Postmedia’s mega deal

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This article was published 07/10/2014 (4195 days ago), so information in it may no longer be current.

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TORONTO — Postmedia is bulking up its ammunition against Facebook and Twitter by spending more than $316 million to purchase most of Sun Media, an effort it hopes will help stop the steady erosion of its advertising business.

The move will make the owner of the National Post, and a slate of other digital news properties, a significantly larger national media player and allow it to tap further into the eroding newspaper industry as it builds its network of websites.

“We need this scale, and of course time, to be able to compete with the giant foreignowned, digital-only companies like Google, Facebook, Yahoo, Twitter, etc.,” Postmedia CEO Paul Godfrey said in a news conference on Monday.

Buying Quebecor’s English-language operations puts a lot of options at Postmedia’s disposal, including 175 traditional newspapers and publications, such as the Sun chain of dailies that includes the Winnipeg Sun, the London Free Press and the 24 Hours dailies in Toronto and Vancouver.

Daria Zmiyiwsky, publisher of the Winnipeg Sun, said she does not expect the move to have any effect on operations of the paper in Winnipeg.

“In my opinion, it is a fantastic announcement for the newspaper industry as a whole,” she said. “I believe in strength in numbers. These two organizations are going to allow for greater innovation, better delivery of our content and expand opportunities for advertisers,” she said.

Postmedia also pockets valuable real estate that could soon be on the sales block, as it focuses on assets such as the Canoe.ca national news website, which is part of the acquisition.

“Digital audiences are unbelievably valuable to this strategic acquisition,” Godfrey said.

“Over time, our hope is that Canoe and all of the other related websites may very well become the jewel of the deal.”

The sale is subject to approval by the Competition Bureau.

However, Postmedia will still be dwarfed by the reach of its Silicon Valley, Calif., competitors in the socialmedia world. Google’s advertising division, for example, allows an advertiser to purchase banner ads that run on thousands of popular websites, as well as video spots featured on YouTube. Facebook and Twitter both sell ads that are seamlessly integrated into each user’s news feeds.

Some of the country’s biggest media outlets have complained advertisers, who were once devoted to buying space in their newspapers and on their websites, are now taking their money to social-media operators because of their more favourable rates and massive reach.

Postmedia is one of the most aggressive Canadian media companies in the digital space.

The company launched a redesigned Ottawa Citizen earlier this year, which included a new look for the newspaper and website as well as new apps for smartphones and tablets. It also expects to redesign most of its other newspapers, except the National Post and Vancouver Province, by summer.

All of these ventures have been expensive and merging its content with the new Sun Media assets will almost certainly cost Postmedia more.

The company, however, said it expects to find annual savings of $6 million to $10 million from the Sun Media deal within two years, but did not say where it hopes to economize.

Godfrey’s company has been aggressively cutting some business areas to save money, such as centralizing the editorial production of newspaper pages at a facility in Hamilton and closing printing plants across the country.

Postmedia has also ended the publication of many Sunday papers and sold its original headquarters in Toronto.

There are no immediate plans for layoffs, though Godfrey didn’t rule them out.

Despite its efforts, Postmedia is still deep in debt, owing nearly half a billion dollars and posting a third-quarter loss of $20.6 million.

“The newspaper business is pretty much a mug’s game right now, and you have to have awfully deep pockets to make a newspaper work,” said Jeffrey Dvorkin, director of journalism at the University of Toronto Scarborough.

“My worry is that stripping out assets from Sun Media might be one way of doing that.”

Selling parts of Sun Media could help Postmedia generate cash for its debts.

Sun Media owns 34 real estate properties in Ontario, Alberta and Manitoba, which include a Toronto printing plant and a pagination centre in Barrie, Ont., which handles all of its Ontario newspapers. Both are prime candidates to be merged with Postmedia’s existing operations.

Sun Media has undergone its own changes in recent years, including the sale of the Toronto Sun’s building in downtown Toronto to a developer.

Quebecor president and chief executive Pierre Dion said the deal comes at a time when the newspaper business needs consolidation to remain viable and to compete with digital media.

“The transaction will also keep Sun Media Corp.’s properties in the hands of a well-established Canadian group,” Dion said in a statement.

Earlier this year Quebecor sold 74 weekly newspapers in Quebec to Transcontinental for $75 million.

Quebecor Media still has Le Journal de Montreal, Le Journal de Quebec and the 24 Heures free daily as well as Internet, television, telecommunications and retail operations.

 

— The Canadian Press, with files from Martin Cash