November 29, 2005
Publisher sues, claims Hollinger is unCanadian
EDMONTON—The publisher of an Edmonton-based alternative weekly is suing the Canadian Revenue Agency for $750,000 for failing to enforce section 19 of the Income Tax Act, which prohibits non-Canadian companies from offering tax-deductible advertising services. Hollinger’s trade magazines are also vulnerable and it may have to return millions in federal subsidies.

Vue Weekly publisher Ron Garth filed suit in Alberta’s Court of Queen’s Bench on Oct. 27. Garth claims that when then-Hollinger International chairman and CEO Conrad Black renounced his Canadian citizenship in 2001, HI ceased to be in a position to offer advertisers tax-deductible advertising services as outlined in the Income Tax Act (ITA), which requires simultaneously that in order for a company to be Canadian it must be chaired by a Canadian, be 75% Canadian-owned and that three quarters of the directors sitting on the board are Canadian. Prior to filing suit, Garth, who competes against the Hollinger-owned altweekly See in Edmonton, says the CRA has largely ignored his requests for action. In addition to seeking damages from the CRA, Garth is seeking $5 million in damages from Hollinger International and Hollinger Inc. for misrepresentation.

The CRA does not comment on specific cases.

In its annual report released earlier this month, Hollinger International acknowledged the precarious state of affairs, stating that not only may advertisers seek millions in compensation, but the company may have to return $3.5 million in federal funding, presumably flowing from the Canada Magazine Fund and the Publications Assistance Program. The annual report states:

“It is possible the CRA may find that, as a consequence of Black’s renunciation of his Canadian citizenship in June 2001, certain of the Company’s Canadian newspapers are no longer considered Canadian-owned for purposes of the ITA. Although the Company believes that it has a structure in place that meets the ITA Canadian ownership rules for at least a portion of the period since June 2001, that structure may be challenged by the CRA. Should any challenge be successful, advertisers might seek compensation from the Company for any advertising costs disallowed or otherwise seek a reduction of advertising rates for certain Canadian newspaper publications. Additionally, one or more of the Company’s Canadian subsidiaries has received funding under a Canadian governmental program that is intended to benefit entities that are Canadian owned or controlled. The Canadian government could seek the return of approximately Cdn.$3.5 million as a result of Black’s renunciation of his Canadian citizenship.”

November 24, 2005
Hollinger’s trade titles in play again?
TORONTO—It’s been fiddling around with the idea of selling them for a decade, so is Hollinger International once again mulling an offer to buy its collection of 36 trade magazines and directories? The company isn’t telling.

Bruce Creighton, who heads up Hollinger International’s Toronto-based Business Information Group, declined to comment on persistent industry chatter that the BIG titles are on the verge of changing hands. A similar position is being taken by his boss, New York-based Hollinger International CEO Gordon Paris. “We’re going to decline to comment on any speculation regarding the sale of the Business Information Group,” said Molly Morse, spokeswoman for Paris. Having recently sold the Telegraph group of newspaper properties in the U.K. and the Jerusalem Post, Hollinger International’s prime asset is the Chicago Sun-Times newspaper.

In HI’s annual report, released earlier this month, the company stated that “[i]n addition to pursuing revenue growth from existing publications, from time to time the Company may pursue acquisitions to expand the Chicago Group and selective newspaper acquisitions in the United States and divestitures of non-core assets. Many of the Company’s Internet and other non-core investments remain available for sale.”

Asked if HI considers BIG’s trade magazines a “non-core investment,” Morse replied that “the company is not commenting on this.” That marks a different public relations approach than the company had adopted in 2004. Back then, it openly declared that it was pursuing a divestiture process and that it had retained New York brokerage firm of Lazard Frères & Co. to field interest in its assets, including BIG. (See News Archives, March 4, 2004).

BIG generates estimated annual revenues of $40 million and the sale price for the division is estimated at $40 million. A number of companies have expressed interest, including Rogers Media, Transcontinental Media, CLB Media, Toronto-based investment bank Kilmer Capital, Montreal’s Transcontinental Media and Vancouver-based up-and-comer Glacier Ventures International. And don’t forget the possibility of a management-led buyout by Creighton himself. Many BIG rivals are interested in cherry-picking select titles against which they compete, or which are complementary to their existing brands, but don’t count on HI parting out the division’s various titles, experts say; the transaction fees and added paperwork would be prohibitive, and BIG’s Web play (the massive portal esourcecanada.com) relies on a cohesive magazine division.

Why sell now? The legal bills that HI is ringing up in its quest to prosecute embattled former CEO and controlling shareholder Conrad Black are surely mounting. The Canadian economy is relatively stable and, perhaps most importantly, Black is no longer directly involved (he resigned from HI board this past June). It was Black who has been, since 1996, fielding offers for BIG that were ultimately swatted down because he felt they weren’t high enough. At a Hollinger Inc. meeting in May 2001, Black suggested that he thought BIG ought command a selling price of 10 times EBITDA. Failing that, “we’re happy to hold onto them,” he told MastheadOnline at the time.

November 22, 2005
Freelancer union by as soon as February
OTTAWA—The nascent Canadian Freelancer Union, in the process of being hatched as a local of the Communications, Energy and Paperworkers Union of Canada, may have its executive, bylaws and charter in place in a couple of months but employers won’t feel its bargaining power until 2007.

The CEP is currently working closely with the Professional Writers Association of Canadian (formerly known as the Periodical Writers Association of Canada) on such issues as freelance compensation rates that can then be presented to employers during the collective bargaining process. CEP organizer Gary Engler expects the CFU will be formally created by this coming February. “We're going to attempt to do that sort of stuff [elect the executive, draft bylaws and charter] as much as possible online,” he says. “We want to be as much as possible an online organization. It’s really critical for a local that’s spread across the country to be able to have regular communications with its membership, and the only way to do that in a way that’s cost-effective, is online.”

Who will be the first employer to deal with the CFU’s demands? Engler says it’ll likely be the Vancouver Sun and the Vancouver Province—both CanWest Communications papers. The collective agreement there expires in December 2007. Bargaining typically begins six to eight months prior to that. “Approximately a year from now there will be meetings between the CFU, PWAC and the bargaining committee/executive of the CEP Local 2000 of the Sun and Province, to discuss what it is we think are the right things to go for.” For most of 2006, the CEP, CFU and PWAC will examine what sorts of demands their members have.

The CEP has said that it requires about 400 members for the CFU to be viable. PWAC brings about 550 members and there are 300 freelancers in B.C. alone, “and we’ve been holding membership meetings across the country [in the past couple of months],” Engler notes.

November 17, 2005
Some mention of magazine at Maclean’s party
TORONTO—While there were plenty of media, business, and political personalities among the guests attending Maclean’s 100th anniversary gala on Tuesday night, only Ted Rogers and Maclean’s editor/publisher Kenneth Whyte actually spoke about the magazine itself.

Rogers Communications CEO Ted Rogers

Sex in the City actress Kim Cattrall, and friend

Marc Blondeau, senior vice-president of Rogers Consumer Publishing Group, and Maclean's editor-at-large Joanna Pachner

Last to speak was Maclean’s editor/publisher Kenneth Whyte. After reflecting on all the creative energy that went into the first 100 years of producing Maclean’s, he gave some hints about the future. He said:

“We’ve talked a lot about the past tonight and I just want to say a couple of words in closing about the future. It’s a rare thing for a magazine to survive 100 years. One of the reasons that Maclean’s has lasted as long as it has is because it’s never really stood still. Part of being engaged with one’s times means moving with one’s times, and as many of you know, we’ve been working the last six months on the relaunch of Maclean’s. I’ll spare you all the details. You’ll get a copy on your way out tonight and you can see what we’re up to. But I want to make a couple of points. This is a substantially new magazine. Past generations of Maclean’s journalists have struck out on their own and we saw no reason to do any different. We have many new writers, editors, artists and art directors at the magazine.

Long-time backpage columnist (1975-2002) Allan Fotheringham

We’re in the process of assembling what I believe is, man for man, the best journalistic organization in the country. The magazine will work as hard as Maclean’s has ever worked to inform, enlighten and entertain its readers. It has a very distinctive new look and feel and singular voice which is how we want it. Canada’s national current affairs magazine should not be an imitation of anyone else’s national newsmagazine. It should be uniquely ours. I think it is. Thus far we’ve gotten a great response from readers and strong support from advertisers…and good reviews from our critics. The magazine will continue to evolve in the weeks to come. I hope you’ll continue to watch and let us know what you think.”

The redesigned Maclean's, on newsstands now

November 8, 2005
Walrus publisher declares future secure
TORONTO—In a bold show of confidence, Walrus publisher and editor Ken Alexander has announced that he is “100% certain” that his three-year struggle for charity status will soon end in success. “There are still some details to be ironed out regarding our charitable status, but I am now 100% certain that The Walrus’ future is secure.”

Alexander says he’s been working very closely with the Canadian Revenue Agency’s charities directorate and is now confident that all the matters of concern have been resolved. “I believe we’ve agreed on all the substantive stuff. There were a few higgledy-piggledy things that we had to talk through, as there always are…[but now that’s finished],” he said in an interview late last week.

The CRA will not comment on active files, “and the file is still active,” notes Alexander. Why is he announcing it now? “Because I am,” he says. The announcement was perhaps meant to placate anxious freelancers and other creditors to whom the magazine owes money (see News Archives, September 8, 2005). Once The Walrus Foundation receives charity status, it can begin receiving some of the $5 million promised to it by The Chawkers Foundation, a charity established by Alexander’s father, Charles. “All the activities of the [Walrus] Foundation,” says Alexander, “will be devoted to elevating public discourse on matters of importance, and will promote arts and letters and public debate.” Once the status is obtained, issues raised within the magazine will be “lifted off the page” and into “public fora of various and sundry descriptions,” he said.

Other publishers are following The Walrus case closely. Maisonneuve editor/publisher Derek Webster says that if Alexander’s confidence turns out to be well-founded, a precedent will be set. He says that, initially, both Maisonneuve and The Walrus were denied charity status for the same reason. “Revenue Canada makes a distinction between an educational publication and an informational publication, and they deemed Maisonneuve and The Walrus to be informational,” he says, therefore their applications were thrown out. If The Walrus does end up getting the coveted status, “we would expect the same treatment. And, in fact, if we didn’t get the same treatment, then I think we would be very, very upset. It would mean that they have not made any changes to the rules; it would simply mean that the squeaky wheel gets the grease—and a very good wheel in this case, and good grease, but I don’t think it would be appropriate to make just one exception.”

November 3, 2005
A magazine promotion that went too far
LONDON—A promotion for a cheeky men’s magazine that offered a free “boob job for your girlfriend” has been ruled out-of-bounds. Readers complained about the promotion in the British lad title Zoo, and the Advertising Standards Authority largely agreed. “We considered that the advert could coerce women into having breast enlargement surgery,” the ASA ruled in its order to stop the promotion. “We considered that, because breast enlargement surgery was a serious surgical procedure that could cause physical and psychological damage, the advert was irresponsible." The magazine used house ads and editorial to lure entrants, and even published a chart entitled “Choose your Chest” that included photographs of breasts of different shapes and sizes. The ASA rejected, however, complaints from the public that the promotion “insulted and objectified” women, considering the context was a humour magazine. Zoo has dropped the boob-job portion of the promotion, and the male writer of this news upload has strenuously resisted the temptation to insert puns and innuendo into this piece.

November 1, 2005
Editors urged to halt erosion of church-state divide
TORONTO—Former Chatelaine editor Kim Pittaway told a room packed full of editors that if measures aren’t taken to reclaim editorial’s independence from advertising messages, magazines risk losing their credibility.

Pittaway’s defiant resignation from Chatelaine this past August after only nine months in the job, was triggered, in part, by a dispute with her publisher over the relationship between advertising and editorial. At a gathering last Thursday of the Canadian Society of Magazine Editors, she said the increasing incidence of sponsored editorial, advertiser requests for editorial mention and special positioning of ads next to related editorial content—a practice known as adjacency—is chipping away magazines’ integrity. “If we think that the pressures are considerable now, they’re just going to get stronger…and frankly, I don’t blame the advertisers,” she said, noting that they’re just doing their job to get their messages across. “We’ve done a really lousy job of communicating to readers what it is we’re doing for them, that the editor’s choices on the page are indeed the editor’s choices.” She said that the ad community needs to be convinced that it’s in its best interests that a rigorous separation between advertising and editorial messages is maintained, otherwise magazine’s will lose their “stickiness”—a quality that represents readers’ deep involvement in the content.

Following her 20-minute talk, Pittaway fielded questions from the floor, including one from Toronto Life editor John Macfarlane, who wondered what sort of leverage editors can summon when asked to cross the line. He noted that, in the U.S., magazines in breach of ad-edit guidelines issued by the American Society of Magazine Editors can be deemed ineligible for National Magazine Awards. No such disincentive exists in Canada.

However, Magazines Canada recently struck a taskforce chaired by Outdoor Canada editor Patrick Walsh that will revisit the CSME’s guidelines governing the relationship between advertising and editorial. Walsh, who also sits on Mags Can’s membership committee, said that the industry association uses the guidelines to help determine the eligibility of prospective members, and that the taskforce was struck, in part, to determine if those guidelines need to be strengthened in the future. The taskforce is being conducted with the involvement of CSME. It will address such questions as: Are the existing guidelines sufficient? Should Magazines Canada create its own guidelines to determine prospective (and existing) member eligibility? What can be done to encourage compliance with the guidelines? Could compliance affect eligibility for National Magazine Awards? Is there a need to educate the public and the ad community about the need for editorial integrity, and if so how should this be executed?

Taskforce members include John Macfarlane, Cottage Life editor Penny Caldwell, House & Home Media vice-president of sales Kirby Miller, Maclean’s advertising director Lorraine Hoefler, Tom Hopkins, editorial director of now-defunct Avid Media, industry consultant and educator D.B. Scott, Maisonneuve editor/publisher Derek Webster and Alberta Venture publisher Ruth Kelly.