Canada’s news­pa­pers need a bet­ter govern­ment re­la­tions strat­egy.

Investment Executive - - FRONT PAGE - BY GORD MCIN­TOSH

there was a time, not too long ago, when own­ers of Cana­dian news­pa­pers could sim­ply pick up the phone and call Ot­tawa to get what they wanted, as the Southam fam­ily did when Lester Pear­son’s govern­ment agreed to ban for­eign own­er­ship of Cana­dian dailies in 1963.

Those days are gone, as the coun­try’s news­pa­pers just found out when they sent a brief that asked for fed­eral help in stay­ing alive. Not only did the pa­pers not suc­ceed, they had to en­dure the hu­mil­i­a­tion of be­ing called an in­dus­try “no longer vi­able” by Mélanie Joly, Min­is­ter of Cana­dian Her­itage.

News­pa­pers Canada (now Me­dia Canada) closed its Ot­tawa of­fice years ago and the in­dus­try has acted like lob­by­ing is be­neath it. But, to be a favoured in­dus­try, you have to be a player in Ot­tawa.

All gov­ern­ments deny pick­ing win­ners and losers in the private sec­tor. Then, those same gov­ern­ments set about pick­ing win­ners and losers and de­cid­ing who of­fers strate­gic value if cod­dled.

Just ask Bom­bardier Inc., which has been the ben­e­fi­ciary of sig­nif­i­cant largesse by suc­ces­sive gov­ern­ments. Or ask Boe­ing Co., which is spend­ing a for­tune on ad­ver­tis­ing to re­mind us of the firm’s long love of Canada and all the Cana­di­ans it em­ploys, all in an ef­fort to get back into Ot­tawa’s good graces after the C-se­ries trade com­plaint.

Or Net­flix Canada, which prob­a­bly de­serves a prize for most cre­ative tax avoid­ance in its re­cent deal with Her­itage Canada to spend $500 mil­lion on Cana­dian con­tent over five years as part of Ot­tawa’s much hyped strat­egy for a cre­ative econ­omy.

As an im­plied part of that deal, Net­flix Canada won’t have to re­mit GST or HST col­lected from con­sumers. The con­sumers will bear re­spon­si­bil­ity to re­mit GST or HST when they down­load from Net­flix.

The com­mon es­ti­mate is that if Net­flix was re­quired to re­mit th­ese taxes, it would be send­ing Ot­tawa $50 mil­lion a year. That’s a cozy re­la­tion­ship to have with a govern­ment.

The pre­vi­ous govern­ment con­sid­ered its friend­ship with the oil and gas sec­tor to be so im­por­tant that the phone lines were per­pet­u­ally burn­ing be­tween Ot­tawa and Cal­gary. We will never know the ex­tent of that con­nec­tion be­cause the Harper govern­ment put a clause in the Lob­by­ing Act that states that cor­po­rate ex­ec­u­tives who speak to govern­ment as in-house lob­by­ists don’t have to reg­is­ter as lob­by­ists un­less they spent more than 20% of their time lob­by­ing — a ridicu­lously high thresh­old. As a re­sult, regis­tra­tion of in-house cor­po­rate lob­by­ists ef­fec­tively be­came vol­un­tary and there’s lit­tle pub­lic record of the Harper govern­ment’s deal­ings with the oil and gas sec­tor — or any other.

This current govern­ment loves any­thing dig­i­tal or in­volv­ing ar­ti­fi­cial in­tel­li­gence (AI). Sev­eral top aides have been re­cruited from Google or Face­book Inc. For ex­am­ple, Les­lie Church, chief of staff for Joly, came from Google Canada.

This is why Prime Min­is­ter Justin Trudeau seems to love to have his pic­ture taken with ex­ec­u­tives in the dig­i­tal or AI in­dus­tries. And Trudeau’s govern­ment is in the process of giv­ing $950 mil­lion to sup­port “su­per­clus­ters” of com­pa­nies that will form in­no­va­tive part­ner­ships and re­new the econ­omy.

And, of course, the prime min­is­ter found the time to phone Jeff Be­zos to tell the head of Ama­zon.com Inc. how much Canada would love to be the lo­ca­tion of the com­pany’s sec­ond head­quar­ters.

All gov­ern­ments like to cosy up to the sec­tors they think can help their eco­nomic and po­lit­i­cal agen­das. And sec­tors with some­thing to gain love to cozy up right back.

Th­ese re­la­tion­ships also are a way of val­i­dat­ing a po­lit­i­cal brand. If a govern­ment brands it­self as in­no­va­tive, politi­cians must be seen with play­ers the pub­lic re­gards as in­no­va­tors — just as the last time any politi­cian had a photo op with any­one from Sears Canada Inc. prob­a­bly was a very long time ago.

In Wash­ing­ton, D.C., de­spite U.S. Pres­i­dent Don­ald Trump’s anger with sev­eral high-tech en­trepreneurs, Sil­i­con Val­ley has been sup­plant­ing Wall Street as key pol­icy in­flu­encers. The same thing is hap­pen­ing in Ot­tawa.

As th­ese com­pa­nies are emerg­ing as mo­nop­o­lies that en­joy lower taxes, Bay Street and Cana­di­ans should be watch­ing.

As for Canada’s be­lea­guered news­pa­pers, they need a new govern­ment re­la­tions strat­egy, one that shows how they can con­trib­ute to a dig­i­tal econ­omy in­stead of just stick­ing their hand out.

Gov­ern­ments like to cozy up to sec­tors they think will help their agen­das

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