Sun Media Corporation has eliminated 500 positions and closed production facilities in Ottawa and Kingston as part of what it described as “restructuring initiatives for sustainable growth.”
The cuts represent an estimated 9% of Sun Media’s total workforce, which stood at 5,680 as of Dec. 31.
The moves, along with other so-called “optimization initiatives” to be implemented in coming months, are expected to produce annual cost savings of $45 million for the country’s largest newspaper chain—which operates 42 daily newspapers and almost 200 community papers.
“I feel very sad for the numerous redundancies we were forced to implement in our newspaper division,” said Pierre Karl Péladeau, president and CEO of Sun Media parent Quebecor Inc., during a conference call with analysts this morning. “Newspapers across the world have been impacted in the last 10 years by the introduction of new technologies, dramatically changing the dynamic of incumbent print products.”
Péladeau added that the reductions were necessary to ensure the continued viability of Quebecor’s other operating units, including its cable TV unit Vidéotron.
He told analysts that while the Sun Media chain’s circulation revenues have stabilized because of “strategic pricing increases,” advertising revenues continue to fall dramatically across all of its publications.
“We continue to be impacted by declining advertising revenues and soft circulation revenues in most urban and community markets, a trend that has been experienced across the industry,” he said.
“Given that we expect these challenging conditions to continue as a result of a pervasive industry-wide transformation, we decided to take decisive and strategic action to align our cost structure with future revenue prospects,” Péladeau told analysts.
“This is hardly unexpected,” said longtime newspaper analyst Ed Strapagiel. “The world is moving to digital and print is falling behind. This is not just happening at Sun Media, but everywhere throughout North America.”
Consolidated third quarter revenues for Quebecor’s news media division were $227.6 million, a decrease of approximately $8 million or 3.2% from the same period last year. Revenue for the company’s urban dailies—a group including its flagship Toronto Sun and other Sun titles—was down 3% on the basis of “soft” advertising sales.
Consolidated Quebecor revenues of $716 million for the nine-months ending Sept. 30 were down $27 million on a year-over-year basis, with advertising revenues falling 7%—or $11 million—to $150 million.
Prior to Tuesday’s announcement, Sun Media had already moved to regionalize its newspaper operations, abandoning what Péladeau called the “legacy publishing model” for “leaner, more efficient, function-based structure” built on three pillars: content, sales and industrial operations.
Péladeau said that the company has eliminated “several layers” of management across the three pillars to streamline its processes, reduce costs and bring decision-making closer to its local markets. “Ultimately this leaner structure will not only be more efficient but, more importantly, will focus people on their core competencies,” he said.
All of Sun Media’s English editorial operations now report to senior vice-president of editorial Eric Morrison, the former president of Canadian Press and a CTV executive who arrived at the company in September. English Canadian sales operations, meanwhile, now report into two vice-presidents: Michael Power for Ontario and John Caputo in Western Canada.
The company also plans to further consolidate its pre-press, printing, transportation and distribution operations into fewer so-called “centres of excellence” and will shut down or dispose of “non-core” activities. The redesign will result in the departure of “several hundred” employees and annual cost-savings of $45 million.
For analysts like Strapagiel, however, the question remains how long the company can withstand such significant reductions in staff. “Eventually, reducing the editorial side of the business is going to show up in the quality of the products they put out, and that will diminish its effectiveness and make it harder to sell advertising,” said Strapagiel.
At the same time, Sun Media also continues to actively pursue revenue generating initiatives such as erecting pay walls at Le Journal de Montréal and Le Journal de Québec. Early results are “very encouraging,” Péladeau told analysts, and the company plans to add pay walls at other major dailies before year’s end.
The company will also continue to aggressively promote cross-platform sales that will bundle its print properties with other assets such as TV networks TVA and Sun News and their associated web sites.
“We’re in a position to propose a larger array of assets for our advertisers, from television to magazines, newspapers and web,” said Péladeau.
But Strapagiel said the notion of multi-platform buys isn’t necessarily as alluring to advertisers as vendors may believe, particularly since many media buying agencies aren’t set up to purchase advertising that way. “The mere fact you can buy it all in one place doesn’t mean the advertiser operates that way,” he said. “It sounds good on paper, but combining all these advertising channels under one roof makes for a very complicated, messy offering, and it’s not easy to pull off.”
Péladeau, however, remained optimistic that a company built in the 20th century can adapt to life in the 21st Century. “This is an industry facing headwinds and the visibility is pretty short, but we look forward, given the size of our business and the magnitude of our national coverage, to being at the leading edge.”
