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The Canadian Small Market Problem

• Canada has half the per capita size of ad spending as the US– tougher market for Canadian cultural industries
• Overspill of US ads vitiates demand
• Segments of the industry: ( health, law etc) are either publicly owned, or prevented from advertising
• Retail sector in Canada has not been as competitive
• In TV, if US programs are more popular: Canadian businesses prefer advertising on US shows, weakening indigenous production markets ( a vicious circle) thus weakening competition, and leading to increase in market dominance and higher US ad rates

Policy Responses to small market problem

• Income Tax Act prohibits spending on US media as an allowable business expense in Canada
• This is intended to protect ‘diversion’ of ad money south of the border
• Regulations: ( Canadian Radio-television and Telecommunications Commission) create rules like the “ simultaneous substitution rule” which allows Canadian stations who have bought the rights to a program to insert their ads sold against it in the imported US signal
• Tax money used to subsidize public/non commercial media ( CBC, community TV)
• As well, tax money increasingly being used to ‘advertise’ in public sector areas
• Public health issue: allow, like the US pharmaceutical manufacturers to advertise to Canadians?

Attack under Globalization

• Before 1999, Canada’s Magazine Policy prevented ‘split runs’ ( except for Time Canada and Readers’ Digest)
• Goal was to prevent US media companies getting around the Income Tax Act by publishing ‘virtual’ editions which could scoop Canadian ad spending without producing Canadian editorial
• As well, Canadian magazines were allowed to mail free to their customers ( unlike US mags) ( see Stoffman, cited in Fleras, p. 208)
• US launched a trade protest under the World Trade Organization on the grounds that magazines offended the rules of free trade:
• National Treatment rule: despite exemption of cultural services from NAFTA
• Canada lost. Instructed to strike down legislation: had to create new ones, and offer subsidies to Canadian magazine sector
• FREE TRADE IN AD SERVICES ON US AGENDA