Postmedia Network Canada Corp. lost about $14-million in the last quarter as print advertising revenue continued its slide. The public company is one of the only in the country that is a pure-play newspaper publisher – most of the other large chains are rounding errors on the balance sheet of massive, multi-billion telecommunications and printing companies such as Quebecor Inc. (Sun Media) or Transcontinental Inc.
That means its quarterly reports provide clues into the Canadians newspaper industry that other companies can't, because the information it discloses is easier to understand and much more detailed. The publisher owns big-city metro papers across the country – such as the Ottawa Citizen and Vancouver Province – as well as the National Post.
Here are five things we learned about the newspaper industry's current state from the quarterly report.
Print is still king
For all of the talk about making money online and via mobile devices, Canada's largest newspaper companies are still hugely reliant on the print advertising market. And that's a scary thing for anyone with a fondness for the old-fashioned newspaper: Print advertising fell by $17-million in the last quarter at Postmedia to $105.4-million – while digital advertising increased by a paltry $400,000 to $21-million.
Indeed, Postmedia earned 59 per cent of its money last quarter from print advertising, the rest came from subscription revenue and digital initiatives.
It's a challenge facing publishers across North America. A recent study by the U.S.-based Pew Research Centre suggested that for every $16 papers are losing in print, they are only making up a dollar online.
"Print advertising fell for a sixth consecutive year in 2012, and not by just a little – it dropped about $1.5-billion, or 7.3 per cent, in a slowly improving economy," the centre's report stated, citing U.S. data. "National advertising is a particular weakness, suggesting that corporations are shifting their advertising dollars to other platforms.
The company said last year it wanted to cut about $120-million out of its operating budget in the next three years to deal with the structural change, and chief executive officer Paul Godfrey said they've already found $58-million in savings through cost cutting. But he warned that wasn't good enough, and also said that while he respects the company's collective agreements and "will do everything possible to live up to them … but we have to be practical at the same time."
Jobs are going
Mr. Godfrey still believes in newsrooms, however, and has said repeatedly that the company must streamline other aspects of its operations in order to protect its core newsgathering operations. He's already cut copy desks from most of his papers and centralized production of national, international and business pages in a Hamilton, Ont. facility to reduce duplication across the chain. Now he's focusing on taking other tasks – such as manufacturing management, circulation and marketing – that he can take out of local markets and handle from Toronto.
"As we look into our crystal ball, we will be a smaller revenue company but as well, a much smaller expense or costs company," he said on a conference call Thursday. "By doing that, we have to look at every aspect we do business, including the potential for outsourcing."
Sun Media is further down that road, and has gone as far as to fire publishers and replace them with regional sales directors. Rumours of a similar move have been swirling around Postmedia for weeks, and Mr. Godfrey said "lots of people jump to conclusions, but everything is on the table and we'll examine it from every aspect. When we make a decision, we usually announce it publicly."
Paywalls are here to stay
Postmedia's paywalls will go up by the end of May. Some of its papers have been experimenting with them – such as the Ottawa Citizen and Montreal Gazette – but the days of free content are over in this country for the foreseeable future. The Postmedia papers will join The Globe and Mail, Sun tabloids and dozens of smaller publications that have chosen to ask readers for money to consume content online. The Toronto Star has also said it will build a paywall, but has delayed its introduction several times and now says it could be fall before it's introduced.
"Twenty-four months ago people were warning everyone that if you went to any sort of charging system you'll lose people," Mr. Godfrey said. "But what people are realizing is if you want compelling content you're going to have to pay. You can't give away content, it costs you millions and millions of dollars … as a guy who once served in public life I know if you give people something for free and then tell them to pay they don't like it, but we can't afford to watch our revenues fall in print. If the public wants to get the compelling content they deserve, they're going to have to pay."
Fewer days of publishing
Several large papers across North America have made headlines of their own by reducing the number of days they publish each week, including the Times-Picayune in New Orleans. Postmedia decided to kill Sunday papers in Ottawa, Edmonton and Calgary last year, and its financial statement on Thursday showed that the decision saved the company about $4-million in the last quarter.
As papers look for ways to further reduce their costs, cutting the number of publication days is an increasingly tempting option. This is particularly true for companies such as Postmedia that have spent a great deal of their time building their digital platforms so that news can still be delivered when the physical paper is not.
Executives at Montreal's La Presse have taken it a step further, musing that they could see a day in the not-so-distant future when the print edition is shut down for good and replaced with a new tablet edition that would be free of charge and updated only once a day in the same way as a traditional newspaper.
Mr. Godfrey said Thursday that there once was a time that you could gauge the state of the economy by taking a ruler to the classified section of a daily newspaper. The thicker the better, as companies took out ads to find new employees and drivers put their cars up for sale so they could buy something better.
But the ad mix at daily newspapers is changing, probably forever, as sites such as Craigslist take a greater share of the market. Remarkably, classifieds still account for 16 per cent of Postmedia's total revenues each quarter, and brought in almost $17-million in the last three months alone. But it is also the category crashing the hardest – down 20 per cent in that same time period.
"That's been under pressure for some time and will be into the future," Mr. Godfrey said.
The company's ad mix is 38 per cent national advertising, 25 per cent from retail, 16 per cent from inserts, and 16 per cent classified (the rest falls under "other").
It's all rather grim, but Mr. Godfrey said there's still cause for hope: "Remember, the U.S. went into a spin earlier than we did in Canada and we didn't know if it was economy driven or structurally driven, and I think now we've learned it's structural. But the economy has been no great shakes – I really think there is a bit of sunshine starting to come in because the U.S. was going down 6 per cent year-over-year and is now only down 2 per cent. We live in hope, and I'm always an optimist."