Crux Strategies.com and Media Inc.

A Case Study of the Special Senate Committee on Mass Media & the Royal Commission on Newspapers

P.J. Worsfold, 3/14/2007

Contents

With the exploits of the Southams, the Thomsons, Black, and the Aspers, the Canadian media landscape has grown all too familiar with concentrated media ownership. Increasingly since the late 1960s, the issue has been a frequent topic within mass media and broadcast policy debate. Proponents of consolidated media suggest that freedom of the press should include the freedom for those who own the press to acquire and merge as they see fit. However, if we hold the business maneuverings of media outlets to the same standards that we would apply to electronics retailers or supermarket chains, it should hardly come as a surprise that media today is characterized by "homogeneity and a narrow range of opinion" (Steuter). Many critics argue that because, "the free marketplace of ideas is not congruent with the capitalist free market" (Raudsepp), media mergers must be subject to increased regulation to prevent the profit motives of the few from compromising the media's obligations to the masses.

The Canadian government has convened eight major committees that, among other topics, have been asked to explore the matter of media concentration and recommend what, if any, action on the part of the government is required. As the nature of the media has evolved, these inquiries have considered various economic and cultural implications of media ownership concentration. Although new ideas and perspectives have been introduced, the debate has often returned to the issue of maintaining diversity in an increasingly concentrated media landscape. This issue has been well articulated and probably most frequently debated within the context of the Canadian newspaper industry. With this in mind, this case study will explore two government inquiries, both of which have become major historical reference points in the debate on media concentration in Canada. The first inquiry I will look at is 1970's Special Senate Committee on Mass Media, which is often referred to as the Davey Committee. The second inquiry is the Royal Commission on Newspapers of 1981, which is commonly known as the Kent Commission. With a shared focus on the Canadian newspaper business, both efforts investigated whether media concentration was "a threat to the quality and characteristics of Canadian journalism" and whether such concentration "unreasonably (restricted) the availability of diverse viewpoints on given issues" (Jackson).

Following a word on the consolidation of Canadian newspaper ownership that occurred from the 1920s to the 1980s, the remaining sections of this paper will follow a chronological order. I will first explore the context and the content of the Davey Committee's work and then present a similar summary of the Kent Commission's activity. Next will be an analysis of the individual and combined effects of both the Davey Committee and the Kent Commission. Finally, this case study will conclude with a look at the effects of both initiatives and a brief summary of where the debate has gone since the Kent Commission tabled its final report.

Before the days of cross-media ownership and media convergence, men like William Southam, in the 1920s, and Roy Thomson, in the 1930s, were hard at work building what would become newspaper empires. Complementing their business acumen were several economic and social factors. The pre-World War I newspaper market was well established and many Canadian cities and towns sustained two daily newspapers. However, as the years progressed, the costs of gathering the news increased as did readers' expectations for what a newspaper ought to deliver. Increasingly in many two-paper markets, newspaper owners risked spending themselves into bankruptcy in order to compete. These conditions made many independent newspapers easy targets for acquisition and the era of the newspaper chain took off.

When the baby boom arrived, consolidation in the newspaper business began to heat up. Economic prosperity encouraged the era's consumerism, which pushed newspaper advertising revenues upward. These increased revenues, coupled with advertisers' preference to "insert their ads in the papers with the largest circulations," (Raudsepp) enabled newspaper chains to acquire smaller operations at an even faster rate. Additionally, the introduction of television into Canadian homes "prompted newspapers to adapt by introducing more background stories, features and visual images" (Jackson). This pushed costs higher and further strengthened the newspaper chain's competitive advantage. By 1958, three newspaper chains, Thomson Newspapers Co. Ltd., Southam Inc., and Financial Post Publications controlled 25% of Canada's English daily newspapers. A decade later, in 1968, the number had almost doubled and by 1980, Canada's three largest newspaper chains controlled 57% of the nation's English dailies (CBC 5 Aug).

Special Senate Committee on Mass Media

Raudsepp credits the U.S. Commission on Freedom of the Press of 1947 as being the first inquiry to systematically study "how well (the) public was served by its providers of news and information" (Raudsepp). Although the U.S. Commission put forth concerns over media concentration that were soon echoed in Canada, I have been unable to determine who first raised the issue north of the border. Consequently, I am unable to comment on the specific motivations and reasons behind the issue's introduction into Canadian politics. In any case, whether it was based on public outcry, personal concern, or a political agenda in 1969, Senator Keith Davey, a former Liberal party publicist, advertising executive and radio broadcaster, persuaded "the Senate to establish a special committee to investigate the mass media in Canada"( Jackson). Thus, on March 18 of the same year, the Special Senate Committee on Mass Media, chaired by Davey, set out to "consider and report upon the ownership and control of the major means of mass public communication in Canada, and… to examine and report upon the extent and nature of their impact and influence on the Canadian people" (Canada 1970 Vol: 2 v).

Over the next 22 months, the Davey Committee explored what "was averred to be the highest concentration of (media) ownership of any democratic nation" (Ungerleider 89). Although its purview was mass media in general, because broadcast media were already under CRTC control (Canada 1981 17), the Davey Committee focused "on the implications of concentration of ownership in the newspaper industry" (Finlay). The Committee surveyed, interviewed, and listened to testimony from over 500 individuals and organizations. Among those who the Committee heard from were a spectrum of representatives from the Canadian public as well as 125 'expert' witnesses including Pierre Burton, Marshall McLuhan, Lester Pearson and John Diefenbaker.

Ideologically ,the Davey Committee is perhaps most indebted to the Fowler Report of 1965 for asserting the notion that, in matters of the media, the public interest supersedes private enterprise's right to profit. The Fowler Report states:

"It is not the freedom of the private station owner or the commercial sponsors that is important; it is the freedom of the public to enjoy a broadcasting system which provides the largest possible outlet for the widest possible range of information, entertainment and ideas" (Finlay).

While Fowler's primacy of the public need pervades the Davey Committee's report, the Committee also cites numerous CRTC and FCC rulings and credits influence from several Canadian and American broadcast policy positions and precedents. For instance, to illustrate the importance of the connection between freedom of the press and media diversity, Davey et al. refer to a 1945 ruling by the U.S. Supreme Court. In this ruling, Justice Hugo Black held that the First Amendment rests on the "assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of public life" (Canada 1970 Vol: 2 4). To expand on this position, the Davey Committee refer to a 1960 argument made by the Restrictive Trade Practices Commission that states, "if well-informed public opinion is an essential of sound public policy then the channels through which information flows to the members of the public have an importance which cannot be over-emphasized"(4). Additionally, the Committee also acknowledges being influenced by the Canadian government's 1966 White Paper on Broadcasting and 1960's Royal Commission on Publications; both of which favoured government intervention in order to ensure that the media to continued to act in the public good. Not mincing their words, the Royal Commission on Publications referred to this process as "impingement by government on the traditional autonomy of the press" (Canada 1970 Vol: 2 5).

When the Davey Committee tabled its final report, the newspaper baron Ken Thomson dismissed it as "inaccurate" and "unfair" (CBC 7 Aug). Thomson likened the Committee's recommendations for media improvement to someone telling "Rembrandt how to paint" (CBC). However, others found the report's conclusions well balanced and fair. The Davey Committee suggested that chain ownership was quite logical under the economic conditions of the day. The Committee found that, when run by skilled management, newspaper chains offered several advantages to their employees over single, privately owned operations. Among these advantages were the access to greater financial and technical resources; a wider audience, due to content syndication; higher salaries; improved job security and greater opportunity for career growth. Moreover, the Davey Committee conceded that on its own, chain ownership was not necessarily responsible for less diverse or poorer quality newspapers. Their report argued, "media monopolies seem to operate against the public interest only when the owner allows it to happen" (Lavoie). To elaborate, the Committee made an example of two of the nation's largest newspaper chains. While they were sharply critical of Thomson Newspapers, which they viewed as a "purely moneymaking proposition" (Lavoie), the Committee praised FP Publications for their commitment to quality.

Davey et al. did however voice numerous criticisms relating to the quality of content that newspaper chains were carrying. The Committee held the unique perspective of a local newspaper in high esteem. They argued that "by reporting those local events of mutual interest, (local papers serve) as a binding force in their areas by contributing to the sense of welfare and togetherness in the community" (Champagne 1).Upon hearing testimony that the copy found in smaller chain-owned properties was often dated, the Committee grew concerned. These concerns escalated when they heard complaints about the "lack of editing of correspondents' reports" and the "tendency to use fillers and press releases as received rather than rewriting (them)" (29), so as to be locally relevant.

Additionally, the Davey Committee found evidence that profits generated by newspaper chain owners were not being proportionately reinvested back into their respective papers. The Committee found that "a few major dailies received sufficient resources while those papers serving smaller centres did not" (Finlay). While the centralized ownership positioned themselves as white knights coming to the rescue of floundering local dailies, The Davey Committee argued that "overall, concentrated ownership of mass media was a process by which "the more that is taken out of a community, the less is put back in"" (Finlay).

Expanding upon concerns raised by the Fowler Report (Finlay), the Davey Committee reserved some of its harshest criticism for cross-media ownership. The Committee argued that, if allowed to continue, cross-media ownership "would seriously undermine both economic competition and intellectual and cultural diversity" (Finlay) in Canadian media. Ultimately, such concerns, combined with the tremendous social importance that they ascribed to the newspaper, caused the Committee to conclude that the inherent dangers of chain ownership were too high to go unchecked. Their final report argued that Canada, "should no longer tolerate a situation where the public interest, in so vital a field as information, is dependent on the greed or goodwill of an extremely privileged group of businessmen" (Canada 1970 Vol: 1 67). In an effort to mitigate the effects of media concentration and to lift the quality and increase the diversity of the Canadian press, the Davey Committee put forth 21 recommendations, highlights of which are summarized below.

  1. That a group called the Press Ownership Review Board be created to authorize newspaper and magazine mergers or acquisitions
  2. That the government creates the Publications Development Loan Fund to assist in the development of new publications and foster media diversity
  3. That the industry set up a press council "to play a decisive role in defining journalistic standards and a code of ethics" (Lavoie)

Royal Commission on Newspapers

Aside from the creation of a handful of provincial press councils, which were "pale shadows" (Jackson) of what Davey et al. envisioned, the Davey Committee's report went largely unheeded. By 1980, Canadian newspaper ownership concentration had increased dramatically. In New Brunswick, the Irving family had taken over all of the province's five English newspapers, while Quebecor, Gesca and Unimédia dominated the nation's French language market with a combined 90% of the total circulation. Nationally, the Thomson group had recently acquired the FP Publications chain. This move made Thomson the largest media company in Canada and meant that three companies, Thomson, Southam, and the Sun controlled over two thirds of Canada's English dailies (Jackson).

Chain ownership was not the only thing on the minds of those worried about the state of the Canadian newspaper business; conglomerates were making their way onto the scene. Indeed, newspapers were only a minor part of the Irving family's numerous "interests in the petroleum, forestry, and shipping industries" (Raudsepp). While, the Thomson group, which had begun diversifying itself in the 1960s, had by 1980, "sizeable interests in oil, retail, travel, trucking, and insurance" (Raudsepp). In earlier years, many could rationalize newspaper mergers as merely part of a business that Davey himself acknowledged was naturally monopolistic (De Rosa). However, the emergence of the conglomerate, and the notion that its sole purpose was to generate profits from its holdings, helped convince many that media ownership was in need of regulation.

Although consolidation coupled with new fears about conglomerates contributed to concern over the state of the nation's newspapers, one event in particular was the impetus for the Kent Commission. This event, which has come to be known as 'Black Wednesday' within the Canadian newspaper business, took place on August 27, 1980. On that day, two of Canada's oldest newspapers, the Winnipeg Tribute owned by Southam and the Ottawa Journal published by Thomson, simultaneously closed their doors. This mutual secession left 375 people in Ottawa and 370 people in Winnipeg jobless (Prochnau) and gave Southam's Ottawa Citizen and Thomson's Winnipeg Free Press each a monopoly in their respective markets. Although it should be noted that the Thomson group tried unsuccessfully to sell the Ottawa Journal on nine separate occasions before opting to shut the paper down (Thomson Corp 29), charges of collusion and conspiracy abounded. Six days later, amid public outcry, political fury and no doubt some degree of fear, the Trudeau government created the Royal Commission on Newspapers. Referred to as a "direct response" (Canada 1981 xi) to the events of 'Black Wednesday', The Commission was asked to "examine the extent, causes and implications" (Finlay) of the declining number of daily newspapers serving Canada's major cities; as well as the declining competition between these daily newspapers; and the increasing concentration of ownership within Canada's newspaper industry (Finlay).

Tom Kent, whose résumé included senior policy aide to Lester Pearson, dean of administrative studies at Dalhousie University and editor of the Winnipeg Free Press, was charged with heading up "the first Canadian inquiry directly concerned with the nature of the newspaper industry" (Jackson). The Commission carried out its investigations over a 10-month period during which it collected a "vast amount of information on newspapers and journalism in Canada" (Jackson). In hearings, written briefs, and interviews, the Commission heard from both the public and those directly involved with the newspaper business including owners, publishers, journalists and union representatives. On July1, 1981, the Commission submitted a nine volume report, which set forth its "recommendations for freeing the press" from the shackles of ownership (Canada 1981 xiii).

Galvanized by the fact that much of what the Davey Committee warned of came to fruition, the Kent Report picks up right where Davey's "eloquently expressed view of journalism and society" (17) left off. The Report reiterated Davey's concern over the shrinking pool of media ownership, arguing that "too much power is put in too few hands" and that this power is "without accountability" (220). The Report also delved into the Davey Committee's concern for diversity in media. Among other criticisms, the Report argued that that chain ownership's reliance on wire-generated content was contributing to a homogeneous "editorial concentration" (166), which hindered the scope of society's democratic debate.

Like Davey et al., the Kent Report also had complimentary things to say about the impact of concentrated ownership. Based on the comments of "several editors and publishers of smaller dailies" (139), the Report found that in some cases, chain ownership was responsible for increased editorial latitude by freeing staff from the confines of "local power structures" (139). The Kent Report echoed the Davey Committee's sentiment that chain-ownership was not necessarily bad, but rather that it was overly dependent on the inclination of the boss. While the Report lauded Southam for demonstrating a "newspaper conscience" through their ongoing investment into quality journalism, it lambasted the Thomson group, much as its predecessor had done. The Report argued that once a paper is bought by Thomson it "becomes a little thinner and the share of advertising increases as a percentage of the newspaper's total space" (Keshen). In his testimony to the Commission, Kenneth Thomson did little to demonstrate that he valued anything other than profits when he remarked "look, we are running a business organization, (it happens) to be newspapers" (Canada 1981 92). Such testimony no doubt contributed to the Commission's grave concerns over conglomerate ownership. Fearing that under the conglomerates, newspapers would be merely another cog in a vast money making machine, some of the Commission's most drastic recommendations were aimed at keeping the conglomerate out of Canadian media.

Expanding on the Davey Committee's notion that the newspaper market is a natural monopoly, the Kent Report noted, "(the) economics of production and advertising dictate that newspaper markets as such are either monopolistic or oligopolistic" (87). Based on this observation and coupled with the notion that the newspaper business was unlike any other, due to its disproportionate reliance on advertising revenue over newspaper sales revenue, the Kent Report proceeded to make one of its most powerful assertions. Kent and his fellow commissioners challenged the old free-market adage, which contends that eventually, all monopolies will be broken by a better product.

The Commission noted that most Canadian newspapers received 80% of their revenue from advertising and only about 20% of their revenue from selling newspapers to readers (Canadian Encyclopedia). Moreover, the Commission held that in most markets, advertisers could reach more readers, more cost effectively through one newspaper than through two. Thus, newspaper revenue structures and the detachment from readership satisfaction that they foster, coupled with advertisers' preference for single paper dealings means that "once a daily has achieved a local monopoly… the nature and quality of its product - its news content - ceases to be a close determinant of its revenue" (Canada 1981 89). The Commission further argued that once a monopoly had been established, few additional readers could be gained from an improved product, while the quality of the existing product could depreciate significantly before people would stop buying it (89). In other words, the Commission contended that by achieving a monopoly, newspapers are able to provide advertisers, their most important customers, with the best service. Moreover, from the newspaper's perspective, little maintenance is required to perpetuate this structure, and from the advertiser's perspective, there is little incentive to change it. According to the Commission, the argument that the newspaper business should be governed by the free market was moot, not only because of the newspaper's social value, but because the nature of the newspaper business did not adhere to traditional free market rules.

In its introduction, the Kent Report addressed what it called the 'stable door argument' (18). This entailed the popular notion that, given the media concentration that had already occurred and the rapid rate at which further concentration was taking place, it was too late to do anything. The Commission countered that there was still a great deal to be done, responding to the 'stable door argument', "if we must speak about horses, let them run free, frisk about the meadows (and) jump the fences" (18). In this spirit, the Commission put forth several recommendations, highlights of which appear below.

  1. The creation of the Canada Newspaper Act, which would be aimed at controlling media concentration, particularly with regard to cross-media and conglomerate ownership
  2. That no further expansion by the Southam group would be sanctioned and that the Thomson group and the Irving family should be required to divest themselves of a selection of their media holdings
  3. That no company should be permitted to own newspapers and television or radio stations in the same market
  4. That a tax credit be established to increase news and editorial content within newspapers and a surtax be applied to newspapers failing to meet a minimum news and editorial content standard
  5. That the editorial unit of all newspapers be required to issue a public statement purpose and policy, which would be subject to annual review by a press council

Analysis

Although largely ignored in its day, the Davey Committee is now credited with creating the first "forum for public discussion about whether and how ownership concentration affected the quality of newspapers" (Finlay). However, the Davey Committee's greatest contribution to the media concentration debate will always be in serving as a starting point for the Kent Commission. Unfortunately, Davey's earlier work did little to encourage the initial reception of the Kent Report.

Following the release of their final report, the Kent Commission met with a negative reaction that was "unprecedented in the history of Canadian Royal Commissions" (Keshen). Many in the public sphere felt that the Report's recommendations were draconian and amounted to a dangerous impingement of the press' freedom, while those inside the newspaper business labeled the Commission monstrous and vindictive (Keshen). Fred Hagel, Editor-in-Chief of the two Irving newspapers remarked that the Kent Report "reads a bit like a psychedelic dream" (Keshen). This barrage of negative reaction coupled with the political pressure applied by the Canadian Daily Newspaper Publishers Association ultimately led the government to shelve the Report (Jackson).

Although initially short-lived, the Kent Commission did inspire at least two government actions, both of which would turn out to be ill fated from the Trudeau administration's perspective. The first of these actions occurred in April of 1981, when Thomson Newspapers and Southam Inc. were charged with "criminal conspiracy to reduce competition and criminal merger"(Thomson Corp. 32) as a result of the events of 'Black Wednesday'. The trial, which took place in Ontario's Supreme court, lasted over two years and concluded with both companies being acquitted and exonerated of all charges. In his final judgment, which is often lacking from many discussions on the matter, Mr. Justice William Anderson "accepted defense arguments that the closings resulted from independent decisions based on the state of the marketplace and were not the result of collusion" (32). The government's second Kent-inspired action took place in 1982 when, in an effort to break apart the Irving family's media holdings, the Liberal party directed "the CRTC not to issue or renew a broadcast license to an owner with another media interest in the same market" (Kierans). However, before the CRTC could take action, Mulroney's Conservative government rescinded the order.

Conclusion

Aside from their 'Big-Brother-like' tone, the Davey Committee and the Kent Commission were compromised by their inability to define the qualities of a 'good' newspaper and, particularly in the case of the Kent Commission, failure to provide an effective methodology for evaluating a newspaper's quality. However, in the mid-1990s, the Kent Report's recommendations made a resurgence. Kent predicted that Southam's "newspaper conscience" would make it a takeover target for interests keen on diverting the chain's above average editorial investment into corporate coffers. With Hollinger's takeover of Southam in 1996, many felt that Kent, and subsequently Davey, had been proven correct and their recommendations once again entered the media concentration debate. However, when asked about the state of media concentration in Conrad Black's Hollinger era, Kent replied, "if the Trudeau government wasn't prepared to face a row with publishers, I'm sure (Chrétien's) government isn't going to" (Keshen). Kent was correct and the Hollinger group and others continued to concentrate media ownership throughout the decade. In today's media market, Black may be out of the picture, at least for a while. However, the likes of CTVglobemedia and CanWest Global Communications and their detractors coupled with government reports such as June 2003's The Second Century of Canadian Broadcasting continue to keep media concentration an active, if never-resolved issue.

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