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Newspaper boxes line a curb in Toronto. (Dave LeBlanc)
Newspaper boxes line a curb in Toronto. (Dave LeBlanc)

Torstar sees no wave of consolidation in newspaper industry Add to ...

The Toronto Star is taking a closer look at digital paywalls, but has ruled out buying other newspapers in an attempt to consolidate the market despite “a growing urgency” to work with competitors to cut costs.

The company met with analysts this week to update them on their plans. The newspaper industry is in the midst of a deep challenge, as national advertisers spend their money elsewhere and readers move away from the printed product.

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And while the Star’s parent company Torstar reached a deal with The Globe and Mail that will see the two companies merge their Ontario distribution operations (Torstar said the deal would save it about $5-million a year), the company said it didn’t think a wave of consolidation was about to move across Canada’s newspaper industry.

“While there is a growing urgency to co-operate with other incumbent publishers, management emphasized that consolidation is not necessarily the solution,” RBC Dominion Securities analyst Drew McReynolds wrote. “While we believe a growing urgency to co-operate with other publishers could eventually lead to further industry consolidation, management emphasized consolidation for the sake of consolidation is not necessarily the solution.”

Companies are scrambling to cut costs as advertising revenue pulls back – for every $7 they are losing in print, they are only gaining $1 online. Postmedia Network announced a wave of cuts several weeks ago that will see dozens of jobs cut at each of its 10 newspaper across the country as the chain consolidates many functions out of a central page-making and editing facility.

Mr. McReynolds said country’s newspaper companies “may increasingly look to co-operate on the selling front,” particularly to sell digital advertisements. Several of the country’s largest television companies have recently formed an alliance to offer advertisers one-stop shopping for their network of sites.

While the company didn’t provide specific guidance on the state of the advertising market, Mr. McReynolds said the weakness in national advertising seems to be continuing through the spring.

“The major culprit for the recent ad market pressure (in both print and digital) has been a substantial pullback in the financial services category since last fall,” he said.

“Consistent with recent commentary from other media executives, management confirmed that advertisers are increasingly experimenting with digital in an attempt to find the right balance in their advertising buys. Management acknowledged that some of the current pressure in newspaper advertising is clearly structural, but it remains difficult to isolate this impact from the persistent cyclical/macro-driven weakness since the 2008-2009 recession.”

Mr. McReynolds said that while the “portfolio of businesses that comprise Torstar Digital is profitable in aggregate,” the company said it needed to be more nimble online.

And while competitors such as The Globe and Mail have said they will transition to a metered paywall system where users will be asked to pay for some content online, Torstar “remains cautious” about charging.

The company has experimented with a paywall at the Hamilton Spectator, but hasn’t said whether it would try the same thing at the Star.

“Management continues to explore and consider what the right model is in charging for its content online,” he said. “The company remains cautious about discouraging the online growth it is currently experiencing, but believes it needs to pursue incremental monetization of its online readership.”

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