Postmedia Network Canada Corp. posted a profit in its latest quarter thanks to a one-time gain from cuts to employee benefits – but as print advertising and circulation continue to slide, the company is warning of deeper cuts as it continues a slow transition to digital products.
The in-the-black third quarter boasted a 23-per-cent boost to digital ad income, which pushed total digital revenue up 14 per cent to $32-million. But this did little to offset Postmedia's print declines. Year over year, print advertising and circulation revenue fell $27.6-million in the quarter – seven times more than the company's $3.9-million digital gain.
Hundreds of staff across Canada's largest newspaper chain have lost their jobs in the past several years and expenses have been reduced across the board. Those include newsroom consolidations last year following its purchase of the Sun Media chain and the slashing of non-unionized employee benefits in March, which notched the company a one-time $23-million gain this quarter. As chief executive Paul Godfrey warns of further cuts to Postmedia, it is not yet clear how its digital initiatives will make up for print losses.
Revenue from print ads fell 19 per cent in the quarter. "We, like all the other newspaper companies in Canada, have to control costs in light of the falloff in print ad revenue," Mr. Godfrey said in an interview. While he declined to suggest where further cuts could come from, he said that "we're looking at every aspect of cost."
In previous rounds of staff cuts, he said staff were simply asked "to do a little bit more," and that the quality of its journalism remained strong. "We've made a number of changes over the last few years, and any changes we make, we'll continue to put out a product that people will consider top quality."
The chain includes the National Post, metropolitan dailies such as the Montreal Gazette and Calgary Herald, and many community newspapers. While the company has received "fabulous raves" for some of its recently revamped mobile apps, Mr. Godfrey said, many of its titles have yet to implement a sustainable digital subscription model. Regarding subscriptions, "we have not taken our eye off the ball," he said.
News-industry analyst Ken Doctor of Newsonomics said that without monetizing digital readers with online subscriptions, "it's impossible" for Postmedia to compensate for print ad and circulation losses. "You've got to make that money to make up for it, and they're not doing it," Mr. Doctor said.
Postmedia saw an 8.5-per-cent decline in print circulation over last year's third quarter and the National Post recently stopped printing Monday editions. Christopher Waddell, a professor and former director of Carleton University's journalism program, said the company could fall into a trap if it can't persuade its former print readers to stick with the brand's digital offerings. "If they can't convert them to digital, the more readers you lose, the less you can charge for the advertising you've got, and it's a cycle," he said.
The company's profit was $13-million for the quarter ending May 31 – versus a $23.7-million loss in the same quarter last year – primarily thanks to the employee benefit cuts, a $15-million decrease in impairment charges and a decrease in interest expense. But it reported $194-million in revenue, down 11 per cent from $218-million, dragged down by its print woes.
The company announced last month that it would sell its media-monitoring division Infomart to Meltwater News Canada Inc. for $38-million, which it said would be used to redeem a portion of its long-term debt.
The company also named a new chief financial officer, Brian Bidulka – who served as CFO for Research in Motion Ltd., later named BlackBerry Ltd., through its highest highs earlier this decade and subsequent near-collapse.
Asked about this history, Mr. Godfrey said: "Many businesses, including the one we're in at the present time, have their highs and their lows. We've had several years of lows – maybe he'll show us how to get to a high."