Business

Publish or perish

Canada's magazine industry faces an uncertain future

JOHN SCHOFIELD June 2 1997
Business

Publish or perish

Canada's magazine industry faces an uncertain future

JOHN SCHOFIELD June 2 1997

Publish or perish

Business

Canada's magazine industry faces an uncertain future

JOHN SCHOFIELD

Six times a year, from an office in the living-room of her modest bungalow in Coquitlam, B.C., Linda Singleton puts out Teddies’ Own Journal, a five-year-old magazine dedicated to lovers of stuffed toys. But the business these days is anything but child’s play. Singleton, a former toy-store manager who always dreamed of running her own company, is struggling to stay afloat in the face of less-than-cuddly competition from rival U.S. and British magazines such as Teddy Bear Times and Teddy Bears and Friends.

Now, Singleton has something else to worry about. Like hundreds of other publishers, she is anxiously awaiting the final outcome of a ruling by the Genevabased World Trade Organization that could sweep aside government measures designed to protect domestic magazines. “If that goes through, I don’t know what I’d do,” says Singleton, 49. “It could kill me. It could just wipe me totally out.”

The future has never been more uncertain for Canada’s 1,400 consumer and trade magazines. Buffeted by the seemingly unstoppable forces of globalization and a myriad of international rules aimed at lowering trade barriers, the country’s politicians are finding it increasingly difficult to shield periodical publishers and other cultural industries from unfettered foreign competition. The absence of any debate on the issue during the run-up to the June 2 election prompted some publishing executives to question whether the major parties care any longer about maintaining a distinctly Canadian magazine industry. “In light of their silence on this key point,” said Michael Rea, chairman of the Canadian Magazine Publishers Association, “we have to wonder whether they’re going to stand firm or fold.”

The government’s performance to date has not inspired confidence. It suffered its most serious setback in January when the WTO ruled against three of the four measures that Ottawa uses to keep out “split-run” editions—foreign magazines that retain their original content but solicit Canadian advertising. Heritage Minister Sheila Copps said last month that Canada is asking the trade body to reconsider only one of those measures—an 80-per-cent tax on revenues of split-run magazines.

Prodded by communications titans such as Time Warner Inc., Washington has launched its own appeal in a bid to strike down postal subsidies for Canadian magazines, the only measure untouched by the WTO. ‘We think that everywhere around the world culture should be open,” says Art Sackler, Time Warner’s vice-president of law and public policy. Awkwardly for the Liberals, U.S. trade officials say they will use a recent speech by International Trade Minister Art Eggleton as ammunition in their assault on Canada’s magazine laws. “From a trade perspective,” Eggleton said, “I must ask whether our cultural interests are best served by the blunt instruments of limits on foreign investment and control of Canadian culture.”

As Ottawa looks for ways to protect homegrown magazines, a more serious threat is lurking around the corner. Canada is among 26 nations helping to forge the Multilateral Agreement on Investment, a new pact that would force the world’s most industrialized countries to treat foreign-owned businesses the same way they treat domestic firms. In the magazine industry, that could give U.S. publications unrestricted access to Canadian advertising. Theoretically,

Ottawa could continue to subsidize Canadian magazines but only if it provided exactly the same assistance to their foreign-owned rivals. The federal government has said it is pushing hard to exempt cul tural industries from that provision, but the United States opposes any such exemption-and so far the issue remains unresolved. All of that has convinced some high-profile publishers that a day of reckoning is fast approaching. If Canada fails to secure cultural protections in the MAT, the country's magazine industry will be dev astated, says Saturday Night publisher Maureen Cavan. "You'd start to see Canadian magazines dying within six months," she says. "Within five years, you certainly would not have an industry. You'd have maybe a couple of titles."

The walls around the industry began crumbling this year, when a three-man WTO panel ruled in favor of the United States in along-

running battle over Canada's magazine laws. It was a watershed moment. For more than 60 years, Canadian governments had imposed sanctions on U.S. periodicals to nurture a do mestic magazine industry. David MacKenzie, a University of Toronto historian who has studied Canadian magazines, says the pressure for pro tection was strongest at times of widespread na tionalist sentiment, such as after the First World War and during the Vietnam War. In 1965, when Canadian students were screaming anti-American slogans on university campuses, Prime Minister Lester Pearson's Liberal government introduced two particular ly contentious measures: a tariff to keep splitrun magazines from crossing the border, and a tax law that prohibited advertisers from de ducting the cost of advertising in magazines that were foreign-controlled or consisted of more than 80 per cent Canadian content. Time and Reader's Digest, both of which had Canadi an editorial operations, were exempted from the 1965 legislation. But in 1976, Parliament amended the law so that it applied to the two publications. Reader's Digest reorganized to

qualify as a Canadian magazine, while Time abandoned its Cana dian edition.

The issue burst on the scene again in 1993 when Time Warner in troduced a split-run edition of Sports illustrated, circumventing the tariff barrier by using satellites to beam stories from New York City

LU a p1 IlluLig piaii~ UI ISJUIHHOIIU till!, Ulli. 1 iie liitroduction of the 80-per-cent tax in 1995 halted that effort and prompted Washington to com plain to the WTO. Publicly, senior Liberals insist that their com mitment to Canadian magazines is unwavering. "If you have a flood of Canadian advertising inAmer ican magazines, it's basically the death of Canadi an magazines-so we have no intention of backing down," Copps said in an interview last week. Added Eggleton: `We want to maintain magazines written in Canada about Canadians by Canadians." Behind the scenes, however, the cabinet is split on the issue, with free-traders such as Eggleton and Finance Minister Paul Martin facing off against such cultural cheerleaders as Copps and Foreign Minister lloyd Axworthy. Even the most zealous open-marketeers agree something must be done to help Canadian periodicals, but they are at a loss to agree on the best strategy Politicians are not the only ones with mixed feelings. In some cases, the magazines' own cor porate masters have argued against protection ism. Press mogul Conrad Black, the owner of Saturday Night, owns 625 newspapers on four

continents, and has often railed against Canadian nationalism. And when Phil Lind, the vice-chairman of Rogers Communications Inc., which owns Maclean's, got together with Time Warner board mem ber Ted Turner last month for some friendly fishing north of Toron to, the topic of magazines never came up, says Rogers spokes woman Jan Innes. "They just discussed cable-TV issues." In some of its other business operations-notably telecommunicationsRogers has aggressively sought partnerships with U.S. corporate giants, including AT&T. There is no doubt about where most advertisers stand on the is sue. Magazine advertising accounts for only about three per cent of total ad spending in Canada-and price beats out patriotism almost every time. David Harrison, president of Toronto-based Harrison, Young, Pesonen & Newell Inc., one of the country's largest ad-buy-

ing agencies, says it is a shortsighted view because a reduction in the number of Canadian magazines would lessen competition and lead to higher rates. Nevertheless, says Harrison, "If you were to ask senior staff at American branch-plant companies, they would say the only issue to them is c~ost"

That mind-set could ultimately kill the Canadian magazine industry. In a mail-in survey conducted by 12 magazines this spring, 84 per cent of the re spondents said it is important to them to read Canadian stories. (Of six million potential readers, 50,000 sent in survey forms.) But the key to the sector's survival is advertising, which last year ac counted for more than 60 per cent of its $867 mil lion in revenues. "You can't compete for advertis ing with publications that have no [editorial] costs," CMPA president Catherine Keachie says. Even the CMPA acknowledges that, strictly from a business perspective, Canadian publishers would be better off becoming advertising repre sentatives for Canadian editions of U.S. maga zines. But the issue goes beyond dollars and cents-it is about preserving a Canadian voice, says Michael Atkins, chairman of Canadian Busi ness Press, which represents the country's 500 trade magazines. `The Americans see it strictly as a business and they say, `What's your problem?' Well, the problem is we'll disappear." But as politi cians and business leaders increasingly compete for opportunities beyond Canada's borders, fewer seem to view that as a problem. o

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