Canada has a new media mogul, Mark Lever. The publisher of the Halifax Chronicle-Herald just bought Transcontinental’s 28 newspapers in Atlantic Canada for a reported $30 million, creating the new “Saltwire” chain of 35 regional papers.
And so continues the doubled-down strategy of Canadian media companies: buy more properties in the pursuit of economies of scale, pile on the debt. Then cross your fingers that someone will figure out how to make news pay in the Internet age.
Mr. Lever ---he of the ongoing 15-month employer-provoked strike at the Halifax Chronicle-Herald--- apparently convinced Toronto banker JFK Robertson this Transcon deal is a good investment. Life-long banking guy Robertson is presumably no fool.
In his publisher’s statement, Lever spoke the praises of local coverage, the public’s appetite for, and how crucial local journalism is to our democracy. It’s true. The question is, how to make it profitable.
Lever appears untroubled by the question, and one report suggest the Transcon properties may be pulling down a 15 per cent gross profit. That could mean that the Atlantic papers have so far evaded the full force of the ad revenue decline that is dragging down the rest of North America’s newspapers. At this point, taking on debt to achieve economies of scale may make sense.
Sure. Just go ask Paul Godfrey how it’s working out at Postmedia.
Now to be fair, the Postmedia debt pit was already dug pretty deep nearly a decade ago, when CanWest entered creditor-protection and emerged paying 10 cents on every revenue dollar to its American and Canadian backers.
Then in 2014 some other Bay Street guy ---not the above noted Mr. Robertson--- decided to finance Postmedia’s purchase of Sun Media. Yes, more debt and more debt repayment. But don’t worry, you’ve got Scale.
Nobody believes Postmedia is going to be around much longer, at least in its current form. Bankruptcy or creditor-protection awaits. The company fails every financial stress-test you can devise for it.
The cold facts are that pretty soon Canadian politicians are going to wake up to the news that Scale has failed and Postmedia newsrooms are shuttering. That would mean not just the Toronto-based National Post goes under, but also the leading urban daily in every other major city from British Columbia to Ontario and a host of other dailies and weeklies in smaller cities and towns as well.
If by then there isn’t a government action plan to provide a stable revenue stream to newspapers, along the lines that the Public Policy Forum of Canada or Unifor have advocated, our democracy is going to be in big trouble.
There remains the thorny issue of whether the government ought to extend a helping hand to pull a debt-mired newspaper company out of a hole of its own digging.
Moreover, the federal Liberals can have no love for Postmedia’s Liberal-slagging opinion columns. Those front-page election editorials published in October 2015 in every Postmedia paper across the country are etched in the Grits’ memory.
But that’s not the point of course. The federal government cannot, out of spite or political advantage, stand by as print newsrooms are closed across the country in one massive convulsion.
So all that remains is for the feds to figure out the conditions for bailing out Postmedia with a stable revenue stream that makes news a financially viable endeavour.
Those conditions will have to be extremely tough, meaning the creditors agreeing to suspend debt repayments.
If that doesn’t work, and if Postmedia does go bankrupt, then the feds must legislate a government trusteeship of the chain. That means they will have to make a deal with the creditors, break up the company into viable publications, allow regional and independent players to step up and take control of those news outlets on a case by case basis, and coordinate the sharing of common corporate services (printing, sales, circulation, editorial wire copy) until new arrangements can be made.
Once that time-limited task is done, the government’s trusteeship should end.
If that sounds complicated, it is. The alternative is unthinkable.