Wednesday, November 05, 2008

How Others See Canada's Newspaper Biz

ANALYSIS-Canada's newspaper industry shows signs of strain
Wed, Nov 5 2008, 18:46 GMT

By Wojtek Dabrowski

TORONTO, Nov 5 (Reuters) - Even though U.S.-style waves of layoffs and major restructurings have not washed over Canada's newspaper industry, signs of a significant downturn are starting to show.

Analysts say that as corporations pull back spending on television and newspaper advertising, already flat revenues are likely to begin declining, especially at newspapers in the competitive market of Toronto, Canada' biggest city.

Companies such as Torstar Corp and Canwest Global Communications are among those that stand to be hurt the most because of their broad exposure to the flagging newspaper market.

In the United States, publishers from Gannett Co Inc and McClatchy Co to the New York Times Co. and Washington Post Co have cut thousands of jobs as they struggle with a sharp drop in advertising revenue as readers drop print editions and get their news online.

Bob Bek, an analyst at CIBC World Markets, said that although the economic pressures facing Canadian newspaper companies aren't as intense as those in the United States, there are still significant problems -- ranging from falling ad revenues to rising newsprint costs and pension expenses.

"By no means is it a positive outlook," Bek said.

Canadian newspapers have also lagged their counterparts elsewhere in the world in finding new ways to charging for content -- such as fees for premium online content -- said Alan Middleton, a professor of marketing at the Schulich School of Business at Toronto's York University.

"If they haven't commercialized the content elsewhere to make it a necessity, their bottom lines are going to be hit very hard," Middleton said, citing falling retail, automotive and government ad spending.

Torstar, which publishes the Toronto Star, the biggest newspaper in Canada, said last week its results should see benefits from unspecified "restructuring efforts already undertaken." It said in the first nine months of the year, its stable of urban and regional newspapers around Toronto cut 270 jobs.

Despite the cost-cutting efforts, Torstar Chief Executive Robert Prichard said the economic outlook remains gloomy as the Star's ad revenue fell 8.5 percent in the quarter and newsprint prices jumped 18 percent.

Meanwhile, Canwest -- Canada's biggest publisher of daily newspapers -- has significantly cut the print presence of its flagship National Post daily in the Western Canadian provinces of Manitoba and Saskatchewan. A company spokesman cited printing and distribution costs as reasons behind the move.

"It's been kept alive artificially," Bek said of the Post, adding that Canwest obviously still sees a franchise value in the daily. The company reports results on Nov. 14.

Asked whether he thinks some newspapers could be forced to close up shop as a result of the downturn, Bek said: "Other than the Post ... I don't think anything else is at risk."

Quebecor Inc is another major newspaper owner, and publisher of the Sun Media chain of tabloid dailies. The company could provide details on its newspaper operations when it reports results on Nov. 7.

The least visibility is provided by the privately held Globe and Mail, which is owned by CTVglobemedia Inc and does not publish financial results.

A turnaround in the advertising market and a cooling of the increases in newsprint prices would likely be necessary before the newspaper industry sees any sort of stability. But signs of a bounce-back are still a long way away, Bek said.

"It's too early to look for a recovery here."

($1=$1.16 Canadian)

(Reporting by Wojtek Dabrowski; editing by Richard Valdmanis) Keywords: CANADA NEWSPAPERS/


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