Canada’s largest newspaper chain is in trouble – Columbia Journalism Review

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Anne Marie Owens couldn’t believe her luck when she landed a job as a general assignment reporter at the soon-to-open National Post in Toronto in 1998. Then a columnist at the St. Catharines Standard, a small southern Ontario newspaper, she had heard the media baron Conrad Black was starting a national broadsheet, and she wanted in. “There was this buzz about a paper that had no name that was about to be launched,” she says. “It was all anyone was talking about.”

Working at the paper was exhilarating, she says. Its mandate then was, essentially, to be different. Black and Ken Whyte, the paper’s upstart editor in chief, lamented Canada’s dull and predictable news landscape, then dominated by the Globe and Mail and Toronto Star. News shouldn’t be such a slog to read, they figured. They wanted their paper to be provocative, insightful, and interesting.

For the most part, they delivered. The National Post’s right-leaning editorial pages were certainly provocative, and the boundless energy of its young reporters helped give the Globe and Mail, Canada’s newspaper of record, a run. However, there was one overarching worry for staff: It always felt like the Post was about to fold. Black’s pockets were only so deep, while many didn’t think Canada had room for two national papers. “Everyone at the outset said we wouldn’t last,” says Owens, now the paper’s editor in chief.

Much has changed over the years, both at the Post and in the newspaper business, but at least one thing has remained the same: Many people think the paper’s days are numbered. This time, their fears have more merit. Amid a difficult climate for newspapers, the Post is facing a mountain of debt and has resorted to frequent layoffs and buyouts.

Even more concerning than the National Post folding is that its owner, Postmedia, could go under. It’s the largest newspaper chain in the country, with more than 200 brands under its umbrella, including numerous community and local papers. Outside of Toronto, Winnipeg is the only one of Canada’s 10 largest cities where you can get a non-Postmedia, English language daily delivered to your home. In some big cities, like Vancouver, the company controls more than one major paper. For comparison, in the US market, a Postmedia failure would be as if Gannett, Tronc, and McClatchy all simultaneously went bust.

Like a lot of media companies in Canada and the US, Postmedia’s financial picture is bleak. Its revenues have been steadily declining for years, most recently falling by 13.5 percent year-over-year in the second quarter. Deep job cuts and controversial management movesit dramatically slashed benefits for its non-unionized employees in Marchhave more people than ever asking where things go from here.

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While many of its woes have to do with declining advertising revenues (Postmedia’s print ad revenue fell by 22 percent in the second quarter), it also owes millions in debt payments to its owners, several US-based hedge funds, some of which helped CEO Paul Godfrey finance the chain’s purchase in 2010. It owes about $343 million and pays as much as 10.25 percent interest on that debt.

Unfortunately, hedge funds tend not to prioritize journalismthey just want to get paid, says Stephen Kimber, a journalism professor at Halifax, Nova Scotia’s University of King’s College. “They have, for the most part, no interest in the journalism that’s produced.”

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Morale at Postmedia has suffered as revenues have fallen. Last October, the company announced plans to slash 20 percent of its staff, and in November, it paid out $2.3 million in retention bonuses to senior executives, only to have three of the five recipients leave the company soon after.

While the payments were tied to a restructuring plan that wiped out $268 million in debt, many staffers saw them as a slap in the face, considering the company had announced layoffs just few weeks earlier. “Everyone who worked there was embarrassed and angry that day,” Sean Craig, the paper’s former media reporter, who took a job at national television network Global News in May, tells CJR. “The optics were insulting.”

Godfrey, a former Canadian politician and onetime president and CEO of Sun Media Corporation, a national chain of papers that Postmedia purchased in 2015 for $316 million, hasn’t been the most inspiring leader, either. In February, he gave a curt interview to Toronto Life about the chain’s troubles. When asked about the bonuses, one of which he received, he admitted they didn’t look good, and that people likely walk by his office now saying, “There’s that evil guy.” Asked if he would have quit if not for the bonus, he responded, “Not necessarily. I don’t know.”

Gerry Nott, Postmedia’s senior vice president of content, says layoffs are a result of the company trying to rebalance costs against declining revenue, and while digital ad revenues climbed 18 percent in the second quarter, they aren’t rising fast enough to make up for lost print revenue. “If you talk to any news executive in this country and they tell you there will be no more layoffs, then they wouldn’t be telling you the truth,” he says. “But we still need to produce content that resonates.”

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Fears of layoffs and low morale are familiar to most working journalists today, though Canadian media has been hit particularly hard over the last couple of years. According to News Media Canada, a newspaper industry association, total daily newspaper revenue fell by 12.6 percent in 2015.

At the end of 2016, Rogers Media, which is owned by Rogers Communications, the country’s largest telecom, stopped printing Canadian Business and MoneySense magazines. It also turned Maclean’s, its newsweekly, into a monthly, sold off its financial trade division, and cut the publishing frequency of other popular magazines.

Torstar, the company that owns the Toronto Star, is also in dire financial shape. It reported a $24.4 million net loss during the first quarter, and a revenue decline of 10 percent. It has also gutted its staff, and its stock has dropped by 82 percent in five years.   

It’s harder to find out how the Globe and Mail is faring financially, as it’s privately owned by the Thomson family, the wealthiest in the country. However, last September its publisher offered buyout packages to 40 employees and launched a three-year plan to save $25 million through various cost-cutting measures.

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The National Post  itself has gone through tough times before. In 2000, Canwest Global Communications purchased Black’s Southam Newspapers, which owned the Post and some of the other local papers that Postmedia runs now, for $3 billion, a deal it financed mostly through debt. In 2010, the company went into bankruptcy protection and was eventually purchased by the hedge fund-backed group for $1.1 billion.

What makes Postmedia different from its peers is its size; the company employs about 4,200 people across the country. But even if there were no debt payments, CEO bonuses, or head-scratching investments, Postmedia would still be in trouble. “It’s worse when you’re spending money servicing debt, but the decline is due more to the collapse of the conventional newspaper industry,” says Kimber.

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While company turmoil may be impacting morale, the chain’s journalists haven’t been deterred from practicing their craft.

Bethany Lindsay, a former Vancouver Sun journalist who took a voluntary layoff in April, was frustrated with staff reductions, constant uncertainty, and word-count cuts2,000-word features were now being run at 800 words to save space, she saysbut she says she produced some of her best work in the last few months she was there.

One of her favorites was about life as an LGBTQ youth at Trinity Western University, a Christian school that has a community covenant agreement banning sex outside of a heterosexual marriage. “I was really proud of that one,” she says.

Even with a dwindling staff and smaller papers, people kept plugging away. “We still managed to pull off great papers,” Lindsay says. “You learn to be tough, and you learn to deal with it. That doesn’t mean it was easy.”

It’s a similar feeling at the National Post, which in many ways has had to go back to being different. Over the last six months, the paper has broken down even more barriers between print and digital. After the last round of buyouts, Editor in Chief Owens created a “print hub” that’s essentially a group of curators who decide what articles should go into its print editions. Journalists and editors no longer have to think about what might appear on page 1, she says. “We had to liberate ourselves from being bound up in print conversations. We still have to straddle both worlds, but these changes have allowed us to operate more efficiently.”

Reporters and editors also have access to more analytical tools, such as social metrics and traffic-measuring data dashboards, which allow staff to better understand what readers want. They can then produce stories that resonate with that audience, adds Nott. Vancouver’s newsroom has a “live desk” that starts at 6 am, and “it drives the news agenda,” he says. “Print becomes the outcome of the digital day.”

For Owens, improving morale means making sure staff is constantly challenged and engaged. “We want to make sure this is a place where you can do interesting work in an environment that’s creatively challenging,” says Owens. “If you come into the newsroom, you’ll see it’s not a grim group.”

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So, what does the future hold? Will National Post really fold this time? Will communities have to go without daily papers? Nott says Canada’s cities will continue getting Postmedia-produced news. “We will absolutely have local news,” he says.

If Postmedia does go bankrupt, it should continue putting out papers. The Post kept printing and paying its writers during Canwest’s bankruptcy. “The death of Postmedia doesn’t mean the death of the Post or the Ottawa Citizen,” says Craig. “The ultimate hope is that papers will fall into the hands of a more solvent and more friendly local owners.”

The National Post likely won’t die off, either, though it could morph into something else, says Laurence Booth, a professor of finance at Toronto’s Rotman School of Management. What it might look like is anyone’s guess, but a lot has to happen before the Post brand is killed off. “Someone will own it,” he says. “Someone will say there’s value in the brand name and the readership. They just have to figure out how to capitalize.”

Owens knows that enormous challenges lie ahead, but the spirit and attitude of those early days still exists, she says. It’s just a matter of guiding the paper through uncertainty. “It’s such a great opportunity to have a say in how we try and navigate this huge industry change,” she says. “I don’t know how long this will go on for, or where it will go, but I wanted to help it through the challenging years ahead.”

Correction: An early version of this story misspelled the name of Editor Ken Whyte.

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Bryan Borzykowski is a Toronto-based journalist. His work has appeared in The New York Times, CNBC, BBC Capital, and the Globe and Mail. Follow him on Twitter: @bborzyko.

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