It’s a bad sign when even newspaper companies no longer like the business.
Glacier Media’s latest quarterly report, released last week, suggested the corporation has pretty much given up on a long-term future for its 30 newspapers across B.C.
Vancouver-based Glacier had been seen as a newspaper company (to the detriment of its share price). But it also has information services aimed at more specialized markets - real estate, agriculture, energy and mining, for example.
And that, management says, is where the corporation’s future lies. Newspapers are in decline. The company’s plan is to extract cash during their remaining time and invest it in businesses with growth prospects.
Glacier puts it fairly bluntly: “The Company’s objective is to grow its business information assets and the portion of cash flow generated by these operations, which have higher growth profiles and valuations, and harvest the cash flow from community media assets and reduce the related financial and operating exposure.”
Conventional wisdom has been that small community newspapers - the core of Glacier’s holdings - have a brighter future than urban dailies.
But the corporation no longer shares that optimism.
Newspapers do “generate significant cash flow and provide scale for the Company,” the quarterly report says. “Efforts will be made to restructure community media assets to create greater direct value and simplicity for Glacier, or monetize where appropriate value can be realized.” (Restructure usually means cuts. Monetize means sell, which raises some other interesting questions. )
It’s hard to argue with management’s conclusions.
Glacier’s newspaper revenue fell 9.8 per cent in the last quarter, continuing a long skid. And that is after the corporation swapped papers with Black Press in December to eliminate competition in parts of the Lower Mainland and on Vancouver Island and, theoretically, increase profitability.
Newspapers still provide about 65 per cent of the corporation’s revenues. (Hence the reference to providing “scale.” Glacier is a small company without the newspaper revenues.)
But the newspaper profit margins are shrinking. On an operating basis, the business information division produced earnings equal to 27 per cent of revenue; for newspapers the return is nine per cent. (Before joint administration costs, interest, taxes and depreciation.)
This is the first time Glacier has reported the results of its two divisions separately, as it moves to redefine the corporation.
There was another first. Glacier bought the Victoria Times Colonist in 2011, as part of an $87-million deal that included two other small dailies and 20 weeklies. Postmedia’s community papers in the Lower Mainland were likely the prize that Glacier wanted.
The corporation has acknowledged, vaguely, that it is not the sole owner, describing “certain assets acquired from Postmedia” as “Joint Ventures and Associates.”
In the latest report, after the swap with Black Press, it specifically put the Times Colonist in that category, without saying who was the “associate” involved.
An informed bet would be that Glacier’s associate is David Radler, Conrad Black’s long-time business partner jailed for mail fraud. The corporation has partnered with Radler in newspaper properties in Alberta, the Okanagan and the U.S. He is still, apparently, taking a management or advisory role at the Times Colonist.
Which raise some interesting speculation about the plan to “monetize” its newspaper assets. The Times Colonist, as a daily newspaper in a mid-size city, never fit with Glacier’s focus. It’s even possible Postmedia forced Glacier to take the Victoria daily if it wanted the Lower Mainland community papers.
If Glacier wants out, Radler is the person most likely to take over.
Footnote: I have sat through this movie before. My stints as publisher in Peterborough and Victoria came as the Thomson Corporation made one last stab at bringing growth to its newspapers in Canada and the U.S. It decided, after four or five years of effort, that the future was bleak. It sold the newspapers and invested in high-value information services. Glacier is taking the same route.