Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 16 - Evidence - October 30, 2003
OTTAWA, Thursday October 30, 2003
The Standing Senate Committee on Transport and Communications met this day at 10:56 a.m. to examine the current state of Canadian media industries; emerging trends and developments in these industries; the media's role, rights and responsibilities in Canadian society; and current and appropriate future policies relating thereto.
[Translation]
Mr. Till Heyde, Committee Clerk: It is my duty to advise you of the unavoidable absence of the Chair and to preside over the election of an acting chair to chair this meeting.
[English]
Honourable senators, it is my duty to advise you of the unavoidable absence of the chairman, and to preside over the election of an acting chairman to chair this meeting.
[Translation]
Is there a motion to that affect?
[English]
Senator Graham: Honourable senators, I move that, in the absence of the chair and the vice-chair, Senator Eymard Corbin be appointed acting chair for today's session.
Mr. Heyde: It is moved by the Honourable Senator Graham that the Honourable Senator Corbin do take the chair as acting chair for this meeting.
Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
Mr. Heyde: Carried.
Senator Eymard G. Corbin (Acting Chairman) in the Chair.
The Acting Chairman: Thank you, honourable senators. It has been a long time since I have chaired.
It is a great pleasure for me to welcome honourable senators, our witness, members of the public and our viewers across Canada to this meeting of the Standing Senate Committee on Transport and Communications on the state of the Canadian news media.
[Translation]
The Committee is continuing its examination of the appropriate role of public policy in helping to ensure that the Canadian news media remain healthy, independent and diverse, in light of the tremendous changes that have occurred in recent years — notably, globalization, technological change, convergence and increased concentration of ownership.
Today we welcome Mr. André Préfontaine, President of Médias Transcontinental Inc. As indicated in his biographical notes, Mr. Préfontaine worked in a wide variety of posts linked to the information industry before joining Transcontinental in 1996.
[English]
Mr. Préfontaine is very familiar with Parliament. He worked here as a journalist many years ago.
It is a great pleasure to welcome you to the committee, today, Mr. Préfontaine. As I believe you know, our general format is to have introductory remarks of about 15 minutes, followed by our period of questions and discussion.
[Translation]
Mr. André Préfontaine, President, Médias Transcontinental Inc.: If I may, Mr. Chairman, I would like to start by making two brief comments. You have received a copy of my brief, so rather than read it, I will simply highly its main points.
At the outset, I would like to say that we are pleased to have an opportunity to contribute to the committee's work, and I hope the information I provide today will be helpful in your endeavour. My comments will be general in nature and will serve mainly to pave the way for the questions and answer period.
The first thing I would like to do is to tell you about the credo of Médias Transcontinental and its parent company, Transcontinental Inc., as well as the publishers, editors-in-chief and journalists who work at our 11 dailies, 74 weeklies, 37 magazines and the other 54 periodicals we publish in all parts of the country.
I will read you our credo, to ensure that it appears in your minutes: As a news publisher, Médias Transcontinental believes strongly that factual, verifiable and quantifiable information is at the heart of the production — and success — of all our publications. In our opinion, information is not just another product. It engages the social responsibility of the publishing entity and, through its quality, contributes directly to the health of a democracy.
We believe that the quality of information is the cornerstone of the success of Médias Transcontinental, and that this quality supports our financial success and sustains growth. In 2002, this financial health enabled us to conclude the biggest deal in our history, when we acquired 12 local newspapers of CanWest, including 10 daily newspapers, in the Atlantic provinces and Saskatchewan.
That transaction strengthened our position as the fourth-largest print media group in Canada, the second-largest publisher of local and regional newspapers and pushed our revenues over $500 million a year, increased the number of employees from sea-to-sea to 3,000, and allowed a group of journalists to join a company that believes in newspapers and believes in community service as a philosophy.
[English]
On the Canadian scene Transcontinental Media Inc. can be considered to be a new voice. For instance, in 1997, our publishing revenues were $66 million. I have mentioned that in 2003, that figure will reach $500 million.
In our opinion, diverse and multiple sources of information, especially in the era of the Internet, is the best way to guarantee the publics' right to quality information. However, this diversity must also come from players who have the capacity to act as counterweights to the large media empires. When I refer to ``media empires,'' I will be referring to larger groups that not only publish here in Canada, but also come from other countries, especially south of the border.
We are the largest publisher of consumer magazines in the country; we are the second largest publisher of magazines in categories combined. Our titles hold a 22 per cent market share in Canada. Our women's magazine, the largest portfolio of its kind in the country, has a market share of 49 per cent. The monthly readership of our women's magazines in the country is 11 million readers a month. We are also the second largest publisher of local and regional newspapers in the country and we are the only Canadian publisher in all 10 Canadian provinces.
Our size is essential to sustain the competition that we face, to maintain the quality of our content and the integrity of our operation, and is also instrumental in ensuring our growth.
However notable our size is in Canada, it is very relative on the North American scale. In fact if you look at the 10 largest North American publishers, you will not find a single Canadian publisher. On the North American scale, Transcontinental Media Inc. is a small player. Consider for one instance that People Magazine publishes more copies than all Canadian magazines combined. Yet, we compete against them.
We compete by focusing on the niches that we have identified in the market place. In so doing, however, we have not escaped the fact that there is competition. Our strategy has made us the first publisher of magazines in French and in English, with titles like Canadian Living, Coup de pouce, Elle Canada, Elle Québec, Style at Home, Décormag, Homemakers, TV Guide, The Hockey News, and so on.
[Translation]
Our publishing principles are simple and have accounted for our success to date. Canadians will always prefer magazines offering high quality Canadian content, written by Canadians, for Canadians. We are firmly convinced that our magazines help shape Canadian identity, share our experiences and values and unite Canadians around these values that reflect our identity.
Our competitors do not have the same objectives. The main threat comes from magazines such as Cosmopolitan, which sells over 253,000 copies a month in Canada, Prevention, with a circulation of 184,000 copies, Martha Stewart Living, at 165,000 copies, Oprah, 164,000 copies, People, close to 171,000 copies and Teen People, 126,000 copies.
[English]
Consider for an instant that we have 126,000 Canadian teenagers who shape their image and their values from Teen People, an American teenage magazine.
[Translation]
American publishers see Canada as another American State. They include Canada in North American promotions and programs to develop circulation. They see us as a cheap source of extra circulation, because they do not have to invest in editorial resources or operations in Canada.
Moreover, that is why the cutbacks announced this summer to the subsidies to the magazine industry by Heritage Canada are regrettable. For Transcontinental, they represent a loss of over $6 million in 24 months.
There is no doubt in my mind that these cutbacks will lead to profound, long-term upheaval in the Canadian magazine industry, and that they constitute an unplanned change in the policy of the Canadian government. When I say policy, I want to clarify that I am referring to the Canadian government's cultural policy. In order to prosper in an environment of the type I described earlier, publishers of Canadian magazines need a structured approach that allows them to develop long-term business plans. When we take into account the costs involved in putting our material on the Internet — and we are talking about hundreds of thousands of dollars for each title — we have even more difficulty understanding the decision of the Department of Canadian Heritage to reduce its support to Canadian magazine publishers.
[English]
In such a context, industry movements are to be expected, and some of them will be beyond our control here in Canada, as they are elsewhere around the world.
Some say that concentration of media ownership could threaten the quality of information and the diversity of sources. The fact is the industry today is less concentrated than it was 20, 30 or 40 years ago. Emerging players such as Transcontinental Media Inc. contribute to the diversity and raise the standards of quality. We are convinced that this current environment has fostered a number of new and strong players, even though we face challenging market environments.
Transcontinental Media Inc. has concentrated on local markets, and we have offered a forum for voices that otherwise could not be heard. We contribute at a local level to the plurality of voices. In some instances, our network of publications, whether magazines or newspapers, have contributed to the survival of titles that otherwise would not exist today.
[Translation]
This leads me to talk to you about the sense of community, which is at the heart of our publishing philosophy. Our philosophy is very simple: What is good for the community is good for the newspaper. Our newspapers are active members of their community and contribute to their development. Our employees are involved in community life. I would like to mention that two of our publishers, Caroline Andrews, the publisher of the Orleans Star and the Ottawa Business Journal, and Jean Touchette, the publisher of Progrès, in Saint-Léonard, each received the Queen's Golden Jubilee Medal for their community service.
The local causes and projects supported by our newspapers are too numerous to mention, and when communities have special.'' needs, we are there as well. For example, last summer in the Bois-Francs region, in central Quebec, floods devastated the region and had an impact on several thousand residents. Our publishers, together with the Red Cross raised $275,000, which was $75,000 more than the initial target.
[English]
Some of you will also remember the fate of the village of Badger in central Newfoundland. It was in prison of ice after the flood water froze after severe weather. Our two newspapers in Newfoundland, the Cornerbrook Western Star and the St. John's Telegram, joined with the Red Cross and other organizations across the island and raised $1.6 million to help those that were suffering from this disaster.
[Translation]
Similar examples can be found in all our newspapers in Nova Scotia, New Brunswick, Prince Edward Island, Manitoba, Saskatchewan and Ontario. For the second consecutive year, Transcontinental has been recognized by Corporate Knights as one Canada's most socially responsible companies.
In closing, it is our opinion that the consolidation we have seen in recent years is not yet over. In such a context, Médias Transcontinental intends to pursue business growth and, in our case, our size and resources will foster high- quality information and a diversity of voices. And we must be able to continue, to maintain this growth without any additional regulatory restrictions.
The critical mass is a factor in our survival and is an essential protection against the invasion of foreign publishers and radio and television broadcasters. It is in fact a guarantee that we will be able to offer Canadian products that talk about Canadians for Canadians. This responsibility does not lie solely with the government. The public's right to high- quality information is not incompatible with the right of companies to make business deals. The CRTC and the Competition Bureau exist to ensure that these transactions are in the public interest.
[English]
In closing, we believe that the current concentration of media ownership in the country does not have a negative impact. Transcontinental Media's business development model is based on a disciplined growth that respects journalistic ethics. Our history shows that even without further regulation a media company can be fully aware of its responsibilities and assume them in all of its markets.
Canadian companies must have the resources they need to achieve the critical mass that will make them competitive, long-term players, particularly in this market environment. Given the unprecedented domination of American culture and its formidable financial resources, what we need from the Canadian government is a structured approach that will allow us to develop long-term business plans.
I will be happy, Mr. Chairman, to respond to any questions that members of the committee have.
[Translation]
The Acting Chair: Thank you, Mr. Préfontaine. Honourable senators, it is my duty to remind you that we will try to adjourn by 12:30 p.m. at the latest. The following is the list of senators who have asked to speak: Senators Graham, Spivak, Merchant and Day.
[English]
Senator Graham: Thank you, Mr. Préfontaine, and a warm welcome back to Parliament Hill. You mentioned all the provinces where you were represented through daily newspapers, except, I believe, British Columbia and Alberta.
Mr. Préfontaine: We publish magazines in those two provinces.
Senator Graham: In all the other provinces, you publish dailies?
Mr. Préfontaine: We publish either dailies or weeklies. We publish daily newspapers in Quebec, Nova Scotia, Prince Edward Island, Newfoundland, and in Saskatchewan. In New Brunswick, we publish a weekly newspaper in Sackville. We publish weekly newspapers in Ontario, Manitoba and also Saskatchewan.
Senator Graham: I am interested in the names of the 10 or 12 daily newspapers you have.
Mr. Préfontaine: We will start in St. John's with the Evening Telegram; in Corner Brook with the Western Star; the Cape Breton Post in Sydney; the Truro Evening News; the New Glasgow Daily News.
Senator Graham: The Truro Daily News and the New Glasgow Evening News.
Mr. Préfontaine: I stand corrected. The Amherst Daily News; the Halifax Daily News; the Moose Jaw Times-Herald in Saskatchewan; the Prince Alberta Daily News, also in Northern Saskatchewan; and Métro in Montreal.
Senator Graham: In your summary you say:
We believe that the current concentration of media ownership in the country does not have a negative impact.
Then in your second final point you say:
Given the unprecedented domination of American culture and its formidable financial resources, what we need from the Canadian government is a structured approach that will allow us to develop long-term business plans.
Could you elaborate on what you mean by a ``structured approach?''
Mr. Préfontaine: I will give an example. The Postal Assistance Program that supports the Canadian magazine industry has been in place since before Confederation. It has helped to develop a very vibrant Canadian magazine sector. In fact if you look at magazines sold in Canada today, you have roughly 50 per cent Canadian, 50 per cent American. However, when you look at magazines sold by subscription, ``subscription'' meaning that the distribution of those subscriptions was supported by PAP, 80 per cent of Canadian magazines are sold through subscriptions.
Please try to visualize any newsstand you have visited recently, including perhaps the one at the airport here in Ottawa, and you will realize that you are bombarded with American titles. Ninety-five per cent of magazines sold in Canadian newsstands are American. The federal government has not given any support to wage battle against American publishers on the newsstand.
The Postal Assistance Program has been in place for an extended period of time. It is an integral part of every Canadian magazine publisher's business plan. Last summer we were confronted with significant changes to the Postal Assistance Program decided by Heritage Canada, and this in the context of a three-year agreement we had negotiated. ``We'' is not Transcontinental Media Inc., but the magazine industry through its association, the Canadian Magazine Publishers Association. We had negotiated a long-term price increase agreement with Canada Post with the help of Heritage Canada.
We all assumed at the time of the negotiations that the support from the federal government would not change during that three-year period that we agreed upon. Within that context, we agreed to postal rate increases that are superior to what we would normally have accepted. For instance, as of January 1, 2004, our postal rates are going up 12 per cent. That is to mail our magazines to our subscribers. Had we known that within the time-frame of the three- year agreement, Heritage Canada would have withdrawn a large part of its support, we would not have negotiated the same way.
The result of this is that a number of magazine publishers in Canada do not enjoy high profitability margins. Oftentimes, the subsidy they get through the Postal Assistance Program is equivalent to the profit they make. A gradual erosion of profitability will happen as a result, the consequence of which has not been studied or analyzed.
We recommended both to the senior officials at Heritage Canada and to the minister's political staff that we take time to study the implications of modifying the PAP before we made the decision. Unfortunately, our point of view did not prevail, with the consequence today that I am sure that within the next several years, some Canadian publishers will not be able to sustain the competition to which I have referred. That is one element.
The other element that is important to us is predictable rules. The rules of the game must not change on a short-term basis.
Senator Graham: You say that Transcontinental emphasizes print media, and it wants to offer advertisers complete coverage from highly targeted local promotion to national advertising, in both official languages, coast to coast.
Given your desire and your attempts to provide complete coverage to advertisers have you ever considered getting into the broadcast area of communications?
Mr. Préfontaine: Senator, you have touched on a sensitive point. The answer is ``yes,'' we have looked at it and we have made the decision not to get into that area of communications. The decision stems in part from the fact that our corporate owner is one of Canada's largest printers, in fact, the second largest printer. There is a love affair with the printed product, especially when we print it ourselves.
We have developed a different convergence model, if that is what you are referring to, where we have three core capabilities; printing, publishing, and door-to-door distribution of advertising material being the third.
We believe that we can leverage these core capabilities into packages that are attractive and effective for Canadian advertisers. It helped us resist the temptation to enter the fray when broadcasters came up for sale, whether they were television or radio.
Senator Day: I want to confirm your answer to Senator Graham's question about why you have not chosen to go into broadcasting.
Was your decision based on commercial and ownership reasons rather than the belief that convergence would not be good for the Canadian public?
Mr. Préfontaine: That is a huge debate, senator. It has been our belief and we have been on the record as saying that we believe the convergence model, as exemplified by the AOL-Time Warner merger, would not work. We have been on record for a number of years, to say that this was is not a model we believed to be viable in the long term.
Senator Day: Is that viable from a business point of view?
Mr. Préfontaine: Yes.
Senator Spivak: Apart from the postal subsidy, which I understand, what else are you talking about when you refer to a structured approach that allows you to develop long-term business plans?
Mr. Préfontaine: We believe that the current regulatory framework, whether through the CRTC that reviews requests for new licences or licence renewals, and also at the time of renewal looks at whether the broadcasters own publications or newspapers and the Competition Bureau, offers sufficient protection to the Canadian public at this time. This is a framework with which our industry is familiar; it is one that it accepts, supports and respects.
Any modification to that framework would change the fundamental rules under which we operate. For instance, the CanWest acquisition of the 12 newspapers was a $265-million acquisition, the largest in our history, however it is modest in comparison to some of the larger transactions that have taken place in Canada over the last two or three years. These transactions went forth under some basic rules. I am not sure that, should the rules change, the reality of the marketplace would not change at the same time.
I am of the view that the current model serves us correctly. It has proven itself, and it should not be changed lightly.
Senator Spivak: You are happy with the current rule. However, in some instances, in Canada, I think across the west, there are no competitive newspapers, no dailies. There is really just one daily. I do not know how you feel about that as far as the public interest is concerned.
Mr. Préfontaine: I will have to adjust my answer.
Senator Spivak: I must add that these publications have just one owner.
Mr. Préfontaine: There are a number of newspaper owners in the Prairies and B.C. CanWest, Sun Media, and Black Press are active in those markets. Horizon is active in Southern Alberta, and Sterling Newspapers is active in central British Columbia. We are active in British Columbia and Manitoba. There are a number of players, although some of them are more active than others.
The view that some regions or urban centres would have only one newspaper stems, in my judgment, more from the capacity of these markets to support one or more newspapers, rather than the fact that no one is willing to enter into that market.
I know the principals of all of the companies I have mentioned, and most of them are extremely aggressive in a competitive sense. If there were an opportunity in any of those markets to develop an alternate publication, daily or weekly, they would do so. On occasion, they have done so. Across the lower mainland of British Columbia Black Press competes against Lower Mainland Publishing. They are also active in the rest of B.C. When there is an opportunity to build a franchise, these players do not hesitate.
Senator Spivak: In terms of public policy, do you think we are about just right except for this postal subsidy?
Mr. Préfontaine: In terms of public policy, the Canadian public, at this moment is well served by the policy infrastructure. As I said, the changes to the Postal Assistance Program and the Canadian Magazine Fund are regrettable. The changes will have long-term impacts on the Canadian magazine industry that are not foreseen and that have not been analyzed.
If you look at the different components of the media sector, only the magazine and the newspaper industry still focus on Canadian content.
I have children that listen to music, and I dare say that only a minority of that music is Canadian in origin. They watch television programs and many of them come from south of the border.
The current policy infrastructure has fostered a strong Canadian magazine industry and a strong Canadian newspaper industry, whether daily or weekly. We should be careful how we handle that infrastructure.
Senator Spivak: How important do you think the news outlets are, the magazine racks?
For example, in the airport, I have noticed that there are few Canadian magazines. Even the ones they give out on the plane are all American; there is not one Canadian magazine.
Do you think that this is an area where public policy could help change that situation?
Mr. Préfontaine: Yes. I will suggest a way that this could be done. There has been great debate on the fact that magazines were able to benefit from the Canadian Magazine Fund after the adoption of Bill C-55. Under the regulations that accompanied the bill, the funds had to be targeted strictly towards editorial operations. The rationale behind that was that it would improve Canadian content, and that better Canadian content would attract more Canadian readers. It created a positive dynamic. However, the Canadian content before that time was not that bad. If you look at subscription-based distribution, Canadian magazine publishers have won that war. On the newsstand side, we have lost it; 95 per cent of magazines sold in newsstands are American.
Colleagues and I have recommended to Heritage Canada that we be given the flexibility to direct some of the funds allocated under the Canadian Magazine Fund to newsstand distribution, to expand our position in the newsstand, and to build promotion around the value of Canadian magazines, in opposition to American magazines.
There is something insidious in what is going on because 50 per cent of magazines that are sold are American. The book is this thick. It portrays an image of what a magazine should be and what it should cost.
Most magazines sold in Canadian newsstands are sold below the price you would pay for them if you were in the U.S. I could provide a list of them to the committee. We have supplied that list to Heritage Canada on a number of occasions. Systematically, American publishers under price their magazines. Sometimes their magazines are sold in Canada for less than the price it costs to print them.
If this were wheat or steel sales, it would be called ``dumping.'' We are victims of ``cultural dumping'' through the newsstand distribution process.
Is it not a worthwhile policy objective that we fight back?
Canadian magazine publishers are willing to do that, but we are not asking for supplementary dollars. We are asking for a bit more flexibility in using the dollars you already allocate to us.
Senator Spivak: It is sort of like Coke and Pepsi price war.
Mr. Préfontaine: The issue is that Canadians produce Coke and Americans produce Pepsi. We want to put a big maple leaf on the Coke can.
Senator Merchant: This last bit of information is of interest to me because the America magazines to which I subscribe are not usually cheaper, although there may be one or two. That would be useful information.
Mr. Préfontaine: Senator, you would be wiser to buy them at the newsstand than subscribe to them.
The Acting Chairman: I will accept your invitation to supply that information to the clerk of our committee.
Mr. Préfontaine: I will gladly do so.
Senator Merchant: I am interested in the Saskatchewan dailies. It is very important, when possible, to have local people writing our stories because they are our neighbours and know what is important to us. Without being less factual or of less quality, the way they present the information it is different from when we see a story on the same issue in a big newspaper like the National Post or The Globe and Mail. It is important for our stories to be told by our own neighbours because they know the places, the names and the people.
It is also important to have readers. Is the Moose Jaw Times Herald, for example, sold only to people in Moose Jaw and the surrounding area?
Do people from Regina, for example, buy that paper?
Mr. Préfontaine: It has a very limited distribution in Regina, but when we talk about Moose Jaw we are referring to the general area. Some of our papers are distributed across 100 square miles. Swift Current is another example.
Senator Merchant: Sometimes there is very little information in these papers, and perhaps it is because you can get news in so many different ways. There are lot of ads in them because local merchants want to sell their products, but there is not that much information. Sometimes even the Regina paper has only six pages.
Do newspapers in smaller places have trouble getting enough news that is of interest and is not in the bigger newspapers?
Mr. Préfontaine: You have touched upon many elements that we deal with in publishing daily newspapers in small non-urban markets.
In the Regina Leader Post, for example, there will be two or three pages of local news and the rest will be national and international news. The Prince Albert paper has strictly local news. It contains very little national, international or business news, and that is done on purpose.
The difference between metro newspapers and non-urban dailies is that local newspapers have local content. The news that is in the Prince Albert daily paper is not available anywhere else. There is no television station or radio station to provide it, the only paper. It is like the diary of the community. If we do not do it, no one else does, and that ensures the success of the paper.
Over all, if you look at North American trends, and Canada is no exception, local newspapers have been able to sustain readership much better than large metro dailies, because they are relevant to the lives of their readers and, more often than not, it is what we call in our business ``news you can use.'' It touches upon people's lives and helps them to be better citizens, better members of their communities, and to be informed of what is going on around them.
Senator Merchant: Would you put these newspapers in schools free of charge? You must have an older readership. How do you instil pride of community and country in young people? Do you think it could be done through the classroom? Do you encourage programs like that?
Mr. Préfontaine: We have a program called ``Newspapers in Education.'' We partner with schools to offer newspapers with a guide for the teacher on how to read them, explaining why is it important to read certain portions of the papers and what it brings to citizens.
A fine example of this is not in Saskatchewan but in Cape Breton. The editor of the paper there felt so strongly about the ``Newspapers in Education'' program that on his own he got sponsors in the community to pay for it.
Senator Merchant: That would be very worthwhile because I do not see younger people reading the newspapers. Maybe the local newspapers are interested in the macro element of news rather than focusing on their own.
Mr. Préfontaine: That is correct.
[Translation]
Senator Day: We talked about the dumping issue. Could you give us some figures? Have there been any court cases on this yet?
Mr. Préfontaine: No. Following Canada's defeat at the World Trade Organization, which led to Bill C-55, which changed the levels of foreign ownership for magazines in this country, the government has lost its enthusiasm for this issue.
We are relatively new to the publishing business. In 1997, our revenues were only $66 million, but we learned quickly. We learned that the Americans dominate the newsstands. In order to succeed, as we develop, we will have to be able to sell our magazines on newsstands. Let me explain why.
I spoke earlier about the increase in postal rates. Mailing costs are only one part of the postal cost of magazines. I am sure you subscribe to some magazines, and have noticed that several months before your subscription expires, you start getting cards telling you it is time to renew your subscription. We even have ``early bird'' reminders. We do that seven times for each subscriber before the subscription runs out.
Senator Day: Even if I pay up right away, I continue getting the cards. I have noticed that.
Mr. Préfontaine: I hope that was not one of our magazines. The cost of mailing these cards is increasing, as is the cost of renewing the subscription. It is therefore less and less cost-effective to use the mail.
Consequently, at some point, we will have no choice, we will have to rely on single copy sales on newsstands increasingly as a way of selling our publications.
Senator Day: What are we going to do if 95 per cent of the market is taken up by foreign publishers such as Hearst, Conde Nast, Time-Warner.
Mr. Préfontaine: Transcontinental is a big player in the Canadian market and a very small player on the North American and world markets. When American publishers come to Canada and buy up locations at the cash using American dollars, they see Canada as an American State. I am very serious about this.
Canada is automatically included as a State in the circulation development plan of American publishers. We must restore some balance to this situation. We must be able to develop a credible presence on newsstands.
Senator Day: My next question is on the concentration of the media. We started talking about this a little earlier. You have a Web site. What do you mean by the quote ``Internet solution''?
Mr. Préfontaine: I mean a presence on the Internet. Our magazines are available on the Internet and we operate women's portals, as well as a business portal in Quebec. Each portal costs hundreds of thousands of dollars, and collectively those expenses add up to millions of dollars. No one has yet found the right way of making money through Internet publishings. We know that we have to be there, but it represents an additional drain on the resources of Canadian publishers.
As things now stand, Canadian publishers must focus some of their resources to ensure an Internet presence, and gradually experiment with Internet solutions to come up with a profitable distribution model. But it is a question of size — if they are not large enough, few magazine or newspaper publishers have the ability to ensure an acceptable Internet presence while maintaining the quality of their publications.
Senator Day: So you are talking about electronic aggregation of news and business information. Do you obtain your information from newspapers and weeklies? Do you have journalists working only for the Internet?
Mr. Préfontaine: Some of our portals, like ``lesaffaires.com'' and ``mokasofa.ca'' have journalists assigned only to Internet work. In other cases, the Web site is part of normal editing room operations. Content is provided by newspaper and magazine journalists.
Senator Day: Is the aggregation solely your intellectual property, or do you have a licence agreement with other companies?
Mr. Préfontaine: Some of our publications also subscribe to the Canadian Press service, and enrich their content with Canadian Press articles. Generally, however, the content of our Web site is generated almost completely through our own means.
Senator Day: You talked about the Web site ``mokasofa.ca.'' do you have a magazine with the same title?
Mr. Préfontaine: No. ``mokasofa.ca'' is a trade-mark based on the ``Internet newsstand'' concept. The site ``mokasofa.ca'' provides access to all our titles. On the English site, you can access a number of magazines, including Canadian Living, Style at Home and Home Makers. The French site provides access to our French-language magazines.
Senator Day: You also have a Web site called ``voisin.net'' which hosts non-profit organizations. Does it generate any profit for you?
Mr. Préfontaine: None of our sites is profitable. We must make it clear to the committee that no Canadian publishers make money on the Internet — neither Rogers, nor New, nor CanWest, nor Sun Media. We are really at the experimental stage of this whole enterprise. Even huge U.S. sites do not make money, except for massive portals like Yahoo and Google. We are investing in a future that we cannot clearly see yet.
Senator Day: We have also talked about convergence. Are you against the concept of convergence in newspapers, television and the Internet? From a conceptual standpoint, do you have a problem with convergence?
Mr. Préfontaine: From a conceptual standpoint, I do not see a problem. I worked for Canadian Press well before the term ``convergence'' was invented. There was a Canadian Press subsidiary called Broadcast/News. Journalists working for Broadcast/News, Canadian Press/Presse canadienne, news, television and radio — all working for the French- language sector — called themselves dual-function journalists. We covered news for the news wire, and were occasionally asked to write news bulletins for the radio, or to go out directly on the air. That was a kind of convergence. It enriched the quality of information provided by Canadian Press to its affiliates and to its radio and television clients.
Some employees could do this because they were comfortable with it, but others were less comfortable. We see the same thing today. Will the model of having a single newsroom for journalists who do all sorts of things — sometimes they are on the radio, sometimes they are on television, sometimes they write articles — work? My answer to that is no.
I am a career journalist. When I was 19, I started with the Sherbrooke Tribune. I spent my whole life in newspapers. When I worked at Canadian Press, I managed the television side as well as the news wire. I can tell you that being a good television journalist requires special talent. It is more difficult than being a good radio journalist, and different from being a good print journalist. Sometimes, journalists can build synergy between two or three of these functions, but not always. The journalist-do-all model generates many reservations, and has not been tried on a large scale. In Canada and North America in general, there may be some pilot projects here and there, but the model is not being tested extensively.
The real circumstances involved in collecting and distributing information will mean that this model is not likely to be widespread.
The Acting Chair: I note that you own the Bathurst newspaper?
Mr. Préfontaine: We used to own it.
The Acting Chair: What happened to it?
Mr. Préfontaine: We sold it to the Irving Group several months ago. The Bathurst paper was geographically isolated from the other papers we publish in the Atlantic provinces, and it was surrounded by Irving Group properties and was therefore impossible to develop. There was a natural synergy between the Irving Group papers and the Bathurst Northernlight. That is why we sold it to Irving.
The Acting Chair: That is more than synergy. For all practical purposes, that is a monopoly!
Mr. Préfontaine: That may be how you put it. This was an area in which it was almost impossible to develop the newspaper, and this was threatening the newspaper's very existence.
The Acting Chair: Nonetheless, it is surprising that you acquired the newspaper when at the outset it had been bought by Hollinger — that is Lord Black — then by Hasper when they bought up a block of Hollinger assets. Why did you buy it when you did?
Mr. Préfontaine: We bought all the newspapers owned by CanWest in the Atlantic provinces, which of course include Newfoundland.
The Acting Chair: So it was part of a block acquisition, made for reasons not involving local or other interests?
Mr. Préfontaine: With the regulations set up for the transaction, we could not buy all newspapers other than the Bathurst paper. Bathurst, one might say, came along for the ride. However, I should point out that Transcontinental is not a company that often divests itself of business units. We do not often sell. We are buyers rather than sellers, and we are long-term operators.
When we sold the Bathurst paper to the Irving Group, we made sure that all our employees in the Atlantic provinces clearly understood that this was the only thing we planned to sell, and in fact we are firmly committed to developing our operations in the other Atlantic provinces.
Senator Graham was in a position to see how true this has been. We invested several million dollars in Halifax to relaunch the Halifax Daily News. We moved it downtown, to the core of the community. The paper has new content and a new graphic look. We set up new presses, because I firmly believe that Halifax needed a new voice, a stronger voice. That is why we have made considerable investments in the Halifax Daily News.
The Acting Chair: My second question is on your credo, as it were, the credo you set out for us at the beginning of your presentation. Every credo tends to contain elements of dogma. I remember my catechism well. Either you believe in it or you do not. If you do not believe in it, you are no longer in the church, you are elsewhere, sort of speak. That may have an impact on your life in the hereafter. Do your employees and journalists believe in your credo?
Mr. Préfontaine: Yes. When we acquired the newspapers in the Maritimes, I personally visited every newspaper office. I assembled the employees of every newspaper and presented our credo to them. Transcontinental believes in the editorial freedom of each and every one of its newspapers. Transcontinental believes that the publisher and the editor- in-chief are the individuals in the best position to establish the newspaper's editorial policy. We do not intervene in the newspaper's editorial policy. We have only one rule, which I reiterated during each one of my visits: You must serve the community. If the newspaper does not serve the community, we will come to visit you. Your mandate is to publish a newspaper that serves the interests of the community and that underlies our credo: If it is good for the community, it is good for the newspaper.
I have worked in the field for 32 years. I started at La Tribune of Sherbrooke, a regional paper. When a newspaper covers well the news in its community, the community rewards it. When the newspaper does not do this, the community punishes it. The community is quick to punish when things do not go well.
The Acting Chair: Finally, we could not fail to notice that the Rogers Group, with its distinctive feature of being a magazine owner, Quebecor, where you were formerly employed, Transcontinental and other firms have a considerable debt load at present. The Canadian economy is obviously doing well. Accordingly, when the economy is doing well nationally, regionally and locally, so do your newspapers, dailies and magazines because there is considerable advertising, and without advertising, you do not go very far.
Nevertheless, I am concerned that this debt load poses some long-term risks. We do not know how the economy will do. I do not think that the appreciation of the Canadian dollar will cause an economic crash but if, in two, three or four years — you know how quickly things can change on the international scene at times — if ever there were an economic crash, the large media owners would find themselves in an extremely difficult situation, resulting in the disappearance or even the quick sell-off of some assets in order to keep their heads above water. Does that not concern you?
Mr. Préfontaine: It is true that the Canadian publishers you mentioned have a high debt load, with the exception of Transcontinental. Our debt equity ratio is 32 cents to the dollar.
The Acting Chair: Do you feel that such ratio is healthy?
Mr. Préfontaine: According to the ratios, yes. Our market indicator shows that we will not exceed a debt equity ratio of 55 cents on the dollar, and we are within the indications we provided to the market. We have a line of credit of several hundred million dollars that we are not using. We generate enough cash to cover not only our operating costs but also to encourage expansion. Early, in my presentation, I emphasized the need for financial health, financial soundness being a prerequisite to high-calibre information. That is part of the way we manage our business. I believe that you are right when you say that if ever the economic environment were to slide, some publishers would have to get rid of certain assets, but we would not be amongst them.
Over the years, we have been able to take advantage of the cash flow problems of certain publishers in order to develop our own operations. I would be pleased to send to your committee members a few copies of our annual report and you can see for yourself that Transcontinental's financial statement is extremely solid.
[English]
Senator Gustafson: Do you have holdings in Saskatchewan?
Mr. Préfontaine: Yes, we do, in Moose Jaw, Swift Current and Prince Albert.
Senator Gustafson: How are they doing?
Mr. Préfontaine: They are doing quite well. We have just appointed a new publisher in Prince Albert whose family comes from Prince Albert. He is immensely proud to be back in the community and has an agenda of community involvement that will improve the paper.
Senator Gustafson: Are you referring to weeklies?
Mr. Préfontaine: Dailies in Prince Albert and in Moose Jaw, and a weekly in Swift Current.
Senator Gustafson: I am a Senator from Saskatchewan, and I know that those small papers do very well.
Mr. Préfontaine: They are healthy businesses, yes.
Senator Graham: Senator Gustafson indicated that he is a senator from Saskatchewan, and we all represent our regions and the country as a whole.
Would you please provide us with the circulation figures for the four newspapers in Nova Scotia?
You do not have to give that information to us now, but may give it to the clerk.
Mr. Préfontaine: I would be happy to do so.
Senator Merchant: This committee needs to be forward looking, in order to look 10, 15 or 20 years ahead. Lord Black has interests in Britain. The Aspers have interests in Australia.
Can you elaborate on your feelings about foreign ownership and foreign people coming here to publish newspapers? Is that good for the country? Is that kind of competition good? How do you feel about that situation?
Mr. Préfontaine: I feel strongly about it, senator. I think the current ownership rules should not be changed.
Senator Merchant: Can you explain to us why you feel that way?
Mr. Préfontaine: We see the newsstand, where there are no restrictions, as the best example. The size and scope of American publishers or European publishers are such that they would virtually overwhelm Canadian players, no matter how big we are in our own markets.
The strength of the American dollar would allow American players to pay much higher multiples for our properties than we would be able to pay. As to what would happen once they owned the papers, I can only surmise, but I doubt that it would be an increase in quality content by Canadians for Canadians.
In a country such as Canada, which is thinly populated and spread over huge distances, and where costs are higher, we need protection against foreign ownership. It would be unwise, in my view, to modify the rules. I think that is true for newspapers, and equally true for magazines, although, as you know, the rules have been changed since Bill C-55. It would be most unwise also for the broadcast industry, whether radio or television.
Canada has been well-served by the actions of the federal government to protect its media. I cannot help but be a bit sentimental here, but our national identity depends on our ability to tell our story. If we do not own the vehicles through which we tell our story, our history, who else will tell it for us?
As I said earlier, I have young children and I see what they watch on television. I listen to the music they listen to. I am appalled.
Is that how we want to build our Canadian identity?
Senator Merchant: Unless we teach our children the value of the written word, they will get their information from other sources. It is very difficult to control. I wonder where we will end up.
Mr. Préfontaine: I am equally concerned, but from a mid-term perspective, because I know the current ownership restrictions. We are confident to the point that we have invested hundreds of millions of dollars of our shareholder's money, and we are providing a good return for those shareholders. Should the ownership rules change, I am not sure we would be able to sustain that for any length of time.
I urge all of you to defend the policy structure we have put in place that protects Canadian culture and identity. These rules and policies have done a good job for the country. We should not lightly consider abandoning them, no matter how persuasive people from the outside, or the inside can be in their suggestions to do otherwise. You will always find some people within our industry who will say, ``Open the flood gates.''
Senator Johnson: I listened to much of your presentation. I am sorry, but we have a press conference going on.
Mr. Préfontaine: Those pesky journalists.
Senator Johnson: Could you tell me the degree to which American magazines are subsidized, if they are subsidized at all?
Mr. Préfontaine: They are not subsidized.
Senator Johnson: The loss that you have sustained over the past 24 months is due to cut backs.
Mr. Préfontaine: The cuts were announced July 8 and will take effect as of April 1, 2004 over a 24-month period.
Senator Johnson: That is how much money?
Mr. Préfontaine: It is $6 million for our company alone.
Senator Johnson: What is the national figure?
Mr. Préfontaine: Rather than giving you misleading numbers, I will make the information we have available to the committee.
Senator Johnson: Why has this cutback been made at this time?
I say that in the context that we are littered in our society with magazines. There is not only too many, but they take up a lot of white paper, which affects the environment.
What do magazines actually do to contribute to our culture and the intellectual prowess of our people, because 90 per cent of them that are read are People-type magazines? They are not The New Yorker, not Harpers, not The Atlantic Monthly, and not National Geographic.
You talked about them contributing to the cultural life of our nation. How do you justify that statement?
Mr. Préfontaine: I will not pass judgment on the titles you have named, but I will limit my comments to the magazines we publish, and I will start with Canadian Living.
Senator Johnson: That is a fine magazine.
Mr. Préfontaine: Canadian Living is targeted towards women who have a family, whether they stay at home or work outside of the house, who have to struggle with the pressures of daily life.
The magazine provides what we call ``solutions'' for simple, better living, but the solutions on how to raise your children, be healthy, create an environment in the home that is positive, share values of respect and love understanding and tolerance. If you look at Canadian Living, you will recognize in that magazine a number of values that are shared by all Canadians and that shape Canadian identity.
Canadian Living is an incredible publication.
Senator Johnson: I am very familiar with Canadian Living. Would you consider it one of your better magazines?
Mr. Préfontaine: I would, indeed. I will refer to Homemakers, which is a magazine of late that we have reinvested in, and we are targeting it towards more substantive issues that are of interest to women. We have had features on the fate of women in Afghanistan.
Senator Johnson: That was the Sally Armstrong article.
Mr. Préfontaine: We have had issues dealing with breast cancer, but also more substantive issues that feed reflection, and I think that is one of the few magazines in this country that performs that function.
I will also mention one where the value is not as obvious, and that is Elle Canada. We launched Elle Canada eighteen months ago. It is a fashion and beauty magazine.
One the principles we established when we launched the magazine was it would help foster a truly Canadian fashion and beauty industry. All the products that we talk about in that magazine are available in Canada. The images that we want to promote in that magazine are those of Canadians. We use Canadian writers and Canadian photographers. Some of the photographers that we have used are now being asked to work for other magazines across our chain. It has created — and we might have different opinions on whether this is of value or not — a Canadian view of fashion and beauty rather Cosmopolitan that sells for 280,000 copies a month in this country.
Senator Johnson: How do you do compared to Cosmopolitan?
Mr. Préfontaine: I do not want to compare with Cosmopolitan.
Senator Johnson: I mean how do you compare in terms of numbers.
Mr. Préfontaine: Elle Canada has a circulation of 100,000.
Senator Johnson: Cosmopolitan is not a great magazine.
Mr. Préfontaine: I agree with you.
Senator Johnson: It is popular for a certain population and for certain reasons. As you say, it is American. It is not subsidized, so you are in a free marketplace.
Mr. Préfontaine: Let us go back a bit in history.
Senator Johnson: How much money do you think you need to subsidize to keep producing these magazines?
Mr. Préfontaine: The Postal Assistance Program was put in place before Confederation, and the purpose was to ensure the dissemination of magazines across a very vast country with the intent of putting Canadian contents in the hands of Canadians.
That program has worked extremely well. It is not a costly program for the Canadian government. The total envelope is $47 million, and it helps distribute not only magazines, but community newspapers in rural areas as well. It has a dual purpose.
It has done a wonderful job, and that is reflected in the numbers. The numbers tell the tale. Eighty per cent of Canadian magazines sold are sold through subscription. That tells you the story that the program works.
Our industry is not asking a penny more from Canadian Heritage. We have said, ``Do not touch it. It works. It is not broken. It does not need fixing.'' Obviously, our point of view did not prevail. We are respectful of the decision the minister made, but we believe that this decision will create difficulties for Canadian publishers in the years ahead.
Senator Johnson: This is a subject we could go on about for a long time. The fashion magazine industry is monstrous in the world, not just Canada and the United States. There are some very fine magazines. I am very interested, like you, in having good magazines in this country survive because there are so many others around.
Mr. Préfontaine: It is interesting that Canadian Living is the magazine in Canada that has the most readers.
We have the equivalent in French called Coup de pouce, and it is the No. 1 women's magazine in French speaking Canada.
There is hope for us.
Senator Johnson: In your whole stable of magazines, do you sell more ``women's'' magazines than others?
Mr. Préfontaine: Absolutely. Our portfolio of women's magazines is the largest in the country. We have 10 magazines in that portfolio, and the portfolio has 11 million readers. There is no television network, radio network or newspaper that reaches so many Canadian women, and the reason we have done it this way is our strategy to fight in specific niches against the American titles. It is only by combining the strength and leveraging of our portfolio in a specific category that we can withstand the pressure of the Americans. That is what our business model is based upon.
Senator Johnson: I am impressed by your emphasis on being socially responsible, both in your magazines and newspapers.
Before the acting chair goes on to someone else, for my own Province of Manitoba, which community newspapers do you own?
Mr. Préfontaine: We own four weekly newspapers serving Winnipeg, plus the Headingley Headliner.
Senator Johnson: I have not seen that one recently.
Mr. Préfontaine: I could send it to you. It is very interesting. We own five newspapers in Manitoba.
Senator Johnson: It is interesting in the study we are doing about how many of the magazines and communities and dailies outside the CanWest company are run from Quebec.
Mr. Préfontaine: Quebecor, through Sun Media, owns a fairly extensive portfolio of dailies and community newspapers in English Canada. That is a healthy sign for the country that French Canadians feel so strongly about Canada that they are willing to invest and grow across the country.
Senator Johnson: That point has been profoundly made in the last two days with you and the witness yesterday.
Mr. Préfontaine: If you look at the cultural policy of Heritage Canada, and you actually read it, you will see that it resembles, surprisingly, the strategies that we have put in place to grow our business across the country, the value of shared identities, of speaking in both official languages while reaching a national audience with a national message.
The formula works. It is a good policy. It has served Canadians well, and it has allowed publishers such as Transcontinental Media Inc. to build a business plan around it and be successful.
Senator Johnson: Thank you for your presentation and for putting up with some of my questions today.
Senator Day: My question goes to the issue of your social responsibility, and we talk about what the government has done to help make the industry function well, and you talked about levels of ownership and foreign ownership and the postal rates that have helped the industry. The industry's responsibility back to society is what I would like to discuss.
What controls are there, and do we need any more, to ensure that the opinions that you are helping to form in the public are being performed in an unbiased manner?
Is there anything wrong with a journalist, who writes stories on farming, sports and other news items breaking in a community, accepting an invitation to attend a barbecue at the residence of a local successful farmer?
Is there anything wrong with going to that free of charge, or going to a hockey game and attending at a booth, or spending the weekend somewhere?
If you think there is something wrong, are there rules within the corporation or within the industry that prevent that from happening and where do you draw the line, or do you need something from us?
Mr. Préfontaine: It would be a great mistake if the government were to edict rules to govern the profession of journalism in this country. That would be a sad day for Canada.
That being said, you raise some operational issues that our editors and our publishers are confronted with on an ongoing basis, and that require judgment. It is something to be invited to lunch and it is another thing to be invited for a lengthy trip somewhere, which purpose is only pleasure or entertainment. I would be very remiss personally, if I learned that one of our journalists had actually engaged in such activities. As I said earlier, I began at La Tribune in Sherbrooke, which is a good strong regional newspaper. I went on to Canadian Press where, as you know, the ethics guidelines are extremely stringent. That is where I was schooled in the basic rules of our profession on a national scale. I believe in them. I think they are well intended, and I think they protect the integrity of the profession and they must be upheld.
Yes, some of our reporters will take trips. Some of them will accept a dinner or a lunch, but they will do it in the course of their profession. If a journalist took a trip to visit a plant or an operation, it would have to be written into the story that he or she accepted that trip. These are the basic rules. If you checked any further, you would find that most news-gathering operations respect these rules very highly.
Senator Day: We have run out of time, but if you would like to write to us through the chairman, we would be happy to learn more about this interesting subject.
I would have asked you more questions about the journalist and corporate ownership level. I would like to know about embedded reporters with the armed forces, and CNN establishing themselves in Baghdad but having an agreement with the local government that they would not report any unfavourable stories about the government just so they could be there. Do they tell everyone that?
Mr. Préfontaine: There is a huge distance from Corner Brook to Baghdad.
Senator Day: There is and there is not. In Corner Brook you are reporting stories that form opinions that might have a stronger impact on that local economy and that local government, as would something from Baghdad. You are right, there is a huge difference, but in terms of impact it might not be as great as one thinks.
Mr. Préfontaine: I am currently the vice-chairman of the Canadian Press. The Canadian Press was invited to embed some of its reporters in the American troops in Iraq. It was discussed. We refused. We felt that it was not the appropriate way to cover these types of events. I am proud to say to the committee that Canadian news organizations have been extremely rigid in their standards and reporting, both in Afghanistan and in Iraq.
Senator Day: We were told by Radio-Canada that they did have an embedded reporter.
Mr. Préfontaine: They might have had one.
Senator Day: Which is amazing.
Mr. Préfontaine: One is not the rule, and we should congratulate ourselves. Personally, I do not run Radio-Canada, but it would be a good thing if some people at Radio-Canada went to work for Canadian Press for a little while.
The Acting Chairman: You have been a fantastic witness, Mr. Préfontaine.
What are your associations with foreign media or publishing houses, if any?
Mr. Préfontaine: We are partners with Hachette Filipacchi International to publish Elle Quebec and Elle Canada. We are partners with Bayer Press International for our senior's publications group. Bayer is the foremost publisher of senior publications around the world and we have a relationship with them. Other than that we have no associations or partnerships with any other foreign publishers.
[Translation]
The Acting Chair: On behalf of the members of this committee, I would like to sincerely thank you. We greatly appreciate the fact that you have been an honest and open witness.
Mr. Préfontaine: The pleasure was mine.
[English]
I wish to inform you that our next meeting will be next Tuesday, November 4, at 9:30, in room 505 of the Victoria Building.
The committee adjourned.