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Competition vs capitalism in Canada

An interesting story in The Tyee that picks up on evidence from the Conrad Black Trial (from a story in the Globe  as blogged here), and runs with it. It is a telling insider story, one that nicely clears up the difference between the notion of competitive markets and the real world of capitalism and Big Media conglomerates:

How Black and Asper Plotted to Control Canadian News Biz

By Marc Edge

Among other things — high drama, low journalism — Conrad Black’s fraud trial in Chicago has provided a rare inside glimpse into the divvying up of much of this country’s news media seven years ago.

Thanks to the openness of the U.S. justice system, much of Black’s back room dealings with the late Izzy Asper have been uploaded for all to see. In contrast to the Canadian courts, where getting a look at an exhibit at trial usually requires retaining a lawyer to argue for its release, the U.S. Department of Justice has posted on its website documents entered into evidence in the case of U.S. v. Black, et al.

Thus we can read how, after doing their $3.2 billion deal in July 2000 for Southam Newspapers, Canada’s oldest and largest chain of dailies, Black and Asper set their sights on the next largest, Thomson Newspapers.

Thomson had already declared its intention to get out of traditional print-on-paper in favour of online information. Under plans outlined by Asper, consolidation of Canada’s media would have grown even tighter than it did in 2000.

“This isn’t the end of a deal, it is only the beginning of the real deal,” Asper enthused in a fax to Black days after his CanWest Global Communications bought Southam. “The possibilities are truly awesome and infinite.”

‘Bulletproof media position’

Asper told Black he was discussing a “strategic alliance” with the Rogers and Shaw broadcasting empires. “Ted [Rogers] has offered us a proposal which would give us a meaningful position in Sportsnet if we would join him in a joint venture on certain sports franchises.” Asper wrote. “You can appreciate that a strategic relationship between CanWest and Rogers, and possibly Shaw, would give us the most bulletproof media position in Canada — radio, cable, television, print, magazines, Internet, direct-to-home satellite, multilingual broadcasting.”

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Asper said he hoped to start with “joined sales forces, limitless cross promote,” and sports media synergies in Toronto and Montreal. “And the beauty of all this is that it could be done without any approvals being necessary from the Competition [Bureau] or CRTC, or government.”

Asper and Black plotted a co-ordinated assault on Thomson. Despite CanWest being deep in debt as a result of swallowing Southam, Asper coveted the Winnipeg Free Press in his hometown and had been talking to Thomson about buying it. “I believe we are the only game in town with Thomson on the Free Press, but, of course, one never knows,” Asper wrote to Black.

Instead, Thomson sold the Free Press and the Brandon Sun to Vancouver lawyer Ron Stern and Winnipeg businessman Bob Silver in late 2001 for $150 million.

Swallow the Globe

Black wanted Thomson’s Globe and Mail to merge it with the National Post, and Asper offered his assistance in getting it. “We believe that you will get your best deal on the Globe and Mail by being seen, by them, to be the ticket to unloading the other papers,” he told Black in August 2000. “If you agree with this scenario, we would tell [them] that we are willing to purchase ‘whatever.'” Thomson instead cast its lot the following month with BCE, which had recently bought CTV for $2.3 billion, to form Bell Globemedia, which is now known as CTVglobemedia.

Under Asper’s plan, press competition in Canada would have been even more severely curtailed, but even he questioned whether Canadians would have stood for such tight news media control. “I certainly agree that there should only be one national newspaper,” he wrote to Black. “In order to gain all the synergies of the merger, in effect, you might turn the Globe and Mail into merely a Toronto edition of the National Post.”

Asper anticipated that regulatory alarm bells might go off in Ottawa under that scenario, however. “Although we claim no expertise in the newspaper business, we do have a concern, perhaps ill-founded, that there would be an enormous public reaction, and possibly political repercussions, if the two papers simply merged and one disappeared, causing regulators to complain about a lack of diversity and choice, even though none existed a mere two years ago.”

David Asper slams own paper

The correspondence also reveals Asper’s outrage at the reaction of National Post journalists to a March 2001 column by his son David that criticized their coverage of the “Shawinigate” scandal surrounding then-prime minister Jean Chrétien.

The column charged that media coverage of the controversy over Chrétien’s part-ownership of a golf course in his riding had “crossed a line that delineates solid investigative reporting from adjective-driven innuendo.” It even singled out the National Post for criticism: “This newspaper and others across Canada, including other forms of media, have had a remarkably unfair ‘go’ at the prime minister.”

Black initially sold CanWest only half ownership of the National Post he had founded in 1998, and he was still its chairman at the time. Printed alongside Asper’s column was an editorial defending the Post. “The onus is not on newspapers to ‘put up,’ but on Mr. Chrétien to convince us of the propriety of his actions,” it noted defiantly. “This newspaper will continue to follow the story, and it encourages all other Canadian media and all opposition politicians to do the same.”

The next day, National Post columnist Mark Steyn pointed out that Asper’s column had refuted “not one specific fact or allegation made by the Post.”

‘Too much power, too few hands’

The political fallout from Asper’s column was also intense. Political partisanship was strongly suspected, as CanWest Global’s seven-year television licence was up for renewal the following month amid questions about the “convergence” of newspapers and television. Izzy Asper had been leader of the Liberal Party in Manitoba in the early 1970s, and Chrétien was a family friend. MPs from all three opposition parties united in Parliament to demand an inquiry into media ownership in Canada.

Heritage Minister Sheila Copps at first promised a “blue-ribbon panel” of experts to study the matter, but within days she announced it would instead be studied by a committee already examining broadcasting policy.

The Lincoln Committee, as it became known, issued a report two years later that warned against convergence. “The danger is that too much power can fall into too few hands,” it concluded, “and it is power without accountability.” The report, however, was scarcely reported in the news media.

Izzy accuses Conrad of ‘public slap’

In a strongly-worded fax to Black a week following the contentious column, Izzy Asper complained about the National Post’s “outrageous…and savage attack” on his son. “I assume the Post’s conduct, both before and after the publication of David’s piece, and the firestorm its staff helped unleash across the media, was caused by your personal orchestration, or done with your acquiescence and approval.”

Asper threatened “unilateral action to address the slurs and abuse that has been heaped upon us from a variety of quarters.” He claimed the Post’s rebukes violated their partnership agreement that promised CanWest would get advance notice of any editorial positions adverse to its interests.

“Given that we view this as a blatant and defiant breach of the letter of our agreement, and more saddening and provocative, the spirit of our arrangement, I consider the situation both currently and foreseeably, as in crisis. Neither you nor I would profit from a public battle, which would give great pleasure to those who wish neither of us well, but regrettably, you have chosen to publicly throw a gauntlet, administer a public slap in the face which has both embarrassed, humiliated and held up to ridicule and dishonour both my family and my company.”

Black warns of ‘servile toadying’

Black assured Asper he had nothing to do with the reaction of Post journalists to his son’s criticisms or the political fallout from them. “I did not orchestrate anything,” he wrote the following day. “The ‘firestorm’ orchestrated itself.” On the contrary, Black told Asper, he had intervened with the National Post’s editor to tone down the reaction. “I was shown Ken Whyte’s editorial comment and I asked him to remove one sentence that I thought was inadvertently insulting to you and your family and he did so.”

Black pointed out from London that he and other Post executives had warned David Asper that criticizing his own journalists would produce “great resentment” among them. They also told him, in Black’s words, that his column “would appear to anyone in that country still interested in an independent press to be servile toadying to a rather corrupt regime.”

Black noted he had told the Aspers “many times” that ownership influence on news coverage had to be accomplished in a more subtle manner. “If he [David Asper] wished to alter the tenor of the coverage, this should be done, at least initially, in comprehensive discussions with the individual metropolitan editors,” wrote the British lord, whose Hollinger International also owned the conservative Telegraph in London.

Aspers ‘tinker recklessly’

Black argued it was not he who had violated their partnership agreement, but instead the Aspers. Another letter entered into evidence at Black’s trial showed that he had complained about David Asper attempting to influence news coverage earlier in 2001. “I am aware that considerable pressure has been exerted by David on National Post editorial personnel on behalf of Chrétien,” he wrote to Izzy Asper on Jan. 5. “This is not reconcilable with our agreement.”

Black’s letter of March 14 made it clear Black felt the Aspers were shooting themselves in the foot by interfering so obviously in political coverage. “I believe it is, in fact, contrary to the spirit of our arrangement and to CanWest’s corporate interests for you people to tinker so recklessly by these interferences with the credibility and therefore the value of these franchises which my associates and I so swiftly built up.”

The National Post partnership agreement required advance notice to the Aspers of “any editorial position which could reasonably be viewed as embarrassing, damaging or adverse in the interest of CanWest or affiliates.” If anything adverse to CanWest was printed, it required the National Post to publish a reply “in the op-ed or editorial pages of such other prominent location as CanWest shall reasonably request.”

The partnership agreement became moot a year later when CanWest bought Black’s remaining half of the National Post.

Sparking a Senate inquiry

A draft version of a management services agreement with Black’s company Ravelston Inc. proposed by CanWest, however, went even further. It would have required any of the Southam newspapers to run Asper-authored editorials “on any subject at any time.” Black hand-edited the proposed clause in the court exhibit to instead give CanWest the right “to submit to editor of relevant publication a signed article to be published on op-ed or editorial pages or other prominent location.”

After Black bowed out, the Aspers prompted outrage in late 2001 by ordering “national editorials” written at CanWest headquarters in Winnipeg to be published in Southam newspapers across the country. A Senate inquiry was called to investigate the news media, but its June 2006 report issued only modest proposals to curb the growing power of Canada’s media giants. The new Harper government, however, declined to adopt even those safeguards.

Flowing profits, shared ideology

Other items gleaned from the Asper-Black faxes include:

  • A June 14, 2000, version of CanWest’s proposal to buy Southam listed the profits of each of its dailies because their price was set at ten times their earnings before interest, taxes, depreciation and amortization (EBITDA). According to those figures, Southam’s Pacific Press operations in Vancouver accounted for about 19 per cent of the company’s profits. They included not only the Vancouver Sun and Province dailies, but more than a dozen non-daily newspapers, including Canada’s largest “community” newspaper, the Vancouver Courier, the similar-sized North Shore News, and the Now newspaper chain in the eastern Lower Mainland. Their $76.13 million in 2000 earnings resulted in the Vancouver newspapers, since renamed Pacific Newspaper Group, carrying a price tag of $761.3 million. The Calgary Herald was the most lucrative stand-alone daily in the Southam chain, however, making 25 per cent more in profit than any other single newspaper in 2000.
    Newspaper 2000 Profits
     
    Pacific Press $76.1 million
    Calgary Herald $55.4 million
    Ottawa Citizen $44.2 million
    Montreal Gazette $41.1 million
    Edmonton Journal $40.8 million
    Windsor Star $18.9 million
    Victoria Times Colonist $16.6 million
    Regina Leader-Post $13.7 million
    Saskatoon StarPhoenix $12.3 million
    St. John’s Telegram $10.4 million
  • A June 15 letter from Black to Asper explained to the neophyte newspaper owner that editorial policy could not be dictated directly from corporate head office. “The board of directors of the National Post cannot determine editorial policy,” wrote Black. “The editor and publisher will, subject to general direction.” Whyte was replaced as National Post editor in September 2001 when David Asper succeeded Black as its chairman. Whyte, who testified at Black’s trial, is now editor of Maclean’s.
  • An early CanWest “concept document” proposing the purchase of Southam set out the political congruence between the Aspers and the neo-conservative Black. “It is noted that the Asper Group, in general, endorses and shares the editorial and philosophic views that Conrad and/or Barbara A. Black have expressed over the past years.” Black pointed to the ideological similarities between himself and Izzy Asper in an August 2000 parting shot to Canadians published in Southam newspapers. “When he was leader of the Manitoba Liberal party, Izzy Asper advocated a flat tax and workfare,” noted Black. “National Post has no more appreciative reader than he.” Since Asper’s death in 2003, his heirs have distanced themselves from the Liberals and openly endorsed the Conservatives.
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Comment from Argyros
Time: September 3, 2007, 5:26 am

Nice!

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