This article was originally published in Maclean's Magazine on August 10, 1998
Canadian Magazine Strategy
Heather Ormerod is working hard to keep Canadian Yachting afloat. And so far, says the magazine's energetic young editor, it is sailing along beautifully. The 22-year-old, Mississauga, Ont.-based publication is one of Canada's 10 fastest-growing magazines. Circulation has more than tripled in the past five years to 8,000, thanks in part to savvy grassroots marketing. At regattas and sailing festivals across Ontario this summer, enthusiasts can spot CYnergy, a 41-foot yacht with the magazine's logo emblazoned on its spinnaker. But allowing big U.S. books such as Sail and Yachting to launch so-called split-run editions by selling Canadian ads while keeping their U.S. content would quickly rock the boat, says Ormerod. The U.S. boating publications already crowd out Canadian Yachting on the newsstand. "We don't have a big market of advertisers to begin with," she says. "For us, it's a danger."
To ward off that threat, Ottawa has fired yet another volley in its 33-year battle against the U.S. juggernauts. Last week in Toronto, International Trade Minister Sergio Marchi and Heritage Minister Sheila Copps unveiled a series of steps designed to promote and protect Canadian periodicals. These include barring foreign magazines from selling advertisements aimed solely at Canadian readers; those who ignore the ban could face fines of up to $250,000. The proposals, which will go before Parliament this fall, come one year after the Geneva-based World Trade Organization struck down four measures Ottawa has been using to shelter Canadian magazines from split runs. Because their editorial costs are covered in their home market, Canadian industry officials charge, split-run editions can boast profit margins of up to 80 per cent, compared with an average of four per cent for Canadian magazines. Copps said the measures will guarantee the continued vibrancy of the industry. "Unless Canadians stand up for Canadian culture," she added, "no one else will."
Copps's patriotism met with approval in some quarters. The Institute of Canadian Advertising, a Toronto-based group that represents ad agencies, supports the government's action. "Our position," said Rupert Brendon, the institute's president, "is to find a legal and fair way to maintain the status quo, and we believe the government has done that." But in an apparent industry split, Ron Lund, president of the Toronto-based Association of Canadian Advertisers, whose nearly 100 members include the federal government, said the organization may challenge the proposed ad ban under the Charter of Rights and Freedoms, arguing it would infringe on advertisers' freedom of expression.
Washington is also girding for battle. U.S. Trade Representative Charlene Barshefsky said Canada is simply replacing its old discriminatory rules with a new way to keep U.S. companies from doing business in Canada. She pledged to dispatch trade experts to Ottawa this week to consult with Canadian officials on the issue. If a settlement cannot be reached, Washington will consider retaliating, said Jay Ziegler, a spokesman for Barshefsky. The real problem, he added, is whether Canada is respecting global trade laws by opening its market, not whether its culture is at stake. "We're simply asking for the opportunity to sell a particular product in the marketplace."
Government officials and Canadian publishers say that product is already abundantly available on local newsstands. Foreign magazines account for nearly 90 per cent of newsstand sales, according to the Toronto-based Canadian Magazine Publishers Association, of which Maclean's is a member. "In fact, Canada is more open to foreign magazines than any other country in the world," says Marchi. The measures follow the WTO's ruling to a tee, he adds. Along with the ad ban, Canada will remove its existing customs tariff on split-run magazines, eliminate its 80-per-cent tax on split runs, pay postal subsidies directly to publishers rather than Canada Post, and charge foreign publications the same commercial postal rate as Canadian magazines. "We make no apologies for being insistent on standing up for culture," Marchi stated. "At the same time, we will honor our obligations. We can't afford the laws of the jungle."
Despite the brave words, trade lawyers cast doubt on whether the government's new rules will stand up under the glare of WTO scrutiny. Ultimately, they say, the government may be forced to support Canadian magazines with direct subsidies, which are least likely to contravene international trade laws. Most publishers have roundly panned any hint of handouts. "Canadian taxpayers should not be asked to pay huge subsidies to offset unfair competition," says François de Gaspé Beaubien, a CMPA director. But publishers of some small special-interest magazines say subsidies might help them more than the current protections. Robert Danté, founder of Boudoir Noir, a Toronto-based quarterly that caters to devotees of bondage and discipline, says subsidies could help him attract more American readers, who already account for half his subscribers. "Split runs are going to be a fact of life," he predicts. "What we need to do is figure out a way to exploit them to our advantage." But until the U.S. appetite for Canadiana matches the interest in things American north of the border, Canadian magazine publishers say they will fight to keep Canadian ad dollars to themselves.
Maclean's August 10, 1998