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January 9, 2010
By Terry Field
CALGARY, AB, Jan. 9, 2010/ Troy Media/ — It would be hard to imagine anyone being surprised by the news yesterday that one of Canada’s big media players has sought bankruptcy protection for a portion of its holdings.
Nor should we expect any big surprises as the effort to sell 10 major Canadian newspapers covered by the filing unfolds in the months ahead. Still, the sale of the Calgary Herald, the Montreal Gazette, the Ottawa Citizen, seven other significant dailies and perhaps the National Post, could provide some hints on how media companies will evolve in the digital media world.
The move to place the newspapers and some smaller holdings under bankruptcy protection by parent company Canwest Global is a logical next step in the company’s quest to deal with billions in debt. Canwest has been in the news for more than a year as it has attempted to save itself by pushing back successive credit repayment deadlines, selling off some holdings, and seeking bankruptcy protection for its broadcast properties – principally the Global Television network – in October 2009. The move to place its newspaper subsidiary under similar protection, while also putting it up for sale, is a logical step toward achieving solvency.
Too rapid expansion
Canwest’s financial woes are primarily the result of rapid expansion of the company, with the resultant increase in debt. It had hoped to catch the digital media wave by adding print and online properties to its traditional broadcasting group, but it was left wallowing in the shallows as it proved more difficult than it calculated to earn revenue by combining broadcast, online, print and publishing ventures. The recession and reduction in advertising revenue for mainstream media outlets exacerbated the problem. One could speculate now that, in selling its newspaper arm, Canwest could use the debt relief to rework its core broadcasting business and stay afloat by reducing its scope and sharpening its focus.
There has been a lot of speculation in the past few days as to who might buy the newspapers and whether they will be sold as a group or separately, but it would be a big and unlikely surprise to see them sold off one-by-one. Historically, Canada’s media outlets were owned by families and run largely as small businesses and as a community service.
But that model gave way many years ago because larger companies could wrestle more revenue from owning a number of newspapers or broadcast outlets. Given the cost of operating these days, including the outlay required to stay in touch with technological change, you can expect a large company to purchase the Canwest newspapers as a package. It would be pure speculation to suggest a suitable suitor. Most major media companies are likewise struggling these days, and so it is not inconceivable a purchaser could come from outside the media world.
The one certainty in this story is that the 10 newspapers now in the receiver’s hands (and the National Post which is also for sale but outside the bankruptcy filing) will represent substantial value to someone. A number of the 10 have continued to do well financially even as the industry as a whole struggles, but dollars don’t tell the whole story. Having a group of major newspapers and their associated online potential would give a buyer instant coast-to-coast reach as the economy builds back. Value can also be measured in the fact that the papers are highly important local entities that their respective communities want and need. Years of history and goodwill are true commodities in media terms. It matters to be trusted, appreciated and identifiably local. As real as the economic woes are for media organizations, those that provide local news and information will continue to have a reason to exist and an audience to serve. Arguably, as a news consumer, I can obtain national and international news from myriad sources, but the number of options for local news is much more restricted.
We shouldn’t assume it will be easy for the media industry to return to profitability. The bottom line for media these days is that the industry is somewhere on a business renewal continuum between old revenue models and emerging models.
The principal challenge is to find new ways to make money. Canada’s broadcasters (like their US cousins) are currently having a celebrated battle with the cable giants Shaw and Rogers over revenue for programming. In short the broadcasters want cable to pay for mainstream programs such as local news, which cable has historically passed on to us for free. News Corp’s Rupert Murdoch is involved in the US version of that debate but has also suggested that he will begin charging readers for online material, and charge Google for using News Corp product. These efforts to find new revenue will continue until media companies (which are almost too big to fail) find a sustainable model.
Advice for the new owners
That said, I do have some advice for the company that buys the Canwest papers. Invest in content. For too long Canada’s newsrooms have been run on shoestring budgets and the result is often that today’s news looks a lot like last week’s. There is too little investigative effort (with the Vancouver Sun being a notable exception) and too little originality. If you want to retain readers, whether they read on their phone, a computer screen, an e-book, or messages projected onto clouds (it could happen!) they need a reason to do so. The company that buys the country’s newspapers can capitalize by being aggressively local in each market, by sharing important stories in all markets, and by making content generation job one. One might say the new media model, and new revenue potential, will come from an old idea – first serve the needs and interests of your audience.
Terry Field is an Associate Professor and Program Chair – Bachelor of Communication – Journalism, Mount Royal University, Calgary, Canada.
Channels: QR77, January 12, Canada Free Press, January 13, the Prince Rupert Daily News, the Yukon News, January 14, Surrey Now, Battlefords News Optimist, Portage La Prairie, January 15, Slave Lake Lakeside Leader, January 20, 2010