New book urges Ottawa to let the country’s largest newspaper chain go bankrupt

My new book The Postmedia Effect chronicles the machinations of Canada's largest newspaper chain, which is 98-percent owned by U.S. hedge funds that are bleeding it dry by also holding most of the company's massive debt. New Jersey-based Chatham Asset Management alone owns almost two-thirds of Postmedia Network shares and holds much of its debt. It's a scam that has been going on since 2010, when the American vulture capitalists used a legal loophole to do an end run around Canada's 25-percent limit on foreign ownership in this cultural industry. Postmedia Network, which at last count owned 15 of the country's 21 largest dailies, has been kept alive since 2019 by a $595-million media bailout that expires this year. 

Now the newspaper lobby it founded to persuade the federal government to bail out the industry is pushing for Ottawa to order Google and Facebook to pay publishers for supposedly "stealing" their news stories by posting links to them. It might work if the government enacts Bill C-18 The Online News Act, which passed third reading in Parliament last year and is currently before the Senate. Google and Facebook have made it clear, however, that they don't intend to be used as a piggy bank by Canada's dying newspapers and will instead discontinue carrying links to news stories.

That will leave Ottawa with a dilemma. It could either continue to bail out the foreign-owned company that publishes most of Canada's largest dailies, such as the National Post, the Ottawa Citizen, the Vancouver Sun and the Montreal Gazette, or it could let it go bankrupt. The latter would not only put hundreds of Canadians out of work, but also leave millions without a daily or weekly newspaper. My book concludes, however, that it might be the only way to get rid of the vultures.

My research shows that Postmedia reached a tipping point last year at which its dwindling profits no longer covered its annual debt payments of more than $30 million. Its 2022 earnings fell to only $13 million, almost $10 million of which came from government subsidies. It has been in a crash dive ever since, closing a dozen community newspapers in Alberta earlier this year and selling its Calgary Herald building for $17.25 million to U-Haul, which plans to convert it into storage lockers. It then announced that 11 percent of its roughly 650 journalists would soon be laid off, leaving politicians and local business leaders scrambling to do damage control.

The Postmedia Effect, however, concludes that it would be "probably best to let Postmedia fail rather than keeping it alive through serial bailouts so it could keep paying off the debt held by its New Jersey hostage takers." Under Chatham's ownership, the former Southam newspapers have turned hard right politically by head office decree. Much of the "news" they carry is now "native advertising," which is paid content designed to look like news. This isn’t journalism, but instead a perversion of journalism, I conclude in The Postmedia Effect, so it won't be much of a loss. "From the ashes might emerge a new type of journalism, one that wouldn’t be for sale to any advertiser who wanted to buy positive coverage."

Not all Canadian newspapers are failing, my research finds. The Globe and Mail is making a profit both online and in print by investing in quality content. Community newspapers have been able to survive in towns where Postmedia has ironically had to close titles by meeting local needs rather than providing cookie-cutter content. New titles have even sprung up in some communities where Postmedia has left town. Online publications such as the Halifax Examiner are flourishing in many communities by providing the kind of hard-hitting investigative reporting the Postmedia newspapers can no longer afford. Letting Postmedia fail would hardly be the disaster some pundits predict, and in fact could very well be for the best, as I conclude in The Postmedia Effect. "Its would be no big loss, hopefully to be followed by something better."