Monday, February 8, 1999

Money, not culture, is Bill C-55’s raison d’être

By

I've circled Wednesday, February 10th on my office calendar with a big red marker. It's the day the 1999 Sports Illustrated swimwear issue hits the newsstands. Heritage Minister Sheila Copps is scheduled to push Bill C-55 through third and final reading in the House of Commons the same day.

Known as the Foreign Publishers Advertising Services Act, the law is intended to stop foreign publications, such as Sports Illustrated, from printing Canadian editions known as split runs. That, in turn, means that Canadian businessmen, such as myself, won't have an opportunity to place ads in a Canadian edition of the magazine at a fraction of what it would cost to place an ad in the full circulation edition sold in the U.S.

The heritage minister has been quoted as saying "C-55 is about promoting Canadian culture." But common sense tells me it's about protecting two of Canada's major magazine publishers from American competition — Maclean Hunter which publishes Maclean's and Chatelaine, and Telemedia Inc. which publishes Canadian Living, TV Guide and Harrowsmith.

For my money, I'll take the Sports Illustrated swimwear models over the Chatelaine butternut fudge recipes any day of the week. Which just goes to show, you can't legislate culture or, for that matter, good taste.

I wager that Copps would have a difficult time defining culture as pertains to sports. If certain sports are so uniquely identified with particular countries, how is it that the International Olympic Committee manages to put on a sports spectacle every four years which features virtually every country in the world?

The answer is that sports enthusiasts share a culture all their own which transcends national boundaries. You can't possibly look at Sports Illustrated and say its news coverage is uniquely American. In its February 1st issue, SI ran items on football, hockey, basketball, golf and the IOC scandal. They even had a blurb on snowmobiling.

I caught the rabbi from the kosher restaurant next door perusing with religious intensity the article on Tamir Goodman, the Orthodox Jewish basketball star who plays for a talmudic high school in Baltimore.

SI is a good read — whichever side of the border you reside. I'm not the only one who thinks so. The magazine has a paid circulation of 3.1 million in the U.S. and 120,000 in Canada.

Copps cannot dictate — either on cultural or legal grounds — to me and 120,000 other Canadians whether to read SI. If I am free to buy and read SI, why am I restricted from placing an ad in a Canadian version of the magazine?

The answer, according to our cultural watchdogs such as Copps, is that American publications have an unfair competitive advantage over Canadian publications. The Holy Grail, according to Canadian protectionists, is that American publications incur their major production costs in the U.S. and are subsequently able to produce a modifed Canadian edition at below cost, meaning they can charge ad rates which are below the market norm.

It's an interesting theory, but it is not supported by facts and figures. Take, for example, Sports Illustrated. When it published a split-run edition up to 1995, it charged Canadian advertisers $8,000 (Cdn) for a full-page, four-color ad in its Canadian edition, which had a paid circulation of 120,000.

Compare the SI rate with that charged by Maclean's for a full page ad in four colors — $30,000 (Cdn) based on a paid circulation of 502,000. The line rate per thousand readers is less costly today in Maclean's than it was in SI's Canadian edition back in 1995.

So much for the protectionist shibboleth that Canadian magazines can't compete with American publications based on production costs. And from the point of view of content, Canadian magazines should have it all over their American competitors. Surely they know better than American editors what interests their readers.

Have you asked yourself why we don't hear our cultural watchdogs howling about the Canadian ads which were substituted for the American ones in Canada on Super Bowl Sunday? That was strictly an American product — the Super Bowl — which had Canadian ads sold to Canadian advertisers at well below the rate at which air time was sold to advertisers in the U.S.

Nobody complained because a broadcaster with the right citizenship — the true blue Canadian Global network — was making money. It wasn't an issue of culture then because the American network — Fox— didn't try to sell directly to Canadian advertisers. Instead, it sold the Canadian rights to Global, which made the ad dollars.Which just proves the point that culture is a five-letter word — m-o-n-e-y.

Of course, money is something that SI makes in abundance. Given that each full-page color ad in the national edition of SI goes for $180,000 U.S., I calculated that their 24 1/3 pages of color ads in the February 1st issue made $4.38 million U.S. for the magazine.

Many of the full-page, color advertisements — for cars, beer, cigarettes, casinos and satellite services — transcended boundaries. If SI still had a Canadian edition, perhaps we could have seen ads for Bell ExpressVu or Star Choice satellite services, rather than for Directv.

SI would be an especially attractive medium for Canadian advertisers seeking a targeted market. For example, close to half a million SI readers in North America are avid golfers.There is no Canadian sports magazine which can deliver a comparable audience.

If the federal Liberals persist in their folly of passing Bill C-55 into law, it's not the future of SI you have to worry about. Its the future of the Canadian economy when the U.S. follows through on its threat to retaliate by imposing between $3 billion and $ 4 billion of sanctions on Canadian exports of steel, wood products, textiles, apparel and plastics.

SI discontinued its Canadian split run edition in 1995 after the Canadian government passed Bill C-103 to amend the Excise Tax Act . Bill C-103 imposed a tax equal to 80 percent of the value of all ads contained in the split-run edition of a foreign publication. That was Canada's way of telling the Americans to stay home.

But Canada has been tinkering with its tax laws and custom tariffs since 1965 to discourage Americans from exporting split-run publications to Canada. In addition to Bill C-103, they modified the Income Tax Act to stop Canadian advertisers from claiming ads run in foreign-owned publications as tax deductions. Then in 1991, Canada Post granted subsidized postage rates to Canadian-owned publications.

Of course, SI stopped its split-run edition after passage of Bill C-103 in 1995. But their parent company, Time Warner, was steamed. When you're as big as Time Warner — revenues of $19.374 billion U.S. for the first nine months of 1998 — you have a direct line to the White House.

U.S. trade representative Charlene Barshefsky registered a complaint on behalf of the U.S. government against "unfair" Canadian trade practices with the World Trade Organization.

The WTO ruled in 1997 that Canadian trade practices were unfair as they pertained to split run editions of foreign publications. An appelate body upheld the rulings last year.

Bill C-55 is an attempt by Canada to circumvent the spirit of the WTO ruling.The law would make it an offense for a foreign publisher to sell advertising services to a Canadian. Penalities range up to $250,000 per offense.

It's bad enough that Copps has picked an unjustified fight with an economic superpower which is our closest trading partner. But it could get even worse if Time Warner decides to sic Larry King, Ted Turner and Elmer Fudd on our foolish heritage minister.

Warren Perley is a former Gazette journalist who is president of Ponctuation Grafix, a graphic design and marketing company.

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