Newspapers stacked and folded in Toronto. Image: Kat Northern Lights Man/flickr.

The Canadian government has pledged to create a $50 million fund to support local journalism in Canada over the next five years. But the money (which amounts to $39 million US), while welcome in an industry that is badly struggling, may also be too little, too late to make a difference.

Erin Millar, co-founder of the online media outlet Discourse Media, says she was afraid at first the budget proposal was going to be throw money at failing entities like The Toronto Star and Postmedia—which owns papers in major cities including Toronto, Ottawa, and Montreal—but was relieved when she saw the announcement.

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“If you gave $5 million to Postmedia or the Star, that would be gone by lunch,” Millar tells CJR. “So at least it’s not a bailout. But then the next question you have to ask is whether this money is going to actually have any impact or not. And is this all going to newspapers, or is there going to be some going towards new digital startups? We just don’t know.”

According to John Hinds, president of News Media Canada, the country’s journalism industry has lost more than 16,000 jobs in the past decade, as publishers have been forced to cut staff to keep pace with plunging ad revenue. As in the US, local media markets have been hard hit, with many municipalities losing their only newspaper due to closures. Postmedia and Torstar—which owns the daily Toronto Star as well as a chain of small weeklies—recently swapped ownership of more than 40 small newspapers, and most were subsequently shut down.

While the government has yet to provide details about the funding, sources involved in the decision-making process say the money may go to The Canadian Press, a wire service owned by several large publishers including Torstar and The Globe and Mail, to hire reporters in local markets. This was one of the proposals made in a report commissioned by the government on the future of news. The report paints a dire picture of Canadian media, noting that “since 2010, 225 weekly and 27 daily newspapers in Canada have shut their doors or merged with other papers” and “[around] one third of journalism jobs have been lost in the past six years.”

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“If they spend it directly on hiring journalists in local markets, that’s better than supporting a dying business model,” Millar says. “But it’s not really an investment in the future because those journalists will go away when the money goes away.” What is most depressing, she says, is “I feel like it’s going to be all the same people in charge of handing out that money—it’s like the same 12 people who were there when things went bad are still controlling the discussion.”

Discourse, just three years old, has built a 20-person operation based in Vancouver and Toronto, with several reporters in in British Columbia and Saskatchewan. “The only reason I was able to do this is because I was willing to put my house on the line,” Millar says. The company—which had $750,000 in revenue last year from subscriptions and donations—has raised $350,000 by issuing shares to the public and $250,000 from a private investor, and Millar says it is close to closing another $400,000 funding round.

Jeremy Klaszus, founder and editor of a Calgary-based journalism startup called The Sprawl, says he hopes none of the funds the government is promising will go to the Postmedia newspaper chain, which has been hit by several rounds of layoffs across the country, in part because of a crippling amount of debt owed to American hedge funds. “They have relentlessly devalued local journalism,” he says in an interview. “The thought of them getting any kind of support for local journalism is a bit of a joke.”

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Selena Ross, a writer and editor with Montreal-based Maisonneuve magazine, says she is encouraged by the fact that the government specified the funds would be focused on underserved communities. “I think the focus on underserved communities is really good to hear because it eliminates places that are covering Toronto or Ottawa or these major cities,” she tells CJR. “There are some places in Canada that are in really dire straits.”

Ken Whyte is the former editor of the National Post, a national daily newspaper owned by Postmedia, and is also a former senior executive with Rogers Communications, one of Canada’s largest cable companies. He says $50 million is not enough money to achieve anything meaningful.

“They’d be better off not doing anything,” Whyte tells CJR. “There’s three problems with what they’re doing—the first is that there’s no amount of money that they’d be willing to spend that’s going to save print journalism. The second is that, to the extent they try to prop up old businesses, they interfere with the birth and growth of new media outlets. And third, there’s a sizeable constituency out there that doesn’t trust the mainstream media, and will trust it even less if it’s subsidized by the government.”

Hinds, president of News Media Canada, said in a statement his group is concerned “the amount announced is far too little to address the growing challenge of providing local news.” The association had proposed that the government remake the Canadian Periodical Fund (which supports the print magazine business with tax breaks and other measures) and give it an extra $350 million in funding.

In addition to the new fund, the government will make it easier for media organizations to seek non-profit status in a way that enables them to accept donations from the public and charitable foundations. (Under current Canadian tax laws, even if media companies define themselves as non-profits, it is difficult for them to get contributions from foundations and other benefactors because only registered charities are allowed to do so.)

Klaszus says he is interested in the possibility of changes to non-profit rules, because that would make a tangible difference to his ability to raise money for his startup. “The part that catches my interest is making it so media organizations can get foundation support, which is really hard in Canada right now.”

“All [non-profit status] really does is confirm that these things don’t make money anymore, and allows them to go out and beg with a certain amount of dignity,” says Whyte. “So instead of issuing shares, Torstar could go out and ask for donations, and people might be more likely to do that if it wasn’t a commercial enterprise and their money wasn’t going to pay Torstar dividends. If they want to do that they can go ahead I suppose, it might be incremental revenue but it’s not going to save the model.”

Ross says these changes to tax rules would be “a huge, huge move” and will actually make a much bigger difference than funding, because it will allow media organizations to restructure and try out foundation or crowd-funding. “It could turn into a longer-term thing or it could help tide newspapers over until they sort out their financial problems.”

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Karen K. Ho and Mathew Ingram are the authors of this article. Ho is a CJR Delacorte Fellow. Follow her on Twitter @karenkho. Ingram is CJR's chief digital writer. Follow him on Twitter @mathewi.