Our special coverage of the Bill C-18 senate hearing continues. This one covers the first segment of hearing 10.
(Note: This hearing took place before it passed the House of Commons and Meta’s announcement that it will block news links. Comments and analysis will rewind things and pretend that the bill hasn’t yet passed along with the events that unfolded afterwards.)
We are continuing our coverage of the Bill C-18 senate hearing at the Transport and Communications (TRCM). We are approaching the final home stretch at this point thanks to this being the final hearing in this entire series. We’ve heard a bunch from different people and different perspectives. While lobbyists struggle to really come up with a single reason why Bill C-18 is worth supporting, independent news organizations and experts were able to lay out not only a fantastic case why this bill will cause much more damage than stems, but also what alternate solutions would be significantly less damaging (i.e. a fund model that platforms could pay into instead).
Before we get into this hearing, we wanted to showcase the previous hearings we covered to date.
Past Hearings Covered
Hearing 1 – Heritage Ministry officials / Lobbyists (1) / Konrad von Finckenstein
Hearing 2 – Missing/Not Available
Hearing 3 – Michael Geist / Peter Menzies / Lobbyists (2) / The CRTC
Hearing 4 – Alphabet / Google / Meta / Facebook
Hearing 5 – Lobbyists (3) / Lobbyists (4) / Western Standard
Hearing 6 – Lobbyists (5) / Lobbyists (6) / Dwayne Winseck
Hearing 7 – Lobbyists (7) / Digital News Organizations
Hearing 8 – Australian lobbyists / Lobbyist (8) / OpenMedia / Internet Society Canada Chapter
Hearing 9 – Indigenous organizations / Lobbyists (9) / Lobbyists (10) / Offline Newspaper
So, as always, the video we are following can be found here. We’ll be happy to provide a detailed summary. Our thoughts will be found in brackets and we’ll also be happy to provide some concluding thoughts at the end. Otherwise, enjoy our coverage!
Opening Statements
Yves Giroux, the Parliamentary Budget Officer opened with his statement. He said that they are pleased to be there to discuss their cost estimate for Bill C-18, Online News Act report which was prepared at the request of a member of Parliament and published on October 6, 2022. With him, today, he has the lead analyst on the report, Rolande Kpekou Tossou.
Bill C-18, said Giroux, regulates digital platforms by establishing a new legislative and regulatory regime that require these platforms that generate revenue in the publication of news content to share a portion of their revenues to Canadian news businesses. The financial costs to the federal government arise mainly from legislative development and administration activities.
The Department of Canadian Heritage, Giroux continued, and the Canadian Radio-television and Telecommunications Commission (CRTC) are the two federal organizations responsible for the development and implementation of Bill C-18. Private sector, essentially news businesses, incur transaction and compliance costs under the bill.
Giroux said that they expect the total costs for the federal government to develop and implement Bill C-18 to be an average $5.6 million per year over 5 years for Canadian Heritage and the CRTC. Budget 2022 allocated $5 million over two years starting in 2022 and 2023 to the CRTC to support the implementation of the bill. In response to PBO (Parliamentary Budget Officer) inquiries, the CRTC and Canadian Heritage stated that the funding in Budget 2022 would not be ongoing as the CRTC’s administration of the regime would initiate a cost recovery process.
Under Bill C-18, Giroux said, they estimate that news businesses will receive total compensation of approximately $330 million per year from digital platforms and will spend about $21 million in transaction in compliance costs for negotiating their first deals under the bill. He said that Tossou and himself would be pleased to answer questions about any of this and previous work.
Questioning the Witnesses
Senator Paula Simons said that she was privileged to receive her own briefing on their report when it first came out and she remained perplexed because she doesn’t understand where this sum of money comes from – the $330 million (My understanding was that it just took the Australian model, based on government given totals, did a currency exchange and adjusted for slight market differences. It was a very back of the envelope method of calculating it, but that was what my understanding of it was.) She means that this seems to be more of a thought experiment of where you are working backwards. If your saying, well, it’s going to say it’s going to supply 30% of the costs of news rooms, therefore, that number is “X” But, from whence have they plucked this number?
Giroux responded by saying that that’s a very appropriate question as usual, Senator Simons. So, there’s not that many bills or legislation of this type in the world. So to arrive at an estimate, they had to look first, was it done anywhere else? They found that Australia has implemented something that’s not identical, but broadly similar to what is proposed in Bill C-18. So, Tossou proceeded to have discussions with those with first hand experience in Australia in implementing legislation and also negotiating some of the agreements that have been established in Australia. That’s based on these discussions that they have arrived at these estimates.
(Booyeah! Sounds like I got that pretty much on the nose. Not going to lie, it feels great having your understanding of something confirmed like that.)
Senator Simons said that, but in Australia, we don’t know how much money is involved because everything is subject to Non-Disclosure Agreements – strict confidentiality.
Tossou responded by saying that in Australia, there weren’t exact numbers, but the operational report for the first year of implementation of the Act was released and when they were preparing the report, they produced a general estimate that did not give the exact amounts given to each business, but they have an estimate. They also consulted businesses, they’re talking about broadcasters, newspapers, etc. They carried out consultations and, at the time, businesses have already reached agreements with Meta and Google. They based themselves on the commercial agreements with these businesses and general revenue obtained in Australia. That’s how they reached the 30% production cost figure.
Senator Simons said that the other question that she has is that, in the report, it suggests that the very largest broadcasters would get the most money because they have the largest expenditures. But again, that’s an estimate, right? She means there’s nothing that says, necessarily, that when agreements are struck or people enter into arbitration, that that would be the metric – an exact dollar, ratio dollar for dollar, right? So, again, that is just a hypothetical, right.
Giroux responded by saying yes. It’s based on what they have seen in other countries, but it’s also based on, as Senator Simons pointed out, their expenditures. They also tend to have more circulation of their news. Like, bigger outlets news tends to be circulated a bit more. So, that would be logical in their opinion that they would also receive compensation that is commensurate with the interest that their news attract from those who consult them on platforms.
Senator Simons said that and let us say, for example, Facebook is not bluffing. Let us say for the sake of our hypothetical assume that Facebook is being authentic when it says it intend to completely exit the Canadian news market, did they do any calculations on what the numbers would be if Facebook withdrew or if Google withdrew?
Giroux responded by saying that no, they did not do these calculations because that would be a totally different ballgame than the other platform would have much more bargaining power than it would be different (I think there is a vague number floating around. My understanding is that Google makes up two thirds of what would be paid out while Meta would make up the remaining one third. It’s not much of a statistic to go on, but it does give a vague image of what is being looked at from a per platform basis.)
Senator Julie Miville-Dechene said that she wanted to back to this 30% cost of news rooms because she is very confused at this number. They tried every way under the sun to obtain this kind of data from Australia this number precisely and senators weren’t able to. Does this mean that they were able to get the budgets for all news rooms in order to get to 30%? This would include agreement from various stakeholders because this is a very specific figure and she finds it quite mysterious. So, what’s their secret? Either they have this secret or it’s just a hypothesis at the end of the day. (My guess is that this is more or less a hypothesis.)
Giroux responded by saying that it’s a good question. The secret is right on his left here (there was some chuckling in the room). In all seriousness, it’s true, Tossou did excellent work. 30%, that figure was obtained through discussions and observations with what is going on in Australia. Media expenditures data was obtained through the CRA and the CRTC. Both organizations gave them lots of useful information. This allowed them to determine the production costs of various media business depending on size. This included digital press. They got to this 30% and this was used for cost estimates. (So, basically, using the projected total number, working in the expenditures, then popping out a number afterwards. I still see that as slightly fuzzy math, but it’s a bit of a step up from a random guess.)
Senator Miville-Dechene asked if they knew that the government is challenging their studies in its entirety, saying that this 30% has nothing to do with it and will not apply in Canada? What do they think of the governments severe criticism? (Personally, I think the government not accepting the number is, in part, due to the increased risk of the platforms leaving. Jack up the expected number of what is being asked and the more likely the platforms will tell the government and the large publishing corporations to pound sand. They’re working the numbers to be as favourable to the bills passage and implementation as possible.)
Giroux responded by saying that this is not unusual. when he tables a report, this happens. It’s not the first time and it won’t be the last. It’s not the first time that a government has criticized his report. They saw, however, from the government, nothing that indicates to them that they need to redo the report. Yes, there is criticism, but there is no substantial evidence to prove that they made any mistakes to that data.
Senator Miville-Dechene said that, one last question. They carried out this report at a time when about 200 media organizations were covered under the bill, now we are up to 700. Does their report still carry water given that there are more companies and that there are larger ones. Does Giroux think that the calculation will need to be done again?
Giroux responded by saying that it wouldn’t be a bad idea to redo the math on this one. The number of media companies is up. These are small media companies. The numbers could vary, but given that this is an estimate, there could be a level of error and this could create a different estimate but would this affect the debate? He doesn’t know that it would.
Senator Miville-Dechene said that one last small question. Maybe it’s not their job to do this, but they said that the larger media companies would, with more wealth, receive more money. Should the Income Tax Act near Quebec or Canada be used to set a cap used on salaries in order to be able to receive subsidies? She believes it’s about $55,000 – that is the cap for a journalist salary that would allow for maybe little to no distortion in this data.
Giroux responded by saying that this is something that could redistribute money from large players to smaller ones. He doesn’t have a say in this as a policy avenue, but it’s an interesting idea, but he can’t really speak more about it.
Senator Pamela Wallin said that her concerns usually about these bills, and this bill in particular, is about free speech and access to information, but this bill is also kind of a massive redistribution of wealth from one set of companies to another set of companies, so she thinks we should just agree that there’s no market value here. There’s no market process. It’s just a legislative activity that has to go on. So, if the value is essentially coercive that, you know, whatever anybody can extract from the other side in a deal, she’s got this vision of news people sitting around news rooms posting stories 24/7 just to get the number of links up.
Senator Wallin asked if there is anything that they have seen, and she’s knows that they kind of have to pull numbers out of the air, but, have they seen anything in that legislation that would restrict or inhibit this rather bizarre process that might go on?
Giroux responded by saying that not that he recalls. However, there will be some regulation making power devoted to Heritage and the CRTC, so there could be ways around that through regulation making process, but he’s not familiar enough with- he hasn’t seen the regulations, obviously. But, no, to his knowledge, the answer is no.
Senator Wallin said that, so really, that situation could occur?
Giroux responded by saying that, in theory, he thinks it could. The agreements could probably cover that. Now that Senator Wallin revealed that possibility, he’s sure that Meta and Google would be negotiating that in the agreements.
(Yeah, on the one hand, you would think that would be part of the details of an agreement to prevent that kind of abuse. On the other hand, the publishers could just demand final offer arbitration and ensure that such a provision would be in place for the explicit purpose of abusing something like that – namely every post with a link would have a dollar value involved. So, I can’t say for certain that this would, under those circumstances, actually be worked out.)
Senator Wallin said that she has been worrying about that. To senator Miville-Dechene’s point, which is that they’ve seen the number of people that are scoped in or covered by this organization grow up to 700. So, there is no constraint on this. Tomorrow, the CRTC could decide that, you know, this group of university students in Regina and their two page publication are now qualified.
Giroux responded by saying that, well, his understanding is that it’s limited to qualified Canadian journalism organization (the first part of Section 27, yes, but I’m not so sure about the rest of that Section.) and there’s some other broadcasters, obviously, and some foreign news outlet that have set up a news room in Canada, so, it’s limited by that, but Tossou can probably specify if he’s inaccurate.
Tossou said that, for the time being, when they were preparing the report, they had very little details about the eligibility requirements criteria. It was quite general. Broadly speaking, they looked at journalism organizations that were qualified. They got this list from the CRA, the Canada Revenue Agency (So, at minimum, they managed to capture all the news organizations that are under the first part of Section 27 which is that they are eligible as per the Income Tax Act. This would be a large number of organizations, though not all of them. I mean, they certainly weren’t wrong if they didn’t have access to the wording of the bill to look in this direction. If anything, it was the best possible guess they could work with at the time. As it turns out, in retrospect, they were right on that assumption.)
Tossou continued by saying that they added the public and private broadcasters, but the estimate was done at the aggregate level. They didn’t take individual media organizations into account. They took aggregated data in order to look at ownership. They used aggregate data and looked at ownership. Based on the changes she has seen, it’s more going to be about indigenous media organizations to be added, but given that these organizations are already under the CRTC portfolio, they would be taken under consideration. (The only flaw I see that is that it could miss some of the smaller players. To be fair, though, they would have no way of knowing that a change like that was going to happen until well after the report was issued. So, hard to blame them on that one. They were at least using the best information they had available, clearly.)
Senator Wallin said that as far as they can see in the wording. If you come together and say that you are a body that creates news content or information content, and you have your own set of journalistic or code of ethics, like, that’s it. (Did someone open a can of pop somewhere in the room? I see in the later wide shot that Senator Jim Quinn has a red can in front of him. Was that him?)
Giroux responded that, yeah, in theory, it’s possible to have such a situation, but if that was to become the case and be much more expensive, for example, for the platforms, then it would mean that the media sector in Canada has grown significantly.
Senator Wallin said that, or the media sector that calls itself the media sector, but they have nothing to do with media.
Giroux said yes, that too.
Senator Wallin said that she wanted a quick question on the CRTC because they heard from the former chair that because there is no expertise on the CRTC at this point on the media side or even on the internet side – the new kind of information world out there. They are “broadcast regulators”. Giroux’s thinking that this could all be done – the cost of kind of building up a new wing of the CRTC with all these people and their existing operations for $5.6 million per year.
Giroux responded by saying with an agreeing uh huh.
Senator Wallin said that and that includes, like, hiring at what level?
Giroux responded by saying that that would be about, what? 20? 25 full time equivalents? So, it’s not something that is uncommon. They based that on other CRTC activities that are not identical, obviously, but broadly similar.
Senator Wallin said that and that accounts for – she doesn’t know where they would draw this particular stuff from, but, you’re going to have perpetual education for people because this world is literally changing as senators debate legislation, so, does Giroux think his assessment is generous or conservative?
Giroux responded by saying that he thinks it’s probably in the middle of the range between conservative and generous.
Senator Wallin said that and then they got other costs of admin in that. What did that include?
Giroux responded by saying that then there is Canadian Heritage, the cost of drafting the regulation, so their part of the deals. So, admin on that side and the CRTC admin costs are for their own part, so that’s the overseeing the agreements, enforcing them, doing audits as they would be required and there’s a couple of other activities.
Senator Raymonde Saint-Germain said that first question that should have a short answer, under the current professional standards, if you are not assured to produce a report and publish it that has enough value, isn’t Giroux obliged not to publish that report? Is that the case?
Giroux responded by saying yes.
Senator Saint-Germain then said, OK, she has other questions. Her first question is on the balance struck between the government investments and the anticipated revenue as well as the profits for businesses. Let’s consider that Giroux made a generous estimate here. This is a hypothetical. It seems that the return on investment is considerable for the government. Is Giroux confirming that even if we take the most conservative estimates, the ROI (Return on Investment) for businesses is approximately 75%?
Giroux responded by saying that, yes, indeed, this is the case. If they estimate that businesses under these agreements, they will have to pay taxes, obviously. This revenue would be significant for the government. This is not atypical when it comes to regulations or bills that require obligations from certain industries.
Senator Saint-Germain said thank you for this answer. Earlier, Giroux was asked if his estimate was generous or conservative, and Giroux said somewhere between the two of them. She’d like to ask Giroux, would he revise this definition – this characterization if he took the impacts on government income revenue that he hadn’t considered? Would this change Giroux’s characterization? Would it change it to something that is more conservative?
Giroux responded by saying that it’s possible, but there’s still significant uncertainty given the novelty of this bill and the type of negotiations that will ensue. It’s difficult to take a multitude of things into consideration when an estimate is based on a series of hypothesis. Some of which, well, many of which would not come true.
Senator Saint-Germain said thank you for that comment and her last question that also addresses Giroux’s reports prudence. Giroux spoke of qualitative impacts. There will be more broadcasting of Quebec content, whether it is journalistic content or otherwise. This is something that is hard to quantify. Can we still consider that another balance can be anticipated with regard to a qualitative assessment of Quebec and Canadian content?
Giroux responded by saying that this is significant, indeed. It’s hard to quantify. They are looking at numbers and things that are accessible. These are things that you, as parliamentarians, must assess. They are to help senators. Senators are here to compare things that are easy to quantify and things that are hard to quantify like the benefits or repercussions of any bill.
Senator Fabian Manning said that he just wanted to go back to the witnesses opening remarks and also in their report of October, 22. Giroux touched on the fact that the estimates that news businesses will spend about $20.8 million in transaction of costs to include their first deals (went by the Closed captioning on a few words there) and that the Online News Act will provide $329 million to news businesses across the country. The report also mention, this is what he wants to get to, that it would be more expensive for smaller businesses to negotiate and comply with the legislation because most would need to hire external expertise. For large companies, internal capacity like that already exists.
Senator Manning said that they’ve heard from several stakeholders here that told senators that the bill is not designed, in their mind, for smaller businesses (I would concur with those concerns, personally). He would like to ask Giroux, does he agree with that comment, but also, does he thinks that some small businesses would suffer and choose not to negotiate due to a lack of capital to comply with the legislation? (Sooner or later, there will be some news organizations that would fall into this scenario. This strikes me as pretty unavoidable sooner or later.)
Giroux responded by saying that it’s quite clear that the process of negotiating with well-established businesses, which is Meta and Google, can be daunting – especially for smaller organizations, so, it’s not unreasonable to say that it’s not very “small business friendly” to be forced to negotiate and then go to arbitration with well-established companies like that. So, he would say it’s not- he wouldn’t say- go as far as saying it’s not designed for smaller businesses, or smaller organizations, but it obviously does not- is not perfectly suited for their own needs.
But, Giroux continued, the fact that there’s arbitration probably contributes to alleviating, at least, in part, these concerns.
Senator Manning said that and, in Giroux’s work, does he expect to see anything on expected costs as we go forward with this. He means, you know, we have the suggestion of what the costs may be now in regards to compliance. He’s just wondering, does Giroux envision anything on unexpected costs – especially for the smaller operators here?
Giroux responded by saying that he thinks the negotiating and arbitration costs will be the main ones, but he;’s sure that experience will show that there will be other costs – probably costs of enforcement or forcing, in some cases, when there are disputes like forcing the agreements to be enforced. So, there could be additional costs but he thinks these, hopefully, should be relatively small compared to the transaction and compliance costs for the initial agreements, but it’s very difficult to anticipate what they have not been able to foresee in the beginning.
Senator Manning said that they have heard also here that there are some larger- businesses in the country have already have deals with the platforms. He’s just wondering when Giroux was doing his report – working in their report, did he take into consideration the fact that some of these businesses already have agreements vs that others don’t? Would that have anything to do with the numbers that have come forward?
Tossou responded by saying that the estimate was done on total revenue – total expected revenue revenues from platforms, that is. But, they take into consideration the fact that some large businesses and companies have already signed agreements with the platforms. This makes it even harder for smaller news businesses to maintain journalistic operations. They need to up their wages in order to maintain personnel (that’s a very good point to make). This is because the large news corporations are trying to draw these journalists in. So, that results in larger costs for smaller businesses (I would imagine that inflation, the rise of the cost of living, and the rise in property value would also have an impact on this as well. There’s lots of financial pressure to go around) as assessed by them in the compliance considerations.
Senator Manning said that their report was published in the 6th of October, 2022. Yesterday was the 6th of June, 2023 (Another reminder that I am behind in these analysis posts. Joy.) He’s just wondering about the numbers, even in the last 8 months. Have these numbers in their estimates changed or would it be too early even as they move along with this piece of legislation we’re hearing from the people involved?
Giroux responded by saying that it’s difficult to determine whether the numbers have moved without redoing the report. But, in the absence of a ground breaking or earth shattering change in the landscape of the media, it’s difficult to see how- what would cause a significant change in their cost estimate.
Senator Manning said that, so the numbers that they have published are they numbers that they have-
Giroux responded by saying that he thinks so. After just six months, there could be changes, of course, but he thinks that the real tangible changes that could be brought to their estimates would be or will be when the first few agreements are signed and negotiated if the bill becomes law.
Senator Andrew Cardozo said that when the witnesses were doing their estimate, did the look at the Canadian Heritage figures because they had a different figure as to what the total amount would be.
(This difference between the PBO and Canadian Heritage was always a catch 22 situation to me. The PBO estimates were higher, leading to a higher risk that the platforms would drop news links because the price tag is, in part, too high. The Canadian Heritage numbers were lower and, because of that, would put into serious question whether the new cash flow would be enough to even sustain news businesses in the first place. It really was a darned if you do, darned if you don’t scenario in my mind.)
Tossou responded by saying that the total business revenue- oh, just for Heritage? The department sent them this data. The department also shared a few details about the resources it will need to implement Bill C-18. Their office used a number of full time employees as gathered by data from the department. They based themselves on the departments average expenditures in the past. Then they used projections to determine the cost associated with this number of full time employees. But, their numbers are approximately the same- lower than those of the minister.
Senator Cardozo asked buy why? Is it just their estimate or- (interpreter was cut off)
Giroux responded by saying that he, without knowing exactly what kind of per FT (Full Time) costs the used, so they use the same FTEs (Full Time Employees), number of employees, they probably used different- slightly different mix of employees level or classification of employees.
Senator Cardozo said that, you know, you’re in slightly different ballparks, but not-
Giroux finished his line, saying not wildly different.
Senator Cardozo said that the folks who they talked to from Australia suggested that there isn’t a real pie to be divided up. That pie can grow and change. Is that how Girouz sees it?
Giroux responded by saying that well, it’s- yeah. It’s difficult to see that there is a fixed pie to share to the extent that the fixed pie would be the overall revenues of the platforms that will be covered – especially their Canadian revenues. So, that is the pie, but he doesn’t think that all that pie is up for sharing because these revenues from Meta and Google comes from more than just media content sharing. So, it’s difficult to say that there is a pie to be shared, the pie is Meta and Google’s revenues and he doesn’t think that’s what’s envisaged to share all of their revenues with media outlets.
Senator Cardozo asked if Giroux thinks that there is a way that- one of the concerns that has been mentioned before that too much of the subsidy or payments would go to the big players and not the small players. Is there a way to turn that around and have more going to the small players? (Would require significant amendments to the legislation or a very specific direction to the CRTC, but otherwise, I personally don’t see that happening.)
Giroux responded by saying that there’s certainly a way to do that. When he was younger, one of his bosses said Parliament can deem Monday’s to be Friday’s. So, he is sure there is a way to redesign legislation to ensure that there is a different distribution of revenues between the smaller and the bigger players, but it’s not his area of expertise to determine, or to provide advice as to how that could or should be done – but he’s sure there are ways.
Senator Cardozo responded by saying that, darn, he was going to ask what Giroux’s advice would be to do that.
Giroux said sorry as they both chuckled. (This is a very fair response, to be honest.)
Senator Donna Dasko said that her questions relate to the Australian research that they did – and especially with respect to the process of negotiation. When they say 30% of the newsroom costs. That, she assumes, is an outcome. It’s not a basis for a negotiation. Is that correct?
Giroux responded by saying yes. Their understanding is that’s the outcome.
Senator Dasko then said that, so- then what is the basis for negotiation? Also, she’s interested in the differences between Google and Facebook in terms of what the companies got from the two different organizations – two different platforms that would give senators the sense of the metrics around what is actually being negotiated. If Giroux could- Tossou did the research too. They could describe what their understanding of what- it’s- (hand gestures) her question.
Giroux responded by saying that, so he doesn’t have the sense of what was the basis of the beginning – the opening positions for negotiations. Maybe Tossou has, but he doesn’t. He personally was not interested in where the negotiations started and where they ended. He was mostly interested in where they ended. He also know-
Senator Dasko asked why did they end where they did is what she is asking. What? Did they just say, well, it’s five o’clock in the afternoon and, therefore, I’m getting x-amount? You know what she’s saying, so…?
(This aspect was never all that clear in the bill. What are the two parties negotiating about specifically? If Konrad von Finckenstein admits this isn’t clear, then it’s not just me that is throwing their hands up in the air and giving up in dismay over this. I mean, I get that there is the goal of negotiating on the basis of value, but is it specifically about links? An amount of revenue that the platforms have? Audio visual content? The toppings on pizza for the next office get together? Really, you’re guess is as good as mine, here.)
Tossou responded by saying that the details of these deals are confidential, but they received reports of two possibilities for negotiation. First, based on the reach of content that is shared. Reach means the number of clicks and the second is costs. How much would it cost for one business to create this content? The first possibility is hard to estimate. It’s hard to estimate the number of clicks for every news story. Therefore, their approach was based on production costs. According to a report by professor Hogness (My guess on the spelling and the closed captioning appears to agree with me), the content of agreements is confidential. But, broadly speaking, the amount gathered covered 20% – 30% of the production costs for news in Australia.
There were, Tossou said, however, no details on the base upon base were negotiations were conducted on which media.
Senator Dasko asked did the companies get more from Google or Facebook or did they get the same?
Tossou responded by saying that generally, 30%: it was 20% from Google and 10% from Facebook. So, more from Google than Facebook.
Senator Dasko asked why.
Tossou responded by saying that she doesn’t know. (My guess is that the size of the two platforms and how they operate play a role here for that discrepancy.)
Senator Dasko said that, so they just kind of fell out of the sky (At the end of the day, pretty much) or Tossou mentioned earlier the number of clicks. That means a small number of clicks on Facebook, that means Facebook pays less or…?
Giroux responded by saying that they were told by Facebook that they derive very little value from sharing news content.
Senator Dasko said that they said that to senators.
Giroux responded by saying, yes, so he assumed they have told that to senators as well. But, he has no independent way of verifying that.
Senator Dasko said that but that’s the way it came out in the Australian situation. The companies got less from Facebook.
Giroux responded by saying, yup.
Senator Dasko said that, yeah, um, OK. So, she’s not sure if she can ask them any questions about, for example, Section 86 in the bill that has to do with the reporting by an independent auditor. Now, she knows Giroux is not an independent here, so- (she chuckled) so have you taken a look at the information requirements under the auditors report that’s required in the bill? She doesn’t know whether they have seen that- if these data points are ones that are adequate and does Giroux know anything about- she means are they confidence that the CRTC is going to be able to gather this data from all the players under this bill and hand it over to the auditor?
Giroux responded by saying that he’s confident that it’s data not overly burdensome for organizations that are somewhat regulated and have to keep accounting in books. So, they haven’t looked at all of the details. There’s not that many anyways.
Senator Dasko said, correct.
Giroux said that, but they think it’s fairly doable for an auditor to get that information.
Senator Dasko said, right, and the CRTC can collect that data – has the authority to do that.
Giroux said, yeah. Under legislation, yes.
Senator Peter Harder said that he’s got a couple of questions with respect to the Australia research that they’ve done. They’ve learned from the Australian’s that in the deals that were concluded, there was a higher per capita benefit for the smaller companies. He wonders if in their research they were able to verify that assertion and whether that was taken int account at all in their determining of the total value in the negotiations.
Giroux responded by saying, no. (LOL! Another swing and a miss for Senator Harder!)
Senator Harder said, OK, uh, second question with regard to Australia, they also learned from hearing from the Australians involved that the smaller outlets negotiated collectively to both strengthen their capacity for bargaining, but also to reduce the unit costs of the bargaining process. He wondered if that reflected at all in the work that they did to confirm that the smaller outfits actually benefited from collective action and negotiations.
Tossou responded by saying that they estimated that a small share of these small businesses registered with the CRTC in order to carry out the mandatory negotiations. But, they, in their estimate, that the companies will negotiate individually because it’s hard to predict what companies will collectively bargain. So, they estimated that they would negotiate individually. However, if they decide to negotiate collectively, it would reduce the compliance costs.
Senator Harder said that in their work before October and since October that they released their report, have they had any discussions with Canadian companies that have agreements to either comment about their framework as being within the zone of their experience or outrageously small or large. Without revealing who they might be, could they give senators a sense whether they have had any feedback from those Canadian companies that enjoy a relationship with the platforms?
Tossou responded by saying that upon preparing the report, they carried out consultations with the businesses. Among the businesses they consulted with, there were agreements already under way. They didn’t get much details on the contents of the agreements, but they were able to determine the 30% figure based on their discussions and based on the overall experience in Australia.
Senator Harder said that whether or not since the report was released had any inquiries from other countries who are contemplating a similar kind of legislation – they know, for example that the Brits are looking, the Indians are looking, the European and even in the United States, their Congress, but also at the state level, there’s a more sophisticated conversation going on. Have they had any inquiries from other countries on how they did their work and the estimates that they brought forward?
Giroux responded by saying that there’s a good network of PBO’s internationally, and it’s not something that has come up in his meetings that he’s had. He doesn’t know if Tossou had inquiries (Tossou shook her head) so she’s nodding, so no. They haven’t been approached to inquire about that particular costing or the approach that the government is proposing to take. (Wow! That really deflates the governments argument that the whole world is watching. For them, it wasn’t even a topic of discussion. I’m actually a little surprised that there is so little interest from the international community on this given the countries pushing similarly terrible bills.)
Senator Jim Quinn said that he just wants to get back to the pie that was referred to earlier – and the revenue pie. Of course, the calculations aren’t based on the grand revenue pie that the platforms have, but they’ve testified before them that roughly 4% of revenue that they contribute to- of advertising revenue can be attributed to news. His question is, is that the number that they have extrapolated from? You know, here’s the revenues for ads that’s attributable to news. Is that the basis for the calculation?
Giroux responded by saying that they took a different approach. They looked at the costs. So, rather than the revenue – the pie to share – they looked at what was the behaviour in other types of agreements. Australia, or the voluntary agreements that have already been entered in to, and they assumed that 30% of the cost of producing the news would be covered by these agreements. So, it’s not the revenues of the platforms that would be shared, it’s the cost- just the production cost that would be covered.
Senator Quinn said, so, just another question – clarification. So, if 30% is estimated to be the cost of producing the news, and the platforms say, hey, 4% of their revenues is derived from the news, there’s a bit of a tilt there. How do you deal with that? (Well, the platforms could deal with that by dropping news links entirely from their platforms citing how unfair that is – a move they are likely to do here.)
Giroux responded by saying that it depends on the accuracy of these affirmations. Also, 4% of a big big big pot can still be a significant share. So, he understands that some senators may be uncomfortable with that approach, but the approach they took to estimate that was the best they could come up with based on the only other country that has done its own form.
Senator Quinn said that his last question is that when the bill becomes law, assuming it becomes law, will they be checking in from time to time to provide information as to how that’s all working out?
Giroux responded by saying that that’s usually left to the other entities who are- have more of an audit function to look after the fact at what has happened. But, if requested to do so by a committee of the senate or the House, they can undertake such a study.
Senator Simons said that she wanted to come at this from a different angle. They said that the CRTC expects, in their estimation, there will be costs of recovery to cover their additional costs. The additional costs of administrating this program would be considerable. This far exceeds the current mandate of the CRTC. How confident are they that the cost recovery model would work? How much money does the CRTC, in their estimation, need to take in from the platforms to make itself whole? And again, if the platforms- if at least one of them doesn’t want to play ball, what does that mean for the CRTC’s ability to cover its costs?
Tossou responded by saying that when they prepared the report, they asked the CRTC what approach would it take to recover these costs? But, they provided no details because they said that, at the time, they still didn’t know how the bill would work. So, in order to estimate the costs of transaction and compliance for news businesses, they spoke with the Canada Transportation Agency (CTA) that is used to carrying on negotiation and arbitration in order to determine how much it would cost to supervise and oversee a negotiations program. They based themselves on the data they gave then produced an estimate of what it would cost news businesses.
Tossou continued by saying that the bill mentions that the news businesses will pay for the services rendered by the CRTC under the bill. So, based on the information they received from the CTA regarding their negotiating problem.
Senator Simons said that but it’s exactly the same thing.
Tossou responded by saying that, yes, it’s the same thing, but it’s the best information they have and that they had at the time.
Senator Simons asked, does Tossou have the confidence that this would apply for everything the CRTC would have to pay for after the adoption of the bill?
Giroux responded by saying that he believes that it would be enough, but clearly it will depend on the nature of the relationships between the platforms and the media companies. If there is lots of arbitration and negotiations to come to, the costs would be very high, but it’s very hard to determine at this time what level of animosity that will exist.
Senator Simons said that, well, it’s impossible. With respect to their work, she feels like more like they are looking into a crystal ball or casting a horoscope than they are able to- because they don’t have the information to make an informed assessment because nobody is giving them the information.
Giroux responded by saying that they have received some information from Canadian Heritage. There’s a country that’s already established something that’s similar and there’s processes or arbitration processes that already exists in the government of Canada. So, they’re not starting from absolutely zero. There’s comparators that already exists.
Senator Wallin said that she’s trying to get some sense of how much they are charging tax payers and news organizations and now platforms to support ailing news organizations. It’s $300 million, maybe. We don’t know looking at that number. She’s just doing a quick list here. Canadian Journalism Tax Credit, Canadian Periodical Fund, Local Journalism Initiative, Digital News Subscription Tax Credit, etc, etc. The billion plus they give to the CBC. Keeping foreigners out of the business- any sense of how much the existing programs are costing us?
Giroux responded by saying that they have not looked at the totality of the support of the news media sector. (Another very fair response.)
Senator Miville-Dechene said that in the governments briefing documents, the market value of news is mentioned and the necessity of negotiations with regard to that. So, what would they believe be with the methodology to get to that kind of estimate? They seemed to have based themselves off of labour expenses. Is there a methodology to assess the market value of news?
Giroux responded by saying that that is a very sensitive issue because it’s hard to estimate the market value of something without a market. Many people believe that news should be free and they are not ready to pay anything whatsoever for news whereas others are ready to pay a few hundred dollars a year to have certain access to news. Therefore, the market value of news and information is hard to estimate in this context when people are used to having things for free, or are expecting news for free.
Senator Miville-Dechene said that, OK, second question: Giroux alluded to the fact that Google would have a greater negotiation power if Meta withdraws from this framework. Can Giroux talk a bit more about this?
Giroux responded by saying that if one of these two players with- leaves the news distribution industry, obviously, there will be only one left covered under this legislation. This gives the company the lot of power. When a company has a monopoly, this gives the ability to reduce the payments to news companies. Would this make a significant difference when we consider the fact that there is a monopoly versus a duopoloy that is two companies? Maybe not, but that is the kind of social experiment that probably won’t happen. They can’t look at two different situations and assess the outcome in both cases.
(Yeah, I think the situation that one platform withdraws from the market while the other platform sticks around would probably be the outcome almost no one has on their Bingo card in this debate. It would be a really unlikely outcome that would be a surprise to pretty much everyone. Of all the commentary I’ve seen, I don’t think I’ve seen any outside of my own writings that even contemplates this. It would be a really weird situation.)
Senator Cardozo said that on the estimates of the costs for Canadian Heritage and the CRTC do they- and perhaps this is more for Canadian Heritage, do they anticipate that their costs would be higher at the front end and then go down once they are up and running?
(I can see the cost of training people at the beginning might contribute to a bump up in costs at the beginning. That’s just my guess on that.)
Giroux responded by saying that he would expect the costs to go- to be higher at the beginning because it is new legislation that requires allotment and acquisition in new expertise, drafting in regulations and so on (whoa! Cool! My guess wasn’t that far off from his guess!). So, the costs should stabilize after a few years and presumably go down a bit.
Senator Cardozo clarified, at the CRTC?
Giroux clarified that it’s at Heritage.
Senator Cardozo said at Heritage.
Giroux said that the minister and his officials would be in a better position to answer that question,but his expectations would be-
Senator Cardozo said that and at the CRTC, the same thing?
Giroux responded by saying that at the CRTC, given that they will have an ongoing role in dispute resolution and enforcement, he would expect them to also have an increase cost at the beginning, but the tapering or the stabilization might not be as obvious as in the Case of Canadian Heritage.
Senator Cardozo said that once they’ve had that initial set of agreements, will that carry on?
Giroux responded by saying that some of it will probably carry on, but there’ll be some ongoing monitoring and enforcement of these agreements, so he’d expect the annual costs to be relatively stable over time. One of Senator Cardozo’s colleagues who was a deputy minister in the public sector is nodding, so that’s reassuring him.
Senator Cardozo chuckled.
Senator Leo Housakos then thanked the witnesses and adjourned that part of the hearing.
Concluding Thoughts
Between the lobbyists pushing this law by lying through their teeth and the lobbyists pushing this law out of pure ignorance, listening in these hearings was growing to be a rather frustrating experience.
Then, when I got to this hearing, it sounded like I was going to listen to something different. What I wasn’t expecting was that this was going to be such a pleasant experience even if some out there might find the discussion to be a bit dry at times. I personally found that both the witnesses handled themselves quite well here.
Most of the time, when I hear one colleague say that the other colleague did well, I just expect that to be a standard pleasantry more than anything else. So, I didn’t expect that to be different when Giroux did that to Tossou. As it turns out, though, it was really clear that the compliment was definitely deserved there. Based on what I heard, she handled herself quite well throughout the hearing. She strikes me as someone who is quite brilliant all around. Very methodical in her analytical approaches and quite creative with gathering that information on top of it all. It was quite impressive stuff.
Another thing that was clear was that the PBO was kind of handed a rough assignment, there. How do you make projections on a law that is, well, unprecedented and produce a report that offers projections on what the impact of this bill would be in Canada? From the sounds of things, they took that bad hand and did the best they could. After all, they were even working without the text of the bill on top of it all, so you are really working with one hand tied behind your back in the process. To work with that and still produce an insightful report after that is quite praise worthy, there.
Were they ever going to get totally accurate numbers for their projections? Probably not. There’s no way to really anticipate the kinds of organizations that are going to be eligible here. I mean, we didn’t have more set in stone provisions about news organizations with two journalists or aboriginal organizations telling stories until the end of the House of Commons stages. There’s no way they could have predicted something like that, I don’t think. So, guessing that eligible news organizations would probably be based on the news organizations designated under the Income Tax Act was probably the best guess they could have made under the circumstances.
Overall, I found this to be a pretty insightful hearing, here.
Drew Wilson on Twitter: @icecube85 and Facebook.
