OMDC study urges government to increase magazine funding, create tax credit

The Ontario Media Development Corporation has published A Strategic Study of the Magazine Industry in Ontario. It was put up on the OMDC website today. It was prepared by TCI Management Consultants.

The report recommends the creation of a new, refundable tax credit for magazines "the only creative sector that does not currently benefit from this form of support." It says that significant additional investment is required by industry and government to create sustainable growth and estimates that such a program of support might cost in the order of $20 million annually and notes that the OMDC's current budget is insufficient to finance what needs to be done.

The industry, acting collectively, can support the strategy with activities in the following areas: research; marketing and promotion; training; exercising collective purchasing power to assist publishers, especially smaller ones, to meet the challenges of the Internet; developing and implementing tools to measure and track Internet usage; and gathering and disseminating information and expertise to support brand extension activities. Governments generally, and the OMDC in particular, can usefully support these activities through trade associations or consortia of publishers.

The report notes that the magazine industry contributes around 9,000 jobs and nearly $1 billion in economic activity annually to the Ontario economy. Ontario-based publishing is by far the biggest part of the Canadian magazine industry, contributing 57% of Canadian periodical publishers’ revenues. It also reports that magazines receive 15% of OMDC program funding, compared with 20% for books and 39% for film.

Ontario magazines face several barriers to growth, the report said:

• Slim profits; the average pre-tax profit margins are 10.5%
• Limitations on increasing revenue; Canadian magazines command a lower proportion of adspend than do their American and British competitors.
• Vulnerability to cost increases; for instance the plan by Canada Post to move to distance-based pricing.
• Limited access to capital.
  

"Magazines have been strikingly successful in retaining and increasing their hold in the Canadian market, despite strong competitive pressure from foreign, particularly American, periodicals. US circulation spill has been declining, from a level of 8.5 million in 2000 to 7.7 million in 2006. The circulation per spill title declined from 15,716 to 13,664 over the same period. Canadian magazine publishers have a significant share of the domestic market with some 41%. This is much greater than most other homegrown creative industries, such as English language film, which has less than 2% of the Canadian market...

"In fact, Canadian magazines are holding and even extending their audiences in the face of competition from the Internet. Measured in terms of issues read per month, magazine readership has grown from 4.4 in 2003 to 5.0 in 2007, at a time when the number of hours per week that all Canadians spend on the World Wide Web – excluding email – has risen from 3.5 to 5.6.

Even more encouraging, although the 18-24 age group shows the greatest increase in Internet usage, its attention to magazines has also increased. Across all age groups, the people who read the most magazines are also likely to be those who spend the most time with the Internet. This confirms that magazine readers share the perception of many publishers that the Internet is a different medium that is not a perfect substitute for magazines, in the way that it might be for other media."