Tuesday, 25 August 2015

Some Recent News about Postmedia, the major Canadian Newspaper Chain, and Reflections on Publishing in General

There was an interesting story about Postmedia, in the Globe and Mail of Saturday August 22, 2015, by James Bradshaw.  Postmedia is the major Canadian newspaper chain, which owns a number of big city dailies (The National Post, The Ottawa Citizen, The Calgary Herald, and The Edmonton Journal, among others), that reach 6.3 million Canadians (about one-fifth of Canadians).  For the sake of our American friends, that would be equivalent to a U.S. newspaper chain that reached about 63 million people, or 20 percent of the population.

The article outlines the fact that Postmedia is in a “cash-sapping cycle”.  It has a serious amount of debt, that dates to its emergence from the bankruptcy of Canwest Global Communications in 2010.  That debt of $652 million has an interest rate of 8.25% to 12.5%.  Thus, these high rates are costing $60 million per year, just to make payments on the interest, much less reduce the principle.  That has led to round after round of cost-cutting, especially of staff, in order to make these payments.   Their main hope is to roll over the debt, at lower interest rates.

The debts are owned by some fund management companies that specialize in distressed assets, Richmond Hill and GoldenTree.  These companies are “in it for the business, not for the love of newspapers”, paraphrasing a quote in the article.  One expects, that when things get too dire, they will pull the plug without any great regrets.

Meanwhile, revenues continue to plunge.  The company has had 17 straight quarters of declining revenue.  In order to make their payments on the debt, they have slashed costs by 20 percent, or $136 million.  They plan to continue, cutting another $50 million.  Ultimately, they hope to increase revenues by tapping into digital revenue, as do many traditional publishers, whether of newspapers or books.  As everyone knows, digital revenues are not easy to tap into, especially for traditional media.  Big tech companies such as Google and Facebook have managed the trick, but most other media companies have not.

One of the main money saving strategies, has been to cut staff, naturally.  They have cut staff to the tune of more than half, from 5400 to 2500 (excluding the recent purchase of another problematic newspaper chain, the Sun chain). 

It is often said, “you can’t cut your way to greatness”.  In a business which relies on reporters and writers, this is obviously more true than in many others.  It is difficult to maintain journalistic quality, while dropping staff and cutting pay and benefits.

And if you can’t argue that your journalistic quality is high, what is the value proposition for subscribers?  And, as subscribers desert the industry, what is the value proposition for advertisers?  The book publishing world faces a similar problem.  In the book world, the question becomes “what does the traditional publisher bring to the table to justify its share, to either the reader or author”, especially if brick and mortar bookstores continue to wither away. 

This is the existential dilemma for traditional media, especially paper media, whether it be newspapers or books.   It will be interesting to see how it plays out, over time.

By the way, I am a subscriber to both the Globe and Mail and a Postmedia paper.  I like paper crossword puzzles, as does my wife :) .  Cost-cut those at your peril, newspaper industry.
And here is an xkcd comic, mocking the very idea of commenting on news articles, which proves that I have a highly refined sense of irony.

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