Let them fail: Author charts new way forward for Canada’s newspapers
Posted July 16, 2023 2:03 pm.
Last Updated July 16, 2023 2:04 pm.
It’s said the media is a small business – and getting smaller all the time.
To wit: an announcement in late June that Postmedia Network Canada – owners of The National Post, the Vancouver Sun, and the Vancouver Province newspapers – was entering merger talks with Nordstar Capital LP – owners of the Toronto Star and Metroland Media Group – to address the “existential” threat facing the media industry.
Then, just as quickly as it was announced, came word this week that those talks had fallen apart given the “added backdrop of regulatory and financial uncertainty” currently.
This is just the latest chapter in the long-running saga of consolidation in Canada’s newspaper sector – one that B.C.-based journalist, author, and academic Marc Edge has been telling for decades, earning him the title as the definitive chronicler of Canada’s journalistic travails.
His seventh and latest book – The Postmedia Effect: How Vulture Capitalism Is Wrecking Our News – tells us how we got here and provides a possible way forward too.
Related Article: Merger talks between Postmedia, Nordstar called off
John Ackermann: You start off by describing what you call the “hedge fund-ification” of the newspaper business. How did we get here and is there a way back?
Marc Edge: Well, we got here because these hedge funds are very crafty investors and during the last recession of 2008-2009, they began buying up the distressed debt of newspaper companies across North America. In Canada, Canwest Global Communications was overextended with debt through this millennium experience of convergence in which multimedia ownership was supposed to be the way of the future. So, of course, Canwest owns the Global television network and then bought the Southam newspaper chain from Conrad Black, who had recently taken it over and went up to their eyeballs in debt.
Well, when the recession hit their revenues plunged and they were unable to service this debt, the same with several of the largest chains in the U.S. that are now in the hands of hedge funds. The hedge fund strategy has been to squeeze them for everything they’re worth, cut costs, and strip assets. The main thing in the Postmedia story is that they bought so much of their debt, they use some of it to buy the company and they kept the rest on the books to basically bleed it dry.
So, at the moment, they’re paying about $30 million a year in interest payments to the hedge funds who are also their owners. So, instead of any returns going to their shareholders, they’re going to the bondholders.
Ackermann: And what does that do to journalism then?
Edge: Well, all newspapers have had to cut back in the wake of their plummeting revenues, but at the Postmedia chain and other chains that are owned by hedge funds, they’ve had to cut twice as much. In fact, they’ve cut so much that there’s not much left. Unfortunately for Postmedia, they went underwater again last year when their profits were only about $13 million dollars, almost 10 million of which came from government subsidies and, like I say, their annual interest payments are 30 million. So, they had to start selling off real estate. They sold off the Calgary Herald building to U-Haul to turn into storage lockers. And we’re not quite sure what’s going to happen yet, but something’s got to give pretty soon.
Ackermann: Now, as I asked earlier, is there a way back here?
Edge: Well, the only way back I see is for the whole thing to go bust again and pick up the pieces from there. It would be nice to salvage some of these historic publications that they’ve got their hooks into — you know, the Vancouver Province started publishing in 1898, the Vancouver Sun in 1913, and the Montreal Gazette, I think, dates to the 17th century. So, I think the government will have to make a decision either to bail out Postmedia again, or maybe make a deal with the hedge funds, buy the titles from them, and see them on their merry way.
Ackermann: Another development since the book went to press was the passage of Bill C-18, a federal law requiring the likes of Google and Meta to pay for news content shared on its platforms. Meta has already said Canadians will no longer have access to news content on Facebook or Instagram. And we’re already seeing the effects on Google in that Canadian news sites do not appear in its search results. What effect do you think this will have on journalism?
Edge: Well, I think it was always a boneheaded scheme from the outset. They thought they could use Google and Facebook as a piggy bank. Of course, these are foreign companies. They don’t have to do business in Canada. Newspaper publishers pay Facebook to boost their posts [so] why should Facebook pay them? I think this is going to have a serious negative effect in Canada, not just for newspapers, but, most of all, for online news media that are trying to make a go of it online. They depend on Facebook and Google, that’s their online newsstand. And so, this is going to be a horrific miscalculation. I think the whole thing is going to backfire on them.
Ackermann: What do you hope people get out of the book?
Edge: Well, I hope they realize that this is a shell game. We’re being played for suckers by these US hedge funds. They’re a lot smarter than our politicians in Ottawa it seems. So, maybe if they read my book, like I say, they can figure out what to do about this.
Ackermann: Marc, you seem to be one of those rare birds in our media landscape, that of media critic. I can only think of a handful of people in this country who do what you do. Of course, in America, in the States, there’s a much more robust media criticism ecosystem. Why do you think it’s so rare in this country? Are we too deferential or what precisely is the issue?
Edge: That’s a very good question. It’s one that Jesse Brown asked about 10 years ago in an article in The Walrus magazine and the conclusion he came to is that Canada’s media is kind of like a small club and there’s almost no competition. So, if you speak out, you might never get a job again, which apparently is what has happened to me.
Ackermann: But here you are, seven books in.
Edge: Seven books in and still fighting.
The Postmedia Effect: How Vulture Capitalism Is Wrecking Our News is published by New Star Books.