Godfrey: tough decisions ahead as Postmedia focuses on ‘areas where we can win’

Postmedia Network Canada Corp. must make tough decisions in markets where revenue from digital services isn’t growing fast enough to offset declines in print revenue, executive chairman Paul Godfrey said.

His comment came after the Toronto-based company, which owns the National Post and other daily newspapers as well as other print and digital publications, reported a $15.5 million net loss in its third quarter ended May 31.

Postmedia’s overall revenue fell to $171 million, down 10 per cent from a year earlier, reflecting a years-long, industry-wide shift in readership and advertising to digital forms of content through social media and the internet.

Print advertising revenue accounted for most of the decline, dropping by $14.8 million or 16 per cent, while print circulation revenue fell by $4.5 million or nearly eight per cent. Digital revenue rose about $2 million to $29.9 million.

Godfrey said in a statement ahead of a quarterly conference call that Postmedia must “take the necessary steps to focus on areas where we can win and make the tough, yet decisive, decisions about where we need to make changes.”

Cost-reduction initiatives that were implemented in the third quarter will result in $7 million in net annualized savings, Godfrey said on the call.

He noted that Postmedia also plans to cut its compensation expense structure by 10 per cent by the end of the fourth quarter, which ends Aug. 31, through voluntary departures and layoffs.

The company said June 26 that it will stop printing daily newspapers in Portage La Prairie, Man., Kirkland Lake, Ont., and Pembroke, Ont., but will have a digital presence in the three communities. It also announced the closures of two community newspapers in Alberta and four community newspapers in Ontario.

An earlier deal last November, in which Torstar Corp. and Postmedia exchanged a total of 41 publications, mostly in Ontario, resulted in the closure of most of them.

In last year’s third quarter, Postmedia had a net profit of $13 million, but that included a $22.8-million recovery of a prior restructuring expense that wasn’t repeated in this year’s third quarter. This year’s thirdquarter loss also included a $9.4 million impairment charge, which was more than twice as large as the $4.2 million recorded in last year’s third quarter.

Excluding impairment charges, other non-cash expenses and restructuring charges, Postmedia’s operating expenses were down $15.9 million or 9.3 per cent in compared with last year – or $13 million if an Ontario tax credit is excluded.

Postmedia chief operating officer Andrew Macleod said during the conference call that the company isn’t abandoning its print business because it “has an important role in building brands, and awareness, and in bringing people together.”

“But the nature of what people come to us for has changed,” Macleod said. “That necessitates our people adapting to the radical change we face in engaging the new strategies under way.”

He said in an interview after the call that part of Postmedia’s multi-prong digital strategy is to co-exist with Google and Facebook by going to advertisers as experts in combining advertising, internet search and social media campaigns.

He added that Postmedia might hire outside writers to produce “sponsored content” if an advertiser shows interest “but it would never be one of our journalists.”