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the lunch

Illustration of Postmedia Network chief executive officer Paul Godfrey.ANTHONY JENKINS/The Globe and Mail

When the call came, Paul Godfrey wasn't wearing any pants.

It was 1988, and Ben Johnson had just tested positive for steroids after winning Olympic gold. Mr. Godfrey – then publisher of The Toronto Sun – was trying to climb into a tuxedo when a friend who represented the sprinter called and asked him how to put together a press conference.

What happened next is the stuff of newspaper legend. Mr. Godfrey convinced the caller to grant the Sun exclusive access to Mr. Johnson, who would tearfully deny the charges in a farmhouse east of Toronto as the publisher and a columnist listened intently.

It was a worldwide scoop that ran under the headline "I didn't do it." To throw competitors off the trail, the Sun printed several hundred decoy copies that hit the streets before press time at rival papers.

And when it finally came out that he did do it, Mr. Godfrey managed to spin that to his paper's advantage as well.

"We just went out there and told everyone that he lied to us first," he says, leaning forward and banging the table as he laughed. "That was an exclusive, too."

The chief executive officer of Postmedia Network Inc. loves to tell stories about overcoming challenges and defeating the competition. But as he seeks to restructure Canada's largest English-language newspaper chain, a happy ending is anything but a sure thing.

Mr. Godfrey is looking to chop $120-million out of its operating budget – a third of its expenses – in the next three years in an attempt to match revenue with costs.

And while he is facing the same challenges as other newspaper publishers when it comes to a tough advertising market and encroachment from Internet-based competitors, his situation is somewhat unique because the company is largely owned by American hedge funds that are able to put extra pressure on him to pay off the company's $480-million debt.

Mr. Godfrey has given up on the idea that the money that left the newspaper industry is ever coming back – one U.S. study has suggested that for every $7 newspapers are losing in print advertising sales, they are only picking up $1 in online revenue – and he's trying to hack at the business until the books balance, without actually ruining his newspapers.

"People buy newspapers for the editorial product and you have to have compelling content at all times or people will abandon you," he says. "That's what happened at a lot of the American papers – they cheated on content and look where they are now."

The Ben Johnson story provides a small insight into the changes Mr. Godfrey thinks he can make without destroying storied titles such as the Montreal Gazette, Ottawa Citizen and Calgary Herald.

His opening shot was to shutter the company's breaking news service in Ottawa because he could get the "commodity news" cheaper from the Canadian Press wire service – in other words, he wants his papers filled with more hard-earned scoops and fewer provincial legislature roundups.

The pronouncement earned him some scorn from within the company, where he is regarded by some as a friendly but dangerous leader who is willing to cut editorial to the bone to appease lenders.

At 73, he's pulling in $950,000 a year to run a company focused on austerity (roughly the same as the newly appointed CEO of The New York Times, bonuses notwithstanding), and his tone of detached amusement has some wondering what he has to be so happy about.

"These are trying times," he says with a shrug and a broad smile. "But people can get more creative when times are tough – I like our position in every market that we are in."

His next move was to expand the operations of a Hamilton-based editing centre. By the end of the month, it will be editing stories for Postmedia papers across the country and designing common pages for all of the newspapers.

Copy editors and page designers were handed pink slips even as the Hamilton centre ramped up with lower-cost replacements – the only journalists left working in Postmedia newsrooms will be "local reporters writing compelling content" and their assigning editors.

He's hardly alone in looking to consolidate operations and outsource some functions to save on costs in response to lower print advertising revenue – Sun Media Corp. sold many of its printing presses years ago in favour of centralized facilities and uses common pages across its titles, The Globe and Mail sends some of its editing and page design to a Canadian company it partly owns called Pagemasters North America.

This first wave of Postmedia's cuts – intended to help stop the losses ($12-million in the last quarter) brought on by a relentless drop in print advertising revenue – won't go nearly far enough to meet his $120-million savings target.

That means he's looking at other options – high on his list are selling real estate and seeking out cost-saving partnerships with rival news agencies.

"I think newspapers will evolve more into media companies than anything else," he says, as he dips a forkful of his asparagus and mushroom omelette (it's the daily special, but he ordered it without the asparagus) into the mess of ketchup that is slowly spreading across his plate.

"They are going to be content centres more than anything else, with maybe some sales and marketing people, too. But I think we'll see more strategic alliances between competitors than we have today on things like national sales. We've already crossed the barrier in distributing each other's papers, and people can get creative when times get tough."

Working with other publishers would be easy enough for Mr. Godfrey, who has been running the chain of newspapers since Postmedia was formed out of the ashes of the CanWest Global Communications Corp. bankruptcy in 2010.

He was an alderman in the 1960s, and despite a varied career that included running Sun Media and the Toronto Blue Jays, he's still very much the showman politician.

Our lunch – at a restaurant called Glow in an open air outlet mall near the company's suburban Toronto headquarters – is our second attempt at doing this story. The first time, a few months earlier at another restaurant in the same mall, we didn't get much of a chance to talk because people kept coming up to the table to introduce themselves to him.

A table of attractive women to the right of us was particularly interested in Mr. Godfrey that day. At first they were sneaking their glances, but by the end of their meals had moved as close to him as the seating arrangements allowed.

They almost knocked each other out of the booth as they scrambled to hand him their business cards. He handled it with the seasoned ease of a pro, smiling the entire time and going out of his way to make sure they knew who I was as well.

"I run the National Post and my friend here is a big deal at The Globe and Mail," he said, as he shook their hands. "Does that seem strange to you? Because we're all right with it, so it shouldn't seem strange to you."

The folksy charm – he frequently says things such as "So then I says … " – serves him well as I press him on the changes he's making to his newspapers. But even he has his limits.

When I ask how he could possibly produce a better product with fewer journalists in the building, he changes the subject to focus on the money the company will save by cutting copy editors and page designers from its 10 newsrooms.

Aren't local copy editors better versed in local markets? Wouldn't local editors be better able to decide which international stories would appeal to local readers?

"Yeah, they would," he finally says, throwing his arms up theatrically. "It's not that we want to do this. We have to do this."

The road ahead isn't likely to get easier for Mr. Godfrey or his employees. He's convinced the cuts have to be made – "in the next three years, print revenue will decline more than digital is going to increase" – and he's willing to concede some Canadian papers (not his own, of course) may not make it through to 2015.

"I'm not sure that everyone makes it, but I think we have a pathway to success," he says, before slipping back into his more comfortable role of storyteller.

"Times have changed. I remember at my first ad meeting at the Sun, I reported 'National advertising – up. Retail – up. Classified – up. Circulation – up.' One joker stood up and said 'I told you guys, this paper is so good even this guy can't fuck it up.'

"That's how things used to be. Things were a little easier back then."

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