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Some of Postmedia's newspapers.

Adrian Wyld/Adrian Wyld/THE CANADIAN PRESS

Canadian newspapers need access to foreign owners if they are to compete with the unregulated Internet for advertisers and readers, Postmedia Network Canada Corp. 's chief executive officer said Wednesday as he spoke out against ownership restrictions on domestic publications.

Under Canadian tax rules, advertisers cannot receive the same tax breaks for advertising in a foreign-owned newspaper as a Canadian one – which effectively ensures that all major newspapers in this country are controlled by Canadians. "Antiquated laws" also mean that the government could veto any foreign takeover, Postmedia CEO Paul Godfrey said.

A month after his company hired a lobbyist to push the government for changes, Mr. Godfrey said during a conference call that the time has come for looser rules. He said online-only, foreign publications such as the Huffington Post can set up in Canada with minor investments and face no regulation.

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"There are no rules on the Internet and you see that digital advertising has surpassed newspaper advertising in 2011," he said. "They provide little content, they get Canadian content from other sources. They didn't have a reporter at our AGM, I don't see them covering city hall and they aren't in Ottawa with a national columnist. "We have two playing fields – one for the Internet and one for print. Maybe it's time to step into the 21st century."

He also brushed aside concerns that foreign owners wouldn't provide local content, a problem that could cause the government to veto any takeover of a newspaper company from abroad.

"A foreign owner that does not present hyper-local news as quickly as a local owner will quickly fail. It is hard for me to believe anyone could differ with that opinion," Mr. Godfrey said.

Postmedia was created in July, 2010, to buy the newspapers of the bankrupt CanWest Global Communications Corp. Its shares were listed on the Toronto Stock Exchange last June. The company's current investors, led by New York-based Golden Tree Asset Management LP and other funds, are expected to try to sell their stakes in the company within the next few years.

Analysts who follow the company aren't convinced any Canadian buyers would step forward, especially if the chain, which includes titles such as the National Post and The Gazette of Montreal, keeps posting weak quarterly reports, such as the one it did on Wednesday. The Toronto-based company said reluctant advertisers pulled first-quarter revenue 9 per cent lower, although a gain on the sale of B.C. newspapers pushed the bottom line higher. Quarterly profit came in at $28.3-million, compared to $6-million a year earlier.

Mr. Godfrey said he wouldn't entertain any offers for the chain's other newspapers to pay off the company's debts, which surpass $500-million.

Revenue fell to $231.1-million from $254.1-million in the same period a year earlier. Print advertising revenue was down almost 12 per cent to $149.4-million.

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Chief financial officer Doug Lamb said a weak national advertising market was the company's main challenge in the quarter.

"Two-thirds of the decline [in advertising]was from national print advertising," he said. "Half of that came from the financial services category."

Digital revenues, a major plank in the company's growth strategy, were also hit by weaker national sales, he said. A rise in local revenue was offset by national dips.

Mr. Godfrey said he didn't think the slow sales had anything to do with the company's management, adding that three-quarters of the company's difficulties were caused by the economy.

"We really believe it was across the board and not just us," he said, adding that the second quarter has also been slow. "It's also affected our competitors."





















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