Building on Canadian Strengths: Canadian Magazines in the Digital Economy

Magazines Canada welcomes the opportunity to participate in the digital economy strategies discussion. We congratulate the Government of Canada for launching this national review and taking leadership in ensuring that we are prepared as a nation to fully exploit new information technologies. Section One: Magazine publishing in Canada: A success story Section Two: Recommendations: Evolving needs Section Three: Appendix: New reach on new platforms (interactive) Magazines Canada is the national trade association that provides advocacy, marketing and professional development services for Canada’s consumer, cultural and business media (b2b) magazines. Members are mostly independent titles located in all parts of Canada, publishing in French, English, Aboriginal languages and others as well. Section One

Magazine publishing is a Canadian success story Canadians have benefited considerably over the years from progressive federal policies in the magazine sector. One of the key ingredients to successful policy making in a fast-changing world is the constant review and updating of policies and programs, and this has been the case with magazines. Federal magazine policy in recent years has been a constant “work in progress” and, as a result, policies are sharply focused on current objectives. And they work. The digital economy presents some new challenges. Canadian magazines welcome this latest review. Changing technologies and resulting new business models and new consumer demand mean that policies need to be updated to ensure Canadian readers continue to have access to Canadian content and choice in their magazines.

 

Canadian owned and controlled magazines publish 80%+ Canadian content and together deliver over 700 million print copies annually and attract millions of readers online. The $2.2 billion Canadian magazine industry provides direct and indirect employment of 15,000, which includes our creative people who write, design, illustrate and photograph on all platforms. We underline that while government investment is appreciated and important, total government investment in magazine publishing by all levels of government combined is less than 4% of the industry’s value, yet the returns are excellent. And the potential return is even greater. Federal policy is working. Over many years, Canada has developed and refined its policies affecting magazines into a sophisticated set of tools. In the digital economy, these tools will need refining but NOT wholesale change. On the one hand, we have modest government investment that has garnered a high level of success. On the other hand, we have a completely open world marketplace for magazines here in Canada within which our Canadian publishers have been successful. To ensure that this success continues in the digital economy, we will need to update and refine the current tools—not replace them. The number of Canadian magazines continues to grow as the internet has expanded. There are over 2,300 Canadian magazines, 335 of which launched in the last five years. These are consumer, b2b and cultural magazines. Canadians want Canadian content and magazines deliver. The growth of print magazines over the last decade has paralleled the growth of the internet. It is often assumed that the growth of the internet means the end of print media. Not so. Moreover, magazines have found innovative ways to utilize the internet to extend and deepen their relationship with readers, extend the scope of stories, develop new story ideas directly from readers and bring them back to the print version. Without the availability of home-grown Canadian b2b print products, Canadian advertisers would have no choice but to spend their money abroad

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to reach Canadian businesses at home. Further, without a strong Canadian b2b media, our professional communities will lose a valuable financial and cultural tool in shaping their futures as Canadian businesses. Canada’s rich cultural magazines in print and digital are the major platforms generating awareness and enhancing the careers of Canada’s writers, editors, visual artists, photographers, designers and the creative industries: film; music; books and the performing arts. The fact is, heavy internet users are readers and readers continue to enjoy their print magazines.

Heavy Internet Users

Light Internet Users

Heavy Magazine Readers 123 81

Light Magazine Readers 68 138

Another misconception of the "digital age" is that young people are abandoning "old" media for the new digital world. Again, not so. Young people are shaking things up. BUT the view that young Canadians have abandoned print magazines and are using digital exclusively is not supported by facts. The largest segment of print magazine readers is, in fact, people between the ages of 18 and 24.

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5.0

5.9 5.8 5.75.2

3.7

0

3

6

Issu

es R

ead

per M

onth

12 - 17 18-24 25-34 35-49 50-64 65+

Magazines are Read by All Age Groups

Source: PMB

Providing readers with the Canadian content they want A high level of uptake of Canadian content is what really sets Canada’s magazine policies apart from other cultural media. When Canadians buy magazines, 41% of their spending goes to Canadian-content magazines. This is a higher level of consumption of Canadian content than most other major media—TV, books and film. Moreover, Canadians choose to purchase the vast majority of their magazines through subscription delivery to their home. Fully 80% of the subscription delivery of magazines in Canada is made up of Canadian titles. The challenge in updating and improving policies and programs in this sector is ensuring that we provide the right tools and policy environment for growth in digital environments while not sacrificing those that are creating such great results already.

In the history of media it is important to recognize that at some point all media was new media and that new media platforms will not drive established media platforms to extinction. The existing media channels simply “move over on the bench” to make room for the new. Television did not cause the demise of radio. Digital media will not mean the end of print. Canadian publishers are adding new platforms, bringing with them the standards of excellence that Canadians have come to expect, while continuing with print platforms because, as all current and projected results indicate, Canadians demand it.

Public policy in the digital economy Digital media will succeed with the right policy framework. We agree that “with the right framework, digital media entrepreneurs have the ability to create Canada’s digital content advantage with vision and boldness to unleash the potential of content to capitalize on our investments in digital infrastructure and drive more innovation in the years ahead.” Good public policy is the key. And we thank the Government of Canada for delivering policy and program tools that work. The current environment includes: Foreign ownership rules have provided a balance in magazine publishing—ensuring there are Canadian perspectives available while not restricting choice to readers. Canadian perspectives mean jobs and economic activity here in Canada. Choice means Canadians have access to the world. We recommend the continuation of the present rules. The Canada Periodical Fund (CPF) has been designed to provide magazine content creators with the flexibility to strategically manage funds to, for example, reach Canadian and international audiences with home-grown content on multiple digital platforms. The Canada Council for the Arts (CCA) focuses on supporting excellence in the development of art and literary-focused Canadian content. It, too, is supporting content created for multiple platforms.

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The foreign advertising services act ensures that we can afford to provide Canadians with excellent content—keeping our creators here. These policies and programs all help Canadians access their own content on all platforms. And we are achieving this success in a very crowded marketplace with over 100 titles available to Canadians per capita; we compete in a global marketplace for Canadian audiences. Section Two

Magazines Canada recommendations: The evolving needs of the digital economy

The question facing Canada’s magazine sector and federal policy makers is how to achieve the same level of success in a digital world as we have achieved in traditional print and, while doing so, continue to deliver the high-quality magazines that Canadians are consuming in ever greater numbers? As we have stated and demonstrated in the examples in Section Three, success in the digital economy will be well served by careful refinement and improvement of existing programs. The digital economy discussion paper “Improving Canada’s Digital Advantage” describes the issues well. Magazines Canada offers recommendations in that context (investments; access to capital; talent and sector development; national institution; rules and regulations) as follows: 1. Investments Magazines Canada agrees that “targeted and strategic public/private investments, both direct and indirect, can and do make a difference.” Our industry has demonstrated the benefits of this partnership over many decades. Modest but predictable public investments have been matched by reader purchasing and the industry has created a successful and resilient sector, rich with Canadian-authored content. Let us apply this approach in the digital economy.

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Fortunately, the Minister of Canadian Heritage is ahead of his time. In February 2009, Minister Moore announced the Canada Periodical Fund (CPF), an updated, streamlined and flexible program to take Canadian magazines into the digital age. The CPF was launched by taking the best components from the Canada Magazine Fund (CMF) and the Publications Assistance Program (PAP) and adding new guidelines to address the challenges brought forward by the digital age. For the Canadian magazine sector, much of what is contemplated in the questions posed by the digital economy discussion paper have already been addressed and answered by the CPF. Consumer choice • The old PAP supported magazine distribution only through the mail.

Today’s CPF encourages magazine publishers to create multi-platform delivery options so consumers can get their content in whatever form they choose.

• The old CMF could only be used to support the development of Canadian editorial content. For many magazines, the development of quality content is not the biggest challenge. Investing in new digital technologies, taking risk in the development of new, innovative delivery options—these are the challenges of the digital age. The new CPF allows publishers the flexibility to utilize public investment as required to meet consumer needs.

• Both predecessor programs needed an administrative overhaul. The new CPF is merged, streamlined, efficient and coherent.

In short, the CPF has greatly re-structured and updated federal support to Canadian magazines and their readers. Much of the work in terms of targeted investments to support Canadian-content creation and delivery in a digital age has been achieved with the CPF. The level of public support for the magazine sector is relatively modest. Additionally, publishers are contributing ever greater ratios of support to lever these funds to the best advantage including dealing with ever increasing postal rates.

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The remaining piece—and it’s an important factor—is the predictability of this support going forward. The Minister of Heritage has created sustainable funding environments for many key arts and culture programs. In 2009, he announced five-year extensions to a number of art sector programs. In 2006, his predecessor provided $30 million in additional support annually to the Canada Council for the Arts. The longer-term predictability of these programs is critically important to their success. The same is true with the CPF. Publishers can make the most efficient use of federal investments when they can build plans around levering the most out of them. Long-term predictability is important for this planning. Today, the full budget of the CPF is on the books only until April 1, 2011. To meet the goals for which it was designed and launched just a few months ago, the fund requires a full budget committed for a four- to five-year term. The CPF is new and updated. Now it needs a budget commitment to make it work and get the best from it.

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Magazines Canada recommends that, under the heading of "investments":

• The Minister of Heritage commit to a long-term budget (4–5 years) at current funding levels ($75.5 million) for the new Canada Periodical Fund.

• Key criteria for the CPF be reviewed each year to ensure the

program continues to evolve to meet the challenges of the digital economy.

For example, paid, digital replica editions of print magazines are currently not supported by the program. This is a disincentive to the development of online, paid editions of magazines—available to readers through electronic means. The industry has adopted new standards to define paid, digital magazine copies. These standards should be recognized by the program to further encourage magazines to develop and sell digital editions.

• Magazine publishers be given access to the Canada New Media Fund.

Giving magazine publishers access to the Canada New Media Fund (CNMF) will greatly increase the potential for successful new digital products. The CNMF recognizes the change in how Canadians create and access media, and will support multi-platform projects. The fund will also encourage the development of experimental, non-linear content and applications. Magazine publishers are already taking action and need support for innovative approaches to digital platforms.

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2. Access to Capital Magazines Canada recommends that the Government of Canada provide access to capital options that focus on digital product development. The discussion paper quite correctly captures the challenges associated with digital media projects—they are risky. Canadian magazine publishers have innovated, introducing content in new digital environments. But the pace of change is restricted by the costs of building new delivery platforms and the risk associated with them. This “toolkit” of capital options could include Government-backed loans such as market-driven investment funds governed by rules for MERs, disclosure, marketing and valuation practices. Conventional tax credits have been successfully deployed in other cultural sectors that could be considered for investments that are focused on digital innovation. The federal government should examine these options with a view to establishing flexible approaches that recognize the variety of operating structures. 3. Talent and Sector Development Magazines Canada recommends that the Government of Canada commit funds to industry collectives for the creation and dissemination of current training. Magazines Canada agrees that, in the main, “digital skills can be understood as the ability to locate, organize, understand, evaluate, create and share information using digital technology.* It involves a knowledge of current communications technology and an understanding of how it can be used. Digital skills are a suite of skills that help Canadians connect in today’s world and function in the labour market of today and tomorrow.” As the largest provider of in-career training for the magazine industry in Canada, Magazines Canada creates national partnerships in both official languages for the creation and dissemination of current training. It is Magazines Canada’s view that the industry itself, being on the forefront and driving change, is best positioned to drive digital skills development. Other partners will be truly progressive post-secondary institutions that can respond

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quickly to continuous evolution. From entry level training to continuous improvement and skills upgrading, public/private partnerships that are efficiently and effectively managed to achieve results are required. The vehicle for this support is already in place. Canadian Heritage’s ‘Collective Initiatives’ component of the CPF can be the delivery mechanism for industry-organized and -delivered projects aimed at assisting the entire sector and building from the leverage of collective action. This program is available to both magazines and community newspapers in Canada. In past years, it has been utilized to deliver very successful industry-wide projects such as the Magazines Canada Direct Marketing Campaign, the Digital Newsstand project and in-career training initiatives including webinars. The digital environment provides many new challenges for the sector. Canadian magazines, especially smaller publishers, have to rely on existing staff resources to implement projects for the digital environment. To do so, training is essential. Augmenting the budget of the CPF for collective, industry-wide training projects is the most efficient route to building human resources skills for the digital economy. Other needs that have been and can be pursued in this framework are the collective development of content management systems; collective engagement with other cultural media in relevant projects; and collective marketing, both foreign and domestic. Magazines Canada recommends that funds be committed to industry collectives that can be cost-effectively utilized. 4. National Institutions Magazines Canada recommends that the Government of Canada support Canada Post’s modernization program. Canada Post has a tremendous impact upon readers and magazines in Canada. Canadian readers obtain the majority of their magazines through the Canada Post delivery system. The corporation has been a key partner in delivering Canadian magazines to readers.

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On the surface, Canada Post Corporation’s (CPC) role in the digital economy is not obvious. And yet, Canada Post continues to play a very important role in the success of the industry. First, while more and more content is being accessed through digital means, print magazine readership is still the bread and butter of the industry. The print version of the magazine will be a key component of any digital strategy for most titles. Today, most magazines’ digital strategies feature interchange between the online version and print version, providing readers with additional content and editorial depth by providing different features in each format. In this environment, the print version of the title is a key success factor for the digital version. Second, Canadian magazines’ starting off point for digital growth is the strong brand recognition of their print title. Moving ahead, the success of magazines in digital media will depend on the continued stability and growth of print distribution. CPC is also developing online services and products aimed at assisting publishers in targeting their circulation and building circulation levels. Canada Post is implementing an aggressive modernization project to update its nation-wide network. Magazine Canada supports CPC’s modernization program and will work closely with the corporation to take costs out of the network and make it as efficient as possible. 5. Rules and Regulations Federal magazine policy has established a predictable and stable environment for industry growth. Competition between Canadian magazines and between Canadian and foreign magazines is fierce. Consumers have overwhelming choice and great value. This environment is the result of a well-thought-out and prudent policy.

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Canadian ownership and control Magazines Canada recommends the continuation of Canadian ownership and control regulations. Canada’s magazine policy has struck a healthy balance between promoting Canadian content through ownership of publications while providing an environment for a very competitive sector, producing choice and value for Canadian consumers. There remains a clear link between ownership and content in magazines in Canada. Most Canadian-owned titles produce high levels of original Canadian content while the vast majority of foreign magazines produce little or none. Canadians enjoy a very open and competitive magazine sector. Competition is wide open when it comes to consumer choice.

1,282 Consumer Choices

500

Number of

CanadianConsumer

Titles

Source: Statistics Canada; Masthead Magazine

750

1999

908

2000

941

2001

9611,000

2002

1,000

2003

1,032

2004

1,114

1,250

2005

1,1601,201

2006

1,244

2007

1,282

2008

Number of Canadian Titles

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The International Federation of the Periodical Press (FIPP) reports that 3,400 “consumer” magazines alone are distributed in Canada (both Canadian and foreign titles). Magazines Canada estimates that Canadian magazines make up approximately 41% of magazine sales in Canada. Therefore, in addition to reading a very large number of Canadian titles, readers in Canada spend the majority of their magazine dollars on foreign titles. Both foreign and Canadian titles exist in virtually all subject areas in both the consumer and business-to-business markets. Foreign magazines can enter the Canadian marketplace using several business models. Firstly, foreign titles can simply extend their sales to the Canadian market without restriction on either subscription or newsstand sales. Today, this approach is the most common and makes up over half of magazine purchasing value by Canadians. Secondly, foreign titles can partner with Canadian companies to extend their brand to the Canadian marketplace using a combination of foreign content from the sponsoring magazine, and Canadian content and Canadian distribution and promotion support supplied by the Canadian partner. Finally, U.S. publishers can establish a magazine business in Canada and sell advertising as long as their magazines contain 50% or more Canadian or original content on average.

Consumer Magazines per Capita (2005) Country # of Titles Population (millions) Magazines/Capita

(index) Canada** 3,400 33 100

France 4,525 61 72 United Kingdom 3,364 60 54

Poland 1,640 39 41 Italy 1,840 58 30

Germany 2,400 82 28 United States 6,234 298 20

Brazil 3,651 188 19 Japan 2,524 127 19

**includes foreign magazines distributed in Canada Source: FIPP World Magazine Trends

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The large number of publishing companies and titles available to Canadian readers creates a highly competitive market where cover prices are held in check by competitors and aggressive price discounting is used to attract consumers to longer-term subscription sales. Canadians also enjoy excellent value in a very competitive marketplace: the overall average retail price in 2009 for all magazines sold on mass-market newsstands in Canada was $5.34. The average retail price for all Canadian magazines sold on mass-market newsstands in Canada was $5.26—very similar to the $5.33 for all U.S. magazines sold this way. The data confirms that Canadians have affordable access to a very broad range of magazines in a very competitive market. This access has been achieved while creating high readership levels of Canadian editorial. Advertising Services Act Magazines Canada recommends the retention of the current foreign investment restrictions and advertising services regulations. In 1999, Canada concluded a bilateral trade agreement with the U.S., focused specifically on the magazine sector. The agreement was designed to limit the ability of U.S. magazines to produce "split-run" titles—magazines that extract advertising revenues from the Canadian market while offering limited or no original Canadian content. Through the agreement, the U.S. agreed that the promotion of Canadian content and protection of advertising revenues in Canada are legitimate public policy goals in the cultural sector. The legislation has been effective. Despite threats of new "split-run" titles at the time, there has been no such activity over the decade. The Foreign Advertising Services Act has successfully limited split-run magazines. The legislation does not ban advertising sales in Canada entirely. U.S. magazines can sell up to 18% of their advertising content to Canadian clients. Together, foreign investment restrictions and advertising services regulations have established a healthy balance between choice and value for readers and the promotion of Canadian content and stability of the Canadian sector. These components of Canada’s policy remain important to the growth of the industry and its potential to invest and grow in the digital space.

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Copyright Magazines Canada recommends that the Government of Canada pursues a period of thorough discussion of the implications of the specifics of the proposed copyright legislation before the legislation proceeds. Magazines Canada agrees with the Government of Canada that copyright reform, in addition to legislative change, must include engaging with creators. To ensure we have a vibrant creative community, such legislation must balance the need for fair remuneration with a practical approach to serving consumer expectations. The right balance can and must be found. However, the legislation as tabled appears to raise a number of concerns that require more time to study. The consequences of failing to fairly compensate Canadian-content owners will lead to a decline in the production and then dissemination of home-grown content. Such a decline would have many negative consequences: the decline of Canadian cultural and business voices, and the loss of jobs and billions of dollars of economic activity. Thank you. Magazines Canada appreciates the opportunity to participate in this critically important consultation process and the ongoing dialogue. Please see Section Three below. Contact: Mark Jamison CEO Magazines Canada mjamison@magazinescanada.ca 416.504.0274 x223

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Section Three

New reach on new platforms In this appendix, Magazines Canada provides some interactive insight into specific advances that the magazine industry has been, is and will be making in the digital economy. The longer-term success of these innovative approaches is dependent upon effective policy as per the recommendations above. The growth of print magazines over the last decade has paralleled the growth of the internet. It is often assumed that the growth of the internet means the end of print media. Not so. Moreover, magazines have found innovative ways to utilize the internet to extend and deepen their relationship with readers, extend the scope of stories, develop new story ideas directly from readers and bring them back to the print version. Magazines Connect is a 110-second video about Canada’s magazine industry impact. Canadians are eagerly adopting new technologies. In considering the demands of a "digital economy" there is sometimes a tendency to believe that we are just starting out—that Canadians are slow to adapt to change and slow to innovate. This assumption is not correct. Canada’s magazine industry has eagerly embraced digital technologies in all aspects of design, production and distribution.

• New digital design and production technologies have simplified and streamlined magazine creative design and reduced production costs.

• New graphics and design software have improved the quality and scope of design innovation.

• Publishers no longer talk about magazine "circulation." Today, publishers seek to "develop audiences” for their content on whatever delivery platform readers choose—the internet, their phone, their print magazines.

Canadian magazine publishers are finding "new ways to meet the needs of Canadian citizens, consumers and creators." And they are driving “the uptake of infrastructure and devices, distinguishing Canadian digital offerings

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in a crowded global marketplace,” in the consumer, business media and cultural realms. Canadian magazines are reaching the world.

Magazines Canada launched the digital newsstand project in late 2009. With 153 titles and a growing reader response, the project supported in part by the Canada Periodical Fund, demonstrates how public/private partnerships can achieve results in the digital economy. The digital newsstand and its related websites provide Canadians with options to access Canadian-created content. These digital formats also allow publishers to enhance core-content offerings with links to related sites, government information, business opportunities and so on. New platforms allow publishers in all categories and corporate sizes greater reach at home and abroad. Our magazines take Canada’s cultural, business media and consumer content everywhere in digital. For example, SkyNews is a small-print-circulation magazine based near Belleville, Ontario. It is devoted to astronomy with a very dedicated print

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readership of about 5,000. This circulation size is typical of small niche magazines.

Look what has happened on the digital platform…

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It is now attracting digital subscription sales from over 17 countries beyond our borders. Quality Canadian content has always been exportable and now, in digital, much more portable. It is early days for the digital newsstand but it is already opening the doors for magazines of all types, sizes and locations to reach even more readers at home and new audiences around the world. This reach will only grow with the right private/public nurturing. Magazines are screen-based content creators. Clin d’œil, a Québec-based fashion magazine, is a proven brand with over 30 years of success. Now making its way in the multi-platform environment, it has launched Clindoeil.ca, which boasts interactive content, blogs, forums and many other digital extensions of the brand and the print magazine. Clindoeil.ca is also a broadcaster. It has a web series entitled "Comment survivre au week-ends." Now in its second season, the series has been downloaded almost 1.6 million times. The storyline in the series comes from themes covered in the magazine. A playlist of the series’ music, cell-phone ringtones and a forum have also been developed to accompany the series’ themes. All of these offerings have very large audiences.

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Magazines drive business-to-business activity on all platforms. Canada’s business-to-business (b2b) publishers are now fully integrated business media companies using multiple platforms. Although it varies from category to category, as noted in a recent Starch report "major contributors to the extensive growth of the Internet since 2004 have been the (b2b) publishers who have embraced the technology and added value to their brands and marketers who have used business publication advertising to generate website traffic." Decision makers make use of all b2b platforms: Media involved with Frequency Time spent Industry-specific business magazines

64% read 3 magazines or more last month

44% spent 3 hours or more reading per week

Industry-specific conference or trade show

51% attended 3 conferences or trade shows or more during the past 12 months

58% spent 5 days or more at conferences or trade shows during the past 12 months

Industry-specific websites

54% visited 5 websites or more last month

47% spent 3 hours or more on websites per week

Web-based events 75% attended 3 web-based events or more during the past 12 months

N/A

See: Magazines Canada Business Media Fact Book for an overview of the impact of the vital b2b magazine sector. CLB Media has developed series of videos for a number of specific business applications. One was aimed at the recruitment of young legal talent, written, storyboarded, shot and produced entirely using in-house CLB staff. Similarly, CLB produced a video documentary for Canadian Occupational Safety magazine on workplace violence titled "Code White."

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The b2b sector is where Canadian suppliers of goods and services are linked up with the community of business interests that buy their services. Canada’s business people need access to Canadian success stories, Canadian best practices and Canadian benchmarks. Without a strong Canadian b2b media, our professional communities will lose a valuable financial and cultural tool in shaping their futures as Canadian

businesses. Should our b2b magazine publishers close, companies would be served by foreign, mostly American magazines and the services and goods offered to Canadian companies would be U.S.-based. Magazines enrich Canada cultural landscape. The Canada Council for the Arts (CCA) focuses on supporting excellence in the development of art and literary-focused Canadian content. It, too, is supporting content created for multiple platforms. Our Canadian cultural magazine publishers are addressing new challenges and achieving a new presence utilizing the new platforms’ tools effectively. Canadian Art has adopted new approaches to the career advancement of artists and the development of art knowledge among our young people using all available platforms.

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Responding to the demand for Canadian content. It is clear that Canadian magazine publisher “brands” are responding to Canadian expectations by creating enhanced content on their websites, blogs, Twitter, Facebook and mobile platforms. As time spent on digital platforms increases, time spent consuming other media is affected. Thank you. Magazines Canada appreciates the opportunity to participate in this critically important consultation process and the ongoing dialogue. Magazines Canada is the national trade association that provides advocacy, marketing and professional development services for Canada’s consumer, cultural and business media (b2b) magazines. Members are mostly independent titles located in all parts of Canada, publishing in French, English, Aboriginal languages and others as well. Contact : Mark Jamison CEO Magazines Canada mjamison@magazinescanada.ca 416.504.0274 x223