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A man runs past newspaper boxes in downtown Vancouver. A new report suggests that the Canadian newspaper industry will have to contend with revenues that continue to shrink over the next four years.

DARRYL DYCK/The Globe and Mail

Canada's newspaper industry will see advertising and circulation revenue decline by almost 20 per cent over the next four years, according to a global study that suggests the market was worth $2.1-billion in 2012.

PwC's Global Entertainment and Media Outlook 2013-2017 said finding readers isn't a problem for the country's newspapers, with 70 per cent of Canadians still reading them on a regular basis. But advertisers are finding other places to spend their money, and the report suggests the industry's revenue will drop to $1.7-billion by 2017.

The report suggests that print advertising revenue in 2008 was $2.7-billion, meaning it will have dropped by $1-billion in less than a decade. The report doesn't provide any further data on the newspaper industry beyond revenue projections.

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"The 95 daily newspapers in Canada are all available online, but although online newspaper advertising is continuing to increase it is not at the rate the industry would like," the report states. "The industry is hampered by a fixed cost base and a number of factors – including long print and paper contracts and pension obligations – that limit its ability to respond to changing demands."

Canadian newspaper publishers have been posting sharp revenue declines in recent quarters, and aggressively restructuring to align costs with expected revenue. Print revenue is by far the most important source of revenue for publishers, and it is dropping faster than online revenues are increasing.

Postmedia Network Inc., publisher of the National Post and nine other metropolitan dailies, is looking to cut $120-million from its operating budget as part of a three-year program. Sun Media has cut more than a thousand jobs over the last several years, while the Toronto Star and Globe and Mail have both looked to buyouts and outsourcing to reduce their costs.

Most Canadian dailies have also introduced digital subscription models, asking readers to directly fund the news they are consuming online.

"Digital readership for Canadian newspapers is increasing steadily," the report states. "Although the potential for advertising opportunities is apparent, the main challenge remains in creating meaningful revenue from this activity."

Consumer magazines, meanwhile, should see revenue stabilize over the next five years after several years of decline. The report states the market will be worth $1.62-billion by the end of 2017, up marginally from $1.6-billion in 2012.

"With overall magazine revenue flat, growth will be concentrated on digital platforms," the report states. "This will have a knock-on effect on advertising, with average annual growth of 11.8 per cent in digital magazine advertising until 2017."

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Both magazines and newspapers are feeling the effects of an increase in online advertising. The report suggests Canadian online advertising revenue reached $3.2-billion in 2012, and will increase to $6.4-billion by the end of 2017. Almost 40 per cent of that revenue is coming from the search market, which is dominated by Google.

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