With three years added to his mandate, Postmedia’s CEO outlines what media will look like in the near future
Despite the company’s well-publicized financial troubles, Postmedia Network president and CEO Paul Godfrey says he has no regrets about taking the helm of Canada’s largest newspaper chain in 2010.
Toronto-based Postmedia announced on Friday that Godfrey’s contract has been extended through 2016, giving him three more years to continue his work on transforming the legacy media company – a job he says is only halfway complete.
His task is a challenging one. For the three months ended Feb. 28, Postmedia’s print advertising revenues were down $16.9 million, or 13.8%, from the corresponding year-earlier period. Digital advertising revenues grew to $21.3 million, not nearly enough to offset the print losses.
“Digital is important, but so far it is not the single source that’s going to solve the problem of print erosion,” Godfrey told Marketing the day of the announcement. “That’s why the reader has to pay more.”
Godfrey said it was unclear when Postmedia took over Canwest’s newspaper properties in 2010 whether the challenges facing the publishing industry at the time were simply the result of a poor economy or representative of a shift from print to digital by readers and advertisers.
Godfrey said it’s since become apparent that it was the latter, forcing legacy media companies to adapt their business model for the 21st Century. Godfrey said that the old revenue generation model of 75% advertising and 25% subscription is no longer sustainable.
Today’s industry requires closer to a 50/50 split between advertising and circulation revenue, he said, which is why readers can expect to see more publishers erecting pay walls in the future.
“Having compelling content is one thing, but if you provide that, the reader will have to pay more,” he said.
Postmedia announced in mid-May that it was extending its digital pay meter to all of its publications, a model already employed by publications including The Globe and Mail and The New York Times. Godfrey said the paid content model is “very important” to the company’s future, and that he’s encouraged by consumer uptake.
At the same time, the company continues to seek out ways to bring costs under control. Postmedia employed approximately 5,600 people when Godfrey arrived in 2010, but has since shed more than a third of its workforce (it currently employs about 3,500 people). Godfrey said the company will “definitely” reduce its workforce in coming years, but wouldn’t speculate on how deep it would cut.
“We will continue over the next three years to downsize the legacy costs [and] outsource where we can,” said Godfrey. “We are going to be a much smaller revenue company and a very much smaller expense company by living with a smaller number of staffers and people doing more. Hopefully we’ll be a more profitable company as a result.”
Problems Out West
The delicate state of the company – and the industry in general – was underscored in a memo sent to staff of Postmedia’s Pacific Newspaper Group (PNG) by newly appointed president and publisher Gord Fisher in April. Fisher bluntly stated that PNG’s two publications, the Vancouver Sun and The Province, are in “serious difficulty,” created by what he called “alarming and unprecedented” revenue declines.
Godfrey told Marketing that the PNG papers are “way overstaffed,” particularly in areas like production and sales, with employees “way overpaid” compared with their counterparts in the rest of the country.
PNG employees have benefited from legacy labour contracts that are no longer sustainable, he said. “It is great to live in the past, but that just can’t continue,” said Godfrey. “We’ve got to correct that situation or it’s conceivable that there may not be any newspapers at all in that community.”
Godfrey said the company is waiting to see how a voluntary staff reduction program introduced in April plays out before making any announcements about the group in the coming weeks.
Postmedia has also eliminated the publisher position (it now employs three regional heads with responsibility for Eastern Canada, the Prairies and Western Canada) and introduced what Godfrey described as a “one touch” content model.
The model means that content such as fashion, entertainment, national and international news is common to the entire chain. “Why do it 10 times if you do it once and you do it right?” said Godfrey, who estimated that about two thirds of the content is now duplicated across the entire Postmedia chain.
Asked if there was any concern about the Postmedia papers becoming homogeneous, Godfrey said that the chain would continue to emphasize core content like local news and sports.
“Local news and sports sells newspapers,” he said. “The Vancouver papers will concentrate on the Vancouver Canucks, the B.C. Lions and the Alberta legislature will reign supreme in the two Alberta papers.”
With an average age of 124 years, Godfrey said that Postmedia publications are positioned to thrive in the new media environment, even if the delivery mechanism changes.
“We’ve withstood the entrance of radio and TV stations, cable and now the Internet,” said Godfrey. “We will be part of any mix in the future.”