Mediacheck

Shrink Wrap: Postmedia's 'Get Smaller' Survival Strategy

CEO Godfrey says red ink, plunging operating income hasten need for 'digital first' identity.

By Belinda Alzner 12 Jul 2012 | J-Source

Belinda Alzner is associate editor of J-Source, where this article first appeared.

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Postmedia president and CEO Paul Godfrey: 'We'll be a smaller revenue company but a much smaller expense company...'

More changes are ahead for Postmedia newspapers as the company looks to radically reinvent itself, executives said Tuesday in a call with investors about the company's third quarter results.

"It's about creating a new company for a new time," Postmedia CEO Paul Godfrey said in the call.

Postmedia's third quarter results include a $12.1 million net loss, a drastic decrease in operating income and fewer print advertising and circulation dollars. Some of those results can be attributed to expenses associated with the company's attempts to shift away from legacy costs and toward practices that would make it leaner.

"I think going forward we'll be a smaller revenue company but a much smaller expense company, and as a result, a more profitable company," Godfrey said.

In B.C., Postmedia owns the Vancouver Sun and The Province, having sold the Victoria Times-Colonist to Glacier Media.

Last month Postmedia announced a number of restructuring measures, cutting jobs at a number of papers, imposing paywalls on some of its newspapers' websites, suspending a number of Sunday editions (or Monday, in the case of the National Post), and moving production to a centralized newsroom in Hamilton, Ontario. Prior to that, it was reported that they would be exiting the wire service business, after signing a new deal with the Canadian Press. 

These moves were made as part of a three-year transformation plan to reduce 15 to 20 per cent of Postmedia's operating costs, Godfrey said Tuesday.

And there are more changes to come. The company's executives hinted that there are some locations outside of major metropolitan areas where circulation would be cut because the distribution is unprofitable, though Godfrey and CFO Doug Lamb would not comment on specifics outside of what was listed in a document for yesterday's call. Lamb did say this may cause the company to take a hit on subscription revenue in the future.

Digital advertising's rapid growth

Postmedia, of course, is not alone in its struggles in the advertising market. The decline of print advertising dollars is well-documented in the industry, and thus, Postmedia has been making an active push toward a digital-first agenda.

The company saw growth in digital advertising revenue in the third quarter of 6.8 per cent relative to the same period last year, compared to a miniscule 0.5 per cent growth in this year's second quarter and a decline of 1.4 per cent in the first quarter. Lamb said yesterday that this quarter's growth is more on par with what they expect moving forward.

The growth in digital revenue comes from one particular area, though. "Local digital is where the big growth area is," Lamb told investors, though he noted that national digital revenue saw modest growth as well.

But the change to having newsrooms that think digital first can't happen overnight. Godfrey noted that the company has to make changes that are in accordance with the collective bargaining agreements that are already in place.

"We have to work within the framework of what we can and can't do. We know what we have to get to," Godfrey said. "We know we can get there, but we have to follow a path of least resistance on this thing to make sure we maintain products with very compelling content."

'Newspaper have advantages they're not exploiting'

John Paton, CEO of Digital First Media, spoke with J-Source when he was in Canada for a forum discussion put on by the Canadian Journalism Foundation in February. Digital First Media is the second-largest newspaper company in the United States and, as the name suggests, puts an emphasis on publishing for their digital platforms. Paton sits on the board of Postmedia, and in that interview noted that Postmedia was having some real success moving toward a digital first strategy.

"I'd say the advantage they have over their competitors is a) they're trying really hard; and b) they're acknowledging they have a long way to go," Paton said. "So, when Paul Godfrey, CEO of Postmedia, talks about pursuing a digital first strategy, he means it."

Part of a digital first strategy means innovating and moving away from using the web as merely a platform on which newspaper content is displayed. Two Postmedia newspapers have appointed teams dedicated to experimenting with different strategies for engagement and innovation on both print and digital platforms.

J-Source held a live Q&A with team members of the National Post Labs and the Edmonton Experiment last month about their projects and about what this innovation means.

"I think that, for all the obvious advantages that digital has over print, newspapers still also have some advantages they're not fully exploiting," Chris Tindal of the National Post Labs said. "They have a mass audience, a shared experience, and, perhaps most importantly, a significant measure of credibility."

The innovation and engagement that these Postmedia projects are working toward recognizes that and may help redefine the role of their respective print products.

And this redefinition may be necessary for Postmedia, because as Godfrey said yesterday: "The status quo just doesn't work anymore."  [Tyee]

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