Postmedia’s purchase of Sun Media’s 175 English print and digital titles from Quebecor Media is a major milestone in the ongoing transformation of the daily newspaper industry, though one senior media buyer is unconcerned about any potential impact on ad rates.
The $316 million purchase price is significantly less than the $983 million Quebecor paid to acquire the Sun Media assets in 1998, a telling indication of the downturn that has impacted the daily newspaper industry over the last decade-and-a-half.
Postmedia CEO Paul Godfrey said during a press conference Monday that the future of newspapers is “often doubted by naysayers,” but did acknowledge that the two companies could have floundered without the deal.
Media Experts founder and CEO Mark Sherman called the timing of the deal “interesting,” particularly given Quebecor’s stated intention to turn its Vidéotron unit into Canada’s fourth wireless carrier.
“Owning a pan-Canadian newspaper chain would be an interesting tool they could use to drive that launch,” said Sherman. “They certainly use their full array of assets in Quebec to support their cable and wireless business.”
The theory, he said, is that the Sun Media assets were likely a drain on Quebecor profits, and the company wanted to strengthen its balance sheet in advance of Vidéotron’s planned national rollout.
If approved by the Competition Bureau, the transaction would strengthen Postmedia’s presence in key advertising markets like Toronto – where it would control an estimated 931,000 of the city’s 2.67 million daily newspaper readers, according to the most recent Newspaper Audience Databank (NADbank) figures – and give it a dominant position in Western Canadian markets like Calgary and Edmonton, where it would control both major dailies.
From a digital perspective, the deal would also give Postmedia a reported 12 million monthly unique visitors, which Godfrey said would enable it to better compete with companies like Google, Facebook and Yahoo.
“Scale is important, especially scale in the digital world,” he said during a press conference this week. “We need this scale…to be able to compete with giant, foreign-owned, digital-only companies.”
Media buyers have traditionally denounced consolidation because it gives media owners the power to increase ad rates, but Sherman said that is not a primary concern in the Postmedia deal.
“My reaction is certainly not ‘Now they’re going to hold us up,’” he said. “The days of newspapers holding up advertisers are long over. I don’t see them having the strength they once did, even with this type of consolidation.”
Sherman called the loss of another major publisher “kind of a sad day” for the Canadian newspaper industry, saying it could ultimately result in one newspaper markets – something Godfrey repeatedly said would not be the case during the press conference announcing the deal.
Sherman said advertisers could also perceive the sale to mean that newspapers are no longer a viable business. “When you have major media owners like Quebecor divesting their newspaper assets, in effect giving up on print, that discourages advertisers and media buyers,” he said.
He said the decline of print is being further hastened by companies like Gesca, which has stated its intention to kill the print edition of its flagship daily La Presse and replace it with a digital-only product.
“When you have major daily newspaper operators in Canada foretelling the end of the printed product, that doesn’t boost the confidence of advertisers or ad agencies,” said Sherman. “When you…tell advertisers that print is no good, that not only has an effect on whether you’re going to put your money in the Gesca papers or not, it has the effect of lowering the confidence of advertisers in the medium in general.”
