TORONTO - Postmedia Network Canada Corp. (TSX:PNC.A) said Friday it will roll out a plan to charge readers for online content at more of its newspapers as it struggles with lower advertising and print circulation income.
CEO Paul Godfrey said the newspaper and multimedia companyis pleased with the results of a subscription-based experiment, which it plans to launch on a broader scale in "the months ahead."
The move is an attempt to shore up revenue as the media conglomerate grapples with falling advertising sales, which took a five per cent hit in its latest quarter.
The publisher of the National Post, formerly part of Canwest, reported a loss of $2.3 million in the three months ended Aug. 31, compared with a net loss of $44.6 million between July 13 and Aug. 31, 2010, the most closely comparable period.
The publisher reported that a 5.3 per cent, or $8.2 million, decline in print advertising sales in the period pushed its overall revenue to $230.3 million, down $11 million relative to the prior year.
Postmedia had previously launched test pay-per-view programs at the Montreal Gazette and the recently sold Victoria Times Colonist.
Each paper tested slightly different "metering" models. Subscribers at the Gazette have access for free, but non-subscribers pay $6.95 per month. Monthly online subscriptions to the Times Colonist digital edition were $9.95, while print edition subscribers got full access for $2.95 a month.
Postmedia, which also publishes the Calgary Herald, Vancouver Sun and Ottawa Citizen, said it will expand the model to its other newspapers. Godfrey did not elaborate on which pay-per-view model it would adopt.
Viewers of the papers' online editions who don't have a subscription will have limited access as more of its websites become metered. Similar policies have already been adopted by many major newspapers around the world such as the New York Times and Wall Street Journal.
"We still believe that this is part of the future in the industry," Godfrey told analysts on a conference call Friday.
"We've been watching the New York Times have considerable success in this area, (even as) their ad revenues are down (and) their print circulation is down. We really believe that this falloff is not so much structural, but more economy-driven," Godfrey said.
"I certainly believe the media itself who reports this news of world economic problems ... do have an impact on consumer confidence and consumer confidence has really been shaken."
Godfrey would not give a revenue projection for the first quarter and beyond, but noted that in the U.S., the seven largest publicly traded media companies have reported sharp advertising revenue declines between five to 12 per cent.
"What we see happening in the U.S. market is happening in Canada, but not to the same degree," he said.
Broadcast media groups Astral Media Inc. (TSX:ACM.A) and Corus Entertainment Inc. (TSX:CJR.B) projected earlier this week that economic uncertainty will affect advertising on radio and TV stations in fiscal 2012.
Media analyst David McFadgen at Cormark Securities said the drop in advertising revenue is likely less due to the current period of economic uncertainty than to a longer-term trend of readers turning away from print toward free, online content.
"You have to try to grow your digital side of your business, but it's pretty tough," he said.
When it comes to generating revenue from advertising online, "you're basically trading dollars for dimes," he said.
He said Postmedia's attempt to turn to a paywall was a dubious endeavour.
"You have to have some pretty unique content to get people to want to pay for it. The only one I know that it's worked for is the Wall Street Journal."
Godfrey said he is hopeful that sales will improve in 2012, but if they don't the company has room to find even greater cost efficiencies. He did not elaborate on where those additional cost savings might come from.
However, he added: "We have no for sale signs in front of any of our properties."
Earlier this month, the company announced it was selling the Victoria Times Colonist and other daily and community papers in British Columbia for $86.5 million to Glacier Media Inc. (TSX:GVC). Godfrey noted that the offer from Glacier was unsolicited, but was simply too good to pass up.
The Toronto-based company said it will use the money from the Glacier deal to further cut debt inherited from the former insolvent Canwest.
During the fourth quarter, Postmedia circulation revenue was off by 2.5 per cent, or $1.5 million, and other revenues declined $2.9 million due to the loss of a commercial printing contract in the first quarter.
The declines were partially offset by growth in digital revenue, which increased 8.2 per cent or $1.7 million relative to the same period in the prior year.
Postmedia, backed by a New York hedge fund, bought the newspapers from Canwest last year as part of the court-supervised restructuring of Canwest Global.
The company has cut about 500 full-time jobs, or roughly nine per cent of its workforce, as part of the restructuring. Shares in the company, which began trading publicly in June, were unchanged at $9 each Friday on the Toronto Stock Exchange.
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