Kelly Toughill examines the sale
of Canwest’s newspaper division, the new owner’s track record and what
it all means for journalists.
The big bold promises packaged in the Canwest newspaper deal seem downright miraculous in this era of downsizing, outsourcing and closures.
The $1.1-billion sale guarantees jobs for almost all of the chain’s 6,000 employees. All pensions will continue. Every creditor owed less than $1,000 are supposed to be paid in full, and the others will share a pie worth $150 million. Perhaps most important – every single one of the chain’s 46 newspapers will continue to operate. Canwest reporters across Canada will still track how power flows through city hall and corporate offices, and deliver that information on pieces of paper delivered to our door.
If it were anyone but Paul Godfrey making these promises, journalists would scoff.
But Godfrey has traction in Canada, and in the news business, and the quiet investors who purchased the chain know that. He is the guy who gets things done.
Godfrey brought the Blue Jays to Toronto. He was the driving force behind the Rogers Stadium (then known as SkyDome). He led a dramatic expansion of the Sun chain, and then an even more dramatic management-led buyout of the chain from Rogers. Those who followed his lead at the Sun made a lot of money when the chain was sold to Quebecor. Lately, Godfrey’s been running the National Post.
We’ve been hearing a lot about Godfrey triumphs since he won the bid. Here’s what we should also remember:
The stadium cost taxpayers $300 million instead of the $60 million that was promised, and eventually ended up in bankruptcy protection, where Godfrey, by then head of the Blue Jays organization, bought it for a mere $25 million.
Many Sun employees enjoyed a windfall when Quebecor bought the chain, but the sale championed by Godfrey turned out to be a terrible deal for journalism and journalists. Quebecor gutted the newspapers and the newsrooms.
So how much are his promises worth in the Canwest newspaper deal?
A lot, even though few of the ones that count the most to J-Source readers could ever be enforced in court. Godfrey has pledged the new company will offer a job to every full-time newspaper employee, and will eliminate no more than 10 per cent of the part-time workforce. He has promised to keep every newspaper open. But there is nothing about how long those jobs will last, or how long he must keep each newspaper running. He could lay off employees next year without violating the court-ordered pledges.
Will Godfrey have the power to keep his promises? He will be chief executive officer, but the chain was bought by a consortium of investment companies. He is a front man, a hired gun. For the new owners, the point of the purchase is to make money, not news.
So Godfrey’s noblest promises could be easily broken, but they probably won’t. There is no more room at Canwest to lay people off. Managers have been cutting the papers since the chain was sold to Hollinger more than a decade ago. Canwest has already consolidated its operations, melded copy desks and ad departments, withdrawn from Canadian Press and sold off printing plants. A strategy of cuts just doesn’t make sense.
More to the point, the cuts won’t be needed.
The publishing arm of Canwest has shown an operating profit for years, with the exception of the National Post. It wasn’t the cost of journalists and newsprint that was killing the newspapers, it was the heavy debt wracked up Canwest when it purchased the chain and when it expanded its broadcast operations.
The newspapers will be servicing just half the debt they had to carry before the sale: just $700 million instead of $1.4 billion. With revenues of roughly $1 billion a year, that means the Canwest newspapers will have about $1.40 in income to help pay principle and interest on every $1 in debt. That’s not far from the ratio boasted by conservative Torstar Corporation – $1.50 in revenues for every $1 in debt.
The time to worry will not be when Godfrey takes over the chain, but when he lists it on the Toronto Stock Exchange, as he has promised to do. No one yet knows if he will simply take the company public, or if he will work out some equity swap that brings another company on board.
In the meantime, we might as well cheer.
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