Postmedia records 10th straight quarter of double-digit growth in digital
But ongoing declines in print business drove $7.7M net loss for newspaper chain
Postmedia Network Canada Corp. is expecting $8 million to $10 million per year in tax credits through the federal government’s media bailout, the newspaper chain said on Wednesday.
Andrew Macleod, Postmedia’s president and chief executive, said the subsidy will help preserve journalism jobs in Canada — since the new tax credit is based in part on staffing levels. But he said it won’t be enough to save Canadian media, unless the government also addresses “systemic structural issues.”
In a quarterly report Wednesday, Macleod pointed to ongoing imbalances in the Canadian media landscape, with competition from both “virtually unregulated digital giants and from government subsidized Crown corporations that are chasing the same private sector dollars that we are.”
“If I had my choice, I’d like to see the CBC adopt a not-for-profit model,” Macleod said Wednesday.
Google and Facebook siphon roughly 75 to 80 per cent of all digital advertising “before you even wake up in the morning,” Macleod told the Financial Post.
“So everyone else in this sector is fighting for 20 per cent,” he said. “And we have to then compete with a Crown corporation that gets a $1-billion subsidy from the government. They hire talent and they go after everything under the sun and then on top of that, they’re pulling revenue out of the ecosystem.”
“You’re fighting against a competitor that doesn’t have to worry about profit and loss and they can run deficits because they’re funded by the government.”
In a statement Wednesday, CBC denied being a threat to digital advertising. The real threat, spokesperson Kerry Kelly said, is Facebook and Google.
This is a continued validation that our strategy is working.
“Our share is under 1% of total digital advertising spend in the country,” Kelly said in an email. “Removing advertising from CBC/ Radio-canada would mean cuts to programs and services including news and information. That’s not going to help Canadians be better informed. And it’s not going to help private media companies make more money.”
Postmedia’s estimates on subsidy are based on government guidelines, which will allow for approved news organizations to claim a portion of each employed journalist’s salary.
Macleod gave the estimates Wednesday as Postmedia announced its 10th straight quarter of double-digit growth in digital advertising revenue.
But continuing declines in the company’s print business drove a $7.7-million net loss, the company reported.
Postmedia — Canada’s largest newspaper chain with 140 titles including the National Post — has held firm on its strategy to extend its legacy print revenues long enough for digital revenue to catch up. Macleod pointed to the 12.2-per-cent boost in digital advertising revenue as proof the plan is on track.
“This is a continued validation that our strategy is working,” he told investors on a conference call.
In its third quarter, Postmedia saw $64.76 million in print advertising, $51.4 million in print circulation and $32.9 million in digital revenue. Total revenue for the quarter was $157.1 million, a $14-million drop compared to the previous year. Postmedia attributed the loss to a $13.8-million decrease in print advertising revenue and $3.4 million in print circulation.
The company also paid $10.5 million towards its debt in the quarter, bringing its total first-lien debt repayment to $94.8 million, compared to $225 million in the fall of 2016.