Good news in bad times

By
Kelly Toughill

The news is not all bad for media companies in Canada. Despite a steady string of lay-offs and losses, there is some good news buried in the annual reports delivered this winter. Commercial radio is surviving well, as are select magazine titles. Community newspapers outside big cities are not hurting as much as their daily competitors, and even job-cutting companies like Torstar and Quebecor delivered a silver lining with their negative bottom line. There might even be an upside to Canwest’s flirtation with bankruptcy.

Commercial Radio
The recession is hurting commercial radio, but the general restructuring of media is not. Financial problems were already stalking newspapers and conventional television in 2007, but commercial radio kept 19 cents of profit for every dollar it took in revenue that year, marking the third-highest profit margin ever earned by that industry. That’s no surprise, since radio stations long ago abandoned the mass media model in favor of developing the niche markets so attractive to advertisers. The shock is that radio stayed strong in 2008, even as companies around the globe slashed advertising budgets. Rogers, which owns 52 radio stations in Canada, reports that its radio revenues were steady through 2008. At Astral Media Inc. radio revenues were up, though it is difficult to tell by how much because of a major merger with Standard. The first quarter of 2009 has hurt some commercial radio networks, but not nearly as much as it has hurt other media.

Magazines
The magazine industry did not fare as well as radio in 2008. Advertising pages in consumer magazines were down nine percent and revenues dropped five percent, according to a report in Masthead that quotes data compiled by Leading National Advertisers Canada. That is not nearly as bad as the double-digit drops in ad revenues experienced by many newspapers, but there were wild variations within the industry. Unlike newspapers, where the financial pain was fairly uniform, some magazines are booming. Transcontinental’s More magazine, which targets women over age 40, and Rogers’ Moneysense were the big winners with increased ad pages of 46 and 11 per cent each. In general, magazines with a tightly targeted readership did better than mass circulation magazines, with the exception of magazines focused on entertainment and home improvement and design.

Newspapers
The good news for newspapers is in community weeklies, and in the fine print of big city dailies. It is harder to track revenues at community newspapers, because so much advertising is local and so many weeklies are privately owned. But the associations that represent community newspapers say they are doing well, and the annual reports of some big chains back that up.

Quebecor struggled through 2008 and saw a three per cent decline in revenues at its daily Sun newspapers, but revenues at its community newspapers were almost even. Torstar reported revenues down at its chain of community newspapers, and at publisher Black Press, of which it owns 19 per cent. The good news is that Black Press was hurt by the performance of its dailies operations, not its weeklies. Ken Sims, president of the Atlantic Canada Newspaper Association and publisher of The Antigonish Casket, said he and most of his competitors are doing fine, and that his ad revenues didn’t start to soften until 2009 – long after the dailies began to suffer. Unlike dailies, which have seen their advertising shift to the Internet and to niche publications, most weeklies depend on local ads that don’t have anywhere else to go.

Even at dailies, the news may not be quite as deathly as it seems at first glance. Big losses on some income statements are being driven by non-cash expenses such as the declining value of an overall brand. At Torstar, for example, the newspaper division still had an operating profit of almost 10 per cent. The company’s $180.5 million loss didn’t reflect its own operations, but its 20 per cent share of CTVglobemedia, which wrote off more than $1 billion in goodwill and intangible assets.

Television
The good news in television continued to be in specialty channels that cater to niche markets. Astral Media, which owns 20 specialty television channels, continued to boom right through 2008, showing a profit margin of 17 per cent in the last quarter.  Unfortunately journalism is mostly excluded from special-interest television. Canada’s conventional private broadcasters  — CTV and Global — lost money, but it isn’t completely clear exactly where or how much.

CTVglobemedia executive vice president Paul Sparkes told the CRTC this winter that the network’s conventional television stations lost $100 million last year, but the company does not have to file public financial statements with securities regulators because it is privately owned. Financial reports filed by Torstar suggest CTVglobemedia had an operating profit of almost 10 per cent before non-cash expenses related to goodwill and intangible assets.

Canwest
The Asper empire may be teetering on the brink, but details of its troubles offer some hope for both the newspaper and television industry. Canwest is a major publisher of daily newspapers in Canada and is the parent of Global Television. It borrowed huge amounts of money to buy the newspapers a decade ago, and complicated its books when it acquired the specialty channels of Alliance Atlantis in 2007. Now Canwest is more than $4 billion in debt, and it doesn’t have enough money to make the payments. Banks have twice delayed key deadlines, and the new do-or-die date for Canwest is April 7.

Many analysts are betting that the company will be split up. That may turn out to be a good thing for those who read, watch or work at Canwest stations and newspapers.

Canwest chief Leonard Asper has been grumbling to anyone who will listen that his media company earns $500 million a year in operating profit, before the cost of those pesky interest statements. He’s right. If bankruptcy eliminated a whack of long-term debt from Canwest properties, the newspapers and television stations would be making money.

That wouldn’t do anything for current shareholders of the beleaguered company, for the banks that gave them money, or for the family that built the media empire, but it would be a very good thing for journalism in Canada.

Kelly
Toughill is an associate professor in the School of Journalism at the
University of King’s College, Halifax and a contributing editor for the
J-Source Business of Journalism J-Topic.