Canada’s support of the magazine industry goes back more than one hundred years, beginning with the creation of the postal subsidy. With lower postal rates, the high costs of distributing magazines to a relatively small market over a large geographic area were alleviated (Sutherland, 12). However, by the early 1960s, advertising rather than circulation became the driving force behind the magazine industry (12). In 1960, Gratton O’Leary led the Royal Commission on Publications to study the “position and prospects of Canadian magazines with special attention to foreign competition” (The Canadian Encyclopedia). The commission found that 80% of the periodicals sold in Canada were American publications. O’Leary recommended that Canadian firms advertising in foreign magazines or Canadian editions of foreign magazines should not be allowed to deduct the cost of this advertising as a business expense for tax purposes. “This would have the effect of doubling the cost of advertising in foreign publications or diverting it to Canadian periodicals” (Desbarats, 62). Despite opposition from some Canadian publishers who thought this was an “infringement by the state on their rights as free-enterprise publishers”, the government enacted legislation based on the O’Leary Report (63). In 1965, a customs tariff was introduced to prevent the import of split-run magazines; and the Income Tax Act was amended to limit tax deductions to advertisements placed in Canadian periodicals and newspapers. However, Time and Reader's Digest were exempt (63).
In 1975, the government introduced Bill C-58 which eliminated, among other things, the tax exemption enjoyed by Canadian editions of Time and Reader’s Digest. After the bill passed, Canadian magazines jumped to 75% of advertising revenue and by the early 1990s Canadian magazines held more than 60% of the market (Skinner). Although there is disagreement about the precise effects of the legislation, most would agree with Fraser Sutherland’s that “there is no doubt that Bill C-58 had given an important psychological boost to many smaller magazines...certainly it was difficult to see how anyone lost from it” (as quoted in Desbarats, 63). One of the greatest beneficiaries of Bill C-58 was Maclean Hunter; with 109 magazines, it was the largest magazine publisher in Canada (The Canadian Encyclopedia). In the twelve years following the legislation, the annual revenues from circulation of Maclean Hunter Publications rose from about $5 million to about $50 million (Desbarats, 63).
However, not all magazines prospered. Over the years following Bill C-58, the industry was still struggling (Desbarats, 63). The most expensive failure was the short-lived Vista, launched by Frank Stronarch in 1988 with a $10 million investment (63). Also, at the beginning of the 1980s, the industry saw the demise of national weekly-newspaper supplements (64). Statistics Canada indicates that the total revenues of Canadian magazines hit a peak of $903 million in 1989-90 and subsequently declined to $846.4 million in 1991-92 (64).
Today, the problems facing the industry are many, but they all have much to do with the fact that we live next door to the world’s most powerful economic and cultural country. For instance, Canadian magazines are threatened by: the U.S. domination on the newsstands; American split-run publications that take advertising dollars from their Canadian counterparts; and the loss of Canadian writers and contributors to the U.S. As previously described, attempts to protect Canadian culture from American domination is nothing new. In 1970, a Canadian governmental Committee on Mass Media concluded that “magazines constitute the only national press we possess in Canada. Magazines, in a different way from any other medium, can help foster in Canadians a sense of themselves” (Center for Strategic and International Studies [CSIS]). In recognition of the role magazines play in Canadian cultural expression, “successive governments have put in place policies that ensure that Canadians have access to Canadian ideas and information through a genuinely Canadian magazine industry” (Copps). Granted, evidence over the years proves that the Canadian magazine industry does play a crucial role for Canadian cultural expression, however, the challenges it continues to face is threatening the future of the industry.
Carleton journalism and international affairs professor Andrew Cohen stated that “Magazines in Canada are in a fix. We don’t have the depth, consistency or quality of periodicals that a country of our size should, especially in critical areas such as foreign affairs” (Hale). He believes that the Canadian magazine industry has “gone from a market that once had a very rich selection of first-rate publications to one that is extremely fragmented and targeted” (Hale). Magazine editor and contributor Rosa Harris-Adler adds that along with fragmentation, meaning producing magazines for a narrow demographic, “the problem in the Canadian industry is one of economy of scale; the U.S. automatically has an audience for magazines, and the advertising potential is huge…in Canada, the advertising dollars just are not there” (Hale).
Many observers maintain that the $846-million Canadian magazine industry is “ill-equipped” to handle anymore hardships. The recession of the early 90s, the Goods and Services Tax and increased mailing costs for paid-circulation magazines have taken their toll (Wickens). According to the former publisher of The Windsor Star and The Edmonton Journal, “less than half of Canada’s 1,440 magazines make a profit. Among those that do make money, profit margins average a meager 2.4%” (Wickens). According to industry bible Masthead, Canada’s magazines generate only about $1.5 billion in annual revenue- an average of $750,000 per title (Hale). This leads to another industry problem: Canada is losing its writers and contributors to the U.S. “Even at the largest publications, that doesn’t begin to finance the kind of salaries that magazine writers and editors can earn in the U.S” (Hale).
When it comes to domestic versus foreign publications, globalization has changed the definition of each. Advances in technology have “blurred the line between what can be considered foreign or domestic”, and trade agreements have limited the options that governments may choose in giving preferential treatment to domestic goods (CSIS). In 1993, this question of domestic versus foreign surfaced when Time Warner started to produce a split-run version of Sports Illustrated (CSIS). Controversy arose because new technology enabled the magazine’s editors to prepare it in the U.S and then beam it by satellite to a Canadian printing plant. In that way, it bypasses Canadian customs—and the three-decade old regulations that effectively barred split-run publications in Canada (Wickens). The old standard for determining whether a magazine was foreign or domestic revolved around where it had been printed. As a result, “Time-Warner could argue that their split-run magazine could be considered Canadian: it was printed and distributed within Canada” (CSIS). By doing so, Time-Warner could “offer a tax deduction to Canadian advertisers and attract valuable ad revenue that would otherwise have been directed to Canadian periodicals” (CSIS). In 1995, the government tried to protect its domestic magazine producers by imposing an 80% excise tax on advertising placed in split-runs (Copps). However, a trade dispute broke out. Imposing a tax on only foreign producers of magazines constituted a “discriminatory practice” (CSIS). Since “the principle of non-discrimination between foreign and domestic producers is one of the core principles of the World Trade Organization”, the U.S instituted a WTO dispute case against the tax, and won (CSIS). The WTO ruled against the tax on split-run editions but also went further and ruled that the long-standing postal subsidies for Canadian magazines were no longer allowed (CSIS). This left the Canadian magazine industry without any immediate or practical alternatives to maintain the economic integrity of its magazines. A parliamentary task force estimated that more than 100 U.S. magazines could establish split-run editions in Canada, wiping out current advertising revenue collected by Canadian magazines. With a few exceptions, Canadian magazines would cease to exist (CSIS). Heritage Minister Sheila Copps described the situation as nearing catastrophe. “Without that ad revenue, there is no magazine industry in Canada”.
Despite these political and economic disputes, a collapse of the magazine industry “perched precariously on a tightrope” was avoided (Wickens). The task force on the industry proposed comprehensive measures that included “halting the erosion of postal subsidies to avoid raising magazines’ delivery costs, and encouraging federal and provincial governments to advertise in Canadian media” (Wickens). It also recommended “better enforcement and policing of tax provisions that prohibit Canadian companies from claiming deductions for ads placed in foreign publications” (Wickens).
Canadian Heritage, part of the Cultural Affairs department in the federal government, also boasts to support the production, distribution and promotion of Canadian books and magazines. It supports government regulations and direct assistance programs such as: “The Foreign Publishers Advertising Services Act” which regulates foreign publishers’ access to Canadian advertising; and the Canada Magazine Fund (CMF) which aims to increase Canadian’s access to and enhance the quality and diversity of Canadian magazines (Government of Canada). Yet despite their objectives, in 2003, Canadian Heritage cut the Canadian Magazine Fund in half, from $16 million from the $32.6 million publishers shared in 2002-2003 (Young). According to Allan Clarke, senior official at Canadian Heritage, CMF was established to “help consumer magazines compete with the expected influx of foreign publications” adding that “the anticipated market penetration has not materialized” (Young). According to the Canadian Magazine Publishers Association, the CMF cut, added to the $15 million already cut in the federal budget, amounted to a 40% decrease in federal cultural investment in the magazine sector. Sue Fredericks, chair of the Canadian Business Press, says that “many consumer magazines will probably find it no longer viable for them to publish” (Young).
There is no doubt that Canadian magazines need to survive because they play a fundamental role in the country’s cultural identity. Titles like Maclean’s, Saturday Night and Weekend form an important part of our cultural heritage. Over the years, the combination of Canadian creativity and government policy has led to considerable success for Canadian magazines. However, the truth of the matter is that the Canadian magazine industry will continue to suffer from budget cuts, loss of writers to the U.S, and most of all, because of the domination of the American magazines on our newsstands. Canadians have all the talent and energy needed to compete at any level, however a simple economic principle like economies of scale guarantee that the U.S. could eventually own the majority of the cultural products consumed in Canada, magazines included. Canadian magazines have enjoyed success over the years and they are an influential medium for sharing ideas, but as a business, it continues to suffer in a field dominated by foreign competition.
Works Cited
Copps, Sheila. “Culture and Heritage: Making Room for Canada’s Voices”.
The Focus Report. June 1997.
/english/resources/articles/sovereignty/culture/heritage.cfm
Desbarats, Peter. “The Special Role of Magazines in the History of Canadian Mass Media and National Development”. Toronto: Thompson Educational Publishing.
Government of Canada. Canadian Heritage. “Magazines”. 2004.01.08.
Hale, James. “Magazines Matter: Is the Canadian Magazine Industry in Trouble?”.
Carleton University Magazine. Spring 2004.
The Canadian Encyclopedia. “Magazines”. 2005.
http://www.thecanadianencyclopedia.com/PrinterFriendly.cfm?ParamsA1ART50
“The Canadian Magazine Dispute”. Center for Strategic and International Studies.
2002.
Skinner, David. “Periodicals and Magazines”. York University, Toronto.
1 February 2005.
Sutherland, Fraser. The Monthly Epic: A History of Canadian Magazines.
Markham, ON: Fitzhenry and Whiteside, 1989.
Wickens, Barbara. “The Issues at Stake: The Government Considers Proposals to Protect
The Canadian Magazine Industry”. Maclean’s. 4 April 1994. v107. n14. p63.
Young, Lesley. “What’s the Future for Canada’s Magazines?” Marketing Magazine.
22 September 2003. v108. i32. p20.