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Government surrenders to Google: Peter Menzies


7 minute read

From the MacDonald Laurier Institute

By Peter Menzies

In the short term, this is very good news. The bad news is that $100 million won’t save journalism

Heritage Minister Pascale St. Onge has surrendered to Google and Canadian media have avoided what would have been a catastrophic exclusion from the web giant’s search engine.

In the short term, this is very good news. The bureaucrats at Heritage must have performed many administrative contortions to find the words needed in the Online News Act’s final regulations to satisfy Google, a beast which isn’t easily soothed. In doing so, they have managed to avoid what Google was threatening — to de-index news links from its search engine and other platforms in Canada. Given that Meta had already dropped the carriage of news on Facebook and Instagram in response to the same legislation, Google’s departure would have constituted a kill shot to the industry.

Instead, the news business will get $100 million in Google cash. For this, all its members will now fight like so many pigeons swarming an errant crust of bread.

The agreement will also allow the government, while surrounded by an industry whose reputation and economics have been devastated by this policy debacle, to attempt to declare victory. Signs of that are already evident.

That’s the good news.

The bad news is that while 100 million bucks is nothing to sneeze at, in the grand scheme of things it is a drop in the bucket for an industry in need of at least a billion dollars if it is to recover any sense of stability. Indeed, when News Media Canada first began begging the government to go after Google and Meta for cash, some involved were selling the idea that sort of loot was possible.

This did not turn out to be so.

Instead of the $100,000 per journo cashapalooza that was once hoped for, the final tally will be more like $6,666.00 per ink-stained wretch.

That figure is based on two assumptions. The first is that the government has agreed to satisfy Google’s desire to pay a single sum to a single defined industry “collective” that would then divide the loot on a per-FTE (full-time employee) basis to everyone granted membership in the industry’s bargaining group. Google had made it clear it had no interest in conducting multiple negotiations and exposing itself to endless and costly arbitrations. So, as we have a deal and Google held all the cards, it’s fair to assume it got what it wanted — a single collective with a single agreement and a single cheque.

The outcome, in the end, (and the government will deny this endlessly) is essentially what Google was offering from the outset and what Konrad von Finckenstein and I had recommended in our policy paper for the Macdonald-Laurier Institute — a fund.

Now comes the haggling within the collective: who counts as a journalism FTE? Newsroom editors, photogs, camera operators, graphic artists, illustrators, support staff, and so on?

The second assumption is that this fund will be distributed across about 15,000 media workers nationwide. But whether that number turns out to be 15,000 or 5,000, here’s what really matters:

Such an agreement is likely to bring an end to Google’s existing commercial agreements — at least with those organizations that join the collective. That means the incremental amount of cash coming into the industry once its internal negotiations have been completed could be somewhat less than $100 million. How much less would be pure speculation, but individual agreements certainly exist — with the Star, for example, and also with Postmedia. Or at least they did.

The largest beneficiaries — because they have the most journalists — will almost certainly be the CBC/SRC, Bell Media and Rogers, none of which actually need the money, and that may also convince the Canadian Radio-television and Telecommunications Commission (CRTC) to shake down foreign streamers to subsidize their newsrooms.

Just for reference, Bell Media’s parent company made $10 billion last year.

With 75 per cent of the dollars predicted to go to broadcasters, that leaves those organizations in the most dire financial circumstances — Postmedia and the Toronto Star for example — with about $25 million to fight over. So, the scraps will go to the starving (the Star has suggested it is losing close to a million dollars a week) while the healthy will be even more well fed.

And of course none of this means Meta, which had estimated that on top of the $18 million it provided to Canadian journalism directly via now-cancelled deals, it also once drove more than $200 million in business annually to Canadian news organizations, will get back in the business of carrying news. If we assume that was the case, the final impact of the Online News Act amounts to revenue losses to the nation’s news industry of something north of $100 million, likely closer to $150 million.

It also means that those smaller startup news organizations that may have represented the industry’s best chance to transition to the digital world no longer have access to Facebook or Instagram, which constituted a free platform through which they could launch and market their ventures.

The bottom line is that lobbyists for Canada’s news industry, in concert with the government, launched the Online News Act in the belief it would make the industry better off by as much as $600 million and no less than $230 million. The end result is an industry at least $100 million worse off and with severely reduced access to the eyeballs needed to survive.

Well played, everyone. Well played.

Peter Menzies is a senior fellow with the Macdonald-Laurier Institute, past vice-chair of the CRTC and a former newspaper publisher.


Canadians in three provinces will spend roughly the same on debt interest as K-12 education

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From the Fraser Institute

By Grady Munro and Jake Fuss

From 2008/09 to 2023/24, the federal government is projected to have run deficits every single year, with no interruptions. This has resulted in federal net debt (total debt minus financial assets) increasing by $603.6 billion (inflation-adjusted).

For more than a decade, Canadian governments have increasingly relied on borrowed money to fund their excessive spending habits. However, as debt has continued to pile up so have the costs associated with this debt—namely interest costs. A recent study shows that in some of the largest provinces, governments now spend nearly as much or more on debt interest costs than on K-12 education.

Since the 2008/09 financial crisis, governments across Canada have fallen into the habit of utilizing debt to fund their spending habits. For example, consider the federal government.

From 2008/09 to 2023/24, the federal government is projected to have run deficits every single year, with no interruptions. This has resulted in federal net debt (total debt minus financial assets) increasing by $603.6 billion (inflation-adjusted). Conversely, from 1996/97 to 2007/08, the federal government actually lowered its net debt by $348.1 billion (inflation-adjusted). Clearly, there’s been a shift in the government’s approach towards debt accumulation.

This is not simply a federal problem, as provinces have also seen their debt burdens rise as well. Cumulatively, provincial and federal net debt has increased by $1.0 trillion (inflation-adjusted) from 2007/08 to 2023/24.

Government debt carries costs, primarily in the form of the interest payments, which represent money that doesn’t go towards paying down the actual debt amount, nor does it go towards providing government services or tax relief. And since governments must utilize tax revenues to pay interest, taxpayers are ultimately on the hook for servicing government debt.

But how much do Canadians actually pay in debt interest costs?

Using data from the most recent fiscal updates, a new study compares combined (federal and provincial) debt interest costs for residents in three of the largest provinces (OntarioQuebec and Alberta) with what those provinces expect to spend on K-12 education in 2023/24. The study utilizes combined debt interest costs because Canadians are ultimately responsible for interest costs incurred by both the federal government and the province in which they live. The following chart summarizes the comparisons from the study.

As is clear from the chart, combined interest costs for residents in these provinces are nearly as much or more than their province expects to spend on K-12 education in 2023/24. Specifically, combined interest costs are $31.5 billion for Ontarians, which is only $3.2 billion less than the province will spend on K-12 education in 2023/24. Combined interest costs for Quebecers ($20.3 billion) will actually exceed the $19.9 billion the province will devote towards K-12 education. And combined interest costs for Albertans are only slightly lower than the $8.9 billion that will be spent on K-12 education.

In other words, taxpayers in Ontario, Quebec and Alberta are paying nearly as much or more to service federal and provincial government debt than they are paying to fund K-12 education in their province. This budget season, it’s important to remember the costs associated with growing government debt.

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Edmonton triples venture capital investment in 2023

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Alberta’s tech sector continues its strong momentum, with Edmonton seeing its strongest growth ever, proof Alberta remains a hot tech market.

As global and national investment have declined, Alberta has remained a strong tech market and is showing continued leadership, as shown by Pitchbook ranking Calgary as the 12th fastest-growing tech ecosystem in the world and LinkedIn ranking Calgary as one of the best places to hire and recruit tech workers.

At the end of 2023, Alberta’s five-year growth rate for venture capital dollars invested reached an impressive 48.5 per cent, more than triple Canada’s compounded average growth rate of 13 per cent, according to the 2023 Canadian Venture Capital Private Equity Association fourth-quarter report.

The province’s growth rate means Alberta finished 2023 with $707 million invested over 86 deals, in line with Alberta’s 2022 record-breaking year. In contrast, Canada ended the year with a 31 per cent decline in investments. Over the past five years, Alberta technology companies have secured more than $2.7 billion in venture capital funding across 350 deals, creating thousands of jobs for Albertans.

“While Canada as a whole saw massive declines, Alberta has held steady. We are a major venture capital player in Canada, as technology drives growth across all sectors.”

Nate Glubish, Minister of Technology and Innovation

Alberta’s two largest cities continued to attract investment dollars in 2023, with Calgary and Edmonton coming in fourth and fifth respectively for number of deals, with $501 million invested in 64 deals in Calgary and $188 million invested in 21 deals in Edmonton. Edmonton saw a 324 per cent increase from $58 million in 2022 to $188 million in 2023. In total, Alberta captured 10.3 per cent of dollars invested in 2023 and 13 per cent of venture capital deals in Canada.

“Edmonton’s tripling of venture capital investment in 2023 underscores our city’s position as a dynamic tech capital within Alberta’s thriving innovation ecosystem, reaffirming our role as a powerhouse driving technological advancement and economic prosperity across diverse sectors. It is the local innovators’ relentless pursuit of solutions to real-world problems, with the continuing support of the Government of Alberta, which not only attracts significant investment but also propels our city to the forefront of Alberta’s tech revolution and fosters job creation for our community.”

Launa Aspeslet, interim chief executive officer, Edmonton Unlimited

“At Platform Calgary we are working with our partners to continue this momentum by linking up high potential tech startups with the investors that can help them take their businesses to the next level. The evidence is clear, Alberta is emerging as one of the most exciting and resilient tech ecosystems in the world. Together with our growing tech community, we can secure Alberta’s position as the best place in the world for anyone to launch and grow a tech business.”

Terry Rock, president and chief executive officer, Platform Calgary 

Alberta remains a growing market for the technology and innovation sector, and Alberta’s government celebrates its steady contribution to the Alberta economy, including in the fourth quarter of 2023. The end of last year saw venture capital investments in the province increase by 35 per cent for dollars invested and 19 per cent for deals closed compared with the third quarter. There were 25 deals closed valued at a combined $173 million in the fourth quarter of 2023.

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