Front Burner - Is COVID-19 an 'extinction event' for newsrooms?

Episode Date: May 11, 2020

Canadian newsrooms have had serious financial woes for years now. But since the coronavirus pandemic began, layoffs, cuts and closures across the country have left many teetering on the brink of survival. Today, Craig Silverman, a Toronto-based media editor for Buzzfeed News, joins us to talk about how it got to this point and what can be done to stop the hemorrhaging.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi everyone, Jamie here. So if you listen to the show on Friday, you'll know that I'm going away for a few months on maternity leave. But if you missed it, well, now you know. And Pia Chattopadhyay is taking over for me for the next few weeks. Hi, Pia. Our listeners are so lucky to have you. I'm looking forward to listening. You're not going to be listening. You're going to be raising human

life. No time. I know you'll be up at all kinds of obscene hours. Yeah, two in the morning. I'll just like get caught up on everything. Listen, good luck. Remember my stock line about motherhood, 80% chores, 20% magic, but the 20% mitigates the 80%. Sounds like wonderful advice.

Thank you so much. Okay, should I take it from here? Please, please. So, I don't need to tell you, lots of industries are reeling from the effects of COVID-19. And today, we are going to spend some time talking about how news media is taking a hit. In Canada, more than 100 outlets across our country have made cuts since just mid-March. Around 50 community papers have shut down. More than 2,000 workers have been laid off.

That's all according to a research project called the COVID-19 Media Impact Map for Canada. And it's among those warning that the media industry could face a mass extinction event. Today, I'm speaking to Craig Silverman. He's a media editor for BuzzFeed News, and he's here to talk about how we got to this point and what might be done to stop the hemorrhaging. This is FrontBurner. Hi, Craig. Hey.

Hey, so we know that journalism is struggling on the business side and has been for some time. That is not news. But in order to understand where we are today, I want to first really go back, like jump back more than a decade ago, specifically to 2008 and the financial crisis. What was the state of journalism leading up to that crisis? In 2008, newspapers were still pretty strong. You know, the decline for them had sort of started about four years earlier where ad revenue was starting to go down. But they weren't feeling this really sort of horrible scenario at that point. They were aware that digital outlets were starting to emerge. They were under pressure.

And so particularly for newspapers, they were feeling a bit of pressure, but were still looking at, you know, healthy, robust, relatively profitable businesses. And then the financial crisis hits in 2008. And if we look at the numbers in the US, which are pretty similar to what would have happened in Canada, almost 20% of newspaper revenue just poof, disappears. And the thing about it that's really important is it never comes back.

They didn't sort of have a tough six month or 12 month period. They lost a fifth of their revenue and never comes back. They didn't sort of have a tough six-month or 12-month period. They lost a fifth of their revenue and never came back, and the decline of overall revenues just started to accelerate. Here in Washington, Len Downey, the former executive editor of The Washington Post. We actually have more readers of Washington Post journalism now than ever before. But the Internet has taken a lot of classified advertising away from newspapers. It's easier to search for jobs and cars and houses on the Internet than it is in print.

That's the problem. That is where we have to cut costs in order to deal with the smaller revenues. So as poof goes 20 percent of revenues, what sort of fills that gap? Who and what comes in to buy up news organizations? and what comes in to buy up news organizations. This is the moment where already, you know, Google is really starting to dominate online advertising. When we originally tried AdSense, it lifted our revenue about threefold. It doubled or tripled our revenue.

Instantly, revenue doubled. But within a few years, we've got Facebook, we've got, to a lesser extent, newer things like Twitter and what have you. But really, the duopoly begins to emerge of what we see today, where so much of that revenue that has gone from not just newspapers, but also now starting to go from TV and broadcast and other places, has shifted significantly into the pockets of Facebook and Google. And that shift has really accelerated over the past decade. There are about 7 million advertisers on Facebook. And the ads that you see aren't like a traditional TV commercial or newspaper ad that looks the same to

everyone. An assurance that a prom dress ad will be seen by a high school student and not a retiree. And in terms of who, you know, following the financial crisis sort of entered the market, if I can put it that way, buying up news organizations, what kind of players are we talking about? Right. So at the same time, these newspaper companies are starting to experience a lot of financial pressure. You know, some of them do go bankrupt. Like in Canada, you know, we have PostMedia, which owns National Post, the major dailies in Montreal and Calgary and Vancouver and on and on, as well as tons of community newspapers. And, you know, so PostMedia emerges out of bankruptcy. And so they are at that point

really heavily owned by venture capital firms. And a lot of them are in the U.S. And this happens in the U.S. as well. So these are, you know, private equity players, meaning they've raised money from, you know, wealthy other kinds of firms and from individuals, and they go out and they buy up assets. And in the case of the newspaper and other media assets that they buy, they really just start to kind of squeeze out every dollar, every penny that they can get. And there's not a lot of reinvestment going on. We see a lot of layoffs. We see them selling off assets like nice buildings and real estate these companies had. And they're really just making sure they get their debt payments. They're

making sure they hit their profit margins. And just by way of example, you mentioned PostMedia. I think it's 66% owned by a U.S. hedge fund. Yes, that's it. And these hedge funds, in a lot of cases, they specialize in what are called distressed assets. So they're not necessarily buying something that they expect to be a big growth business throwing off lots of cash and lots of profits and they're going to invest and make a really nice thing of it. They're buying something that they already know is a declining asset that is coming out of bankruptcy or that is on the precipice of bankruptcy. And they specialize in taking on that risky kind of operation and getting their money out of it. And that is their number one priority. They are not about community service.

They are not about, you know, the good of journalism. They are about making sure they expected. And so that's all playing out over the last decade or more. And then we get to the end of 2019. So heading into this past winter, so pre-COVID, describe for me the health of the news media as a business story, so to speak. It's been a tough few years. One of the interesting things that happened, if we look at coming out of the crisis of 2008-2009, is that a lot of newer digital players came into play. I mean, I work for BuzzFeed News. BuzzFeed started our news organization in about 2012. And so you had a different kind of venture capital money flowing in to create new digital assets to challenge these established players, whether it's broadcast or newspapers,

even more. And there were boom times probably up until about 2017 into 2018. And by 2019, you know, my employer, we had big layoffs a little more than a year ago. A lot of the digital outlets that had received, you know, big investment had to lay people off. The advertising environment is still really tough. And a big reason for that is the duopoly. That's so much money that is getting spent, especially in the digital realm or in advertising overall, is ending up in the pockets of Google and Facebook. So things were already tough and especially tough for the legacy outlets. And the legacy outlets, many newspapers in Canada had been asking for some kind of government

assistance, which the PM has announced, we will get back to that. But I want to get to the COVID-19 crisis, the times in which we live, there is this crazy weird scenario going on, where there's this huge demand, appetite, necessity for news, and specifically local news, but it is clearly at the same time not generating the revenue necessary to keep media outlets afloat. What are you seeing? Like, paint that picture for me. Yeah, this is a really, really bad, I mean, bad doesn't even seem to encapsulate it. Really, really bad and potentially catastrophic moment for media. And it's really hitting across the board. So as you mentioned, massive, massive interest in people getting information about the coronavirus. And they

are going to tons and tons of legacy and new digital outlets. There is a hunger for information and for journalism. And that has been great. And so you see tons of online traffic and you see, you know, increasing people paying attention to broadcast news and things like that. Here's the problem. The problem is that, you know, these are largely advertising based businesses. And so at the same time, there is a surge in interest about this topic. Advertisers are sort of feeling very nervous. One, they're seeing their businesses really hit hard, so they don't want to spend as much on advertising. And two, those that are spending on advertising have a bit of a wariness about being next to really negative, tough news about the coronavirus. So I want to ask about that, that not wanting your ad to run alongside anything to do with coronavirus.

As I understand it, this is called keyword blocking. What's the story there? Yeah. So in the digital ad environment, you can exercise a new level of control to the point of in that split millisecond of where your ad is deciding to be placed, you can sort of set some of the rules about it. So I don't want to show up on porn sites. I don't want to show up on these kind of low quality sites. And they can also say, I don't want to be next to coronavirus content. And is that because they don't want to seem like uncouth? Like, I don't want to be shilling my wares next to this very serious article about people dying and getting ill and public health measures? What's happening, which is extremely frustrating, is that in a lot of cases, brands and the agencies they work with, the place Digital Ads, they just sort of added it in what seems like as kind of course of business,

thoughtless sort of way saying, well, that's negative news. We don't want to be there. But they didn't really think about the fact that one, people are really interested in that content. And, you know, you have an opportunity to get there where people are really engaged and to the catastrophic economic impact that this would have. And the thing about advertising is whether you like it or not, every player in the market people are really engaged and two, the catastrophic economic impact that this would have. And the thing about advertising is whether you like it or not, every player in the market depends on it. So there's one estimate that advertising revenues are generally down about 50%. Even when you look at the CBC, we get about $1.2 billion annually from the federal government. But then on the TV side, they generate hundreds of thousands of dollars on advertising revenue.

So everyone is leaning on advertising. So if that evaporates, we're all in trouble? Yes, to a certain extent. I mean, you mentioned the CBC. Obviously, the CBC is getting that, you know, that big amount of money from the government as the public broadcaster, but it sort of tops that up with some advertising. Now, when it comes to newspapers and when it comes to broadcast and digital players, advertising is the lion's share of that revenue. And this is, this has been the business model for roughly about 200 years. And for a long time, it worked great,

was very lucrative. Newspapers in particular were fantastic businesses to own in the 20th century. But now today, you know, this pressure and this ability in the digital environment to instantaneously change your strategy, to instantaneously suddenly block millions and billions of ads from appearing just because there's the word coronavirus on the page. You know, that is a very different environment. Yeah. I mean, I spoke to in Seattle that they had an early outbreak there. An 11th person in the United States has died from the coronavirus. Ten of those deaths have been Washington state. It has been widely reported that Washington state was slow to test for the virus,

losing valuable weeks in identifying who had it and how it was spreading. And I spoke to the publisher of the Seattle Times, and he said that basically, you know, their core categories like automotive and real estate and other things, they basically have disappeared. And so the big question, if we look at the lesson from 2008, is that, okay, almost 20% of the newspaper print revenue disappeared, and it never came back.

What is actually going to come back in this case? And it may actually be that final nail in the coffin for print advertising revenue. And it may kill off, it's already killed off a fair amount of outlets in Canada, but it may have more to do. In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization. Empowering Canada's entrepreneurs through angel investment and industry connections. So that's what's happening in terms of advertisers.

But the federal government recognizes, and about two years ago, it unveiled this $595 million aid package, really aimed at helping the struggling media sector. A 15% tax credit to encourage Canadians to subscribe to digital news media. But perhaps the most important measure, to subscribe to digital news media, but perhaps the most important measure, a new tax credit to help cover the labour costs of producing original news content locally.

And I don't have to tell you, Craig, that it was met with quite a lot of criticism. Why doesn't the Prime Minister just admit that he's trying to stack the deck to win the next election? Some thought it was too selective, helped the big guys who hadn't proven their ability to adapt, some of whom have made bad decisions that exacerbated their lousy finances. There are criticisms over the group that decides who qualifies for the money.

Andrew. To have, you know, the industry itself allocating the thing stinks. To have Unifor and the other unions involved stinks. Chantal. It's a bad idea and it's being articulated badly. And still, no cash has moved. No cash has been provided to the news outlets yet. But overall, do you think something like government support

can make a difference here? Well, I mean, we know that publishers are asking for it. And I think that, of course, you know, Canada already funds journalism in the form of the CBC, and there's money that flows in other kinds of indirect ways. So it's not unprecedented for this to happen in Canada. But I think there is always a concern about relying on government money to run a journalistic outlet, because of course, we are supposed to be keeping the government accountable. The CAJ represents more than 700 journalists across the country and Pugliese has been hearing

from many who are worried about how this looks. What they're concerned about is not that they're going to suddenly give good coverage to the Liberals over the Conservatives because it's an election year and this money's coming. What they're concerned about is that people are going to think that. And this is something that the CBC and journalists at the CBC have to hear about every single day that, you know, they are people accusing them of being in the pocket of, you know, the Liberal government or others. And so it is a fraught scenario. But it's also, I don't think, a fully sustainable one if we're talking about for-profit companies receiving government assistance for their newsrooms. That doesn't really seem to make a lot of sense for taxpayer money. And it doesn't necessarily provide the right incentives for

for-profit companies if they know that they can sort of pad things with government money. You know, that being said, we are in an extraordinary scenario right now. And I think that there is an argument that, of course, newsrooms should be eligible for the kind of paycheck, you know, funding and supplemental financing that other businesses are. And the other thing that I think is some governments are doing at the provincial level is they are saying, okay, well, we're going to funnel a lot of our advertising back into, say, print newspapers to make sure that that helps. And so those are a couple of things that are going on. I think it's dangerous to think about sort of establishing something over the long term

based on this moment, because we do need new players in the environment. And I don't know that this is going to help it. And in the short term, the Federal Heritage Minister, Stephen Guilbeault, says he expects money from an emergency COVID-19 general business wage subsidy program start flowing within weeks to Canada's newspaper industry that is beleaguered. So in the short term, that's what the government is saying it plans to do to help out. Does that money, Craig, come with any strings attached? Like, I'm just thinking about executive compensation, because there's been a couple stories about that as it pertains to newspapers. Despite pay cuts, job losses of the front lines at newspapers,

we have seen some executives still making boatloads of money while laying off staff. Yes, that has been really the chief complaint and often focused specifically on Post Media, which is a publicly traded company. And you can see exactly what the top executives are earning. And they have absolutely been reaping significant bonuses at the same time they're laying people off and cutting newsroom resources. The company decided to award over $2 million in bonuses to five executives. The bonuses were part of a retention plan to keep employees during a debt restructuring. And, you know, one thing that has happened already is that PostMedia has instituted pay

cuts for, you know, for people at sort of the senior level of the organization. And that's something that a lot of companies are having to do, and particularly newsrooms are having to do. You know, I've received a pay cut, and the CEO of my company is not taking any salary until the end of the year. And in fact, I'm waiting to find out next week if I'm going to be laid off or not, or potentially furloughed. So we are already in a catastrophic scenario right now.

And money does need to flow. But I think it has to be strategic in the sense that, yeah, we don't want the executive level people getting bonuses when this is meant to just prop up and enable basic reporting to be done. So you're among the critics who say, look, long-term government bailouts are not the way to save these media outlets, these newspapers. And people who share that view say, look, there are other options. You could adopt legislation similar to the one being proposed in Australia that would force the Googles and Facebooks to pay for media content they carry. Joining me now is the communications minister, Paul Fletcher. Facebook and Google provide a useful service, but if there's content that's being used that has cost money to produce, then there ought to be payment for it. This is going to be a significant tussle.

Would that even be a realistic option to save some of these papers? I think that it is, first of all, an option that the sort of lobbying association for Canadian newspapers is actively pushing very hard. And I think that we're going to see that become a big pressure point that people are pushing the current government on. And it may be a tenable situation for the current government being a minority government in that it sort of puts the responsibility away from the taxpayer and has them go after large companies. It could potentially put some money back into the kitty, but it's not necessarily going to save these companies because the reality is that PostMedia and Torstar, publisher of Toronto Star and many of the publications they own to take two of our biggest newspaper publishers in the country, they have made a lot of really bad decisions as companies. That's the unfortunate reality. And to prop them up and enable them to sort of continue to go on life support if they're not going to make tough decisions on their own and make the

transition is not necessarily the best scenario. The question, though, then becomes, well, what comes to take their place? And we don't actually know. We might have a kind of, you know, extinction event for a lot of print publications, and there's going to be a lot of short-term job losses. And the question is, are we going to see, like we saw after the 2008 financial crisis, a kind of rush into the market and say, hey, there's opportunity here, and build up some new outlets in Canada. And that is an unknown. So it's a very risky scenario to be in. We started talking about 2008, so 12 years ago. So now I want you to prognosticate 12 years into the future. What do you think Canada's media landscape might look like by then? Well, that's, you know, that's difficult. I mean, I think I think we still have a CBC in 12 years from now. And, you know, beyond that, I have to say, I don't think that Torstar as a company exists 12 years from now. I think that they are in a really tough spot. And I think that PostMedia as a company doesn't exist as it exists today, 12 years from now. I suspect there'll be acquisitions or bankruptcy procedures that happen for both of those.

I suspect there'll be acquisitions or bankruptcy procedures that happen for both of those. And what I would hope is that we have finally figured out a new business model in 12 years from now that can make local news work. Because that is the main problem right now is that local news at a community level where it is most essential is also the one that is simply not working from a financial perspective. So I do think that the giants of Google and Facebook will be putting more money into funding news and journalism in 12 years. I hope that we'll have a new business model for local news then that perhaps includes some subsidies and things from then. And I don't think our big legacy print newspaper organizations are going to exist then as they do today. That's all that's fit to print, and that is some bad prognosticating, Craig, some bad outlook on the future.

But here we are. I hope you keep your job and stay strong, my friend. Thank you. Same to you. Now, before we go today, I want to give you an update. You may have heard our episode last week on the COVID-19 outbreak at the Cargill meat processing plant in Alberta. It's the worst single outbreak in North America. And now, a second location in Canada has an outbreak.

A Cargill plant in Chamblee, Quebec has announced it will be shutting down this week because of that outbreak. As of Sunday afternoon, 64 employees were known to be infected. We'll be following that story as it develops. That's all for today. I'm Pia Chattopadhyay. Thank you for listening to FrontBurner.