In 1980, Rick Smith discovered how to turn a huge profit out of the contents of newspaper editors’ garbage bins.

His logic was that every press release an editor discards is mailed out by someone in need of a better way of getting their message into the media — if he could intercept these failed releases, he would have a list of potential clients who might be interested in a new, creative way to get their brands into newspapers.

Smith, then a 28-year-old Windsor University commerce graduate living in Toronto, met with editors across Ontario who were happy to throw their piles of irrelevant or inconvenient releases in a box he would collect when full.

“And I’d give them 25 bucks for that big box,” says Smith in a phone interview.

He’d call the press agents on the other end of these releases to let them know he could have their pitches re-written into feature articles resembling traditional newswire stories and mail them out in a catalogue to editors who may need filler content.

Instead of traditional source lines like Associated Press (AP) or Canadian Press (CP), his stories would be tagged News Canada, or (NC). Subscriptions to established newswire services were expensive — News Canada stories would serve as a free alternative.

Rick Smith in 1991. He left News Canada in 1984 and founded News USA, an American company operating by the News Canada business model. (News USA)
Rick Smith in 1991. He left News Canada in 1984 and founded News USA, an American company operating by the News Canada business model. (News USA)

“In this way, a local newspaper could have a column from the head of the Federal Business Development Bank, talking about how to get money for your business,” says Smith. “It made a local newspaper look important, they had all this expertise and all these helpful tips.”

Smith and News Canada co-founder Paul Aunger, then a new journalism graduate of Toronto’s Ryerson University, discovered many of their first clients – including government clients – through this method of reverse engineering editors’ garbage bins.

News Canada-sponsored stories appeared in newspapers and community newsletters thousands of times. Within years, the company was making millions in revenue with offices in Toronto, Ottawa and Montreal.

Government finds use for little-known form of sponsored content

News Canada now employs more than 30 people and brings in an annual revenue of about $3 million. Hundreds of private, non-profit and government organizations have paid to have their stories placed in News Canada catalogues. Especially government organizations — for more than three decades, Canada’s federal government has been one of its largest clients.

Federal departments publish their contracts issued over $10,000 by default. Analysis of available disclosed contracts shows that since April 2004, federal departments have spent more than $4.9 million in taxpayer dollars to have content they co-produce through News Canada distributed to publishers, editors and producers across the country.

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From April 2014 to April 2015, over 300 Canadian newspapers ran more than 1,500 News Canada-supplied stories paid for by the federal government, according to the News Canada president Shelley Middlebrook.

News Canada’s services also include radio scripts and video news releases, and it distributes stories in French under the brand L’edition Nouvelles.

This content is published and aired thousands of times every year — and the stories never mention they are sponsored content, or who paid to have them distributed.

There’s nothing new about services like News Canada, which now offers other marketing services under the name Fifth Story.

Since the early 20th century, ready-for-insertion stories have been known among marketers and public relations agents as “mat” or “matte” releases. There are many companies specializing in producing and distributing these stories, but the practice remains widely unknown to the public: “mat release” is a term that appears in Public Relations textbooks but has no Wikipedia entry.

Mat release stories blend in easily with regular journalistic content, but they represent an ethical challenge to publishers and producers who are increasingly strapped for cash and time. And while the new federal Liberal government has promised to increase oversight on government advertising, it continues to pay for new News Canada stories, which aren’t subject to the traditional oversight of government advertising.

Mat stories “need to be marked as not-journalism”

Meredith Levine, lecturer in the Faculty of Information and Media Studies at Western University and co-chair of the Canadian Association of Journalists’ ethics committee, says publishing mat stories without labelling them as sponsored is “very unethical.”

For Levine, the key test for determining whether a story is sponsored content or journalism is asking: “What is journalism?” Any journalism code of ethics has serving the public interest as its first principle, and Levine says mat stories don’t meet this — they’re created to serve private interests.

When sponsored mat stories are published, they’re rarely in a designated advertising section. Usually, the only clue to who produced them is in the tagline.

Levine, who participated in a CAJ discussion paper on sponsored content in September, says these stories are not journalism, and need to be marked that way.

But it is not rare for newspapers to publish sponsored stories in their regular news content sections.

In January 2015, for example, Halifax’s Chronicle Herald — Canada’s largest independent newspaper — published “How to get through tax season with a smile,” a News Canada article citing the Canada Revenue Agency as its only source. The next month, the same paper published “Careers abound in our country’s agriculture centre,” an article paid for by Human Resources and Skills Development Canada.

Neither article carried a “sponsored content” label nor appear in a designated advertising or “custom content” section.

Bob Howse, the Chronicle Herald’s editor-in-chief, did not respond to emailed questions for this story. Brian Ward, the Chronicle Herald’s Vice President of News, forwarded questions to Jeff Nearing, who manages the Herald’s “Custom Content” — sponsored content — section. Nearing did not respond to emailed questions.

Media critics say these government-sponsored articles should be classified as “advertising,” but the government classifies the articles not as advertising, but as “earned media.”

Government newspaper advertising decreases while budget increased for mat release firm

Government figures show how the Harper administration prioritized advertising spending.

The maximum allowance for all government departments to spend on News Canada services increased by 25 per cent in 2013-14, from $1 million to $1.25 million. And while the government spent more than $1 million on these contracts in 2014, federal government advertising spending in community newspapers collapsed.

During the 2013-14 fiscal year, the Canadian government spent almost $2.1 million on advertising in weekly and community newspapers. That’s a severe cut from the year before, when the government spent $5.3 million on such advertising.

Not to be confused with the mat release company News Canada, Newspapers Canada is the organization representing more than 800 Canadian daily and community newspapers. John Hinds, president of Newspapers Canada, says government advertising has enabled newspapers to hire journalists to write stories about their local communities — fewer newspaper ads mean less money for journalists.

Less money in newsrooms may also be a plus for providers of free sponsored stories. In a January 2008 press release Debra Weiss, executive vice president of Metro Editorial Services, another canned content distributor operating in Canada, said, “As media outlets have trimmed their staffs and budgets in recent years, more editors are receptive to using wire features and mat releases they can use for free.”

Advertorial vs. “Earned Media”

When a federal department wants to advertise, it’s required to open up the contract to a complicated and competitive process.

To officially place advertisements in a newspaper, for example, a federal department must:

• develop a proposal, including a “detailed overview of the advertising campaign, including its objective, key messages, and the government priorities it supports”;

• consult with Public Works and Government Services Canada (PWGSC) on contracting options — PWGSC may advise “a mini-competition among agencies preapproved on a supply arrangement” or a Request for Proposal, two options that engage the department in a bidding process;

• produce the ads and develop media plans with the Agency of Record; and

• provide “final creative and media plans to PWGSC who reviews for compliance with applicable legislation, policies, and standards.”

PWGSC, which manages all government advertising, has had a standing offer with News Canada for more than a decade.

The offer is for “Multi-Media News Services,” and it enables any federal department to contract News Canada to provide content up to $1.25 million across all departments.

Hinds says the process for the government to buy ads should be transparent and accountable, “which it is, but it’s also difficult” — it’s much easier to buy News Canada services.

The company is popular, in part, because it can short-circuit the official “advertising” process.

“Whereas with a News Canada type of thing, you know, you get a standing offer,” says Hinds, whose organization published a report analyzing the decline of government advertising in community newspapers last year. “You want to send a story? That’s great. You just do it, right?”

Shelley Middlebrook, president of News Canada, declined a phone interview for this story. But via email, Middlebrook says that News Canada’s standing offer with the government is for “earned media services.”

She writes that “earned content” refers to public relations and media relations efforts to get stories picked up or written by media outlets. Editors who see value in these stories are not compensated for running them, and the clients who pay for the production and distribution of this content are not guaranteed coverage in any specific media outlets.

But with advertising, according to Middlebrook, a client picks the content of their ad and where they want to place it. They directly pay the media outlets that run their ad.

The history of sponsored deception

To the CAJ’s Levine, the stories are advertisements even if publishers aren’t paid to print them.

“They come across as trustworthy,” says Levine. “But you unpack it, where is the evidence for these claims? Who’s making these claims? Where are your sources? Who stands to benefit from this content? So, it’s advertising and it belongs in advertising sections.”

Objectively deciding how to label News Canada stories is complicated by the lack of any critical material analyzing the practice or history of mat release placement.

The Encyclopedia of American Journalism, published in 2008, never mentions mat releases, but provides historical background for a form of sponsored content dating back to the mid-19th century in the United States and France — the “reading notice.”

Reading notices were stories advertisers would pay newspaper publishers to print alongside their regular news content, without any indication they were advertisements. As the most profitable form of advertising for newspaper publishers, the practice was widespread for decades.

In her 1988 article “Advertisements Masquerading as News In Turn-of-the-Century American Periodicals,” Linda Lawson writes that patent medicine seller “Dr. Warner” of Warner’s Safe Cure has been credited with writing the first reading notice. Warner would compose fictional news stories of general interest and insert mentions of his product a few paragraphs in.

One of his reading notices, for example, examined how Associated Press journalists deal with their busy lives, with a reporter mentioning Warner’s Safe Cure as the only remedy to his mental strain in the third paragraph. The story was published multiple times between 1892 and 1894 in newspapers from California to Michigan, disguised as regular content each time it was printed. In concept and appearance, Warner’s reading notices were no different from News Canada stories, except for Warner paying to have his stories appear in newspapers.

The third column from the left on this excerpt from a page of a 1894 issue of the Salt Lake Herald is an advertisement, though it blends in with the journalistic content on the left and stands out from the obvious advertisements on the right. (Library of Congress)
The third column from the left on this excerpt from a page of a 1894 issue of the Salt Lake Herald is an advertisement, though it blends in with the journalistic content on the left and stands out from the obvious advertisements on the right. (Library of Congress)

Even the New York Times embraced the reading notice until the practice was discredited around the turn of the 20th century and new postal regulations in the U.S. prohibited disguised advertisements.

But unlabelled sponsored stories for which newspapers receive no payment have long existed under the radar of journalistic ethics.

The Encyclopedia of American Journalism overlooks mat stories, saying in its entry for Reading Notice that in theory, “the practice of disguising blatant advertising as editorial content no longer exists today.”

The encyclopedia says a more accurate parallel to reading notices today might be brand placements in film and on television, “since there is little to no recognition that the content has been supplied either for free or for a charge.”

But if free content supplied to editors and published without any disclosure fits the definition of “reading notice,” then News Canada stories would qualify, and reading notices hardly ever went away. Metro Editorial Services, an American PR firm, credits itself with pioneering national mat release distribution in 1933.

Mat releases do fit the trade definition of “earned media” as a PR method where an agent persuades an editor to run content positively portraying a brand. But the releases also fit every traditional definition of “advertising.”

Regardless of how News Canada stories are labelled, what matters practically is that in Canada, the federal government has strict outlines on how departments may advertise — and a recent government review apparently decided these stories are not advertisements.

“Advertising” definition works for some government staff, not others

Paul Rolland, Acting Senior Director for the Communications Procurement Directorate at Public Services and Procurement Canada, oversees the standing offer. Rolland was available for a phone interview arranged by PWGSC in December after the department was emailed questions about the standing offer for this story. The interview runs just over five minutes, with a PWGSC representative prefacing the call saying Rolland soon had to be at a meeting.

“We had a review of the standing offer and the communications policy, and after this review, we determined that the services provided by News Canada do not contravene the communications policy and are not considered advertising services,” says Rolland at the beginning of the interview.

“The reason for that is that these are services and not a product. So, these are ready-to-use news stories that are provided by the firm, and then they disseminate these out to news outlets to be used as articles. And it’s not considered advertising because we’re not buying the media space, or the placement is not paid for.”

The Communications Policy of the Government of Canada defines government advertising as “any message conveyed in Canada or abroad and paid for by the government for placement in media such as newspapers, television, radio, Web, cinema and out-of-home.”

While it’s true no one paying for News Canada stories gets to choose exactly where the stories will be placed, which would meet Middlebrook’s definition of advertising, the government does pay to have content inserted directly into News Canada’s catalogues and website, so it is paying to ensure its articles are placed in online media.

Asked whether the government paying to place stories in News Canada catalogues and its website is “advertising,” Rolland says  it is not. “What we’re buying is, we’re buying the editorial services, and the distribution of those news stories,” he says. “We’re not paying for a product, we’re paying for their editorial services.”

But at least seven federal departments have contracted work described as “Advertising services” to News Canada in contracts outlining they were call-ups against a standing offer. One of these contracts, in 2013, was for PWGSC itself.

Details on a 2013 Public Works and Government Services contract with News Canada.
Details on a 2013 Public Works and Government Services contract with News Canada.

Why would multiple departments repeatedly describe these services as “advertising” in contracts if a review determined they aren’t considered advertising? Rolland — speaking on behalf of PWGSC — says he cannot speak for the other departments.

The Communications Policy also says that for the government to be accessible and accountable, the government and its institutions “must be visible and recognizable wherever they are present.”

Does it contravene the Communications Policy for the government to pay for stories produced and distributed by News Canada that do not include government branding?

“Well,” answers Rolland, “as I mentioned earlier, we reviewed the communications policy and it was determined that this was not considered advertising, and it does not contravene the communications policy. We are paying for a service, and not buying media space.”

Pressed for more information on the review he was referring to, Rolland says, “We reviewed the standing offer itself, and the communications policy. And it has been determined that it is not.”

There is no time remaining in the interview for further questions.

Decades of current affairs stories brought to you by the government

Newspaper archives reveal a history of more than three decades of Conservative and Liberal governments sponsoring a huge variety of stories, including current affairs stories portraying government decisions in a positive light.

In May 1985, for example, News Canada distributed four pages of stories by Finance Canada about the new federal budget. The only interviews featured in the stories were with the Minister of Finance. Some stories from the package included no sources.

A News Canada-placed story in the Canadian Jewish News; September 5, 1985; Pg. 54. Scan via Multicultural Canada.
A News Canada-placed story in the Canadian Jewish News; September 5, 1985; Pg. 54. Scan via Multicultural Canada.

Middlebrook, the News Canada president, writes that when media use News Canada, “they identify News Canada as a source, like they would do with Canadian Press and Associated Press, the difference being that News Canada does not provide breaking news or current affairs.”

But News Canada does provide current affairs stories. In 2013, for example, News Canada produced a video showing then-Prime Minister Stephen Harper apologizing for residential schools in 2008:

YouTube video

Asked whether News Canada’s 2014 stories on the Nutrition North Program or Canadian High Arctic Research Station — both paid by Aboriginal Affairs and Northern Development Canada — could be considered “current affairs,” Middlebrook replies that they could.

She writes that News Canada’s services are generally used “for more non-controversial, informational content and to more efficiently reach smaller outlets across Canada with limited resources.”

Canadian newspaper organization shares sponsorship with News Canada

While some Canadian newspapers may never publish mat stories, most papers are members of Newspapers Canada, which cross-promotes News Canada.

News Canada has sponsored some Newspapers Canada events since 2007, and the organizations advertise each other on their websites.

A promotional message for News Canada on the Newspapers Canada website.
A promotional message for News Canada on the Newspapers Canada website.
News Canada’s front page features a Newspapers Canada logo at bottom right.
News Canada’s front page features a Newspapers Canada logo at bottom right.

Newspapers Canada’s online list of partners describes News Canada as providing “ready-to-use, timely, credible and copyright-free news content.” There is no mention made that News Canada provides sponsored content.

However, after Newspapers Canada learned of News Canada’s work with the government last year, it warned of the practice in an editorial on the trend of declining government advertising spending on community newspapers.

Newspapers Canada distributed the editorial to its community newspaper members in August. The piece was published by papers from Quebec to British Columbia — but two different versions made it to print.

The first version was the piece as it was originally composed by a Newspapers Canada member from PEI. The second version contained edits Hinds made after News Canada contested points the editorial made about their relationship with the government.

Excerpt from the original editorial (highlights added):

The Harper government spent $1.25 million with a company called News Canada to create its own stories – stories it offered for free to print and broadcast outlets. The vast majority of these government-approved stories were never published. But you and I paid for them. It is disconcerting that the federal government spent 50 per cent more creating its own news than the total advertising buy in Canadian newspapers.

Same excerpt from the revised editorial (highlights added)

“The Harper government budgeted $1.25 million to be spent with a company called News Canada to create its own stories – stories it offers for free to print and broadcast outlets. But you and I paid for them. It is disconcerting that the federal government proposed spending 50 per cent more to create its own news than the total advertising buy in Canadian community newspapers.”

The original editorial is inaccurate in saying the government “spent” $1.25 million, because that’s actually the total amount PWGSC had budgeted, and the full amount was not spent.

But why was the line removed saying the “vast majority of these government-approved stories were never published”?

“I took that out because News Canada went crazy,” says Hinds in a phone interview.

“And, on sober second thought, I just thought that was a bit incendiary, and it didn’t really go to the piece, so I thought — why crap all over News Canada?”

Middlebrook, the News Canada president, writes she emailed Hinds about the editorial after reading it in September, “in regards to the numerous inaccuracies.”

In an email to Hinds, Middlebrook outlined “significant inaccuracies” in the editorial, writing that the line about most government stories not being approved was incorrect: 255 community papers and 58 daily papers ran 1,516 Federal Government articles distributed by News Canada from April 2014 to April 2015.

Despite the ongoing sponsorship between the two organizations, Hinds reserves criticism for editors who would knowingly publish News Canada’s government-approved stories.

“I think it really goes to the point of the media — what is the role of the media and the accountability function, holding government to account?” asks Hinds.

“And if you are sort of, publishing state propaganda, for want of a better word, is that really what we should be doing?”

Proposed ad legislation overlooks mat releases

The Liberal platform in last fall’s federal election included a promise to appoint an Advertising Commissioner to assist the Auditor General in ensuring government advertising is “non-partisan and related to actual government requirements.”

But government-sponsored mat releases, radio scripts and video news releases, not being considered “advertising,” would not be subject to the Liberals’ Bill C-544.

PWGSC’s current News Canada standing offer lasts until February 2017, and the new government is continuing the practice — editors have been publishing News Canada stories promoting projects of the new Liberals since January.

Top four reasons why education is so important” is a story pushing participation in the 2016 long-form census — the article was printed verbatim in the Edmonton Sun’s Careers section on February 13:

Screen Shot 2016-04-29 at 3.36.05 PM

Lorne Motley, Edmonton Sun editor, directed emailed questions about this story to Postmedia spokesperson Phyllise Gelfand. Gelfand did not respond to emailed questions.

As long as organizations still see mat stories published and aired, they will still pay for them. According to Middlebrook, News Canada articles were distributed more than 50,000 times by print and digital media outlets in Canada in 2014.

To the CAJ’s Levine, the ubiquity of these releases has to do with a “global forgetting” about the purpose of journalism — to serve the public interest, and not private interests.

“I don’t know why it’s not more discussed. It’s a very unethical practice and there’s no doubt that editors and publishers in many news organizations, their backs are against the wall,” says Levine.

“But I really, really hope this isn’t settled on as the way out or the way through, because of the potential consequences for journalism of this.”

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  1. It really looks like solving this problem on the front end (Government) isn’t going to happen any time soon. The mid-section probably won’t change any time soon either –they’re making easy money from what they’re doing. Looking at things from the back end, when you have the CAJ acknowledging that items like those produced by NC aren’t really credible, journalistic content, what is stopping local papers from identifying such content as “Sponsored”? I mean they’re getting NC content for free. Is there some sort contractual agreement stating that local papers aren’t allowed to highlight that NC content isn’t necessarily journalistic in nature?

  2. I had no idea. Thank you for the primer! I’ll be sure to be even more suspicious of news items than I already am….. (Present company excepted)