04/11/2013 05:28 EDT | Updated 06/11/2013 05:12 EDT

Postmedia is looking at more outsourcing as revenue from newspapers falls in Q2

TORONTO - Postmedia Network Canada Corp. (TSX:PNC.B) says it's continuing to look at making more cuts across its operations, including centralizing its manufacturing, marketing and circulation departments.

"As we look into our crystal ball, we will be a smaller revenue company but as well, a much smaller expense or costs company," Paul Godfrey, Postmedia's president and chief executive told investors Thursday.

"By doing that, we have to look at every aspect we do business, including the potential for outsourcing."

The media company, which owns several big city newspapers including the National Post, Vancouver Sun and the Ottawa Citizen, reported a $14.2-million loss in the second quarter due to a 10 per cent drop in revenue and changing currency values resulting in a foreign exchange loss.

The loss amounted to 35 cents per share for the three months ended Feb. 28 compared with a loss of $11.1 million or 27 cents per share a year ago.

Overall, revenue for the three months ended Feb. 28 was $178.8 million, down from $198.6 million.

The company is in the midst of a three-year program to transform its business and cut ongoing costs.

During the three months ended Feb. 28, it implemented changes to create $16 million in annualized savings, bringing the total since the program was announced in July to $58 million.

But Godfrey said the savings were not enough, and the company will continue to explore other ways to get costs down.

"I don't think there's a day that goes by that we don't look at various aspects of our company. Look, we have a business to run on a day-by-day basis. It's not like dropping a guillotine, you just drop it and everything continues," he said.

"What you have look at is the practicality of when to do it. That's why we were realistic when we talked about a three-year program. We started not too many months ago."

It expects to be able to get revenue once it rolls out paywalls at all of its newspaper websites beginning in May. Currently, only a handful of its newspapers' websites require a paid subscription.

"You cannot give away your content which costs you millions and millions of dollars and give it away free," said Godfrey.

"I think the mistake that newspapers made, was when the Internet started and places like Google and others started to aggregate content from various sources, that newspapers shrugged. I think that shrug has turned into a grim-faced publisher."

Postmedia had slightly more revenue from digital and other products but that was offset by bigger declines in print advertising and print circulation revenue compared with the second quarter of 2012.

However, Postmedia's operating expenses were down as it spent less on compensation, newsprint, and distribution.

Godfrey noted that the company is cognizant that the cuts do not compromise the content it puts out, and has done this by attracting prominent columnists like National Post writers Christie Blatchford and Andrew Coyne to its pages.

"The minute you start cheating on content, you better look for the exit door. The fact is that people buy newspapers, to put it very bluntly, for the content," he said.

— With files from David Paddon, Canadian Press