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Heady Fry, chair of the Standing Committee on Canadian Heritage, and Conservative MP Peter Van Loan spoke about the committee’s report on the state of the media on Thursday.

Adrian Wyld/THE CANADIAN PRESS

For years now, there has been a digital disconnect between the organizations that invest heavily in creating content – including journalism – and tech giants, such as Google Inc. and Facebook Inc., that are paid handsomely for distributing it.

Ask any marketer or media-buying agency and they will likely say they support the funding of content creators. But ultimately, advertisers' main job is not to find a future business model for that content; they are focused, rather, on reaching the right consumers with their message in a cost-effective and precisely targeted way. That has led to a fragmentation of advertising dollars through digital media.

The report of the Standing Committee on Canadian Heritage – Disruption: Change and Churning in Canada's Media Landscape – released on Thursday, represents the federal government's attempt to find a sustainable model for funding Canadian journalism.

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Its recommendations include:

Tax incentives. The report recommends expanding tax deductions, which currently apply to Canadian advertising with Canadian broadcasters, newspapers and periodicals, to digital advertising on Canadian-owned platforms. It also suggests a temporary five-year tax credit to help print media companies offset part of the investments they've had to make to transition to digital. And it suggests imposing the same tax obligations that apply to Canadian companies on "foreign news aggregators, which publish Canadian news and sell advertising, directed to Canadians." The report also recommended expanding the current definition of a registered charity, which in Canada does not include not-for-profit journalism organizations.

Controls on media consolidation. The report referred to Postmedia Network Canada Corp.'s purchase of Sun Media Corp.'s English-language newspapers as "devastating" in impact because of job cuts that have diminished the "diversity of voices" in Canadian media. The report recommended an addition to the Competition Act specifically for news media mergers to test such deals against their impact on that diversity.

Beef up Canada Periodical Fund. The fund already provides support – $74-million in 2015-16 – to some publishers, but currently excludes daily newspapers and free community newspapers, which the report recommends including for eligibility. It also suggested more financial support for online magazine and newspaper distribution, and print media representing diverse communities and Indigenous readers.

Local news support. It suggested the Canadian Radio-television and Telecommunications Commission review its policies for funding community television, as well as enforce requirements for local news programs as part of broadcast license agreements to address under-served communities. Innovation, Science and Economic Development Canada could also set aside a portion of the estimated $5-billion in revenue that could be generated from an upcoming auction of additional wireless spectrum for mobile services and direct that to local news funding, the report said.

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The revenue pressures that media organizations face are well-documented. In Canada, digital media accounted for 41.9 per cent of ad spending last year – a massive jump from 2012 when it was less than a quarter of overall spending, according to GroupM, the world's largest media-buying firm. By comparison, TV commanded just under 25 per cent of media budgets, and newspapers less than 13 per cent. Much of that money flows to two Internet giants, Facebook and Google, who together commanded two-thirds of all advertising revenue online in Canada in 2015, according to the Canadian Media Concentration Research Project.

Circulation has also suffered. In 2015, daily newspapers drew $680.5-million from subscriptions, a drop of more than 17 per cent from 2010, while community newspapers saw their circulation revenue fall almost 50 per cent in the same time frame, to $21.7-million total in 2015, according to News Media Canada. There were 102 daily newspapers in Canada last year, a decline of 16 per cent in five years. The number of magazines in Canada is actually growing, but larger companies, such as Rogers Communications Inc., have closed or put up for sale some of their titles. As of last year, overall magazine ad pages had dropped by roughly 80 per cent from their height, Doug Knight, president of St. Joseph Media and chair of industry association Magazines Canada, said in an interview this week.

"It's important from a public policy point of view, that as the economic models are transformed, we don't lose the ability for Canadian voices to be out there. We need it more than ever," Mr. Knight said.

Conventional television stations have seen advertising revenue fall 20 per cent in five years to $1.63-billion in 2015, according to the CRTC. When it comes to local broadcast news, costs regularly outstrip what broadcasters make back in ad revenues. For example, local broadcast news made $266.4-million in advertising but had $348-million in expenditures in the 2014-2015 measurement period, according to the CRTC.

Approximately 16,500 jobs in the media sector have evaporated since 2008, with roughly 47 per cent of them in print media, 36 per cent in broadcasting and 17 per cent in digital and other forms of media, according to the Canadian Media Guild.

Canadians are consuming a great deal of their online news from non-Canadian sources. While CBC and Radio-Canada together are the top news destination online, 13 of the most visited news sites (measured by monthly unique visitors) are American or British, according to the report, The Shattered Mirror: News, Democracy and Trust in the Digital Age, released by the Public Policy Forum in January. Among the most popular include the Huffington Post, Yahoo and ABC News, Buzzfeed, CNN and the Daily Mail.

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"We were pleased with the report," said John Hinds, president and CEO of industry association News Media Canada, which on Friday plans to release its own recommendations for a new funding model. "The concern is ensuring that journalists can continue to do their job to cover those institutions – whether local city hall, school boards, the courts – that have an impact on civil society and on democracy. We need strong, informed, credible journalists to inform the public on those institutions."

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