Declining print revenue at its newspapers and fewer readers for its Harlequin novels pushed profit at Torstar Corp. 44 per cent lower in its last quarter.
"It was a difficult quarter as decline in results were experienced in both the book publishing and media divisions," chief executive officer David Holland said in a statement. "Management of costs remains a priority and helped to mitigate the impact of the revenue decline experienced in the quarter."
Torstar is the parent company of The Toronto Star, the Metro commuter papers and the Metroland media chain. It also owns publisher Harlequin, which specializes in erotic fiction.
Torstar reported its second-quarter earnings Wednesday, with profit dropping to $18-million from $32-million a year ago. Revenue was also lower, down 7.5 per cent to $354.9-million from $383.9-million.
Like other publishers, Torstar has seen print advertising slip at its newspapers at a faster rate than digital revenues are increasing. Postmedia Network Inc. posted a $112-million loss in its last quarter ($94-million was a non-cash writedown) on a double-digit decline in print advertising, while Sun Media recently saw a similar decline. The publishers – including the privately held Globe and Mail – have responded by slashing costs and introducing digital subscriptions to supplement their circulation revenue.
Here are five highlights from Torstar's quarter.
The Star: Print advertising at the Star fell about 14 per cent from the year earlier, a decline that is consistent with titles owned by other publishers such as Postmedia Network Inc. and Sun Media. Other details of the paper's performance aren't as public, because its results are rolled into the Star Media Group division which also accounts for the Metro chain of commuter dailies. Digital revenue in the division dropped by almost 5 per cent, mostly because of weakness at its job listing site Workopolis.
A paywall is coming: The Star promised a paywall almost a year ago, as it looks to join other publishers in making money from online readers. The Star didn't actually give a roll-out date, though it reaffirmed its desire to introduce a subscription model. An analyst on the company's conference call said he anticipated the site "within a month or two," and wasn't corrected by any of the executives. The company's executives said the paywall is more about keeping existing print subscribers than winning new readers, because a paper subscription will provide complete online access.
Restructuring details: The Toronto Star offered its employees buyouts earlier this year and said it would outsource production of its pages to help cut costs. Some of its smaller papers were also hit as the company tried to get ahead of falling profits. The extent of the cuts were made clear Wednesday – 238 positions (of about 6,500 as of the end of last year) across the entire company, which are expected to save the company almost $18-million a year. Mr. Holland said more cuts are likely in the coming months, but the bulk of the changes have already been made.
Community paper woes: Metroland papers saw advertising drop 10 per cent in the last quarter. The company said digital profits increased, which is good, but didn't break out the actual dollar amount. Digital revenue is another story – it was down almost 17 per cent because of weakness from its WagJag online deal service.
Harlequin: Fewer people are reading racy books, and it's showing up in Harlequin's profits. The publisher was able to cash in the wave of enthusiasm for erotic novels as 50 Shades of Grey dominated the bestseller lists and drew attention to the genre, but revenue fell almost 7 per cent. It also took a hit because of an increase to the amount it pays authors in digital royalties.
Editor's note: An earlier version of this online story contained incorrect EBITDA information for each of Torstar's media divisions. Harlequin posted EBITDA of $11.5-million compared to $18-million a year ago. Metroland and Star Media Group posted combined EBITDA of $37.4-million, compared to $43.2-million.