Dispatch from the Front Line: So this keeps getting worse. Enjoy the fireworks.

Sure, Google's threat is a negotiating tactic. But it's not a bluff.

This won’t be a fun dispatch, guys, but it hasn’t been a fun week. Still, we do want to start off by wishing everyone a happy Canada Day and a wonderful long weekend. You may be broken, Canada, but we still love you. Perhaps we’re broken, too.

Since Russia avoided any major catastrophes this week, we were able to get a video in.

The podcast is here, too.

A note to our readers before we proceed with the dispatch: we will be sending out update and housekeeping notes to our paid subscribers and free readers early next week, but other than that, The Line is stood down for a week’s holiday starting … well, when we publish this. We need it.

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As our readers may have predicted, given the slate and tenor of recent developments in the media industry, much of this dispatch must be devoted to the news percolating out of our own industry. Forgive us for this; we do try to avoid navel gazing, but collapses happen slowly and then quickly, and where media is concerned, we're now heading into the "quickly" side of that cycle. This isn’t just about our job prospects, either. There will be major implications not just for our colleagues if current trends continue; decisions are now taking place that will fundamentally alter how every Canadian not only reads the news, but accesses the Internet. This goes way beyond whatever petty gripe one might have with Postmedia or Torstar or the media writ large. 

There are two major items up for consideration, and we'll deal with each in turn. The first is a proposed merger between Postmedia and the Torstar/Metroland newspapers. The second, and most significant, news item, is that following on Meta/Facebook's decision to stop featuring news on its feeds, Google is promising to drop the Google News Showcase feature, and to stop surfacing Canadian news links on its search feeds. All of this is in response to C-18, the Online News Act.

This law is trying to force Facebook and Google to compensate news organizations for the links that appear on their platforms; so the companies reacted in an entirely predictable way after the bill received Royal Assent last week— they announced they are going to absent themselves from the scope of the bill by no longer providing those links.

The government, its supporters, and many in the media itself reacted to this announcement with the same inane bluster that has come to dominate the conversation around this byzantine and poorly conceived bill. The Liberals promised to stand up to "Big Tech;" and the media organizations that pinned their survival on milking this new revenue stream are now accusing Google et al. of "bullying." We at The Line don't consider this rhetoric to be rational or in good faith. We are annoyed — we are horrified — by these companies' decisions, but we understand them.

Both Facebook and Google made it clear that C-18 was untenable from a business point of view; they both warned that they would consider pulling news links in response. From Big Tech's perspective, the decision-making tree is real simple here: does the revenue generated by news outweigh the potential uncapped financial liability that C-18 would present? Further, would complying with C-18 in Canada present a greater risk to the company globally if the bill were replicated in larger media markets? Or are the companies better off to withdraw from a low-priority market pour encourager les autres. We can scream about the evils of Big Tech all we want, but ultimately, these are just math conversations.

No one ought to be surprised that the math didn't go our way. But almost everyone was. Because — and there's no nice way to say this — this country's media industry is both painfully parochial and embarrassingly self-important. For people whose job it is to understand and explain the world to Canadians, it often astonishes us at how incompetent we are at understanding and explaining that world to ourselves. Canadian journalists have an unshakeable faith in our vocation; we genuinely believe that our work is a vital service to democracy. Therefore the fruits of that labour — the news content — must be valuable to the digital platforms that we now depend upon to distribute it. This is why many in the industry were so unshakeably convinced that Facebook and Google were bluffing during the course of C-18. Incredibly, many seem to remain convinced that Big Tech will capitulate to their demands for capital, even now. To quote this old gem: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

The flaw in this reasoning ought to be apparent, yet the industry lacks the digital savvy to understand the risk it is courting. “What about Bing, amiright?” Denial and self-importance are now sucking Canadian journalism straight into the maw of an existential crisis. To lose Facebook is a major set back; to lose Google is death. 

The thing our colleagues and peers need to come to terms with is that Canadian journalism just isn't that important in the global scheme of things. Facebook and Google aren't out to get us — they are indifferent to us. Canadian news comprises a small and un-lucrative segment of even Canadian traffic flows. And Canada is a mid-tier market, at best. Optics aside, global tech oligopolies simply don’t lose very much by cutting us off. Facebook and Google are in the business of advertising, not journalism. They share neither our self regard, nor our democratic mandate; as a result, there is no internally coherent reason for them to take losses in order to save our industry. We just don't matter to them. 

Those who are still clinging to the idea that this is all a bluff have been quick to point to the Australian example — C-18 was modelled after an Australian law, after all. In that country, the popular narrative goes thusly: After pulling out of that market for a few days, Big Tech companies blinked, restored services, and are now gamely generating revenue, mostly for major Murdoch-owned properties. 

The problem is that's not really what happened in Australia. It might be as apt to say that the government blinked after the tech companies cut the lights; afterward, the Australian law was changed to permit voluntary deals to supplant the mandatory ones; this allowed Google et al. control over how much money it would be required to pay. In other words, the parties came to a compromise.

The Canadian regulation has no equivalent to this as of yet. To put it in technical terms, there is no way for Google to be assured of an exemption path that takes voluntary agreements with media outlets into account with the regulators overseeing these media deals. C-18 simply forces the companies to negotiate under the auspices of the CRTC, thus lining Big Tech up for an "uncapped liability." A simpler way to put it is that there is no obvious limit on what Google and Facebook might be required to pay out, nor is there a limit on how many media organizations they might have to fund in the future. 

As much as we would find it emotionally gratifying to bleat about our noble Canadian journalists standing up to evil Big Tech, we have to concede the basic criticism of C-18: Taxes or journalism funds would be one thing; those are predictable line items a company can plan around. But no business, no matter how wealthy, is going to operate in a regulatory environment that requires it to cut a blank cheque to its competitors. And that’s before we get into the question of whether or not Google is going to allow the Australian model to be replicated in country after country. If Facebook and Google blink here, they’re going to look like marks.

This is why we at The Line take Google seriously when they announce they are pulling out of the Canadian news market — a move that will hit The Line as well as everybody else. Yes, we concur that this is a negotiating tactic. But it's not a bluff. 

As Parliament has been dismissed for the summer, there is no way to fix or repeal C-18 in the short term. However, all is not lost. Now that the law has been granted Royal Assent, it will be up to the CRTC to draft a set of regulations, and in this regulatory process, there may yet be room for compromise. However, time is not on our side. There are already public reports surfacing indicating, for example, that Facebook is terminating deals it had previously reached with Canadian news organizations. That’s not a possible consequence six months into the future. That’s happening right now.

We at The Line have written long and often about how C-18 is bad. Government subsidies for journalism is bad. All of this is bad. However, our philosophical objections are not relevant to the immediate crisis. It’s too late to fix C-18, but it’s not too late to prevent worse outcomes. But to do so, the government is going to have to move, and quickly. The terrible irony of all of this is that there is some money on the table to be funnelled into Canadian journalism via these companies. Google has stated as much. If Heritage Minister Pablo Rodriguez were to spend a little less time tweeting about the evils of Big Tech, and a little more of his energy offering solid reassurances around exemptions and uncapped liabilities, Google probably would change its mind, keep the traffic flowing, and send along more cash to boot.

However, as it stands, we are spending this Canada Day weekend staring into the void. The government is more concerned with its political posturing, maintaining the perception that it is a strong opponent of the evil monopolies of the Internet; the news outlets are in a state of denial, so buoyed by their own desperation and pride that they can't see the omens of death flying right at their faces; and Big Tech simply doesn't care about us enough to save us from ourselves. 

We do hope that everyone is going to pull their heads out of their own asses in time but, bluntly, we don't think any of our leaders have demonstrated themselves to be as deft as they imagine themselves to be. All we can do here at The Line is batten down our tiny little ship, and hope for the best as we all get sucked over the edge. 

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Speaking of media outlet desperation, the worst-kept secret in Canadian journalism wiggled its way into public view this week when Torstar and Postmedia announced they were in non-binding merger talks. There is really no way to describe this other than a Hail Mary pass intended to help two flailing companies limp along until C-18 money and/or some form of government subsidy can paper over the gaps in cash flow. 

But that didn't stop Andrew Macleod, the president and CEO of Postmedia, from trying! To wit: "The core rationale for the proposed merger is to create a new entity with reduced debt, national digital scale to compete with the global technology giants and economies of scale in the business model," Macleod noted in a statement. 

Only half of that statement makes any kind of sense to us. 

Merging the Torstar and Postmedia papers would allow the new company to dilute its overall debt. As we all know, Postmedia is living hand-to-mouth off the financial services equivalent of payday loans and existing federal subsidies. It would have been toast long ago otherwise. The rising interest rates, combined with the end of COVID supports, ain't helping matters. If Postmedia merged with a slightly more solvent, albeit cash-flow poor company, then its overall debt-to-equity picture looks better. 

Imagine two households; one house is underwater on the mortgage thanks to multiple home equity loans; the other house is over-spending, but still has some equity on the books. Merge the two households, and now you've got two assets — the houses — both of which appear to be above water again thanks to the magic of accounting. 

Merging doesn't fix the long-term trends, but it does get the situation solvent enough to carry on for a little while longer: it also presumably allows the new company to take on more debt, potentially at a more favourable rate. Add in additional revenue via C-18 or further direct government subsidy, and it's not hard to see why Postmedia was feeling optimistic this week. 

It's the second part of Macleod's quote that doesn't add up — and we presume it was crafted solely to appease the conscience of the Competition Bureau. 

Sure, a larger newspaper chain might be able to present itself as a more lucrative place to buy ads. But there's nothing about a merged PostmediaTorstar consolidation that substantially improves scale, and the notion that a Canadian media behemoth would be able to compete with global tech giants for ad revenue is now a dark joke.

No, what's actually on the table here is a repeat of what happened to the Sun Media papers back in 2015. Postmedia will merge the two entities, dilute the debt, consolidate the revenue streams, and then find "efficiencies." More plainly: the company will merge newsrooms across its chains and then cut any staff that overlap in formerly competitive markets. Why have two reporters in Anytown when one will do, right? More content will be produced centrally and then shared uniformly across the entire Canadian market. And as the Competition Bureau allowed Postmedia to cannibalize the Sun in this way, there's no reason to suspect it would step in to save the Metroland papers. 

Notably, the merger talks do appear to omit the Toronto Star, which will be granted some kind of semi-untouchable status within the new company. To this, we credit the sentiments of Jordan Bitove, the Publisher of the Star, and the owner of Nordstar. Bitove possesses the zeal of the newly converted, and we suspect he would do anything to preserve the Star's holy democratic mission. (See above.) We also note that he's new to this industry; if he honestly thinks he will be able to trap the Toronto Star in amber while the emaciated sailors on his ship are drawing lots, well, that naivete is on him. 

The last thing we would note is that the Sun chain was comparatively healthy when Postmedia ate it whole; its papers were still relatively fat with ad revenue back in 2015. But it clearly didn't take very long for Postmedia to swallow and digest its sister — five years, perhaps? — and to find itself still hungry for more. Torstar is skinnier fare, and we don't think there's much here to sate Postmedia's appetite in the long run.

So let’s be clear: nothing being proposed here improves journalism. It will further reduce it — fewer outlets, fewer journalists. All in the hopes of buying a little time until something — anything — comes bobbing down the line to keep this pitiful little status quo running.

Just something for the government to consider as it lays out new ways to keep these companies afloat.

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One last point to the above. We’ve touched on this a bit in the sections before this, but there’s a point we want to make really explicitly clear: we would both feel an awful lot better about this if more people were willing to defend C-18 on its merits. Instead, what we see is a lot of people deflecting from the issues at hand by offering assorted critiques of Big Tech in general.

Seriously. Ask anyone who’s had any concerns with C-18 along the way. There are a bunch of us. We’ve all been accused of being on the payroll of either Meta or Google.

(We’ve said it before, we’ll say it again: we aren’t. The Line has not accepted funding from any organization, including Google and Meta. As has been previously been disclosed, Line editor Gerson was invited to Meta’s table at a Walrus gala one year after she wrote a Maclean’s article about how the Metaverse would probably doom us all. They paid for her travel expenses. That’s the extent of our conflict here.)

We don’t put Big Tech on a pedestal. Bluntly, we don’t really like technology generally and suspect we’d all be happier if the Internet never happened. We have varied and assorted concerns with Google and Facebook and all the rest. None of those objections make C-18 good, though. And we have become increasingly alarmed at how many of the law’s champions explain their support not by defending why the law is well conceived, or why it was the right way to accomplish this specific policy objective, but rather by telling us that Big Tech is bad, or bullies, and we must stand up to them.

With C-18? That’s our best and apparently only option?

Guys? If you hate Big Tech, fine. If you want the government to crusade against it, fine. But don’t use the corpse-ridden fields of of our dying industry as your battleground. We see all of you out there taking pot shots at Big Tech under the guise of supporting journalism, and we are politely asking you to stop.

Opposing Big Tech and supporting Canadian journalism are not the same thing, and trying to accomplish both in one law explains a lot about what went wrong with the bill and why it is looking unlikely to accomplish either goal.

So sorry, guys. We refuse to accept you’re as dumb as you’re pretending to be. There were a lot of ways to support Canadian journalism, and are a lot of ways to oppose Big Tech. We know that you know this, and we’re calling bullshit on anyone who still chooses to play dumb.

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ROUND UP:

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And on that note, everyone, happy Canada Day, and God help us all.

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The Line is Canada’s last, best hope for irreverent commentary. We reject bullshit. We love lively writing. Please consider supporting us by subscribing. Follow us on Twitter @the_lineca. Fight with us on Facebook. Pitch us something: lineeditor@protonmail.com