Canada's Postmedia trims for digital age

Reuters News
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Posted: Apr 12, 2011 1:42 PM

By Alastair Sharp

TORONTO (Reuters) - The man in charge of Canada's largest chain of newspapers, Paul Godfrey, is reshaping his titles for the digital age in a cost-cutting drive that will bring extensive retraining and more job cuts.

Godfrey, president and chief executive of Postmedia Network Canada Corp, said journalists and others would have to change their ways in the transformation of the company, created last July to take over the newspaper assets of bankrupt Canwest <CWGVF.PK>.

"Reporters are going to have to become more than just a reporter," he said in an interview, pointing out that Postmedia's print journalists are already armed with video cameras and send clips back from the field for the website.

Godfrey said he expects a quarter of ex-Canwest staff to be retrained for the "digital-first" media outlet, which will get up to a quarter of its revenue from digital platforms within four years.

Postmedia websites, smartphone and tablets apps and other digital services bring in some 10 percent of sales today.

But not everyone will want to learn new tricks. "A lot of people who have done a certain job for so long do not want to learn anything new, and the older you get, the more reluctant you are to change," he said.

Soon after taking over, Postmedia, whose papers include the flagship National Post, as well as the Montreal Gazette, Ottawa Citizen and Vancouver Sun, cut more than one in ten jobs. It now has fewer than 4,800 employees.

It is bringing its country-wide business operations into a Toronto headquarters and expects to leave only one or two back office staff in other cities. It has offered buyouts across the country, including at the National Post.

Much of the advertising production has been moved to the Philippines and India, its call center is in Dominican Republic and it closed a printing plant after a contract to produce the rival Globe and Mail expired.

SKIN IN THE GAME

Godfrey is backed by a collection of 17 hedge funds that hold shares via GoldenTree Asset Management. Merrill Lynch Canada holds a sizable stake, and Godfrey has encouraged senior staff to also take stakes in Postmedia.

"If you've got your own skin in the game, managers will push harder to cut every cost they can and chase every penny of revenue they can," he said.

The company made revenue of C$242.5 million in the three months to end-February, a slight decline on a year ago under the Canwest management. It had a net loss of C$12.3 million as it booked restructuring costs.

Postmedia must list shares by late July or face crippling conditions including the inability of advertisers to account for spending with the newspaper chain as a business expense.

Under the terms of the Canwest buyout, Postmedia has to retain Canadian control of the newspapers, which include the Montreal Gazette, Ottawa Citizen and Vancouver Sun, and to list its shares publicly within a year.

The need for Canadian control means the listed company will issue two classes of shares, one of which can only be held by domestic investors and which will make up a majority on any vote.

Godfrey expects the GoldenTree stake, which will hold the less-influential variable voting shares, to remain committed for at least three to five years from the closing of last July's C$1.1 billion purchase.

"They're all in it to make money and I guess they'll stay in as long as they think there's great potential," he said.

(Reporting by Alastair Sharp; editing by Pav Jordan and Janet Guttsman)