Saturday, April 19, 2008

Prem Watsa sees CanWest, TorStar breakups coming

And Watsa owns 19% of CanWest. Watsa's Fairfax corporation began buying CanWest last year and has steadily added to its holdings as the stock price tanked. His last purchase was at $4.60, just above the 52-week low. He's also buying TorStar non-voting stock. TorStar's voting stock is controlled by a collection of "founding familes" assembled after the death of Joseph Atkinson, the publisher who built the paper. Atkinson wanted to leave the Star to a charitable foundation, but the Tory government of Ontario put a hex on that idea. The top executives of the paper bought it themselves and left the control of it to the present generation, which shows little sign of interest in the business. This generation of coupon-clippers may well decide to sell if the paper's dividend falls.
In CanWest's case, the company is so loaded with debt that the company needs to have a healthy after-expense profit just to keep the bankers at bay. As I said more than a year ago, CanWest is a recession away from being broken up and sold. Well, the recession is here. Media always feels hard times first, and both TorStar and CanWest stock have tanked.
As I noted in the post below, TorStar's reaction has been the type of occified thinking that got the Star where it is today: lay off the young, bright people in the Internet department, do some buy-outs and toss some staff.
Don't get rid of the bloated management of the paper. Don't re-think its sections. And when you get real desperate, hire someone to do another re-design.
At CanWest, the newsrooms are run by office politicians and their toadies and are fat with ass-covering management. That's why they don't have boots on the ground in the community. Quite simply, reporters are missing the news and their bosses don't care.
And what's the excuse with weekly papers? They aren't being beaten by the Internet. No one posts Midland Town Council news on the Internet. In my home town, the Midland Free Press is dead because it has one reporter. Two decades ago, it had six. Now, people won't buy the paper. There's nothing in it.
What happened? It wasn't the Internet. It was the sale of the paper by Thomson to Conrad Black in a leveraged buyout. Black sold the paper to the Aspers in a leveraged buy-out. The Aspers sold the paper to Michae Sifton in a leveraged buyout. Michael Sifton sold the paper to Quebecor in a leveraged buy-out. The "profit" from all of these buy-outs was actually just debt loaded onto the balance sheet of the paper.
So the geniuses decided to cut costs to make the paper pay its debts. Where to cut? Well, they started with the newsroom. No one there brough in any revenue. And they sold the press and the office. They essentially acted like a farmer who sells his topsoil for quick and easy money. When the paper eventually closes -- after more than 110 years of publication -- Quebecor or whoever will likely blame "market conditions" and the "Internet", which are now the lame excuses of every sad-sack media manager.
The problem isn't the Internet. It's media corporation debt, "investment" that was just paper profit for lawyers and sellers, shrunken newsrooms, lack of community presence and, above all, lack of relevance and respect.

1 comment:

Anonymous said...

Presumably, "doc," you meant "ossified".

And this just in:

"Instead of recognizing the necessity to reinvent their approach online, for the most part they simply transferred their old dullness to the new technology. Their print drabness derived mostly from the complacency of their local monopoly, and that's the one thing you can't transfer to the Internet. It will take more than the web to save these sclerotic franchises."