Two days after announcing a series of staff cuts at its flagship daily the Toronto Star and its Metro properties, Torstar Corporation today announced fourth quarter results that underscore the significant challenges facing traditional print media.
Torstar’s fourth quarter revenues were $395.7 million, down 5% from the corresponding year-earlier period. Net income was $24.1 million, a drop of $40.2 million from $64.3 million a year ago.
During a conference call with analysts on Wednesday, Torstar president and CEO David Holland said the results were the result of a combination of “industry-specific pressures” and a “relativity soft” economic environment.
Holland told analysts that a “soft” print advertising environment that emerged in September continued through the quarter, significantly impacting revenues. The losses were most pronounced at Star Media Group, while Metroland Media’s community-based operations – where revenue was down $2.3 million – were “more resilient,” said Holland.
“We’re feeling pretty good that Metroland is a pretty good Ontario platform now,” he said, noting that the business unit saw increases in distribution revenue and a slight uptick in retail advertising – a key category that showed more stability than it has in the previous five quarters.
Holland said staff cuts announced earlier this week were necessary as the company grapples with declining print ad revenue. “Costs continue to be an area of emphasis as we resize the cost base in response to the pressures on ad revenue,” said Holland, noting that a series of “restructuring steps” are expected to yield annual labour savings of $6.6 million when fully implemented.
Fourth quarter revenues for the Star Media Group division, which includes the Toronto Star, weekly city magazine The Grid and the free daily Metro, fell $6.4 million to $138.6 million.
Star Media Group president John Cruickshank told analysts Wednesday that the revenue decline was largely attributable to an 11% decline in print ad revenues at the Star.
These declines were “broadly-based,” said Cruickshank, with particular weakness in the technology and broadcast categories. Star Media Group’s digital revenues also declined 1.8% on accounting changes.
Cruickshank said that the revamped Star.com introduced in January provides the company with greater editorial flexibility and also positions the company for the planned introduction of a paywall this summer.
The grim financial results followed the elimination of nearly 70 positions at the country’s largest paper on Monday as it looks to outsource copy editing and page design functions and eliminate other positions throughout the operation, including advertising and human resources.
In an internal memo announcing the staff cuts posted on the website of Globe and Mail media reporter Steve Ladurantaye, Star editor Michael Cooke said the decline in ad revenues is “more dramatic and increasing at a speed none of us foresaw.”
The layoffs led to a byline strike at the Star Wednesday, with reporters removing their name from stories appearing in the publication’s print edition.
Torstar has also eliminated about 15 positions at Metro in response to what Bill McDonald, president and publisher of Metro English Canada, described in a memo to staff as “continued advertising revenue challenges.” The cuts were made across the board including sales, marketing, editorial, finance and human resources.
According to the memo, among the Metro layoffs are Jodi Brown, vice-president of interactive and marketing (succeeded by Jeff Smith, VP, creative); Quin Millar, VP of sales (succeeded in the interim by Tracy Day, VP of business ventures).
McDonald did not respond to interview requests, but Holland told analysts that Metro remains a “critical” print initiative for Torstar as it attempts to further grow the franchise.
Holland also said that the 2011 re-launch of the former Eye Weekly as The Grid has carved out what he called a “pretty interesting” niche among urban readers. “We feel pretty good about the progress we’re making on that print initiative,” he said.
Torstar executive vice-president and chief financial officer Lorenzo DeMarchi, said that the company’s revenue outlook for 2013 is “uncertain” because of the shift in ad spending and economic softness. Early indications for 2013, he said, is that print advertising will remain soft while digital advertising revenue will grow.
