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.
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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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