Thursday, January 09, 2014

Another bad quarter for Postmedia, and a plan that's not working

The latest grim quarterly report from Postmedia sharpens questions about the company’s future.
Continuing declines in revenue and circulation are too great to be solved by the company’s current approach.
The corporate strategy is straightforward. Cut costs, find ways to get readers to pay more, in part through innovations like tablet editions, and convince advertisers that they should pay more for more effective ads.
It might work, if revenue was not continuing to vanish at such an amazing rate. 
Revenue fell 8.4 per cent compared to the same quarter a year earlier, or $17.7 million. Print revenue - the largest category - was down 12.2 per cent.
Revenues have been eroding for two years - down 7.4 per cent in the 2012 fiscal year and 9.6 per cent in the 2013 year. Print revenues were down 10.3 per cent and 13.4 per cent in the same two years.
Based on the first quarter results of this fiscal year, which ended last Nov. 30, the decline isn’t slowing in any significant way.
That highlights the problems with Postmedia’s strategy.
Cost-cutting can only work if revenues, at some point, stabilize. Otherwise, it’s an endless process of cuts that weaken the quality of the products and services and lead to more revenue losses and more cuts.
In the quarter, Postmedia revenue dropped $17.7 million, but its operating expenses, despite the major cost-cutting initiative and falling circulation, were only reduced by $13.7 million.
The corporation launched its cost-cutting ”Transformation Program” in July 2012, with a target of $102 million to $135 million in annualized savings within three years.
But since Dec. 1, 2011, revenue has fallen by $165 million. The expense-reduction program goals are far short of what’s needed. And the gap looks to keep growing.
New revenue generation initiatives haven’t worked either. Postmedia was enthusiastic about increasing digital revenues for a while, but they actually fell 5.1 per cent in the quarter.
And the plans to increase the number of people reading and paying for digital products have been slow to show results. Postmedia said 135,000 people have registered to access the newspaper websites, now paywall protected. But it won’t say how many are paying customers and how many receive free access as subscribers. Digital circulation revenue is up only $300,000 over a year earlier, a suggestion that few new paying customers are signing up.
And at the same time, print circulation was down 13.4 per cent over the previous year. Price increases offset the loss in customers, but prices can’t keep rising indefinitely.
It’s another grim quarter. Postmedia needed to show that the revenue declines were at least slowing significantly. That would have given hope.
As it is, unless the corporation comes up with a more effective, bolder strategy, and a much faster rollout, the future looks bleak.
(For earlier posts on Postmedia, see here and here.)


Anonymous said...

Hi Paul, Vivian here. This is all so depressing. What would a bold strategy possibly look like?

paul said...

Hey Vivian. I think we could do a lot of bold experiments. Postmedia has a great chance to try four or five strategies in different markets. The Province could go hardcore tab, with a Daily Mail-type populist website. The Citizen could try subscription products modelled on Regina could go super local, with reader-contributed content. The Sun could test the appeal of content that focused on analysis and opinion.
I wrote a bit more on options here -
What's striking to me is how timid and unimaginative we have been. A 2014 edition looks much like a 1994 edition, despite the two decades of lost readers.

paul said...
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paul said...
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Anonymous said... was recently valued at $7B !

So there's definitely a market out there.

Unbelievable what a quality web business can get valued at. Whoever was/is in charge of Postmedia's web dismal strategy should be made to walk the plank.

The NY Times just got a facelift... meh.

Anonymous said...

Postmedia's problem is hubris. A lot of great, smart people were doing interesting things online at the papers, winning awards, getting great traffic, and bringing in revenue, but the head office digital results were consistently god awful. every time got a redesign its traffic halved.
And instead of looking to the innovators in the company and learning from them, sharing wins across the company, they paid the innovators to leave their jobs, centralized everything, and tied innovation up in endless process and denied permissions.
The Daily Mail populist tab website for the Province you propose here was planned last year. But head office said no. It knew better.
It always knows better. and it never - ever - plays out.
Newspapers aren't dead. Just newspapers run by people who don't understand their audience and think wire copy is journalism.

Anonymous said...

What Postmedia is going through is the classic corporate case of the hollowing out of a company's assets by a CEO dedicated to feathering his own nest and those of his hedge fund masters.
Godfrey and his fellow board executives do not have the longterm future of the company in mind; instead, it's all about hitting their annual bonus numbers, selling off company assets and keeping those high-interest monthly payments up for their New York-based masters.
The sad part is that these old men are forever destroying brands that have for decades provided their respective city markets with good journalism and civic discourse.
One can only hope their hands can be ripped from the tiller before they smash into the shoals that are becoming increasingly near.

Anonymous said...

Going hardcore tab and populist is the LAST thing they should do. Why compete with the likes of Gawker and buzzfeed for the garbage readers? You have a building full of supposedly experienced journalists...use them to create high quality, in depth news. Offer this quality is the ONLY thing that will save these places.

Anonymous said...

A bleak future for Postmedia is a better future for the rest of us. If there's anything I can do to hasten its demise, please let me know.