A bigger pie? The vast expansion of the network media economy, 1984–2009

That the media are in crisis often appears to be a given, with no shortage of examples that seem to prove the case. To take just a few of these for examples, Canwest and CTVglobemedia closed several television stations in 2009, while workers of the former acquired one of its stations in Victoria, BC, and another in Hamilton, Ontario, was sold. TQS, the second largest private French-language television network, was sold to Remstar in 2008 by the consortium of Cogeco, the Canadian Imperial Bank of Commerce (CIBC), and BCE that had previously backed the beleaguered network. Even the CBC's advertising revenue dropped significantly in 2007–8. Profits for private conventional television fell to zero in 2008, and revenues declined from $2.2 billion to $2.1 billion (Canadian Radio-television and Telecommunications Commission (CRTC) 2009b). Daily newspapers also seem to have been hit hard, and several—National Post, Brockville Recorder and Times, The Chatham Daily News, and The Daily Observer (Pembroke)—pared back their weekly publishing schedule in 2009 from 6 days to 5. Newspaper revenues declined slightly, and daily circulation fell yet again from 4.3 to 4.1 million between 2008 and 2009 (Canadian Film and Television Production Association (CFTPA) 2010). A slew of layoffs by Rogers at its Citytv stations in 2009 and 2010 (140 jobs), CTVglobemedia in 2009 (248 jobs), and Canwest in 2008 (500 jobs) and 2009 (an additional 15 percent cut in the workforce or 1,400 jobs) only seems to reinforce the view that a secular wave of destruction has pummeled the traditional media (Canwest 2009; Toughill 2009).

Broadcasters’ incessant pleas to the CRTC to shore up their supposed faltering economic base have been met with several modest initiatives, including the implementation of a “local programming improvement fund,” more flexibility for broadcasters to negotiate fee-for-carriage arrangements with cable and satellite distributors, permission to include advertising in video-on-demand services, and a willingness by the regulator to entertain the potential for all television distributors—including currently exempt internet service providers, wireless service providers, and content aggregators such as Apple, Google's YouTube, and Zip.ca—to be required to financially support Canadian content (Canadian Radio-television and Telecommunications Commission (CRTC) 2009c, 2010).1 At the same time, the regulator's decisions regarding “network neutrality” and media concentration have favored established telecom and media providers, on the dubious grounds that they possess the deep pockets and inclination to invest in network infrastructure and high-quality journalism and programming (Canadian Radio-television and Telecommunications Commission (CRTC) 2008, Canadian Radio-television and Telecommunications Commission (CRTC) 2009d). Clearly, the “media in crisis” argument is being mobilized, but policy responses thus far have been subdued relative to the anguish hanging over the press in the United States and television news in Britain or relative to the $850 million newspaper bailout in France in 2009 (Benkler, Faris, Gasser, Miyakawa, and Schultze 2010; Nichols and McChesney 2009; Scherer 2010).

It is one thing, however, to recognize that the media industries face tumultuous times but another altogether to see current conditions as cataclysmic (Picard 2009). In fact, notions that the media are in crisis must contend with the reality that they have grown immensely over the past 25 years, as Figure 6.1 demonstrates.2

Figure 6.1 indicates that the total telecoms and network media economy expanded enormously over this period. In real dollar terms adjusted for inflation, the size of the media economy in Canada expanded from $38 billion in 1984 to $56.6 billion in 2000 to $73.6 billion in 2008.3 Even after removing the wired and wireless telecoms sectors, the remaining seven sectors of what I call the network media industries—television, cable and satellite distribution, newspapers, internet access, internet advertising, radio, and magazines—expanded substantially from $21.4 billion to $32 billion between 2000 and 2008. Newspaper revenues have stayed flat; almost all sectors of the media have survived well (radio, television, magazines), while some have flourished (cable and satellite television); and internet access and internet advertising have exploded. The decline in wired telecoms from 2000 to 2008 is substantial, but not without precedent (e.g. 1984–92), and it has been offset by the immense growth in wireless and internet services. In fact, almost all new revenue from the latter services goes to incumbents: BCE, Telus, Manitoba Telecom Services (MTS), SaskTel, Rogers, Shaw, Quebecor, and Cogeco. These firms are not in crisis.

6.1 The growth of the network media economy, 1984–2008

CRTC, Communication Monitoring Report , 2009a and various years; Canadian Newspaper Association, Ownership of Canadian Newspapers , 2009 and various years; Internet Advertising Bureau, Canada Online Advertising Revenue Survey, 2009; Corporate Annual Reports.

Claims that television is in desperate straits typically highlight the relative decline of conventional advertising-supported television, where profits fell from 11 percent in 2005 to 5 percent in 2007 to zero in 2008. This argument is disingenuous. For one, it confuses short-term events with long-term patterns. Profits for conventional television hovered between 10 and 15 percent from 1996 to 2006 and have declined for only the 2 most recent years. In addition, revenues have been steady for the past half a decade and have not fallen except for a slight decline in 2008. Moreover, the television universe as a whole has grown enormously. New distribution channels, as well as cable and satellite television, pay-per-view, video-on-demand, the internet, and so forth, have proliferated and are exceptionally lucrative. There were 48 cable and satellite television services in 2000; today there are 189. Indeed, revenues for these services ($3.1 billion) in 2008 were nearly four times those of a decade ago and slightly less than those for conventional television (if the CBC's annual subsidy is included) (Canadian Radio-television and Telecommunications Commission (CRTC) 2004, Canadian Radio-television and Telecommunications Commission (CRTC) 2009a).

Overall, profits for specialty- and pay-television services have hovered between 21 and 25 percent annually since 2002—roughly two-and-a-half times the rate of profit for all industries as a whole and equaled by just three other economic sectors: banking (25.2 percent), alcohol and tobacco (23.6 percent), and real estate (20.9 percent) (Statistics Canada 2010a). Even at the height of the financial crisis in 2008 and 2009, specialty- and pay-television profits were 22 and 23 percent, respectively. Cable and satellite distributors are equally lucrative (Canadian Radio-television and Telecommunications Commission (CRTC) 2004, Canadian Radio-television and Telecommunications Commission (CRTC) 2009a). As a whole, the television universe has expanded from a $5 billion market in 1984 to $10.1 billion in 2000 and $13.9 billion in 2008 (see Figure 6.1). Thus, television is not in crisis but one of the fastest growing and most lucrative sectors of the economy!

The newspaper business offers the most challenging test to the arguments that I am making, but its current state is better described as a continuation of long-term trends, rather than a crisis. Picard (2009) and Goldstein (2009) argue that daily newspaper circulation has been in long-term decline relative to the total population in the United States, Britain, and Canada since the 1950s, partly due to the steady rise of new sources of news over this period (e.g. television beginning in the 1950s, cable news channels in the 1980s, and the internet in the 1990s). Measured in absolute terms, however, daily circulation in Canada rose until 2000, when 5 million copies were sold, before falling to 4.7 million in 2005 and 4.1 million in 2009 (CNA 2010; Goldstein 2009). There has been no downward spike in circulation attributable to the advent of the internet. In fact, there are indications that the tide is turning as internet newspaper readership begins to yield some new subscribers. The catch, of course, is that internet audiences are worth a tiny fraction of the value of “hard-copy” readers. Still, the Project for Excellence in Journalism (PEJ) lays a good part of the blame for the state of the press on a complacent industry that has been slow to adjust to the internet over the past decade (Picard 2009; Project for Excellence in Journalism (PEJ) 2009, Project for Excellence in Journalism (PEJ) 2010; Zamaria and Fletcher 2008).

Newspaper revenues in Canada have not plunged. They fluctuated between 1984 and 1992, grew steadily afterward from $3.9 billion (1992) to $5.7 billion in 2000, then fell to $5.5 billion in 2008. In addition, with operating profits of 12 to 15 percent between 2000 and 2008, newspapers are comparatively profitable outlets for investment (Statistics Canada 2010b). The profits for Torstar—owner of the Toronto Star and closest to a “pure” newspaper publisher in Canada—ranged from 16 to 18 percent annually between 2000 and 2005, then declined from 13 to 14.5 percent between 2006 and 2009. Looked at from a slightly different angle, however, the image of the press and media industries being in peril did have some basis in reality in recent years as net profits and return on equity plunged briefly for Astral (2009), Canwest (2008–9), Cogeco (2009), Quebecor (2007–8), and Torstar (2008). These are 5 of the top 10 media firms in the country, and therefore this is significant. Except for Canwest, however, the shock was short, sharp, and confined to 1 or 2 years between 2007 and 2009, depending on the firm.

Figure 6.2 illustrates the operating profit trends for the top eight firms in the network media industries from 1995 to 2009. As this figure shows, mid- and long-term profits for Canada's leading media companies have been high, not low. Moreover, it also indicates that the occasional woes of some media firms have been transitory and have coincided with the two economic crises of the past decade, suggesting that broad economic forces, not the internet, are the source of their problems. Indeed, recent troubles have been compounded by their close proximity to the crash of the telecom–media–technology (TMT) bubble between 2001 and 2003 (Picard 2009).

6.2 Big eight media companies’ operating profi ts, 1995–2009

Company Annual Reports ; Bloomberg Professional; Statistics Canada (2010a and various years), Financial and Taxation Statistics for Enterprises.

Clearly, the network media economy has not shrunk, but it has grown and consistently allowed companies to achieve well-above-average profits. The pleadings of the industry, however, begin to make a bit more sense once we realize that some of the overall growth that has occurred has been ambiguous in the sense that it has occurred not in terms of money but time. Indeed, “total media time” for internet users (over three-quarters of the population) surged from 46 to 62 hours per week between 2004 and 2007 (Zamaria and Fletcher 2008). Canadians have long been intensive media users, and this is still the case, as their use of the internet, online video, social networking, and blogs exceeds that of their counterparts in Britain, France, Germany, and the United States, although the growth of the media economy “in time” is also visible in these and other countries (Benkler 2010; “Changing the Channel” 2010; comScore 2009). A steady rise in spending on connectivity further highlights this trend, while spending on media content and cultural goods, conversely, has stayed remarkably flat for the past quarter of a century, as Figure 6.3 shows.4

6.3 Relatively constant media expenditures and “bandwidth kings,” 1982–2008

Statistics Canada (2008 and various years), Survey of Household Spending (Catalog No. 62M0004XCB). Ottawa: Statistics Canada.

The fact that spending on content and cultural goods in 2008 was the same as it was in 1982 (2.4 percent) suggests that people are using “bandwidth” and “connectivity” for their own purposes rather than consuming more commercial media content. If so, bandwidth, not content, may be king in the network media ecology. Such trends also coincide with the growing visibility of “mass self-expression” (Castells 2009) and the “social economy of information” that has been enabled by distributed networked media (Benkler 2006). This is an important point because it helps to illuminate the “multiple economies” of the network media ecology. As Aristotle observed over 2,000 years ago, the production of things, in this case communication and media goods, does not have a singular purpose. Instead, we create things for ourselves (self-production), for exchange (markets), and for others (the community). It may be this reality that is essential to grasping the relationship between the commercial network media economy, mass self-expression, and the social economy of information. In other words, the growth of self-production and the social economy of information are likely behind traditional media players’ concerns that they are being deprived of their “fair share” of the “new media economy.” But if Aristotle was right, then the greater mediation of everyday life has only brought to the fore the multiple economies of cultural production that were already there. While this may be a difficult concept to wrap our minds around, Wikipedia can usefully be seen as the poster child for some of its core values. The collaborative online encyclopedia was launched in 2001 with 800 “stubs” to be developed by volunteer contributors. By 2010, it held more than 15,000,000 articles written in 270 languages by 91,000 regular contributors—all based on values of “self-production,” shared editing, and an alternative model of property, that is, the GNU Free Documentation License, which lets everybody use one another's work and even download the entire database for free. Canadians, on a per capita basis, are generous contributors to the venture (Wikipedia 2010).

All in all, these trends express the multiple economies of digital capitalism, and while nestled firmly within the “belly of the beast,” so to speak, they should not be conflated with the logic of market exchange. The key point is that these trends add to the media economy, rather than taking away from it. People are using traditional media somewhat less, but this applies to all media users. As Zamaria and Fletcher (2008) observe,

Online activities appear to supplement rather than displace traditional media use. In general, new media … activities are being added to an existing media diet that includes substantial time spent with conventional media, even for youth and younger internet users. (Zamaria and Fletcher 2008: 9)

The Canadian television industry has been slow off the mark in coming to terms with these new realities, but this may be beginning to change. Perhaps this complacency is not all that surprising, given that only 3 percent of television viewing occurs on the internet, while mobile devices account for much, much less (CBC/Media Technology Monitor (MTM) 2009; “Changing the Channel” 2010). Yet “digital download stores” (e.g. Apple), content aggregators (e.g. Google's YouTube), and peer-to-peer networks (e.g. BitTorrent) are expanding rapidly, albeit from a low base, and a flurry of activity is occurring that will shape the future of the media. Indeed, there have been many attempts to transform nascent trends into viable services. The BBC's iPlayer, created in 2008, now obtains 70,000 views a day, and Hulu, the jointly owned internet television service of News Corp., Disney, and NBC-Universal, is now one of the leading online video services in the United States. None of these ventures, however, is profitable, others have folded (Joost), and still others are expected to be short-lived (Netflix) (Canadian Broadcasting Corporation (CBC)/Media Technology Monitor (MTM) 2009; Canadian Newspaper Association (CNA) 2009). Broadcasters in Canada finally joined the fray in 2007/8 when they began their own substantial video portals in a sustained way (e.g. CBC.ca, CTV.ca, and GlobalTV.com) and started to offer programs through Apple's iTunes store and YouTube. Behind-the-scenes clips also increasingly accompany scheduled fare, although imported programs such as “The O.C.” (aired by CTV) are more likely to use Facebook, YouTube, and MySpace pages than Canadian programs. “Degrassi: The Next Generation” (CTV), “Star Académie” (Quebecor's TVA), and the independently produced “Sanctuary” are notable, but extremely rare, exceptions (Grant 2008; Miller 2007; Nordicity 2007).

The main thrust, however, has been to prevent the rise of the internet as an alternative medium for television. To this end, telecom and cable providers restrict peer-to-peer traffic and regulate their networks with a heavy hand, as the CBC discovered when Bell hobbled its attempt to use BitTorrent to distribute an episode of “Canada's Next Great Prime Minister” in 2008. Geo-gating and content rights management technologies are also being used to shore up “national borders.” The US cable companies’ “TV Everywhere” strategy is an excellent example of this. Created in 2009, it was quickly imported by Bell and Rogers as the basis for their own broadband video portals. Broadcasters have offered more programs to these services in response but, as in the United States, exclusively to existing cable and satellite subscribers. Geo-blocking and content rights management technologies are also being used to preserve the window-based model that has forever been central to the television and film industries, where the release of films and television programming is staggered over time and across territorial borders in order to maintain separate markets for the theater, specialty and pay TV, DVD, conventional television, and so on. Deals have been struck with Google, Apple, ISPs, wireless service providers, and so on, but they have been hedged by broadcasters’ demand that the CRTC require all of these “new media” providers to contribute to Canadian television production funds (Canadian Radio-television and Telecommunications Commission (CRTC) 2009c; Grant 2008; Miller 2007). Of course, Google Inc. (2009) and Apple Inc. (2008), with ISPs at their side, staunchly oppose such a move, arguing that they offer additional channels of distribution that benefit not just traditional commercial media providers but independents and the hordes of people involved in mass cultural production.

Financialization and consolidation of the network media industries

Instead of investing in cutting-edge network infrastructure and adapting to new media forms, incumbent media and telecom firms have mostly spent the past decade and a half amalgamating and subsequently retrenching under the weight of fairy-tale levels of capitalization, enormous debt, and dubious business strategies (Benkler 2010; OECD 2008). The process of consolidation is usually explained as a response to new digital technologies, permissive regulation, and globalization, but the financialization of media is another phenomenon that has arguably been even more important and understudied. Kevin Phillips (2009) defines financialization as a function of the swelling role of the financial sector in the United States from 11 to 12 percent of GNP in the 1980s “to a stunning 20–21 percent … by 2004–2005 … while manufacturing slipped from about 25 percent to just 12 percent” (Phillips 2009: xiii). Duménil and Lévy (2005) highlight “the tight and hierarchical relationship between industrial capital and banking capital” as its signature feature. Foster and Magdoff (2009) define it as the growing reliance of the economy on the financial sector in response to general economic stagnation and overproduction—the “normal state of the monopoly capitalist economy” (Foster and Magdoff 2009: 14) but also a source of chronic instability. Crotty (2005) and Shiller (2001) argue that such processes have been pronounced in the telecom, media, and internet sectors, with detrimental effects (“The Great Telecoms Crash” 2002).

The financialization of the media and telecom industries also occurred in Canada in the latter half of the 1990s, as investment poured into mergers and acquisitions, yielding huge media conglomerates with unheard-of capitalization levels and enormous debts. Figure 6.4 reveals the spike of acquisitions in the telecoms and media industries between 1996 and 2000 and again, albeit more modestly, from 2003 to 2007 as well as the sharp rise in the market capitalization of the leading media firms in Canada.5

6.4 Mergers and acquisitions in network media industries, 1984–2009

Thomson Financial 2009; FPInformart 2010; Bloomberg Professional.

Media transactions alone in 2000 ($7.1 billion) were more than eight times greater than 5 years earlier, while telecoms and internet acquisitions were more than 10 times that amount. Indeed, primed by the easy cash of the TMT boom, media convergence, and the permissive policies of the Liberal government, media and telecom companies went on a buying spree. BCE acquired CTV and The Globe and Mail ($3.4 billion) in 2000, and Quebecor bought Vidéotron, TVA, and the Sun “Media” newspaper chain ($7.4 billion) between 1998 and 2001, making it Quebec's biggest media conglomerate. Canwest purchased Western International Communications ($800 million) in 1998, followed 2 years afterward by the Hollinger newspaper chain and the National Post ($3.2 billion). The capitalization levels of the largest eight publicly traded media firms soared alongside these trends, from $8.5 billion in 1995 to $25 billion in 2000. As the TMT bubble collapsed, however, their capital structure tumbled by nearly 45 percent, while rival telecoms and internet firms created in the late 1990s went bankrupt or “ceased to exist” altogether (CRTC 2002: 21).

This caused a lull of activity, but by 2003–4 the process regained steam. Already struggling to bring its debt under control, Canwest sold several smaller newspapers to Transcontinental and Osprey Media (2002–3). With financing from the US-based private equity fund Providence Equity Partners, Craig Media expanded its modest A-Channel and created a new station, Toronto One (2003). The effort, however, failed; Craig was forced into bankruptcy, Toronto One sold to Quebecor, and the A-Channel system bought by CHUM (2004)—the fifth largest broadcaster in Canada and owner of Citytv. That too was short-lived, however, and the debt-laden CHUM was sold after its founder's death to Bell Globemedia in 2006 ($1.6 billion). But even Bell Globemedia was in disarray, and the company abandoned its convergence strategy by scaling back its stake in CTV and The Globe and Mail (from 71 to 15 percent) in late 2006 and selling its stake in TQS the next year. A re-branded CTVglobemedia emerged from this restructuring with the Thomson family at the helm (40 percent) and the Ontario Teachers’ Pension Fund (25 percent), Torstar (20 percent), and Bell (15 percent) all holding minority interests.6 The last step in this tangled web of affairs occurred as the CRTC allowed CTVglobemedia to keep the A-Channel stations as well as the specialty- and pay-television services that it had acquired from CHUM but forced it to sell the Citytv stations (Canadian Radio-television and Telecommunications Commission (CRTC) 2006). Rogers snapped them up within the year ($375 million).

Three other transactions occurred in 2007 that set the course for the rest of the decade. Astral Media bought Standard Broadcasting. Osprey was sold to Quebecor. Lastly, Canwest and the New York–based investment bank Goldman Sachs bought Alliance Atlantis for $2.3 billion. The CRTC blessed this transaction based on the fiction that Canwest maintained ownership control of the entity as required by the Broadcasting Act's foreign-ownership rules, despite the fact that Goldman Sachs held two-thirds of the equity in the acquired specialty- and pay-television services, and with few qualms for the rise in concentration the deal entailed. Some argued that the huge debt levels involved would not be sustainable and that the increased media concentration that would result was unacceptable. This was all for naught, however, and Canwest's takeover of Alliance Atlantis gave it ownership of 13 specialty- and pay-television channels (such as BBC Canada, HGTV, National Geographic, and Showcase). Goldman Sachs assumed half the stakes in Alliance Atlantis’ highly touted “CSI” series (with Viacom/CBS holding the other half) as well as a 51 percent stake in its film and television production venture (Communication Energy Paperworkers 2007; Canadian Radio-television and Telecommunications Commission (CRTC) 2007; Goldstein 2007). All in all, media acquisitions neared their dot-com highs and the market capitalization of the leading eight media firms outstripped even the levels set in 2000 to reach $53.3 billion, but this figure, too, began to plummet with the onset of the global financial crisis of 2008.

The scale and speed of these events suggest that the media were swept up not only in the financialization of the economy but also on the cutting edge of this process. The intensity of investment driving media consolidation has been wholly out of proportion to the media industries’ weight in the “real economy.” The dynamics are also important because, as Picard (2002) notes, institutional investors prefer firms that possess a reach across many media sectors and a deep treasure trove of content. The outcomes yielded a half-dozen media conglomerates and four other significant entities that now form the “big 10” media firms in Canada, as ranked by market capitalization and revenues, outlined in Table 6.1.7

Table 6.1 highlights the sheer size of the leading media conglomerates, but as Terry Flew (2007) states, this tells us little about whether media markets have become more or less concentrated over time. Others also argue that media ownership no longer really matters because most media companies are now owned by shareholders and controlled by managers. As Demers and Merskin (2000) argue, the managerial revolution signals the death knell of the media mogul, and this is a good thing because corporate media managers do not have ideological axes to grind, but they do have deep pockets and the expertise needed to support better media performance and higher quality journalism than owner-controlled companies. Others go even further and argue that the vast expansion of the television universe, explosive growth of the internet, and the rise of YouTube, MySpace, Google, and so on render worries about media concentration anachronistic. Indeed, Benjamin Compaine (2001) assures us that “the democracy of the marketplace may be flawed, but it is getting better, not worse.” Finally, Kenneth Goldstein (2007) argues that the issue is not concentration but the fragmentation of audiences. Audience fragmentation is a problem because it threatens to yield a tower of babble as strident voices swamp civil discourse and the mutual understanding that democracies depend on to survive (Sunstein 2007).

The upshot from all of this is that the media are more competitive and fragmented than ever. Or are they? The fact that all of the “big 10” media firms are owner controlled, except Bell and the CBC, suggests that Demers and Merskin's (2000) case does not fit the Canadian context. Furthermore, their data from the early 1990s highlight a process of steady, incremental change, whereas the financialization thesis reveals a sharp, dramatic bout of transformation beginning in the latter half of the decade that led to a sharp rise in concentration, albeit without substantially altering the structure of media ownership.

To help determine whether the media have become more or less concentrated, I collected data from company reports, the CRTC's Monitoring Reports, industry associations, and other sources for each sector of the network media between 1984 and 2008 (see Note 2). Data on the number of media owners and market share were gathered at 4-year intervals and then analyzed using concentration ratios (CR) and the Herfindahl–Hirschman Index (HHI). The data were then pooled to create a portrait of the network media. The CR method adds the shares of each firm in a market and makes judgments on the basis of widely accepted thresholds, with 25 percent market share by three firms (C3), 50 percent or more by four firms (C4), and 75 percent or more by eight firms (C8), indicating high levels of concentration. The HHI squares the market share of each firm and then adds them to arrive at a total that will range from 100 (i.e. 100 firms each with a 1 percent market share—perfect competition) to 10,000 (one firm with 100 percent of a market share—monopoly) (Noam 2009). The US Department of Justice as well as Canadian competition authorities use the following thresholds to help determine whether markets are more or less concentrated:

Overall, the “big 10” media firms’ share of all revenues in 2000 and 2008 hovered around 71 to 72 percent in both years—a substantial rise from 61 percent in 1996 and a still further increase from 54 percent in 1992. Taken individually, each sector was highly concentrated in 2008 on the basis of the CR method (Figure 6.6). The picture according to the HHI is slightly more mixed. Cable and satellite distribution (2,094.7), conventional television (1,929), and newspapers (1,819) were highly concentrated in 2008, while specialty- and pay-television services (1,588) and radio (1,151) were moderately so. Only internet access (926) and the network media as a whole (616) were unconcentrated. The pooled network media score rose steadily to 667 in 2000, where it stayed until declining to its current level after BCE and Cogeco scaled back their convergence strategies in 2006–7 and new players (the Thomson family and Remstar, respectively) filled the breach. As an aside, Thomson's takeover of Reuters—the world's largest news and financial information agency—2 years later transformed CTVglobemedia into a subdivision of the eighth largest global media empire. In short, media concentration has grown in specific sectors and plateaued at historically high levels after 2000 for the network media as a whole, with the sharpest increase occurring after 1996. Figure 6.5 and Figure 6.6 illustrate the trends.

6.5 Network media industries concentration ratios (CR), 1984–2008

6.6 Network media industries concentration (HHI), 1984–2008

In some ways, this portrait understates media concentration. The national measure used does not fully capture the extent to which, for instance, Quebecor dominates the French-language media. The shares of media conglomerates in the English-language market would be higher as well if this factor was taken into account but not to the same degree. A web of alliances between key players also blunts the sharp edge of competition. The Globe and Mail and Torstar, for instance, are rivals in some markets, but the latter has a stake (20 percent) in CTVglobemedia and a director on its board. Rogers owns 20 percent of Cogeco and has a director on its board, while CTVglobemedia, Rogers, Quebecor, Shaw (Corus), Astral, and Cogeco jointly own a dozen cable and satellite television channels (Canadian Radio-television and Telecommunications Commission (CRTC) 2009a).

Many argue that the internet obviates such concerns, but the internet is not immune to consolidation. Roughly 94 percent of Canadian high-speed internet subscribers gain access from incumbent cable and telecoms providers (Canadian Radio-television and Telecommunications Commission (CRTC) 2009a). Google's growing dominance of the search engine market further illustrates the trend, where it accounts for 81.4 percent of searches. Trailing far behind are Microsoft (6.8 percent), Yahoo! (5 percent), and Ask.com (4 percent), yielding a CR4 of 97 percent and an HHI of 6,713—far outstripping the standards of concentration outlined earlier. Social networking sites display a similar trend, with Facebook accounting for 63.2 percent of time spent on such sites, trailed by Google's YouTube (20.4 percent), Microsoft (1.2 percent), Twitter (0.7 percent), and News Corp.'s MySpace (0.6 percent) (Experien Hitwise Canada 2010). Again, the CR4 score of 86 percent and HHI score of 4,426 reveal that social networking sites are highly concentrated in Canada. Google's dominance in the search engine market and pivotal place in social networking help to explain why it is such a powerful force in defining the relationship between “old” and “new” media.

The number of websites, blogs, and so forth continues to proliferate, but the amount of time that internet users spend on the top 10 sites has nearly doubled from 20 percent in 2003 to 38 percent in 2008 (comScore 2009). In Canada, 8 of the top 15 internet news sites belong to traditional media firms: cbc.ca, Quebecor, CTV, The Globe and Mail, Radio-Canada, the Toronto Star, Canwest, and Power Corporation; CNN, BBC, Reuters, MSN, Google, and Yahoo! cover almost all of the rest (Zamaria and Fletcher 2008). A similar pattern prevails in the United States (Project for Excellence in Journalism (PEJ) 2010), and Chris Paterson (2005) argues that concentration is even higher, given that 40 to 60 percent of foreign stories published by internet news sites originate from Reuters or Associated Press.

The problem, therefore, is not the “fragmentation” of audiences, as Sunstein (2007) and Goldstein (2007) fear, but the concentration of attention. While Noam (2009) argues that this reflects the continued power of money and brands in structuring the internet, Benkler (2006) argues that the concentration of attention on the internet reflects the workings of “power law distribution.” According to this idea, most networks—communication, social, and transportation—have just a few nodes, blogs, websites, and so on that attract most of the traffic, attention, people, and so on, after which a steep drop-off occurs, followed by a “long tail” that accounts for ever tinier slices of attention. Benkler believes that this could be a good thing if communication networks remain open and processes of communication and social interaction, versus power and money, function to foster understanding out of the “tower of babble.” While strongly opposed to the trend toward closed and controlled communication networks, he sees popular sites arising out of the internet's hyperlinking structure, where relevance, credibility, trust, and communities of interest help to organize attention on the internet. The outcome is not ideologically sealed “echo chambers” and a “tower of babble” but a substantial improvement in understanding and knowledge relative to the standards set by the “industrial media” of the past. The upshot, however, is not that this diminishes worries about concentration but that the suppleness of these structuring practices makes maintaining open networks and curbing the influence of money, power, and “business models” over network media more important than ever.

Debt, delusions, and the crisis facing the network media ecology

There is a giant, tangled paradox in all of this in that while media conglomerates have become larger and continue to be very profitable, and markets have become more concentrated, there are obvious signs of disarray all about us. Why? In addition to the impact of two economic crises and excessively capitalized corporate structures, part of the answer lies in the irony that convergence was embraced in Canada precisely as it was losing its luster elsewhere. Indeed, by the turn of the twenty-first century, all the major regional telecom firms in the United States —SBC, Bell Atlantic, US West, and BellSouth—had drawn back from the close alliances they had forged with television and film studios over the course of the past decade. Microsoft has also wound down the stakes in cable and telecom systems WebTV and MSNBC that it acquired in the late 1990s, while its CEO, Steve Ballmer, lamented entering the media and telecoms businesses directly as early as 2001 (Olsen 2001). AT&T sold off all of its cable interests in 2003, just 5 years after embracing the “convergence strategy,” and was sold to SBC in 2005. Time Warner is, ironically, the poster child of the failures of convergence, having dropped AOL from its moniker in 2003, sold the Warner Music Group in 2004, labored under fraud charges for years until settling with the Securities Exchange Commission in 2005, and spun off its cable systems in 2008. Indeed, in 2009, its market value stood at $78 billion—about a fourth of its value in 2000, when the merger between AOL and Time Warner was the biggest in corporate history and supposedly a sign of things to come (Time Warner 2009). The collapse of KirchMedia in Germany, the travails of ITV in Britain, and the continued dismantling of Vivendi in France are further examples of crestfallen media conglomerates formed amid the fin de siécle convergence hype.

So too have the “field of dreams” visions of convergence floundered in Canada. BCE's capitalization soared from $15 billion in 1995 to $89 billion in 1999 but plunged to $26 billion 3 years later (Bloomberg 2010). By the time the renamed CTVglobemedia was sold in 2006, it was worth roughly half of the $4 billion assigned to the venture 6 years earlier (BCE 2003, BCE 2007; Canadian Radio-television and Telecommunications Commission (CRTC) 2006; see Note 6). “Broadband multimedia trials” continue to come and go at other regional telecom providers in Canada, but they play tiny roles in the media. Canwest's collapse in 2009–10, the sale of its 13 dailies and the National Post to “old hands” in the Canadian newspaper business (Paul Godfrey) backed by a private equity fund in the United States, and the tentative sale of its television operations to Shaw provide yet another example of consolidation gone bad. Quebecor has also struggled with enormous debt, but it has enjoyed considerable success presiding over the star system in Québec, with newscasts that rival those of the CBC's Réseau de l'information (RDI) and popular programs such as Star Académie. Quebecor's case also reveals a striking feature that applies to all the “big 10” media firms: namely, that if profitability is a good proxy for success, then they have been very successful except for the sharp but short shocks felt by some media companies after the crash of the TMT bubble and the financial crisis of 2008 (see Figure 6.2). Even Canwest has been profitable, sometimes extremely so, every year since 1991 in terms of operating profits and all but 2 years (2004 and 2008) in terms of return on equity. The industry's favorite “bragging rights” measure of profit—earnings before interest, taxes, depreciation, and amortization (EBITDA)—also reveals that its profits were in the low- to mid-20 percent range for the past decade before falling to 16 percent on the eve of its demise in 2009. How is it possible for highly profitable firms to be in such disarray? The answer is debt. Figure 6.7 and Figure 6.8 put the issue of debt in historical perspective.

6.7 Leading media firms and debt, 1990–2008

Company Reports; Bloomberg Professional.

6.8 Leading media firms and debt-to-equity ratios, 1990–2008

Company Reports; Bloomberg Professional.

As Figure 6.8 illustrates, the mountain of debt acquired by the eight major media companies soared from $8.8 billion in 1995 to $24.8 billion in 2001 and continues to hang about the industry to this day. There are no hard-and-fast rules as to when there is too much debt. However, Figure 6.8 demonstrates a clear break with historical norms after the mid-1990s, although Rogers and Quebecor were already pacesetters for the trend to come. Likewise, there are no fixed rules regarding appropriate debt-to-equity ratios; however, historical norms and informed views provide a useful guide. Before 1996, most firms maintained a debt-to-equity ratio of less than 1, and this is still the case for Astral and Torstar, which are considered to be fiscally conservative entities. The Bank of Canada (2009) gives a sense of appropriate debt levels when it applauds the decline of corporate leverage from over 1 in the early 2000s to roughly 0.85 in 2009, while urging an even greater return to corporate fiscal probity. William Melody (2007b) argues that a debt-to-equity ratio above 80 percent “is unsustainable in the long term [and that] running a firm's debt up to an unsustainable level … is simply acquiring short-term cash at the expense of long-term development and increased financial risk and costs” (Melody 2007b: 2).

According to this standard, most major media firms in Canada throughout the 2000s, except Astral, Torstar, and to some extent BCE, have been bloated corporate entities, run as “cash cows” rather than companies capable of sustained investment and innovation. Indeed, while the cost to specific firms has been high, the cost to the economy, society, journalism, and the network media ecology has been higher, as the following discussion illustrates. At the end of the 1990s, a slew of new rivals in telecoms and the internet did lead to an unprecedented surge of investment in network infrastructure that put Canada near the top of “global league” rankings for basic communication and broadband internet services. Most of those rivals vanished long ago, however, and their facilities were absorbed by the incumbents (Canadian Radio-television and Telecommunications Commission (CRTC) 2002). The result has been stagnating investment in network infrastructure and weak competition, buttressed by weak regulation and policies. As a result, in the past decade, Canada fell to the middle or bottom of the rankings relative to other OECD countries in terms of the state of high-speed broadband networks; wireless connectivity; bundled telephone, cell phone, television, and internet services; and public Wi-Fi services (Benkler 2010). Figure 6.9 charts long-term investment trends in network infrastructure.

6.9 Stagnating network infrastructure investment, 1984–2009

Statistics Canada (2010b), Capital and Repair Expenditures—Broadcasting and Telecommunications (2001–2009) Cansim Table 029-0013 and Statistics Canada (2010c) Capital and Repair Expenditures on Construction and Machinery—Broadcasting and Telephone (1984–1993), Table 029-0033; CRTC (2002). Status of Competition in Canadian Telecommunications Markets.

Spending on conventional television news and programming shows similar trends, while expenditures on foreign (mostly United States) programs have risen sharply to feed the expanded fleet of cable and satellite television services. Indeed, the trends shown in Figure 6.10 comport with many studies that show that commitments to domestic television production continue to fall short of the pledges made by companies during regulatory reviews and when their acquisitions were approved (Auer 2007; McQueen 2003). Total television production grew slightly from $1.8 billion in 1998 to $2 billion a decade later in response to the growth of cable and satellite television channels, although full-time production jobs fell slightly (Canadian Film and Television Production Association (CFTPA) 2010). This parsimonious approach, however, has come back to haunt the industry by making it more vulnerable to rights holders who have no qualms about playing off “old” and “new” media providers against each other for television and internet distribution rights, while leaving broadcasters badly equipped to benefit from the huge growth of television worldwide (Miller 2007; Grant 2008). In other words, this is one more small reason for the current woes facing some media firms.

6.10 Television program expenditures, 1996–2009

CRTC, Communications Monitoring Report, various years; Statistics Canada (2007), Television broadcasting industry, by North American Industry Classification System (NAICS), annual—Survey of Program Details, 1995–2007.

Quebecor and Canwest are especially notorious for their “slash and burn” approach to the restructuring that inevitably follows the consolidation of ownership. Throughout the past decade, they have failed to meet pledges for television program production, eliminated journalists, centralized operations, and lost editors in chief and publishers under clouds of acrimony (Jim Jennings at the Toronto Sun; Russell Mills at the Ottawa Citizen) (Soderlund and Hildebrandt 2005). To be sure, CTVglobemedia and Torstar have also sought to revamp the conditions of media work, albeit with a little more finesse. Indeed, 281 positions were cut at CHUM on the day it was acquired by CTVglobemedia, while another 248 jobs were cut across the operations of the latter in 2009 (Toughill 2009). In contrast, Canwest riled journalists and the public alike by withdrawing from the Canadian Press news service and initiating its national editorial policy, a move that ultimately collapsed under the weight of its own stupidity (Soderlund and Hildebrandt 2005). Canwest also cut the number of its foreign news bureaus from 11 in 2000 to just 2 a few years later—exactly the opposite of what Canadians need as the country becomes deeply embroiled in complex and contested world affairs and military conflicts. The CBC, in contrast, has 14 foreign bureaus. In addition, just as Canwest was lining up its bid with Goldman Sachs for Atlantis Alliance, it eliminated 300 media jobs in the fall of 2007 and centralized its news operations in its Winnipeg, Vancouver, Montréal, and Toronto facilities. Despite all of this flailing about, uncontrolled debt finally triggered the fall of Canwest in 2009–10.

Similar forces have continuously pushed Quebecor to the brink but without ultimately pushing it over. Nonetheless, massive debt caused Quebecor to delay investment in its cable networks in the early 2000s (Marotte 2000) and to push through aggressive changes to working conditions in the face of staunch opposition from journalists and other media workers. The Ryerson Review of Journalism refers to Quebecor's “hatchet job” at The Sun in 2006, with another 120 jobs slashed and its production and printing operations centralized—a move that led Jim Jennings, the internationally experienced editor in chief of the Toronto Sun, to resign (Magarrey 2006). Such conditions have created conflict between media workers and executives of the likes not previously seen in Québec or Canada. There have been at least nine lockouts in the past decade at Quebecor operations, including a protracted 15-month standoff at Le Journal de Québec that ended only after the Québec Commission des Relations du Travail (2008) ruled that its activities were illegal. Unbowed, Quebecor Inc. (2009) locked out reporters at the Journal de Montréal a few weeks later, arguing that newspapers everywhere were “in a state of crisis, given that the entire world is experiencing an economic crisis and is eager to embrace change.” Yet such opportunistic claims ignore the fact that, far from being innocents caught up in events not of their making, Quebecor, Canwest, Cogeco, Bell Globemedia, and so on took the lead in fostering the financialization of the media to begin with. It is this reality that has come back to haunt them, while others are left to grapple with the underdevelopment of the network media system that has followed.

Concluding comments

Ultimately, this chapter has shown that the network media ecology has become larger and, by and large, remains highly profitable. The declining costs of information creation and distribution have yielded important new players and rendered the multiple economies of the network media ecology more visible. These same considerations, however, have also amplified economies of scale and scope, leading to greater concentration and the rise of media conglomerates. Google's dominance of search activities and its sizeable stake in social networking sites alongside Facebook also shows that the internet is not immune to consolidation.

Yet the “fly in the ointment” from the perspective of the media industries is that while the cost of reproducing the immaterial stuff of information may be zero in a hypothetical world, this potential is difficult to achieve in practice. The OECD's observations about the music industry are relevant to most media on this point:

Contrary to earlier expectations, distribution of digital music is complex and far from costless … [and] requires … the digitalization of content, the clearing of rights, … online music storefronts, secure billing systems and new digital intermediaries (e.g. digital rights clearance, software such as Windows DRM, online billing). (OECD 2008: 269)

To put this in more familiar terms to media scholars, different media work by different rules, and these distinctions are not easily reconciled within a single firm (Garnham 1990; Miège 1989). Mediation is a constitutive element of modern societies and economies that is magnified, not diminished, by communications media (Calhoun 1992). This also helps to explain why Google stands midstream between the “new” and “old” media. It furthermore reminds us, as Bernard Miège (1989) observed long ago, that the distinctive qualities of media and cultural activities can and often do throw up obstacles to the “capitalization of the cultural industries.” The financialization of the media and the formation of media conglomerates according to the “slick rationality” of synergies ignored such realities, but the folly of doing so has been laid bare. To grasp contemporary conditions, it is essential to pay attention to this dialectical interplay between efforts to expand and accelerate the circuits of capital accumulation, on the one hand, and the distinctive aspects of media and cultural goods, on the other, as well as to the recursive effects of “discursive models” on the worlds that they represent and strive to create. These are also key elements for a critical cultural political economy of the media formulated along the lines that I have begun to sketch out in this chapter (Jessop 2008; Sayer 2001; Thompson 2010a).

In the end, we can conclude that there are no clear cases in which specific media sectors are “in crisis,” although the two major global economic crises of the twenty-first century have dealt punishing blows to some media conglomerates. In fact, at the core of the network media industries are a number of stumbling media behemoths that are ill-equipped to create the kind of open, digital network media system needed for the twenty-first century. Canwest is the poster child of the bankrupt media conglomerate in Canada, but others such as TQS, Craig Media, and CHUM demonstrate the stern lessons of hubris, empire-building, and debt. Add Bell Globemedia's retreat from convergence and the perennially indentured state of Quebecor, Rogers, and Shaw to this portrait, and it is abundantly clear that media conglomerates can, and sometimes do, fail. Ultimately, if free and open media really are essential to democracy, then surely we cannot let the fortunes of the latter hinge any more than they already have on those who have done so much to drive the current media system into the ground.