by Elaine Dewar
In 2009, Indigo began to invest heavily in a new e-reader system called Kobo.132 In January, 2010, Trilogy, its majority owner, sold two million of its Indigo shares to a Bay Street equity group with a US counterpart operation for a price not made public.133
In March, 2010, on learning that Amazon was asking for permission from the Minister of Canadian Heritage to set up a distribution warehouse in Canada, Reisman made it clear that something had to give with Canadian publishing policy. “Supposing I should decide three years from now that, in order to expand some of my capability, I’d like to partner up with a foreign company,” Heather Reisman told the Globe and Mail. “I do not want to be disadvantaged.”134
Perhaps it is just coincidence, but that same month, Prime Minister Stephen Harper called Nigel Wright at Onex and asked him to become his Chief of Staff as of January 1, 2011. He would replace Guy Giorno who would run the Conservatives’ campaign in the coming federal election. Wright asked Schwartz for permission to take a leave of absence, and in April, he got it.135
In April, 2010, the Minister of Canadian Heritage, James Moore, gave Amazon permission to set up a book distribution warehouse in Canada. “This signals a government of Canada policy change confirming that a company no longer needs to be Canadian-owned to sell books in Canada,” said Reisman to the Globe and Mail.136 The Minister followed that decision with another that permitted Apple to set up an iBookstore in Canada. In July, the Minister and his department announced it had begun a review of the “foreign investment policy for the book industry” as one law firm’s bulletin put it.137
Concentration in the newspaper side of the publishing business increased to the point of implosion in July, 2010, as the Canwest papers changed hands once more. Canwest had become insolvent, then bankrupt. That month, the corporate remains were sold to a group led by the National Post’s publisher and prominent Conservative, Paul Godfrey. The price paid was $1.1 billion, the great bulk of it borrowed.138
Most of the money for the purchase was loaned to the buyers by a US hedge fund called Golden Tree Asset Management. Most of it went to pay off Canwest’s creditors. Some newspaper watchers were concerned that the renamed and soon-to-be publicly traded Postmedia Network Canada Corp. Inc. would be eaten alive by the interest costs imposed by Golden Tree and end up in bankruptcy just like Canwest. Its assets could then be scooped by its creditors—such as Golden Tree. In effect, these critics argued, these loans gave a foreign-owned hedge fund effective control over Canada’s largest newspaper chain. Yet the government did not interfere: it would have been hard to interfere. The actual ownership of the newspapers had moved from one group of Canadians to another. While Golden Tree Asset Management owned more than 30% of Postmedia’s shares, the shares it owned had fewer votes attached than those of other share categories.139
By November, 2010, Nigel Wright was working in Ottawa, though his appointment would not begin for two more months. His leave of absence permitted him to keep his Onex shares and options earned over 14 years of service: his leave was to be for a term of two and a half years. This continuing relationship with Onex created ethical issues. Wright was examined by members of the Standing Committee on Access to Information, Privacy and Ethics140 who were concerned about how he could run the Prime Minister’s Office without resigning from Onex given Onex’s reach across whole swathes of the Canadian economy and beyond. The federal conflict of interest rules also required a cooling off period for high level appointees upon leaving government. By taking a leave instead of resigning from Onex, Wright not only kept his wealth growing uninterrupted, he avoided having to endure that cooling off period. He explained to the Committee that the Ethics Commissioner and senior Privy Council officials had instructed him on how to erect an ethical wall to prevent him from making decisions regarding his personal interests, which he had revealed to the Commissioner as required. He said his subordinate would keep certain files away from him. These were in the following areas: aerospace, special taxation, taxation in the Canadian private equity sector, tax deductibility. Wright insisted that in his experience, Onex had few direct contacts with government, so conflicts would be minimal.141
Certain committee members found that statement very hard to swallow. Some opined that there was no area the government of Canada overlooks in which Onex had no interests and there were at least 40 companies in the Onex kingdom whose interests were clearly connected to government departments, including cultural entities like “Cineplex and Indigo.” Carole Freeman, BQ Member for Chateauguay—Saint-Constant asked: “Do you not find it odd that you are moving from the largest private corporation in Canada to the most influential position in the country, second only to the Prime Minister? It appears that your mandate will be relatively short, following which you will be returning to the private sector with privileged information and contacts, and that raises an ethical problem.”
Mr. Wright did not find it odd. “I’ve sent a memorandum to political staff throughout government and through PCO, through deputy secretaries… I have asked that no information come to me that in any way relates to Onex or its business or the other areas…”
Still, Freeman persisted with her question. Given that Wright had asked to be kept away from such a lot of files, he would constantly have to recuse himself, so how could he carry on his Chief of Staff duties and advise the Prime Minister on key areas? Pat Martin, the NDP Member for Winnipeg Centre, put this most succinctly: “You can’t even order pizza for the PMO… Onex owned CiCi’s Pizza Parlor. Every move you make, every breath you take puts you in a conflict of interest.”142
Nevertheless, Wright became Chief of Staff on January 1, 2011. By then, Indigo’s monopsony had badly frayed. A graph of Indigo’s share price shows a consistent pattern of falling and struggling back up, falling and struggling back. Its share price used to be about $20. In 2015 it had sunk to about $10. By 2016 it was back up to about $16. The federal election took place on May 2, 2011. Just before, Trilogy Retail Enterprises LP, Indigo’s owner, sold a lot more of its Indigo shares, retaining only 51.78% of shares outstanding as of May, 2011.143 Were Schwartz and Reisman anticipating a large Conservative majority, and thus a major change in the book policy? If they were, they were disappointed. Though the Conservatives won, their majority was small, several ridings’ results hotly disputed. The NDP under Jack Layton had done so well they pushed the Liberals to third place and became the loyal Opposition. Not surprisingly, though the Harper government had consulted the industry on changing the Book Policy in 2010, no changes were announced. The Minister of Canadian Heritage proceeded as his predecessors had done, hands off the third rail, approving application after application, the exact nature of net benefits extracted from each deal approved covered up neatly by the secrecy provisions of the Investment Canada Act.
In November, 2011, the Minister approved Indigo’s sale of its Kobo ebook publishing business to a Japanese company called Rakuten. The sale price for Kobo was $315 million.144 The company was certainly not in trouble and apparently had not been offered to Canadians first, yet the deal went through.
And at the end of 2011, the Minister of Canadian Heritage permitted Random House to buy the University of Toronto’s shares of M&S.145
Another not-for-attribution informant regaled me with book industry stories one hot spring day. We were sitting at a small table in a small coffee house named for a dead fascist poet. Soon my informant began to lay out his frustrations with the Canadian book publishing business, which in his view has stayed “stuck in the Medieval period.” For example, while ebooks enjoy about 30% of the US bookselling market, in Canada the percentage is about 13%,146 though that is just a guess, no accurate data is kept. There are no returns with ebooks, so you would think that small Canadian publishers, in thrall to a monopsonistic bookseller, would have gone heavily into ebooks by now. Yet most have continued to ship the bulk of their production as paper books at discounted prices, waiting for the inevitable returns. Wh
y inevitable? Because: only the foreign-owned publishers can afford to pay for prominent display space in Indigo’s stores. Publishers must buy marketing position for the books they want to push in the same way cookie manufacturers buy shelf position at Loblaw.
As another informant had already explained, once upon a time, the publishers of leading Canadian authors (e.g., Atwood, Shields) paid Chapters or Indigo a great deal of money for prominent table position for their new works. They spent a great deal too on other forms of promotion, buying newspaper ads, paying for big tours. In those golden days, Canada’s booksellers allowed books to sit for six to nine months on their shelves before they were returned. Indigo shortened that period to about 30 days. Thirty days is not a lot of time for word of mouth to spread about a book, and word of mouth is the main form of advertising for Canadian books nowadays, unless an author is already well known, or wins a big prize. Thus, many books meet the fate described by philosopher David Hume when he bemoaned the reception afforded to his first, his Treatise on Human Nature. It fell “dead-born from the press without reaching such distinction, as even to excite a murmur among the zealots.”147
Then, my informant got to his main point. He believed that since the final handover of M&S by U of T to Random House, Canadian authors had become window dressing for the foreign-controlled entities operating here, companies which make the bulk of the money they earn in Canada by selling brand name international authors published originally elsewhere.
To illustrate, he told this story. He had attended a party held by Random House of Canada about a year after it took full ownership of M&S in 2012. The occasion was the celebration of a big prize won by an M&S author—a writer born in Canada, so therefore a Canadian, but who had mainly lived elsewhere. The book had originated in New York, which is where an M&S executive heard about it. Canadian rights had not been sold, so the executive made an offer and M&S got them for a song. Yet at the party, this coup was being lauded as another Canadian triumph by Random House, with M&S’s bird dog role in the background. This inspired someone to ask the M&S people at the party why U of T had sold its M&S shares to Random House. One of the M&S editors had just stared and said nothing. Another said M&S was so deep in debt there was no other way out.
In debt to whom, my informant asked me rhetorically? Hmmm?
2
Hints and Allegations
On a blue-sky day later that spring, I found myself at a certain senior publishing professional’s front door. He lives in a Toronto neighbourhood in transition, meaning caught in a class war. I’d been given his email address by an informant who demanded to remain nameless. Knows everything, I’d been told. Go see him.
I was still at the first stage in my research, just curious, just poking here and there, trying to figure out why I was so interested in the handover of M&S, why the story kept yanking at my knees like a hungry child. I had no inkling, then, that I wasn’t just inquiring into the life and death of a publishing company and the national publishing policy. I was on the edge of a larger narrative about the way our politics work, about how control of what Marx might have called the means of reflection had been gathered in so few hands with such firm links to power.
A few blocks away, a well known author and his wife live in a beautifully renovated home on a 19th century street where Mercedes and Audis preen at the curbs. The city gardens there are small but perfect. This man’s street was not so advanced in its rejuvenation. On one side, there was an array of painted row houses. On the other, an old woman who appeared to be fresh from the bars staggered up the path to her rooming house.
I could hear dogs breathing heavily behind his door. He’d warned me about them, but not about his incendiary views: perhaps that’s why he too had demanded to remain anonymous.
As his dogs buffeted my knees, I made my way through the narrow front hall into a slightly down-at-heels living-room which would have been unremarkable in Bloomsbury circa 1935. It was designed for the comfort of people who read, and who talk about what they read. A deep couch and three upholstered club chairs were set around a circular coffee table, its tiered surfaces hidden by mounds of books and marked up manuscripts. The dining room beyond glowed in the late afternoon light. A majestic Edwardian sideboard shimmered behind a gauze of dust motes. It was a home from another era, yet the man in front of me was youngish, certainly younger than me. Dishevelled hair; flushed, yet pale skin; a bit on the heavy side, as if he spent too much time at his desk; clothes of no distinction and not artsy black. One of his dogs flopped on my feet, demanding petting.
He’d responded to my first email with a digital screech:
Who are you? What do you want?
Who are you was a good question. Yet it was impossible to answer. I’m too old to reduce myself to a few sentences. He could have zeroed in more tightly on my political beliefs, but they are no easier to spit out. My understanding of things has been revised and revised and revised again through the years. He could also have asked if I think that Canadians need cultural mirrors to reflect our shared multicultural identity, and whether such reflections must be guaranteed by a national policy enforced by the State. What would my answer be?
I think I believed in all of that while learning my craft as a journalist at Maclean’s in the 1970s. As I sat in one of his club chairs trying to figure out what to say, I remembered the exhilaration I felt when I began my career there. We were making an ideological commons, a home for stories that Canadians could immerse themselves in just by picking up the magazine. Magazines are small countries. They are always changing and evolving, they are both creative and reflective.
What do you want? It was an even harder question to deal with.
What did I want? I was painfully aware that the time I have left is shrinking, and should not be wasted on stories that will be forgotten before they wrap the fish. Maybe this M&S story was much ado about who cares.
I stuttered out some sort of answer. By contrast, he had no difficulty describing himself to me. Liberal, he said. He’d been a student of the works of both Hugh MacLennan and Louis Dudek, who had been teaching at McGill, just before the Americans took over the English department and these giants of Canadian literature went out the door. Everything he said marked him as a Canadian nationalist to the core.
We tussled for a bit over the current state of Canadian publishing. I said something provocative like: what’s in it for authors anymore since we give up 90% of the take to booksellers and publishers who can’t get our books reviewed, let alone sold? I told him I’d just self-published a book that had been bought but then offloaded by Penguin, and it had been an interesting experience and probably the way things will go in future. He asserted that self-publishing would never substitute for a Canadian publishing industry because it would never produce literature. He, as a publisher/gatekeeper, brings to his authors the years he spent at university training his mind, his tastes, and his methods, not to mention all his subsequent years of experience. This is why his authors’ books get nominated for prizes, year after year.
Big deal, I wanted to say, what have prizes got to do with it? I’ve been on prize committees, I know how choices are made. But I held my tongue, because I decided I liked him. He was so certain, so passionate. I used to be certain and passionate too. Maybe that’s why I confided in him as if explaining my present self to a younger version. I told him I was still kicking the tires on a story about the death of Canadian publishing policy beginning with the handover of McClelland & Stewart, but was finding it hard to clear a path through my entanglements. I laid them out, especially the problem of writing about Penguin Random House Canada, once such supportive publishers, now something else again. On the other hand, these changes were what had made me think this was a story I should tell. The publishing policy’s story arc ran parallel to my own career as a writer. It had shaped me, it made my working life possible.
I explained that I started my career just as
the policy was born. I was hired as a researcher and then editor at Maclean’s when Peter C. Newman was Editor. He was finishing the first volume of The Canadian Establishment and pushing—along with his publisher, Jack McClelland—for government support for Canadian storytelling, and especially for Canadian periodicals like Maclean’s. By the time I got to work in the morning, Newman had been at his desk for hours, plowing through transcripts of his interviews as jazz blew through his headset. He was writing about the Canadian business elite as it then was, introducing the rest of us to those who had been running the country, often on behalf of foreign masters, for generations. His next volume would be about the people he called acquisitors who were poised to buy the old guard out, people I too found myself reporting on only a few years later. We—the more junior editors and writers on Maclean’s staff—knew that our job was to discover, present, promote and critique Canadians of every sort, from politicians to cowboys to feminists, from musicians to writers to scientists, to give them platforms to propound their ideas, to shape national debates, to make sure there were some.
As I said these things out loud to my informant, I was hit by a wave of sadness. Too many of my colleagues from that time were no longer above the grass. They’d died, just like many of the ideas we’d shared.
One of my jobs at the magazine had been editing the book review pages and excerpting new books for the feature section of the magazine. I had excerpted a reissue of a non-fiction book written by Hugh MacLennan. I had also set up Maclean’s first bestseller list at the behest of one of Maclean’s more senior editors, John Macfarlane (who went on to a long career leading several national magazines and co-founded the publishing company Macfarlane, Walter & Ross). To create that list, I had to set up relationships with booksellers across the country who we could call once a month to find out what was selling. Remembering how tricky it had been to get that list going was why I found myself gritting my teeth whenever I opened the shrinking book sections of my weekend newspapers to scan their bestseller lists. These days there are two: one labelled ‘Bestsellers,’ the other, below, labelled ‘Canadian.’ While there is no text explaining the difference, it is pretty clear that the bestsellers lists record the books selling in the greatest numbers in Canada. While Canadian authors telling Canadian stories sometimes appear on the bestsellers lists, it is getting rarer. Lately, they mainly record the success of works originated elsewhere.