stake in the paper’s parent company, and niece to family patrician Donald Graham); Stephen Hills, President and General Manager; Martin Baron, Executive Editor; and Fred Hiatt, Editor of the Editorial Page, will all retain their jobs. For how long, however, he did not say. His pledge to the newspaper’s 650 journalists that there would be no lay-offs for a year also no doubt helped to allay whatever concerns might have arisen among journalists.

The journalistic rank-and-file in general seem to be on board with Bezos’ acquisition of the PostCarl Bernstein praises him as “exactly the kind of inventive and innovative choice needed to bring about a recommitment to great journalism on the scale many of us have been hoping for.”

Fred Hiatt, the editorial-page editor who will stay with the Post under its new ownership arrangements, put matters thus: “We’ve all been looking for a way to marry quality journalism with commercial success in the digital era, and it’s hard to think of anyone better positioned to figure that out than Jeff Bezos”. Columnist and editor of Wonkblog, Ezra Klein: “For now, I’m hopeful.”

Bob Woodward distinguishes good moguls like Bezos from bad ones: “This isn’t Rupert Murdoch buying the Wall Street Journal, this is somebody who believes in the values that the Post has been prominent in practicing, and so I don’t see any downside.” James Fallows goes a step further, hoping that Bezos acquisition of the Washington Post “signifies the beginning of a phase in which this Gilded Age’s major beneficiaries re-invest in the infrastructure of our public intelligence.”

This is Bezos as the 21st century version of the Carnegies, Rockefellers and Fords. Whereas they built libraries, foundations and schools, he is revitalizing a landmark press institution in the U.S., the Washington Post, and, if all goes well, lighting at least part of the path to recovery for the rest of the newspaper business.

Economic Woes at the Post, Malaise Across the U.S. Press

The Washington Post is in financial trouble. Revenues for the newspaper segment at it’s parent company, the Washington Post Company, peaked at $961.9 million in 2006. By last year, they had plunged to $581.7 million. The division has not turned a profit since 2008, either (Washington Post Company’s Annual Reports).

Declining advertising revenue has led the way; paid weekday circulation has declined sharply from 768,000 copies in 2002 to around 450,000 today (Steve LadurantayeAnnual Report 2012, p. 21). Online revenues have grown greatly, but from a low base and are nowhere near covering the losses.

The paper’s role within the overall Washington Post Company has shrivelled as well. Whereas it accounted for a quarter of total revenues in 2006, by last year it accounted for just 14%. The education division (55%), cable television (20%) and other activities (10%) accounted for the rest. 

The company as a whole continues to be profitable, however, and even during the financial crisis years of 2008 and 2009, it turned profits between 5-6%. Profit levels have been in the 10-15% range for most of the years before and after that, but last year they fell to under 4% — half the rate of the year before (Annual Report 2012, p. 1). They are down further yet this year, with newspapers and broadcast television the biggest drags on the company’s balance sheet (Ladurantaye). 

Of course, the woes of the Washington Post reflect the woes of the US newspaper industry in general. The U.S. and UK press have suffered the most amidst the ‘crisis of journalism’ afflicting much of the Euro-American world. A 2010 study by the OECD indicated that the woes of the press set in earlier in the US and UK than in most countries, 2005-2006, and have been unrelenting since. The growth of internet advertising relative to other media also started earlier and tends to account for a bigger share of all advertising spending in both countries as well (see Ofcom, International Communication Market Report, p. 187).

U.S. newspaper industry revenues peaked in 2005 at $61.2 billion. Last year they were $32.8 billion — a fall of almost half (46%), according to the Pew Research Centre’s Project for Excellence in Journalism.

Figure One below shows the trend.

US Newspaper Revenues (1979-2012)

The toll on the number of working journalists has also been grim. Figure 2 shows the trends.

PEJ Total Newspaper Workforce

While there is no doubt, then, that both the Washington Post and the U.S. press in general are in dire straights, the idea that Amazon CEO is the white knight he is being made out to be is questionable for at least three reasons.

1. The Return of the Mogul and the Quest for Political Influence and Power

Bezos purchase of the Washington Post puts him amidst the swelling ranks of uber-rich individuals who have stepped in to scoop up newspapers that have fallen on hard times. Just days earlier, hedge fund operator and owner of the Boston Red Sox, John H. Henry, acquired the Boston Globe from the New York Times.  

This revival of the new breed of billionaire newspaper owners also includes real estate tycoon Sam Zell, who scooped up the LA Times and Chicago Tribune in 2007, only to drive them further into the ground (see here). It also includes partisan zealots like the Koch brothers, David and Charles (tied for sixth on the Forbes’ list of billionaires worldwide with a network of $34 billion each), who are circling newspapers in distress in the hope of taking them over and harnessing them to their right wing conservative causes.  

The hopeful, however, appear to divide the new breed of press mogul into “bad” and “good” capitalists, with Bezos apparently firmly in the latter camp. Like Warren Buffet, the folksy investment guru of Omaha, who acquired Media General’s 63 dailies and weeklies (except for The Tampa Tribune and its weeklies) and several other papers last year, Bezos occupies such a place because he says he values the role of daily newspapers in the communities they serve and because he has supported some progressive causes, notably gay marriage, and operated Amazon as an open bazaar when it comes to books and literature, while refusing to buckle to censorious moralists.  

According to Eli Noam, in Media Ownership and Concentration in Americathe number of owner-controlled media firms fell from 35 percent to just 20 percent between 1984 and 2005 (p. 6). The revival of the press baron in the past few years reverses this trend of the last half of the 20th century when media moguls were steadily being replaced by share-holder owned, managerially-controlled corporate media.

The problem with moguls, however, is that the drive for profits are often tempered by the personal quest of newspaper owners for political influence and power. This clouds the independence of the press and turns journalism into the plaything of the rich and powerful. Like other internet giants, Amazon’s annual lobbying budget has risen steeply in the past few years. In 2008, for instance, its lobbying budget was $1.8 million; in 2012, it was $2.5 million. It also doubled the number of lobbyists from 12 to 25 over the same period.

While still modest compared to Google ($16.5 million in 2012) or Microsoft ($8.1 million), the fact that Amazon’s lobbying budget is high relative to other companies, and that it has risen steeply in recent years, suggests that its appetite for influence over politics, policy and public opinion is growing. Bezos acquisition of the Washington Post could add to that mission.

2. The Content Industries are Being Subsumed by the Tech and Internet Industries

There is a fundamental difference between the press barons of the 21st century and those of the past, however. Unlike the Pulitzers, Hearst, Browns, McCormicks and so forth who made their fortunes in the newspaper business, Bezos, Buffett, Zell and Henry have made their’s from the internet, finance and real estate, as Dean Starkman and Ryan Chittum have observed.

The press is being sucked into the orbit of far larger enterprises as a result. The Washington Post case exemplifies the point given that not only is Bezos’ net worth a hundred times greater than the price he paid for the paperAmazon’s revenues in 2012 — $61.1 billion — were nearly double those of the entire U.S. newspaper industry ($32.8 billion). 

Newspapers, in other words, are no longer stand-alone operations. They are minor appendages in much larger business empires. The possibility that the component parts of these entities may not always be aligned raises the question as to how journalists will be treated when conflicts of interest arise. 

The Washington Post could benefit mightily from such arrangements if it is able to use Amazon’s hyper-efficient distribution infrastructure as a way to cut the enormous cost of delivering the paper to readers down to size.  However, this could also be another case where “content” is sublimated to technology and distribution, a mere tool used to promote the acquisition and use of technology, similar to how ‘free radio programs’ served such a purpose for the manufacturers of radio transmission and receiving equipment in the early days of radio history. As John Cassidy asks, is the Washington Post‘s new role primarily to prime the pump for the sale of more Amazon Kindle e-readers? 

Amazon’s clout in online book retailing illustrate the point even better. In this domain, Amazon’s ability to effectively set prices and rule the book publishing industry with an iron fist has put it at war with publishers. 

This is not hyperbole, but  the conclusion recently reached by Judge Denise Cote in a decision that found Apple guilty of colluding with the ‘big five’ book publishing giants in the U.S. — Harper Collins (NewsCorp), Simon & Schuster (Viacom), Hachette, MacMillan and Penguin — to form a scheme intended to break Amazon’s stranglehold in online book retailing. Indeed, the book publishers’ “abhorence of Amazon’s pricing” drove them to join forces (collude) with Apple to devise a plan that would “eliminate retail price competition”, raise prices, hold back books for online distribution, and establish a whole new business model. All of this was to be accomplished in an astonishingly short period of time — 4 months — to coincide with when Apple “launched the iPad on January 27, 2010” (p. 10).

Apple wanted a secure line of content from top publishers to help drive uptake of its new devise, the publishers wanted to regain control over their industry from Amazon (pp. 10-13). A win-win for them, but a loss for Amazon and consumers / readers because of higher book prices and the triumph of collusive behaviour over competitive market forces. Underneath it all, however, lays the idea that technology and capital are in charge, not content or even Bezos for that matter. 

Those who hold out Bezos as a saviour ignore all of this. 

3. Amazon’s Treatment of Wikileaks in 2010 does not bode well for the Network Free Press in the Days Ahead

Lastly, while many commentators point to Bezos’ liberal stance when it comes to gay marriage and his track-record of standing down pressure to censor books as a good sign for the values of the free press, it is essential to remember the entirely different stance Amazon took towards the whistle-blowing site Wikileaks.  In this case, Amazon’s web hosting service, AWS, far from standing up for the free press, banished Wikileaks’ content that had been stored on its servers. It did so the same day (December 1, 2010) it received a letter from Senator and Senate Committee on Homeland Security and Governmental Affairs Chair, Joe Lieberman (2010) calling on any “company or organization that is hosting Wikileaks to immediately terminate its relationship with them”.  That Amazon so dutifully and quickly did so raises questions about Bezos’ self-professed commitment to free press values (Benkler, 2011).

Given that dubious track record, we can also wonder about how supportive Bezos would have been in relation to the Washington Post’s ground-breaking coverage of NSA contractor Edward Snowden’s leaking of documents detailing the agency’s secret program of mass surveillance and metadata collection, worldwide and in the United States, over the past few months? (see here, here and here, for example). In the face of intense pressure from the U.S. government, would Bezos have stood firmly behind Washington Post journalists or buckled as in the past to protect the vastly larger interests of the company he created, leads and still controls? 

The Growth of the Network Media Economy in Canada, 1984 – 2011

Has the media economy in Canada become bigger or smaller over time? Which sectors are growing, which are stagnating and which are in decline? These are the questions addressed by this post.

To answer these questions, I will examine the following key sectors of the network media economy: wired line & wireless telecoms; broadcast TV; subscription and pay TV; cable, satellite & IPTV distribution; newspapers; magazines; radio; music; Internet access and internet advertising? I will also hone in on rising new segments (IPTV) and others that appear to be in long-term decline (newspapers). I will also examine whether the media economy in Canada is big or small relative to global standards.

The post kicks-off a three part series that I’ll unfold over the next few weeks. Similar to what I did last year, the next post will examine telecom, media and internet (TMI) concentration, while the third will look at who owns the leading telecom-media-internet TMI companies in Canada. The goal is to offer an empirically and theoretically-grounded, and historically informed, portrait of the development and current trends in the network media economy over the period from 1984 until 2011.

Canada’s Network Media Economy in a Global Context

While often cast as a dwarf amongst giants, the network media economy in Canada is in fact the ninth largest in the world, with revenues of just over $35 billion in 2011 (excluding wired and wireless telecoms). The media economy in Canada has also grown fast relative to other media economies. The twelve largest national media economies worldwide and their development over time are depicted in Table 1 below.

Table 1: Canada’s Ranking Amongst 12 Biggest Network Media, Entertainment and Internet Markets by Country, 2000 – 2011 (millions USD) [i]

 

The media economy in Canada is obviously small relative to the U.S., at one-tenth the size, but amongst the twelve biggest media economies in the world, as the above table shows, falling right after Brazil and just before Australia, South Korea and Spain. The media economy in Canada, like those in Germany, the UK, and Australia, largely stagnated for two years following on the heels of the Anglo European financial crisis (2007ff), but for the most part things have turned around since 2010. In contrast, media economies in the U.S., Japan, Italy and Spain actually shrunk during this time before once again picking up in 2010, except in Japan and Spain. Overall, the network media economy in Canada has fared well during the economic downturn years.

In sharp contrast to much of Europe and North America, the media economies of China, Brazil and South Korea continued to grow at a fast pace. Indeed, the media economies in these countries and a few others such as Turkey and Russia have been going through something of a ‘golden media age’, with most media, from internet access, to the press, television, film and so on undergoing an unprecedented and extended period of fast-paced development (OECD, 2010).

The Network Media Economy in Canada: Growth, Stagnation or Decline?

Turning our attention solely to Canada, the figure below shows that the network media economy has grown enormously over the past few decades, from $19.4 billion in 1984 to nearly $71 billion in 2011 (current $). In inflation-adjusted dollars, the network media economy grew from $37.5 billion in 1984 to just under $70 billion last year (2010$). The figure below charts the trends (you can access the underlying data sets by clicking on the Media Industry Data tab at the Canadian Media Concentration Research Project).

Figure 1: The Growth of the Network Media Economy in Canada, 1984 – 2011 (Mill$ unadjusted for inflation)

Sources: see the CMCR Project’s methodology primary.

The vast expansion of the media economy has been driven by the addition of new media – wireless, internet access, pay and specialty tv services, internet advertising. The most significant source of growth is from the network connectivity elements (e.g. wireless, ISPs, IPTV, cable and satellite), especially after the mid-1990s.

The Network Connectivity Segments

The connectivity segments – the pipes, bandwidth and spectrum used to connect people to one another and to devices, content, the internet, and so forth — grew from $13.9 billion to $51.5 billion between 1984 and 2011. In real dollar terms, revenue grew from $26.8 billion to $50.5 billion. The following table shows the trends.

Table 2: Revenues for the Network Connectivity Industries, 1984 – 2011 (mill$)

Accounting for just under three-quarters of revenues across the media economy as a whole, the network connectivity sectors are the real fulcrum of the media economy in Canada, as is the case generally in most of the world. This is why Bell, Rogers, Shaw, Quebecor, Telus, SaskTel, MTS Allstream, Eastlink, Cogeco, etc. are so central to the media economy, to say nothing of the holdings that the biggest among them have in the media content sectors of the network media ecology.

While some might think that the over-sized weight of these sectors is of recent vintage, this is not true. In fact, the connectivity sectors’ share of the network media economy in 2011 was not even two percentage points more than twenty-seven years ago: 72.8 percent versus 71.2 percent, albeit within the context of a vastly larger media economy.

Why? One reason is TV, which is still very much at the centre of the network media universe (see below).

Not all network connectivity segments have grown and this is especially true of plain old wiredline telephone services. Wiredline telecom revenues peaked in 2000 at $21.2 billion and have fallen steadily ever since to reach $16.4 billion in 2011. The decline, as both figure 1 and the data in Table 2 above show, has been steep and unrelenting.

As plain old telephone services (POTS) has gone into decline, however, some pretty awesome new stuff (PANS) has come along to more than pick up the slack.  The best example is wireless cell phone services. Wireless revenues were $19.3 billion in 2011 – three-and-a-half times revenues at the beginning of the decade ($5.4 billion), and up significantly from $18 billion in 2010 and $16.2 billion in 2008. Unlike a few other areas (see below), wireless revenues did not suffer from the economic downtown either after the collapse of the dot.com bubble in 2000 or in the face of the Anglo-European financial crisis (2007ff).

Internet access displays similar patterns but for not as long or to the same extent. Internet access revenues last year were $7.2 billion, up substantially from $6.2 billion in 2008 and quadruple what they were at the turn-of-the-21st century ($1.8 billion).

The most notable development over the past year is the growth of Internet Protocol TV (IPTV) services, which are essentially the incumbent telcos’ managed internet-based tv services: e.g. Telus, Bell, MTS Allstream, SaskTel, and Bell Aliant.

IPTV services are often seen as important because the entry of the telcos into tv distribution promises more competition for incumbent cable companies and because IPTV is often associated with efforts to bring next generation, fiber-based internet networks closer to subscribers, either to their doorstep or nearby neighbourhood nodes. If the distribution of television is essential to the take-up of next generation networks, as I believe it is, then IPTV will be part of the demand drivers for these networks.

According to the CRTC, IPTV revenues were $322.3 million in 2011, up greatly from $207.8 million a year earlier and triple the amount of 2008.  The CRTC also states that there were 657,300 IPTV subscribers in 2011 versus 416,900 in 2010 and 225,000 in 2008. By any standard, this would appear to be impressive growth.

These numbers, however, still seem low.  For example, published data from Telus, MTS Allstream, SaskTel, and Bell Aliant show that they have substantially more subscribers than the CRTC identifies (775,000 vs 657,300), and this is without including Bell. Add another estimated 128,000 subscribers for Bell’s Montreal and Toronto-centric IPTV service and the number of subscribers rises to approximately 903,000. Table 3 below shows the trends in terms of subscribers.

Table 3: The Growth of IPTV Subscribers in Canada, 2004 – 2011[ii]

2004 2006 2008 2010 2011
Bell Fibe TV (1) 83,000 127,644
Bell Aliant (2)   49,000 77,000
Telus (3)  78,000 314,000 509,000
MTS Allstream (4) 32,578 66,093 84,544 89,967 95,476
SaskTel (5) 25800 51277 70463 85537 93,960
Total IPTV Connections 58,378.0 117,370  233,007 621,504 903,080

I explain some reasons for this large discrepancy in the endnote to Table 3 and will write another post to examine the issues more thoroughly. For now, however, I want to note that, not surprisingly, given that my estimate for subscribers is much higher than the CRTC’s, that my estimate for IPTV revenues is also much higher than the figure the Commission states. I estimate that IPTV revenues in 2011 were $650.6 million — more than four times the amount in 2008 ($142.7 million) — and up greatly from $423 million the previous year. Table 3 below illustrates the trends.

Table 4: The Growth of IPTV Revenues in Canada, 2004 – 2011 (mill$)[iii]

2004 2006 2008 2010 2011
Bell Fibe TV (1) 60.2 91.0
Bell Aliant (2) 33.6 54.9
Telus (3) 50.1 215.3 364.8
MTS Allstream (4) 10.8 32.2 50.6 59.0 71.5
SaskTel (5) 8.6 25 42 55.1 70.3
19.4 57.2 142.7 423.2 650.6

The growth of the IPTV services is significant for many reasons. First, it suggests that the telcos are finally making the investments needed to bring fiber networks closer to their subscribers, at least on a large enough scale that their efforts can be measured, despite being hemmed in by opaque reporting measures in some cases (Bell Aliant, Telus) and a complete lack of disclosure in others (Bell).

Second, the addition of IPTV as a new television distribution platform expands the size of the “BDU sector” (cable, satellite and IPTV), while bringing the telcos deeper into the cable companies’ dominion. By 2011, IPTV services accounted for 7.6 percent of the TV distribution market, based on my numbers, or 3.8 percent using CRTC data. I’ll address whether or not this has significantly increased competition and lessened concentration in the next post.

While IPTV services finally appear to be taking off, we must remember several things. First, it has been the small prairie telcos, followed by Telus, which have taken the lead in deploying IPTV. For Sasktel, Telus and MTSAllstream, IPTV revenues now make up a significant 11.9 percent, 8.5 percent and 6.6 percent, respectively, of their revenues from fixed network access services (Wiredline + ISP + Cable).

Bell lags far behind, with only 1.4 percent of its revenues coming from IPTV services, including Bell Aliant, in 2011. Indeed, Bell only launched IPTV via its affiliate Bell Aliant in 2009, before targeting high-end districts of Montreal and Toronto the next year, half-a-decade after MTS Allstream and SaskTel began doing so in the prairies.

In other words, innovation and investment is coming from small telcos on the margins and Telus, not Bell. This replays a long-standing practice in telecoms for new services to start out as luxuries for the rich and well-to-do before a mixture of public, political and competitive pressures turn them into affordable and available necessities for the masses. From the telegraph to fiber-based next generation Internet, the tendencies, conflicts and lessons have remained much the same.

Generally speaking, IPTV remains under-developed as a critical part of the network infrastructure in Canada, accounting for only 2 percent of the $32.2 billion in fixed network access revenues (see Table 2).  OECD data confirm the point, with Canada ranked 20 out of 29 countries in terms of fiber-based connections to the premises as a proportion of all broadband connections available.

In Canada, just over one percent of broadband connections use fiber, while the OECD average is 10 percent (similar to levels at Sasktel and Telus). In many ways, the poor performance of Bell over the past half-decade has dragged Canada down in the global league tables as a whole. In countries at the high end of the scale (Sweden, Slovak Rep., Korea, Japan), thirty to sixty-plus percent of all broadband connections are fiber-based. The following figure illustrates the point.

Source: OECD (2011a). Broadband Portal. www.oecd.org/…/0,3746,en_2649_34225_38690102_1_1_1_1,00.html.

The Network Content Industries

In the remainder of this post I will turn my attention to the content industries (broadcast tv, pay and specialty tv, radio, newspapers, magazines, music and internet advertising). For the most part, they too have grown substantially, although the picture has become more mixed than in the network connectivity sectors in the past few years.

In 1984, total revenue for the content industries was $5.6 billion; it was $19 billion in 2011. The growth overall appears to have been steady throughout this period, with no discernible major uptick or downturn at any given point in time. Table 4, below, depicts the trends.

Table 4: Revenues for the Content Industries, 1984 – 2011 (mill$)

Despite much hand-wringing to the contrary, television remains at the very centre of the increasingly internet-centric media environment. Indeed, this is true of all three of the main components of the television industries: conventional broadcast tv, specialty and pay tv services as well as the cable, satellite and IPTV services that underpin TV distribution for the vast majority of Canadians.

Many have argued that television is dying as audiences shrink and advertising revenues is diverted to the internet. Indeed, the dreaded “TV tax” (local programming improvement fund, or LPIF) was put into place by the CRTC in 2008 precisely on the basis of such arguments, before being rescinded by the regulator in 2012 and to be phased out completely by 2014. The rise of over-the-top services such as Netflix only further compounded the woes, so the story goes.

Yet, the evidence suggests that television is, for the most part, not struggling to survive but actually thriving. Broadcast television revenues did decline between 2008 and 2009, but only modestly, and were quickly restored and on the rise again by 2010. In 2008, broadcast TV revenues were roughly $3,381.4 million (including the CBC annual appropriation). They fell in 2009, but by 2010 had risen to $3,405.6 million. Revenues were just under $3,500 million last year.

Focusing solely on inflation-adjusted dollars changes the picture somewhat, but only slightly. Seen from this angle, broadcast television revenues were roughly $3,454.7 million in 2000, peaked at $3,518 million in 2005 and have drifted down slightly since, where they have stayed fairly steady around $3,400 million since 2008.

Small decline? Yes. But a calamity? Hardly.

That the TV in crises choir is wide of the mark becomes even clearer once we widen the lens to look at the fastest growing areas of television: i.e. specialty and pay tv services (HBO, TSN, Comedy Central, etc.) and television distribution. In terms of specialty and pay television services, these have been fast growing segments since the mid-1990s and especially so over the past decade. Specialty and pay-tv services eclipsed conventional broadcasting as the largest piece of the TV pie in 2010, when revenues reached $3,459.4 million. Last year, that figure grew to $3,732.1 million.

Adding both conventional as well as specialty and pay tv services together to get a sense of ‘total television’ revenues as a whole yields an unmistakable picture: with revenues of $7,224 million in 2011, television is not dead or dying. It is thriving.

TV remains at the centre of the internet-centric media universe and is growing fast. In fact, Total TV revenues quadrupled from $1.8 billion in 1984 to $7.2 billion in 2007; using ‘real dollars’, total TV revenues doubled from $3.5 billion in 1984 to just over $7 billion last year — hardly the image of a media sector in crisis.

Add to this, cable, satellite and IPTV distribution and the trend is more undeniable. In these domains, as indicated earlier, the addition of new services, first DTH in the 1990s, followed recently by IPTV, and steady growth in cable TV, means that TV distribution has grown immensely, in essence expanding ten-fold from revenues of $716.3 million in 1984 to $8,588.3 million in 2011 (in current dollars).

Altogether, adding “Total TV” and TV distribution revenues together, these segments of the network media industries accounted for just over $15.8 billion in 2011. As a matter of fact, the weight of all television segments in the network media economy has risen considerably over time, from accounting for 13.2 percent of all revenues in 1984, to 18.4 percent in 2000 and to 22.3 percent in 2011.

Of course, this does not mean that that life is easy for those in the television industries. Indeed, all of these sectors continue to have to come to terms with an environment that is becoming structurally more differentiated because of new media, notably IPTV and over-the-top (OTT) services such as Netflix, as well as significant changes in how people use the multiplying media at their disposal.

While incumbent television providers have leaned heavily on the CRTC and Parliament to change the rules to bring OTT services into the regulatory fold, or to weaken the rules governing their own services (see Bell’s submission in its bid to take over Astral Media, for a recent example), OTT services are still minor fixtures in the media economy. For example, based on roughly 1.2 million subscribers , Netflix’s annual revenues were an estimated $115 million in 2011 – about 1.6 percent of “Total TV” revenues.  Recent reports by Media Technology Monitor and the CBC as well as the CRTC’s (2011) Results of the Fact Finding Exercise on Over-the-Top Programming Services lead to a similar conclusion.

Part of the more structurally differentiated network media economy is also illustrated by the rapid growth of internet advertising. In 2011, internet advertising revenue grew to $2.6 billion, up from just over $2.2 billion a year earlier and $1.6 billion in 2008. At the beginning of the decade, internet advertising accounted for a comparably paltry $110 million, but has shot upwards since to reach current levels, demonstrating both fast growth as well as the fact that, like wireless services, internet advertising has not been significantly affected by downturns in the general economy.

To be sure, these trends have given rise to important new actors on the media scene in Canada, notably Google and Facebook, among others, who account for the lion’s share of internet advertising revenues. Indeed, based on common estimates of Google’s share of internet advertising revenues, the internet giant’s revenues in Canada in 2011 were in the neighbourhood of $1,300 million. This is indeed significant, enough to rank Google as the eighth largest media company operating in Canada by revenues, just after the CBC and SaskTel but ahead of Postmedia and MTS Allstream.

For its part, Facebook had an estimated 17.1 million users in Canada at the end of 2011. Based on estimated revenues of $9.51 per user, Facebook’s advertising revenue can be estimated at $162.6 million in 2011, or 6.3% of online advertising revenue – an amount that give it a modest place in the media economy in Canada but which would not put it even close to being on the list of the top twenty or so TMI companies in this country.

While it is commonplace to throw digital media giants into the mix of woes that are, erroneously, trotted out as bedeviling many of the traditional media such as television in Canada, the fact of the matter is that Netflix’s impact on television revenues is negligible, while those of Google and Facebook are mostly irrelevant.

Where they may be more important, however, is in three other areas where the portrait is not so rosy: music, magazines and newspapers.  With respect to music, it is not advertising that is at issue, but rather the manner in which online digital distribution, legal and illicit, as well the culture of linking is affecting the music industry. At some point I will write a full-length post on each of these sectors, but for now a simple sketch will have to do.

Music

While many have held up the music industry as a poster child of the woes besetting ‘traditional media’ at the hands of digital media, the music industry in Canada is not in crisis, although the picture is mixed. Using current dollars, the sum of all of the main components of the music industry – recorded music, digital sales, concerts and publishing royalties – the music industry grew from $1,181.9 million in 2000 to a high of $1,373.7 in 2008.

Music industry revenues across these four segments have generally stayed remarkably steady around the 2008 level, up to and including 2011, when revenues were $1357.7 million. There is no crisis.

The picture is a little more troubling, however, when we switch the metric to ‘real dollars’, which results in revenues reaching a high of $1.5 billion in 2004 and a decline from there to $1.316 billion last year — a significant decline, yes, but not a calamity, and with the trend clearly towards a floor being in place below which further declines in the future will be unlikely or very modest.

Radio

Radio stands in much the same position as the music industries. Revenues continued to grow until reaching a peak in 2008 of $1,990 (including CBC annual appropriation), a level at which they have stayed relatively flat since, with revenues of $1,949.5 in 2011 (current dollars). Change the measurement from current dollars to inflation-adjusted, real dollars, however, and the picture changes slightly, with a gradual decline from just over $2 billion in 2008 to roughly $1.9 billion in 2011.

Magazines

Magazines appear to stand in the same position as the music and radio sectors as well, although I have not been able to update my revenue data for the sector for 2011. Yet, extrapolating from trends between 2008 and 2010 to obtain an estimate for 2011, revenues have declined slightly on the basis of current dollars (from 2,394 million in 2008 to $2,135 in 2011). The drop is more pronounced when using real dollars, with a significant drop of about sixteen percent from $2,457.8 million in 2008 to $2,071.1 last year.

Newspapers

Perhaps the most dramatic tale of doom and gloom within the network media economy, at least in terms of revenues, is from the experience of newspapers. Readers of this blog will know that in earlier versions of the “Network Media Economy in Canada” post, and other posts, I have been skeptical of claims that journalism is in crisis. I still am, and believe, much along the lines of scholars such as Yochai Benkler, that we are in a period of heightened flux, but with the emergence of new commercial internet-based members of the press (the Tyee and Huffington Post, for example), the revival of the partisan press (e.g. Blogging Tories, Rabble.ca) as well as non-profits and cooperatives (e.g. the Dominion) and the rise of an important role for citizen journalists indicating that journalism is not moribund or necessarily in a death spiral. In fact, these changes may herald a huge opportunity to improve the conditions of a free and responsible press.

At the same time, however, I also believe that traditional newspapers, whether the Globe and Mail, the Toronto Star or Ottawa Citizen are important engines in the overall network media economy, serving as the content factories that produce news, opinion, gossip and cultural style markers that have the ability to set the agenda and whose stories cascade across the media as a whole in a way that is all out of proportion to the weight of the press in the media economy. In other words, the press still originates far more stories and attention that the rest of the media pick up, whether television or via the linking culture of the blogosphere, than their weight suggests. Thus, problems in the press could pose significant problems for the media, citizens and audiences as a whole.

While I have been reluctant to see newspapers as being in crisis, mostly because in previous years I have felt that the trends had not been long enough in the making to draw that conclusion, and also because I think many of the wounds being suffered by the newspaper business, have been self-inflicted out of a mixture of hubris and badly conceived bouts of consolidation, I’m now ready to change my tune when it comes to the state of newspaper revenues.

Newspaper revenues have plummeted. In current dollar terms, newspaper revenues peaked in the years between 2000 and 2006 at between $5.5 and $5.7 billion. They have fallen substantially since to just under $4 billion last year – a decline of 30 percent or so. Indeed, revenues fell by 9 percent just between 2010 and 2011.

In real dollar terms, the fall is more pronounced yet. Newspaper revenues, on the basis of this measure, shrunk by about $1.7 billion – or almost a third (30.7 percent) – in the five-year period between 2006 and 2011. This is the most clear cut case of a medium in decline out of the ten sectors of the network media economy reviewed in this post.

Some Concluding Comments and Observations

Several observations and conclusions stand out from the preceding analysis. First, the network media economy has grown significantly over time, whether we look at things in the short-, medium- or long-term.

Second, while the network media economy in Canada may be small relative to the U.S., it is large relative to global standards. In fact, it is the ninth biggest media economy in the world.

Third, while most sectors of the media have grown substantially, and the network media economy has become structurally more differentiated and complex on account of the rise of new segments of the media, a few segments have stagnated in the past few years (music, radio, magazines). It is also now safe to say that two sectors appear to be in long-term decline: the traditional newspaper industry and wiredline telecoms.

The next and last table of this post gives a snapshot of the state of affairs across the network media economy as things stood at the end 2011 by placing each of the sectors covered in this post in one of three categories: growth, stagnation and decline.

Table 5: The Network Media in Canada: Sectors Experiencing Growth, Stagnation or Decline

Growth Stagnation Decline
Wireless Telecoms Broadcast TV Wiredline Telecoms
Internet Access Music Newspapers
Cable & Satellite Radio
IPTV Magazines.
Pay & Specialty TV
Internet Advertising

[i] Sources:  PWC (2012), Global Entertainment and Media Outlook for all countries and for all segments, except the subcomponents of publishing rights and live concerts for the music sector, which is based on IDATE DigiWorld Yearbook 2009. I have excluded video games, book publishing, and business-to-business sectors from the PWC figures to make the country profiles correspond to the definition of the network media economy in Canada used here and by the Canadian Media Concentration Research Project. Canadian sources as listed in the CMCR project’s methodology primary, but generally based on the CRTC’s Communications Monitoring Report as well as Statistics Canada’s Cansim tables and publications for the sectors that make up the network media economy.

[ii] I use BDU ARPU because the CRTC’s estimate for IPTV ARPU of $40.86 appears too low alongside its estimates for BDUs ($59.41). with which IPTV services compete, as well as figures published by MTS Allstream in its Annual Reports that set their IPTV ARPU at $62.38. Sources: (1) Bell’s revenues are based on the CRTC’s Aggregate Annual Return. Dividing this number by the CRTC’s annual ARPU estimates for BDUs of $59.41/month in the 2011 Communications Monitoring Report (p. 96) yields 127.6 thousand subscribers for 2011. (2) Bell Aliant’s subscriber numbers are from its Annual Report (p. 2). Revenue figures arrived at by multiplying subscriber numbers by ARPU estimates for BDUs ($59.41/month in 2011) stated in the CRTC’s 2011 Communications Monitoring Report (p. 96); (3) Telus‘ subscriber numbers are from its 2011 Annual Report (p. 10) and 2010 Annual Report (p. 5). Revenue figures arrived at through same method as above. This number probably inflates the Telus figures slightly because it includes the company’s DTH satellite TV service that it resells for Bell, but Telus officials I have spoken to assure me that true IPTV subscribers are the vast majority; (4) MTS Allstream’s subscriber and ARPU figures from its 2011 Annual Report (pp. 3, 16) and multiplied by an ARPU of $62.38, as per its Annual Report. Its 2008 Annual Report lists subscriber numbers from 2004 (p. 62); (5) Sasktel’s data from its 2011 Annual Report (pp. 14, 29). Previous years from 2010 Annual Report (p. 45) and 2006 Annual Report(p. 49). SaskTel ubscriber numbers, except for 2008, are multiplied by MTS ARPU to arrive at total revenues because SaskTel does not present revenue figures for its IPTV service on a stand-alone basis and because MTS is most comparable to SaskTel vs CRTC’s average ARPU. Note: SaskTel revenue figures for this table revised on November 19th. 

[iii] Ibid.

No ABC in 1st 2011 Canadian Election Debates

No Australian Broadband for Canada, or much to do with the Internet, media, telecoms and copyright issues at all in tonight’s federal election debate.

Before I go any further, though, let me confess that I did not watch all of the federal election debate tonight. I’m sorry, I had other things to do. But I did catch about a half-hour of the debates on tv, another 10 minutes on radio while in the car, and another 15 minutes of video with no sound while at the gym. I may have missed something. Zygmunt Bauman calls it the ‘liquid life’ — that is, cobbling things together to make up your life on the fly.

But, I think I caught the gist of things and that is that none of the leaders really had much to say on media and Internet issues. Nothing about copyright or the uproar over Usage-Based Billing. In other words, none of the ABCs of ‘digital media policy’ merited much attention.

To be sure, I didn’t expect broadband Internet, media, copyright and UBB to be at the top of the agenda in tonight’s federal election debates. In fact, such issues probably should not be at the top of the agenda and generally I agree that funding pensions, healthcare, the general state of the economy, widening economic inequality, and the moral integrity of the Government-of-the-day are probably more important. Still, though, I didn’t expect digital media and Internet issues to be left out altogether, either.

There are a great many who wield fancy labels like the digital media economy, creative industries and the lot to give such issues a lustre and limelight they may not deserve. Big economic numbers for the media, telecom and Internet industries, and their contributions to the economy, culture and society, are often wielded about to underscore the impressiveness of these things. There is, truth be told, a great deal of puffery involved when it comes to talking about these things.

All of which is to say, that while I agree that digital media and Internet issues probably should not be artificially hyped, they should not be peripheral too the election, or just a blip that gets twittered about opportunistically amongst the twitterati. Why should we care if these issues are not at the centre of televised electoral debates?

First, because as a study by Canadian Media Research Consortium just released underscores, television is still people’s preferred medium for information and news. Television still plays an extraordinary powerful role in bringing things to people’s attention. This not just true for old people or couch dwellers, either. The fact of the matter is that those who spend the most time online are also the heaviest traditional media users, too.

Second, most of the primary news sources behind online news sites are creatures of the dominant traditonal news providers: CTV, Global, CBC-Radio-Canada, Globe & Mail, Toronto Star, Le Presse, Quebecor Media Inc. These entities largely, although not exclusively, play a big role in setting the news agenda for the country’s media as a whole, including the ‘news aggregators’ and blogosphere that thrive off of their efforts.

Of course, we can gain access to the New York Times, Le Monde and the Guardian or the Huffington Post, but they aren’t going to be much help on matters specifically Canadian in focus. Elections are one just such crucial matter.

For issues to be taken as a going concern in a democracy, they must be on the media screen, and in today’s world that means being on at least three different screens: the ‘big screen’ of tv, the glowing screen of the computer, and the wee screen of portable ‘devices’.

Third, media and Internet issues have been central themes in other national elections and politics. Network neutrality and broadband development were cornerstones of the Obama campaign in 2008, for instance; his administration has also paid considerable attention to issues surrounding the so-called ‘crisis of journalism’ and media concentration since then.

In Australia, the Government’s creation of a National Broadband Network to do an end-run around a recalcitrant incumbent — Telstra — in order to bring about a ultra high speed, broadband Internet service to ninety-plus percent of all Australians was extremely prominent and divisive in the 2010 federal elections. The Labour Government now in power supported the initiative, as did the Greens, a few independents, Microsoft and Google.

In Canada, the Usage Based Billing issue has received pretty good coverage in general, but broader media and Internet-related issues and, specifically, their place within the context of the elections, have not fared so well. The link between the media and Internet, on the one side, and electoral politics, on the other, has mostly been made on the Internet and Twitter.

This is important because, as the Canadian Media Research Consortium study pointed to above states, if stranded on a desert island, the internet is the least likely of all media to be let go by people. The importance of the internet in general is reflected in the uses of Facebook and Twitter in particular.

Facebook has been central to the efforts of the advocacy group OpenMedia.ca to make these issues an important part of the election campaign and all the political parties have responded rather eagerly, even if sometimes opportunistically, to ‘trending Twitter topics’ and Facebook-based campaigns.

At the end of 2010,Twitter had an impressive average number of monthly users in Canada of around 3.5 million, according to Comscore (p. 19).  That’s a lot. Many fear Twitter-induced attention deficits and depraved forms of journalism will be the natural upshot of Twitter’s 140 character per tweet format, but Alan Rusbridger, the editor of the Guardian in the UK, offers a rousing defense of its contributions to journalism and to public discourse.

However, we also must remember to keep things in perspective. The number of people who use Twitter — roughly 3.5 million a month — is less than the number of people who watched the debates last night or that buy a newspaper every day.  In terms of credibility and trust, the press blows away online sources, and television still fares somewhat better as well — although not much (see p. 14 of the Canadian Media Research Consortium study).

The Twitterverse is also a lot smaller than Facebook. With 22 million unique users a month, Facebook has nearly 7 times the number of unique monthly viewers in Canada (22 million) than Twitter has.

Interestingly, the Broadcast Consortium overseeing the organization of the federal election debates had the foresight to add a Facebook page to the mix of how political debate is circulated in the emergent network media ecology. The development suggests an interesting attempt to meet people where they are.

Facebook also raises anew questions about the relationship between popular culture, the media and politics. Its increasing pivotal role has drawn it closer to traditional conceptions of news and politics. Its inclusion as a formal part of the ‘operational machinery’ of the first televised English-language debates are one indicator of that. Recent overtures by Facebook to news executives is another.

Indeed, as a story on the Globe and Mail’s technology website the other day relayed, Facebook “is looking to strengthen its relationship with the news media and has already helped boost traffic to news websites” (see here).  It also created a special Facebook page just for journalists who want to integrate social media into the journalism process.

The New Yorker drew the connection a step further this month by requiring online readers of the magazine to use Facebook’s “Like” icon to gain access to one of its articles. The experiment essentially sets up the “Like” button as a kind of  “paywall”, but one that tries to translate the ‘social capital’ of Facebook users into a real pot of gold that many commercial media providers hope exists at the end of the digital rainbow.

All of this, of course, adds yet another wrinkle in the ‘evolution of the news’, to put it somewhat grandiosely. To date, the debate has been much about the impact of ‘content aggregators’ like Google and Yahoo on the news industry, and wails from many stalwarts in the latter that the blogosphere lives parasitically off the hard labour of real news organizations and journalists. Enter Facebook stage left.

There is something in all this related to the ‘functional convergence’ between ‘search’ and ‘social’ that I spoke about last week in relation to what I called the Google Switch — i.e. Google’s response to increasing competition from Facebook by increasingly adding ‘social capabilities’ such as ‘+1’ to its ballooning suite of functions such as Orkut, YouTube, Blogger.  However, in the circumstances just outlined, the drift is not from search to social, but rather the other way around. If such a ‘functional convergence’ is in fact taking place, then perhaps it is not just Google, but Facebook and other social networking sites, that will emerge as pivotal to the ‘future of the news’.

Communication researchers have always understood how media and information flows are nestled within existing networks of personal relationships.  Now the process is being digitized, fully commercialized, and rendered visible. Through all of this, will Google and Facebook be good for the News, good for democracy?  Hmm, now there’s a question ripe for pondering in the context of the 2011 election.

Review Essay: Network Nation — Inventing American Telecommunications

Here is a forthcoming review essay that will appear shortly in the journal, Business History. The book that inspired the review is: John, Richard R.  (2010). Network Nation: Inventing American Telecommunications. Cambridge, MA: Belknap Press of Harvard University Press, i-viii, 520pp.

Network Nation is an important book by one of the most highly-regarded communication and media historians in the U.S., Richard R. John. It is probably the most substantive and innovative book to come out on the telegraph and telephone in all their business, political and cultural aspects in years. In the following essay, I review the book and place it within the scholarly literature on the topic, while critically examining some of its key arguments.

Situating the development of the telegraph and telephone into a longer history than usual, this outstanding book takes its point of departure not from the advent of the telegraph in the 1830s or 1840s, but decades earlier with the Post Office Act in 1792, which John dubs “one of the most far-reaching pieces of legislation enacted in the early republic” (p. 18). The book finishes with the consolidation of the ‘regulated natural monopoly’ regime for telecommunications and market segmentation between the telegraph, telephone and radio in the 1920s, a situation that stayed remarkably stable for most of the rest of the century.

John uses the Post Office Act of 1792 to set the scene because its capacious and open-ended mandate gave the government-owned Post Office a huge role in facilitating the flow of ‘intelligence’ and cultivating republican democracy. In its wake, the Post Office became the first national ‘medium’ to bring correspondence and news to “every man’s door” (p. 20). Its exchange system allowed publishers to swap newspapers and magazines across the country free of charge. It also established the notion that an integrated network operated under unified administrative control – i.e. a network monopoly – and guided by enlightened civic ideals could be a useful support for a multiplicity of commercial uses as well as a diversity of voices, a sturdy pillar in other words of a dynamic market economy, a democratic society and a free press. Most observers, including the early developer of the electric telegraph, Samuel Morse, simply took it for granted that the telegraph would become an arm of the Post Office.

Together, these factors set down several durable principles: first, that networks tended toward monopoly, and that whether that was a good or bad thing depended on how they were managed and regulated; second, that single networks supported a multiplicity of uses and thus whether a monopoly was managed and regulated poor or well was crucial to the commercial and social life of the nation; third, and perhaps most surprising in light of prevailing opinion, the U.S. government can take whatever steps its citizens approve of to improve the media environment. Indeed, the first amendment, as John stresses more than once, poses few obstacles to doing just that. Network Nation crystallizes these vitally important principles between the late-18th and early-20th centuries, while their relevance in the 21st century is underscored by ongoing debates today over ‘network neutrality’ and broadband internet development (Benkler, 2010) and the so-called ‘crisis of journalism’ (McChesney & Nichols, 2010). Indeed, the latter authors, in particular, draw very heavily from John’s work to make their case for the steps needed to shore up what they see as the deteriorating state of the U.S. press in the age of the Internet.

Despite the wide scope for government intervention established by the history of the Post Office, government ownership never did extend to the telegraph or telephone in the U.S., other than for a brief and deeply unsatisfactory period at the end of the First World War. Why?

According to John, several factors conspired against the idea of the ‘postal telegraph’. Initially, lingering memories of failed public works projects in the late-1830s as well as the high expense of the US-Mexico War (1846) were two such factors. A more important and enduring consideration was the popular view that the telegraph was the luxury of a wealthy few for whom private enterprise would serve just fine rather than a necessity of the masses requiring public intervention. The same view hung over the development of the telephone until the push for its popularization began to yield fruit after the turn-of-the-20th century. Last, and most importantly, the broadly held belief that competition and regulation were better than any monopoly, government or private, consistently stood in the way of efforts to extend the Post Office’s mandate to include the telegraph or any other means of electrical communication.

John calls this latter set of beliefs the ‘antimonopoly view’ and places a great deal of emphasis on it. He argues that the ‘antimonopoly creed’ should not be seen as either synonymous with, or as being led by populist, agrarian movements in the 1860s or 1870s, or as belonging to the progressive era. Instead, the creed appealed to a disparate cross-section of interests; it was also a mainstay of liberal political economy. According to John, antimonopoly movements had already flourished in cities as well as in state and federal politics for decades before rural populist and labour movements made telegraph and telephone monopolies a target of their criticisms and reform efforts during the 1860s and 1870s (rural populism) or the progressive era (1880-1920), respectively, as most historians claim (e.g. Fischer, 1992; Gabel, 1969; Schiller, 1996).

By the early-1840s, as John observes, “the telegraph business [had] congealed around . . . the [federal] patents that Morse obtained in 1840 and 1846” (p. 43). Indeed, these patents propelled the efforts of two of Morse’s business partners, the former Postmaster General Amos Kendall and Maine Congressman, Francis O.J. (Fog) Smith, who set up companies along the U.S. Atlantic coast and into Canada, while licensing individual franchisees to extend the lines in every other direction. Kendall and Smith attempted to cobble these separate lines into a single, albeit loosely federated system in the early-1850s, but failed. Nonetheless, their attempt to create a ‘single system’ borrowed the vision of a universal integrated network from the Post Office, but also raised the spectre of a private telegraph monopoly, and one buttressed by the Federal Government’s strong defense of the Morse patents. Antimonopolists reacted to such a prospect by appealing to state governments to charter general corporations to foster greater competition, with the New York Telegraph Act (1848) emblematic of the trend. A flood of rivals entered the field, but most quickly failed and/or were acquired by Western Union (est. 1855) and the American Telegraph Company (est. 1859), before being folded into a six-member cartel created in 1857 and led by Western Union: the North American Telegraph Association.

Early ‘network builders’ essentially created a “rich man’s mail service” as well as vastly over-capitalized firms that paid handsome dividends to themselves. However, by the late-1860s a new managerial type began to emerge, as typified best by William Orton who became President of Western Union after his predecessor Hiram Sibley’s ouster in 1867. Far more the professional manager than financial speculator, Orton and others like him play a star role in Network Nation. This is because, according to John, they built the early prototypes of the modern corporation, created complex technological systems, embraced modest civic goals, and steadily committed to more research and development – decades before these phenomenon usually appear in the economic and business history literature (Berles & Means, 1932/1968; Chandler, 1977).

The rise of the professional manager also marked the potential triumph of expertise over speculative finance, although the pendulum continued to swing back and forth between the two until the 1910s when the ‘regulated natural monopoly’ and ‘market segmentation’ (i.e. the lines drawn between telegraph, telephone and radio) regime was finally locked into place for the next seventy years, and with expert managers in charge. Professional managers such as William Orton and, later, Theodore N. Vail also served to fragment the antimonopolist voices because while these two icons of the modern manager shared the latter’s disdain for financial speculators and greedy private monopolies, they believed that well-run monopolies would inevitably be a fixture of late-19th and 20th centuries’ capitalism, and a good thing to boot. As time passed, the earlier experience of the 1840s and 1850s only seemed to confirm such views by demonstrating that the various attempts by individual states to create competition were contrived, and that monopolies in telecommunications were, as it were, natural, and thus in need of competent, uniform regulation, which meant regulation by the federal government. In sum, the initial question of which political economy would prevail — individual states and contrived competition or a strong federal state and regulated ‘natural monopoly’? – gave way by 1910 to a firm answer fully in favour of the latter option. John’s sustained focus on how these two distinct political economies played out during the development of the telegraph and telephone is another major contribution of this volume.

Despite the rising class of professional managers, however, Western Union’s ongoing penchant for meddling in elections, political interference in its operations by Congress (e.g. the ‘dragnet subpoenas’ case), as well as its tight ties to the New York Associated Press continued to stir the antimonopoly forces. Indeed, the only thing worse than the telegraph monopoly, many contemporaries felt, was the ‘double-headed news monopoly’ between Western Union and the NYAP (p. 147; also Blondheim, 2004). This situation broadened the range of antimonopoly voices by raising the ire of newspapers and many journalists outside the NYAP umbrella alongside the already existing, and intensifying, calls for reform by other critics. The situation also, as Menahem Blondheim illustrates, captured the attention of Congress between 1866 and 1900, a period that he and John generally see as a crucial time in the development of the commercial media and media regulation in the US.

Ironically, however, the mounting opposition in the 1870s arguably played into the hands of the era’s most reviled robber baron, leading to Jay Gould’s hostile take-over Western Union in 1881. John does not denounce or demonize Gould, but methodically picks apart his seven-year campaign (1874–1881) to gain control of Western Union. Over the course of this time, John stresses how Gould manipulated antimonopoly sentiment, Wall Street, the press, and the prevailing state-centred political economy to compete with Western Union before finally taking it over. Gould was already the owner of two or three New York newspapers (the Tribune, the World, and Mail and Express) at the time, and used those as vehicles to advance his own ends. His acquisition of Western Union tightened the company’s ties to the press even further. For all this, however, and crucially as John observes emphatically, the long-term rivalry preceding the take-over played out on the frontiers of technological innovation as Gould and Orton at Western Union threw vast sums of money at the leading technological geniuses of their time – Thomas Edison, Elisha Gray, and Alexander Graham Bell. The results produced several cutting-edge innovations that shaped the communication and entertainment industries into the 20th century: (1) the quadraplex technology that doubled the speed of telegraphs, (2) the telephone, and (3) the phonograph.

Historians often point to Orton’s decline of an offer to buy all of Bell’s telephone patents for $100,000 in 1876 as proof of Western Union’s status as a stodgy monopolist adverse to technological progress. John’s remarkable account, however, turns prevailing wisdom on its head by explaining that Orton initially spurned Bell only because he was backing Elisha Gray and Thomas Edison in a far bigger struggle over the telegraph and telephone industries. Far from shying away from the telephone business, Orton rushed headlong into it. In fact, by late 1879, Western Union’s municipal telephone exchanges were competing head-to-head with, and even growing faster than, those of the National Bell Telephone Company in several major U.S. cities (p. 169).

Competition in telephony, in other words, did not emerge from small, rural outfits after the expiry of Bell’s telephone patents in 1893, as most scholarly accounts would have it (e.g. Fischer, 1992; Gabel, 1969). Instead, it had emerged nearly fifteen years earlier in major U.S. cities – New York, Boston, Chicago (and Montreal in Canada, one might add) – and between the two biggest corporations of their day: Western Union and Bell. Rather than continuing to compete, however, the two companies struck a deal in November 1879 intended to keep Gould at bay. Consequently, all of Western Union’s telephone patents and municipal exchanges were given to Bell in return for annual royalties and mutual pledges to stay out of one another’s turf. While John does not say so, the agreement’s reach led to a similar outcome in some of Canada’s larger cities, notably Montreal. By this point, John’s account has completely upset the settled view of Western Union and technological innovation. Equally impressive, it has drawn the telegraph and telephone into a far vaster sweep of history than usual that stretches back to the origins of the postal system in 1792, on the one side, and then forward to the modern entertainment industries in the late-19th and early-20th centuries, on the other. It is an expansive canvas, indeed, and the author fills it in with masterful, colourful and detailed strokes.

John supports these radical departures from conventional knowledge with a wealth of archival evidence, some of which has been previously unavailable. He also invites us to see many familiar things from striking new angles: e.g. semi-autonomous Bell operating companies scattered in cities across the country and loosely affiliated with National Bell, the grubby role of crooked politicians who used their ability to grant municipal telephone franchises to line their own pockets (most notoriously in Chicago), the politics of rate caps that began in the cities in the 1880s (not the countryside, contra Fischer, 1992; Gabel, 1969, etc.) but which paved the way everywhere for the popularization of telephone service after 1900. By the 1920s, the early principles of ‘government ownership and ‘regulated competition’ were replaced by regulated monopolies and market segmentation between the telegraph, telephone and radio, divisions maintained until the passage of the Telecommunications Act (1996) seventy years later.

While John cuts many new paths, I also felt there were several points where he should have given more credit to others where it is due. The concept of market segmentation is a good case in point. Scholars have examined the factors that have separated different media along technological lines for decades, but none are referenced. Erik Barnouw (1975), for example, discussed the division of radio broadcasting from the telephone, telegraph and electronics industries in the 1920s long ago. Ithiel de Sola Pool (1983) likewise examined the segmentation of the telecommunications, broadcasting, computing and publishing industries over the course of the 20th century, before visiting the potential for media (re-)convergence today, as has Robert Babe (1990) and others, including this author. The common point behind these sources and John’s Network Nation is that the separation of media along technological and functional lines is primarily an artifact of corporate strategy, government policies and popular pressures, rather than underlying technological conditions. While the point is reasonably well-known, it is not so common as to not warrant citing at least some of the relevant scholarly literature.

The concepts of ‘methodless enthusiasm’ and ‘ruinous competition’ that also play a significant role in John’s account were first used, to the best of my knowledge, in a systematic way in Robert L. Thompson’s (1947) classic, Wiring a Continent, which also is not cited. Add in that author’s third concept, ‘strategic consolidation’, and the trilogy of concepts nicely captures the trajectory and tenor of developments in the telegraph industry and, as John shows in detail and with due regard to the specific twists and turns, the telephone and radio industries. John also spars with some phantom foes regarding agrarian populism and the progressive era, but seems too polite to name them. A few small errors are important. For instance, on page 184 John states that Gould owned three newspapers, but on page 187 he claims it was two.

Finally, John fails to seriously consider how the “network nation” is intertwined with global, or at least trans-Atlantic trends, cutting short his analysis in important ways and betraying an implicit methodological nationalism as a result. The ‘cheap telegraph rates’ movement in the 1880s, for example, did not just reflect intensified angst with Western Union after its take-over by Gould, but a broader global, or at least trans-Atlantic trend. Henniker Heaton, the Australian born British Member of Parliament, for example, was influential in U.S. circles and quoted often in the New York Time and New York Herald on the topic (see Winseck & Pike, 2007, ch. 5).

John’s examination of the post-WWI re-organization of the electric communication industries in chapter 10 betrays the same limitation. Here, John problematically uses the assertion that “every cable linking the United States and Europe in the First World War was under British control” (p. 398) to explain why Theodore Vail stood solidly behind the Wilson Administration’s take over of the telegraph, telephone, radio and international cables. The problem is, however, that Vail had announced Western Union’s take-over of the British trans-Atlantic cables nearly ten years earlier, when he was President of the company. According to the New York Times, the acquisition gave Western Union “a real system of competitive cables, free of the stigma . . . of foreign domination” (“Letters by cable is . . . .”, 1911, p. 6). The pre-eminent British cable expert, Charles Bright, agreed, but bemoaned the fact (Bright, 1911, p. xvii; also Winseck & Pike, 2007, pp. 187-190).

As a matter of fact, Western Union and another predominantly U.S-based company, the Commercial Cable Company, had been staking out ever-stronger positions in the trans-Atlantic cable market since the 1880s. Adding this element to John’s otherwise brilliant account would not diminish it one iota, but actually enrich it by showing how characters that are already significant in his story – e.g. Jay Gould, James Gordon Bennett, the New York Herald, the Postal Telegraph Company — fit into the global picture. By WWI, the British did leverage their control over cable landing rights to implement a comprehensive system of cable surveillance, but this was not unusual and both companies begrudgingly went along.

These shortcomings aside, Network Nation is a ground-breaking work. Its account of the importance of bringing ‘intelligence’ and communications innovations to “every man’s door” from the late-18th century onwards has a great deal of relevance to current debates about broadband Internet access and the ‘crisis of journalism’, among many others. It is also part and parcel and on the leading edge of a welcomed renewal that is taking place in media history. Wonderfully written, brilliantly told, and beautifully illustrated, Network Nation will quickly assume its place alongside other seminal works, such as Paul Star’s (2004) The Creation of the Media.

References:

Babe, Robert E. (1990). Telecommunications in Canada. Toronto: University of Toronto.

Barnouw, Erik (1975). Tube of Plenty. New York: Oxford University.

Berle, Adolf A. & Means, Gardiner C. (1932/1968). The Modern Corporation and Private Property. New York: Harcourt, Brace & World.

Benkler, Yochai, Faris, Rob, Gasser, Urs, Miyakawa, Laura, & Schultze, Stephen. (2010. Next generation connectivity: A review of broadband Internet transitions and policy from around the world. Cambridge, MA: Berkman Center for Internet & Society. URL: http://cyber.law.harvard.edu/publications/2010/NextGenerationConnectivity [Last visited March 14, 2011].

Blondheim, Menahem (2004). “Rehearsal for Media Regulation: Congress Versus the Telegraph-News Monopoly , 1866-1900,” Federal Communications Law Journal, 56, 299-328.

Bright, Charles (1911). Imperial Telegraphic Communications. London: P.S. King & Son.

Chandler, Alfred, Jr. (1977). Visible Hand: the Managerial Revolution in American Business. Cambridge, MA: Harvard University Press.

Fischer, Claude (1992). America Calling: A Social History of the Telephone to 1940. Berkeley, CA: University of California Press.

Gabel, Richard (1969). The early competitive Era in Telephone Communications, 1893-1920. Law and Contemporary Problems, 34(Spring), 340-359.

“Letters by cable is the plan now”, New York Times, September 15, 1911, 6.

McChesney, Robert & Nichols, John. (2010). The Death and Life of American Journalism. Philadelphia, PA: Nation Books.

Pool, Ithiel de Sola (1983). Technologies of Freedom. Cambridge, MA: MIT.

Schiller, Dan (1996). Theorizing Communication. New York: Oxford University Press.

Starr, Paul (2004). The Creation of the Media. New York: Basic Books.

Thompson, Robert L. (1947). Wiring a Continent. Princeton, N.J.: Princeton University Press.

Winseck, Dwayne & Pike, Robert M. (2007). Communication and Empire: Media, Markets and Globalization, 1860-1930. Durham, NC: Duke University Press.

Wikileaks and the Digitally Networked Free Press

Yochai Benkler has just published a fascinating study of Wikileaks and what he calls the free and irresponsible press. The study’s focus is on WikiLeaks, the Internet-based ‘whistle blower’ site, but it is more than that; it is, as Benkler states, a battle for the soul of the networked fourth estate.

Benkler makes several key arguments.  The most important in my view is that WikiLeaks is part and parcel of a broader set of changes that, once the dust settles, will likely stabilize around a network media ecology consisting of (1) a core group of strong traditional media companies; (2) numerous small commercial media (e.g. Huffington Post, the Tyee, Drudge Report, Global Journalist, etc.), (3) non-profit media (e.g. WikiLeaks, Wikipedia), (4) partisan media outlets (e.g. Independent News Network, Rabble.ca, Daily Kos, TalkingPointsMemo) and (5) hybrids that mix features of all the others.

Second, he argues that far from the Internet aggravating the ‘crisis in journalism’, it may in fact be improving the quality of the new media and journalism overall. According to Benkler, the current turmoil amongst traditional news outlets is the result of so many self-inflicted wounds that have festered for decades.  The rise of the internet and the changing technological and economic basis of the media magnifies these problems, but it is not responsible for them.

Instead of bemoaning the impending ‘death of journalism’, Benkler strikes a cautiously optimistic note. The blogosphere and Internet are undoubtedly bastions of vanity, personal opinions masquerading as fact, and where bellicose politics trumps civility. Crucially, they are also sites where new forms of journalism, new approaches to knowledge production and new kinds to creative expression are emerging that have the potential to make a mighty contribution to journalism and democracy.

Wikileaks is the poster-child for some of the potentials of non-profit, ‘crowd-sourced’, investigative journalism. More broadly, the poster child of ‘crowd-sourced’ knowledge is Wikipedia, a socially produced online encyclopedia that now ranks among he top 7 or 8 most visited websites in the world — except in countries such as China, where it is hard to access. Wikipedia’s credibility ranks on par with venerable entities such as the Encyclopedia Britannica.

Benkler is keen to show that unless we recognize that relatively new actors are making valuable contributions to the networked media environment, we will end up with impoverished journalism and weakened democracies. A key step in this process of recognition is to understand that outlets such as WikiLeaks are fundamentally ‘journalistic’ in function.

Third, to the question of whether or not WikiLeaks is a ‘news organization’ and its key players, most notably Julian Assange, journalists, Benkler offers an emphatic yes.

The first proof of this is that, since it began in 2006, WikiLeaks has received several awards recognizing it as such from Amnesty International and the British magazine, Index on Censorship. More recently, it has been nominated for a Nobel Peace Prize.

Second, it is a global news agenda setter. In 2010, it did this not just once, but four times:

(1) the release of the ‘collateral murder’ video in April;

(2) the release of the Afghan and (3) Iraq war logs in July and October, respectively, and

(4) the release of 1,900 diplomatic cables beginning November 26th.

This is no small feat. It would seem to indicate that Wikileaks is not marginal to journalism, but central to it.

Third, Wikileaks has worked hand-in-glove with the most prestigious news outlets in the world: The Guardian, the New York TimesDer SpeigelLe Monde and El Pais. Rather than simply dumping all of the 250,000 ‘embassy cables’ that it claims to hold into the public domain, only 1,900 or so have been released since late November. Its materials, at least after the problematic “collateral murder” video, have been selected, edited and presented according to professional news values.

Fourth, working with these news organizations has maximized attention for these stories. It has also allowed these news organizations to bolster their already strong positions in local and ‘global news markets’. The cables were leaked pretty much simultaneously by Wikileaks, The Guardian, the New York TimesDer SpeigelLe Monde and El Pais.  The benefits of cooperation cut both ways.

Fifth, this is better than the ‘old days’. For example, in the WikiLeaks’ case, the NYT consulted with the Obama Administration before releasing the ‘war logs’ or the ‘diplomatic cables’. Such deference might seem odd, unduly deferential perhaps, and it is. It was better than sitting on the material for a year, however, as the NYT did in 2005 at the behest of the Bush Administration in the context of the NSA/AT&T unauthorized wiretap case (see mea culpa by NYT public editor Byron Calame, Jan. 1, 2006).  As a non-profit source, and without the need to stay in good standing within the circles of political, military and corporate power, Wikileaks does not have to assume such a deferential stature.

Awards, agenda-setting, cooperation with prestigious news organizations, mutually beneficial arrangements, and no small degree of reliance on long-standing professional practices and some deference to state power, however, are still not enough, it seems, to prove WikiLeaks’ journalistic credentials.  Despite all this and the careful, indeed, responsible approach it took (i.e. as a free and responsible press), WikiLeaks’ actions led to paroxysms in some quarters.

Calls for execution, treason charges, and so forth would normally seem to fall beyond the pale of ‘normal democracy’, but in the WikiLeaks’ case they have heavily framed the discussion. The coverage of the press has been, at best, poor when it comes to specifics about the case. Two-thirds of news reports have mistakenly implied that WikiLeaks simply dumped everything it had into the public domain. Several members of the U.S. Congress called for Assange to be tried for treason; a common tactic was to label him a terrorist. This is not a political culture in which a free press flourishes.

Two Republican presidential candidates, Sarah Palin and Mike Huckabee, as well as some hard-line conservatives in Canada (e.g. Tom Flanagan and Ezra Levant) called for Assange’s execution. All of these actions were not just over-the-top; they are a threat to a free press and to democracy.  Just how over top they are is indicated by the measured response of the U.S. Defense Secretary, Robert Gates. As Gates put it,  “Is this embarrassing? Yes. Is it awkward? Yes. Consequences for U.S. foreign policy? I think fairly modest” (quoted in Benkler, p. 16).

Highlighting WikiLeak’s status as a journalistic organization reminds us that rather than being beyond the pale, it should be situated firmly within the parameters of the free press tradition. The collaborative venture exercised an editorial hand with a keen eye to minimizing threats to humanitarian workers and to military operational security. The WikiLeaks case offers a glimpse of a template for a ‘new cooperative model’ between established news outlets and new comers. It can help to move us beyond the snooty idea that journalism is whatever traditional media tell us it is.

‘Networked journalism’ and ‘crowd-sourcing’ are being rapidly integrated into the operations of well-established news outlets. Such activities are not just free-loading on the ‘content’ of the mainstream press, but rather sometimes function as rivals, while partners at others.  As the uprisings across the Arab world indicate, the network public sphere and crowd sourcing are fast becoming standard operating procedure in the global news system.

The history of cooperation between WikiLeak and the above news outlets has been far from smooth. It has been rife with tensions and personal animosities, especially, it appears, between at least one senior New York Times’ editor and Julian Assange. Beyond individual personalities, constant claims about ‘journalism in crisis’ have made it easy to cast the Internet in the role of villain. Yet, the bottom line in all this jostling between the ‘new’ and the ‘old’, is that members of the networked fourth estate deserve the full rights and protection of the ‘free press’ no less than ‘pamphleteers’ and well-established news outlets such as the Globe & Mail, New York Times or the Nation do.

Wikileaks sturdy journalistic credentials, Benkler argues, makes it all but impossible that any direct attempt by the U.S. Government to put WikiLeaks out of business could pass legal and Constitutional muster. The New York Times’ Pentagon Papers case in 1971 is, in fact, very instructive to the present situation, despite constant denials to the contrary.

The key figure in the Pentagon Papers case, Daniel Ellsberg, has already argued that Assange and WikiLeaks are no more treasonous and outside the scope of the free press protections of the U.S. Constitution than he and the New York Times were in the era of the Vietnam War. Benkler concurs, and walks us through the legal steps as to why this is so:

  • unless the government can show that publication will result in direct, immediate and irreparable harm to the U.S., or its people, any attempts to prevent publication will run foul of the First Amendment;
  • journalists cannot instruct their sources to steal documents, but they are not obligated to determine or reveal how the source obtained them;
  • in times of war, there is no better counter to ‘strong presidents’ than a free press.

The parallels between these two events have been obscured by denial and the tendency in journalistic and other circles to belittle Internet-centric forms of journalism and commentary in the blogosphere. Yet, investigative journalism and commentary are not the sole dominion of the traditional press. They are a signature feature of Internet-based news and commentary outlets. Those qualities are more important than ever in light of the constant erosion of these capabilities within the mainstream media over the past two decades or so. Hot heads and conservatives may not like dissent, but that’s why freedom of speech, press and association exists to begin with.

The fact that WikiLeaks is so solidly at one with journalistic and free press traditions helps to explain why neither it nor any of the five major newspaper organizations — The GuardianNew York TimesDer SpeigelLe Monde and El Pais – that it is working with have faced direct efforts by the U.S. Government to suppress the publication of WikiLeaks’ documents. Although, as the Twitter case indicates, this was not for a lack of trying (see here for earlier post).

The problem, however,  is that what the state has not been able to obtain by legal and constitutional measures, it has been able to gain with remarkable ease from private corporations and ‘market forces’.  Thus, buckling under the slightest of pressure, Amazon removed all of Wikileaks’ content from its servers on the same day (December 1, 2010) that independent Senator and Senate Committee on Homeland Security and Governmental Affairs chair, Joe Lieberman, called on “any . . . company or organization that is hosting Wikeleaks to immediately terminate its relationship with them”.

Two days later, the company everyDNS delisted Wikileaks from its domain name registry. As a result, Internet users who typed wikileaks.org into their browser or clicked on links pointing to that domain came up with a page indicating that the site was no longer available (in addition to Benkler, see the Guardian’s timeline on the sequence of events).

Wikileaks quickly found a new home at webserver firm OVH in France. This connection, however, was also severed after the French Industry Minister warned Internet companies on December 4 that there would be “consequences” for helping to keep Wikileaks online. The Swedish DNS provider, Switch, faced similar pressure, but refused to buckle. It continues to maintain the WikiLeaks.ch address that Internet users still use to access the site. It is also under a constant barrage of Distributed Denial of Service (DDoS) attacks. The Swedish-based Pirate Party also stepped in on December 5 to host the “cablegate” directory after they were taken off line in France and the US. Twitter has also resisted strong arm tactics from the U.S. government (see Twitter does the Right thing).

While Amazon and everyDNS took out part of WikiLeaks technical infrastructure, several other companies moved into to disable is financial underpinnings. Over the course of four days, Paypal (owned by eBay) (December 4), MasterCard and the Swiss Postal Office’s PostFinance (December 6), and Visa (December 7) suspended payment services directed by donors to the site.

The lessons here are three-fold. First, that private companies all too often all too eager to comply with political directives from the state. Cutting Wikileaks off from the key technical and financial resources after coming under the slightest bit of pressure essentially means that several key private businesses willing served as proxies for the U.S. and other governments to do what they would otherwise be prevented from doing by constitutional protections for the free press.  This is a real threat to the networked free press. It is also one of the reasons that Wikileaks exists in the first place.

Second, efforts to suppress unwanted speech are never complete. The distributed nature of the Internet and dispersed actors committed to open media and a free press means that sites can and will be relocated elsewhere. However, that should not detract from the fact that fundamental open media principles have been seriously compromised in the meantime.

Third, the reticence to recognize new forms of journalism and to lash ourselves to the mast of the ‘old’ media is compromising the cultural foundations of the ‘networked free press’. A hostile political and cultural environment is not conducive to a ‘free press’. The response of traditional media organizations, in particular, in the U.S., and the New York Times especially, has been ambivalent on this point. By collaborating with WikiLeaks, they have polished the latter’s journalistic credentials. Just as importantly, they have also once again demonstrated that gaining access to attention in a cluttered media environment still requires ‘big media’.

As Benkler emphasizes, there are contrasts in how different news organizations see WikiLeaks. In contrast to the reluctance of the New York Times to treat it as anything more than just a source, and a mangy one at that, the Guardian sees its experience with WikiLeaks as a template for a ‘new model of cooperative journalism’.  In fact, the Guardian and BBC are way ahead of their North American brethren when it comes to using ‘crowd-sourcing’ and ‘user-created content’ in news coverage.

The trend was kick-started in the UK with the London bombings in July 2005, and has continued to play a strong role since. If the current uprisings spreading through the Arab world are an indication, this ‘hybrid’ genre of news is now  moving quickly from the margins to the mainstream.

The constant hand-wringing about the ‘crisis of journalism’ in the U.S. (and to a degree in Canada), and the tendency to lay this at the doorstep of the Internet, blogs and readers unwilling to pay or incapable of discerning good journalism from bad, has undermined the status of the networked free press in the culture at large.  This ambivalence, along with the hard rights ability to reach easily for the ‘terrorist’ trope and unleash a vitriol hard to imagine in ‘normal times’, further compromises the ‘cultural protections’ needed for a networked free press.

Ultimately, Benkler does a great job, as he so often does, in drawing our attention to not just how the technology and economics of network media are decisive, but also how constitutions and culture play a pivotal role in determining whether the contribution of network media will, on balance, be a boon or bust for democratic societies.

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