Phillip Crawley wasn’t exactly a modest guy when the Fleet Street veteran came to Canada to defend The Globe and Mail against Conrad Black’s National Post in the late 1990s. He’s even more sure of himself today, and not without reason. During his tenure as publisher, the Globe has cemented its position as corporate Canada’s newspaper of record. Its chief rival, the National Post — which endured eight years of ever-deeper cost cuts after being sold to the now-bankrupt Canwest Global Communications empire in 2001 — has racked up nine-figure losses since being launched in 1998.
If you visit Crawley’s downtown Toronto office — the command centre for an upcoming relaunch of the Globe‘s digital and print offerings — you’ll find an industry general dripping with the Alexander-like confidence that comes from believing you have decisively vanquished an enemy. According to Crawley, the Post was a nuisance, but it didn’t start “the First World War.” Getting him to say that much is like pulling teeth. He sees no value in examining the Post‘s launch or influence on the market. “I have lots to say about the future,” Crawley says, “but telling people that the Globe won and the Post lost, while true, is such old news that it’s not worth the discussion.”
That’s not exactly true. After all, the history of warfare is endlessly discussed in military circles to prepare combatants for future battles. As media commentator Carmi Levy points out, the success of the Globe‘s redesign is threatened by a brewing war that will be nothing like what Crawley has experienced to date. “The age of the newspaper is over,” Levy says, noting “the age of the media-agnostic newsgathering, community-building entity is just getting started.” As traditional advertising revenues dry up, Levy says, the Globe faces multiple aggressors on multiple fronts. And the analyst thinks Crawley’s old foe might just be the one to watch.
In the last half of the ’90s, more than 600 daily newspapers were launched around the world, and at least two-thirds of them failed to survive — but the National Post is still breathing. Moreover, it’s being prepped for a counter-strike under the leadership of former Sun Media boss Paul Godfrey, who now heads Postmedia, a company forged by the recent $1.1-billion creditor acquisition of Canwest’s distressed newspaper assets.
According to Godfrey, the only paper buried by competition in recent years was the pre-Crawley Globe, a staid publication that considered dedicated sports pages unnecessary. Today’s Globe is dramatically different from the grey lady of old. For example, it’s hard to imagine the old Globe handing editorial decisions over to rock stars. But on May 10, when Globe editor John Stackhouse handed control to U2’s Bono and Bob Geldof, who signed on to publish a special edition on Africa, it was yet another signal of how much the Canadian newspaper industry has changed.
Globe insiders call the move a media stunt designed to “sell the paper on a Monday” while stealing a few left-leaning readers from the Toronto Star. But executives at Torstar won’t mock the Bono issue. “I thought, Good on them,” says John Honderich, Torstar’s chairman. If you want to put out a good newspaper these days, Honderich says, “you can’t be heavy and serious all the time. You’ve got to have fun. You’ve got to entertain.”
The problem, of course, is that even good papers can (and often do) fail to make money under current market conditions, especially in a highly fragmented, five-newspaper town like Toronto. Insiders say that was the main impulse behind Torstar’s bid to acquire Canwest’s chain, which would have allowed Honderich to kill off the Post and beef up the Star‘s financial reporting at the same time. But Godfrey’s group won, and it plans to heat up the Toronto media landscape by relaunching the Post as the flagship of a national chain of so-called digital-first news organizations. Crawley, meanwhile, is making an 18-year bet on publishing a full-colour newspaper that offers magazine-style content and advertising options. The two strategies represent dramatically different bets on the future direction of the media business. While some in the industry believe the printed word will attract a decent market for a long time to come, others argue it is just a matter of time before remaining newspaper advertisers follow the classified crowd online.
Godfrey won’t use the term “war.” “Pepsi versus Coke is a war,” he says. “What Toronto saw after the Post was launched was just increased competition.” Whatever he calls it, the CEO of Postmedia insists the National Post will eventually dominate the contest because “there is no room for print dinosaurs at daily newspapers.”
But Godfrey has another player to consider aside from his Toronto-based rivals. The Post‘s struggles in recent years have arguably created an opportunity for the Sun Media chain he once commanded. The National Post made a name for itself running right-wing political commentary, leavened with generous helpings of Anna Kournikova photos — a mix famously labelled “tits and analysis” by a Star executive. Sun Media’s corporate master, Quebecor CEO Pierre Karl Peladeau, has plans to take titillating conservatives to the next level by converging Sun Media’s English tabloids — which have traditionally had some of the best margins in the business — with a new populist cable network that promotes Sun personalities.
Peladeau was sold on the idea by Kory Teneycke, former communications adviser to Prime Minister Stephen Harper, who is now heading the new Sun TV initiative. Critics call the concept “Fox News North,” which is OK with Quebecor’s vice-president of media development, who notes the right-wing U.S. cable news network earns hundreds of millions of dollars annually.
Teneycke insists Sun Media “will have more people wearing multiple hats than anyone else in the Canadian media.” He recently ordered reporters to start covering “the launch of any Victoria’s Secret outlet like it was the f—ing moon landing.” In return, Sun insiders started calling Quebecor’s strategy “Tits and Analysis 2.0.” But that’s also OK with Teneycke, who doesn’t mind his venture being compared to the launch of the National Post. Like Black back in 1998, Teneycke is out to give Canadian media a kick in the pants. “As we speak,” he says, “eight out of 10 journalists in the nation’s capital are chasing a story about the long-form census, and, according to a poll I read this morning, 50% of Canadians don’t care about it.” Teneycke insists the tendency of Canadian media to tell the public what it should care about rather than deliver what interests people provides a real opportunity to make money. “When I say we are going to cover Victoria’s Secret like a moon landing,” he adds, “it’s because that’s something people actually care about. Not everything has to meet the highbrow approval of a Jeffrey Simpson to be worthy of making the news.”
And let’s not forget relatively recent changes at the Star, Canada’s largest-circulation newspaper, which is now in the hands of publisher John Cruickshank and editor Michael Cooke. These guys are not traditional Star men. But they are ideally suited to defending Honderich’s liberal paper in an industry war. After all, they helped Black launch the last one — which cost combatants an estimated $1 billion.
Canadian media, get ready for another rumble.
Back in 1998, Conrad Black’s plan to steal market share from competitors while also growing the print advertising pie was not unrealistic. After all, the National Post offered consumers a real alternative, and the newspaper sector was consistently profitable. Today, business conditions are dramatically different. Print advertising volumes have rebounded somewhat this year. But as BMO Capital Markets analyst Tim Casey recently pointed out, the industry still appears to be on death row because of the “gradual but unrelenting erosion of revenues, operating margins and valuation multiples.” Sector revenue growth, he notes, “has underperformed that of its peers since the emergence of online advertising platforms over the last decade.” And the digital world isn’t about to let up.
According to Outsell, a California market research firm, U.S. spending on digital advertising and marketing will hit US$120 billion this year, surpassing print for the first time. Meanwhile, economic naysayers insist a double-dip recession remains a real threat. As a result, Toronto newspaper executives need another industry war about as much as Bono needs an editor’s paycheque. But if Paul Godfrey fears anything, it is waking up and discovering his new gig is just a dream.
In 1998, Godfrey traded the old Financial Post to Conrad Black in return for The Hamilton Spectator and the Kitchener-Waterloo Record. That prompted Torstar to attempt a hostile takeover of Sun Media, which moved Godfrey to cash out and sell to Quebecor. As a result, he sat out the last war — which he says wasn’t easy, despite the extra $40 million in his pocket. “I keep pinching myself,” says Godfrey, itching to initiate the next round with Black as one of his columnists. Godfrey, who has what he considers real money on the line, insists the Post is on the verge of profitability. And he says it won’t start bleeding again because Postmedia will dramatically attack costs associated with traditional newspapers. There will still be printed products from the old Southam chain, but they won’t be breaking news.
“Instead of taping me right now,” Godfrey says, “you’d be collecting video. The editorial guys are going to have to carry webcams. When a story breaks, we’ll issue alerts on cellphones and mobile devices. Then the story goes on the web. Editors will be digital media curators. Video clips will be sent out to all the social-networking streams. And ultimately, the stories of the day are wrapped up in print.” Four years from now, Godfrey says, Postmedia will have “a content division and a sales and marketing division. That’s it. Everything else will be centralized or outsourced.”
According to John Paton, a former Sun Media digital guru who recommended Godfrey to the Post‘s new institutional owners, “Two-thirds of all newspaper costs are in infrastructure that adds zero value to the business. So by putting print at the back end, where it now fits in the natural order of things, you can really attack costs.” Paton, who sits on Postmedia’s board, is currently transforming 18 U.S. dailies into digital-first operations, where freeware is replacing proprietary software in all departments, and audience-driven content is a major part of the business plan. “Put your money on the National Post, not The Globe and Mail,” he says, because Postmedia will be able to effectively leverage “synergies in content creation across the entire country. We are talking about the ability to upsell national advertisers on a true national footprint.”
Back at the Globe, Crawley isn’t exactly shaking in his loafers. When he looks at Postmedia, he sees short-term owners hyping an unproven strategy ahead of a public offering. He points out the Globe is well advanced when it comes to digital offerings. It just introduced an iPad application and won an Emmy Award for an online project on Afghan women. Digital innovation will continue, Crawley says, but he wants to dominate the print side as long as it survives because it “produces big numbers that are not going to be reproduced by digital anytime soon.” Thanks to new 18-year contracts with printers who are investing in state-of-the-art German presses, which cost $50 million each, Crawley insists you will see the Globe selling a multiplicity of revolutionary choices to advertisers, “offering colour on every page with presses that enable advertisers to use different [paper] stocks.”
Outsell analyst Ken Doctor says 18 years “is an eternity in today’s world,” but he likes the Globe‘s bet on high-tech presses. Print, he says, is “becoming a niche for an older, monied demographic while the Googles of the world become the new mass medium.” Meanwhile, digital offerings remain hard to monetize, have lower barriers to entry and don’t currently support a critical mass of content. Doctor warns people not to misread his firm’s study that shows digital spending overtaking print because it looked at all sectors and includes online marketing. When it comes to news organizations, he says, digital will take years to top 20% of revenue.
Unlike analyst Carmi Levy, the ad community isn’t convinced the Post is doing anything revolutionary. At this point “it’s hard to get excited about Godfrey’s vague new strategy,” says one Toronto media buyer who asked not to be named, “especially when the Globe is about to gain a competitive advantage on the print side by opening up to more luxury buys and news customers, like the cosmetic sector.”
Tony Miller, executive creative director at Anderson DDB, likes the idea of more colour in the Globe. But what he really craves is flexibility in terms of where ads can be placed and how they can be creatively shaped. Without that, he says, the Globe might just be putting “mag wheels on a horse and buggy.”
What about Fox News North? If Quebecor manages to land the cable licence it wants, Doctor says the idea makes sense because subscriber fees will provide another revenue source while the company grows its digital business. But, as the Toronto ad buyer says, “advertising dollars won’t necessarily follow eyeballs to a politically charged or unwholesome environment in Canada.”
Industry watchers doubt the Star‘s left-sided market is seriously threatened by the changing landscape. But Canada’s largest paper has a union that isn’t open to arming reporters with video cameras. And Torstar is controlled by a trust comprising five families, who made a court commitment decades ago to promote social justice, a promise that analysts have long insisted eats away at margins. Honderich says that commitment also applies to the digital world.
Honderich is a gregarious industry giant, who loves to tell jokes and bake pies (his secret is 50% butter in the crust). But he isn’t all sugar and spice. It has been said that hell knows no fury like a woman scorned, but when it comes to sweet revenge, Honderich is the man. He was ousted as publisher in 2004 after butting heads with former Torstar boss Bob Pritchard over editorial spending, but miraculously emerged as head of the family trust. He was then named chairman. Pritchard is now gone and Honderich is firmly in charge. But thanks to the Great Recession, Honderich is more open to cost cuts than he was as a publisher.
Dave Holland, Torstar’s CEO, recently put the company through the largest restructuring in its history. And that, along with lower newsprint costs and an improvement in ad revenue at the Star, just helped Torstar post its fourth quarterly profit in a row. Industry watchers suspect the Star is in better financial shape than the Globe, where Crawley says cost cuts have made operations profitable.
Holland says the Torstar strategy is to build out its diversified revenue streams while controlling costs and making the Star a better version of its liberal Toronto-boosting self in both the digital and physical worlds. And this is being done under a stable senior management that is leaving the Star‘s talented new editorial leaders alone.
According to Cruickshank — who has led news operations at The Globe and Mail, the Chicago Sun-Times and the CBC — the Star got too self-important. “What Michael and I have done is bring some fun back while restoring the paper’s edge by doubling the commitment to investigative reporting.” Under his watch, he says, the Star will make a lot of public noise while having a positive impact on society. “And that’s how we’ll distinguish ourselves in the market.”
BMO’s Casey says he isn’t “smart enough” to speculate how digital platforms, social networking and the rise of smartphones will affect today’s newspapers. Nobody is. The only thing anyone knows for certain is that consumers and advertisers are about to witness another pie fight full of surprises. You might even see a return of the man who started it all. “I don’t know what his resources are today,” says Godfrey, “but I would never underestimate Conrad Black.”