Postmedia Network Canada Corp. (TSX:PNC.B) chief executive Paul Godfrey told shareholders Thursday that print isn't dead, but it's costing media companies more to produce because advertising revenues are dropping.
Postmedia plans to shift its strategy to focus more on exclusive content and "unashamedly charge for products of value," he said at the company's annual meeting.
He also outlined plans to redesign most of Postmedia's 10 big-city newspapers.
"We know that our print loyalists will pay for this premium product," Godfrey said in prepared remarks.
"And they will have to pay more to benefit from home delivery because it costs more, and advertisers aren't carrying as much of the load as they used to."
Godfrey's outlook for his dailies, and the industry as a whole, came as Postmedia reported a first-quarter loss of $11.8-million, weakened by lower advertising revenues and soaring costs to rework its operations.
A year earlier, Postmedia had a profit of $6.7 million when the costs of reworking its operations were significantly lower.
Like most of the newspaper industry, Postmedia has been grappling with a years-long trend of readers advertisers turning away from print publications to digital media, including websites.
To counter the decline, Postmedia began a three-year plan to dramatically change its business model by setting up digital pay walls for its websites, ending the publication of many Sunday newspapers and selling its headquarters in Toronto.
In November, the company outsourced the production of the Calgary Herald to TC Transcontinental Printing and said it would also outsource contracts for the production of both the Vancouver Sun and the Province.
In his speech, Godfrey said Postmedia will prioritize an initiative to create more premium content that emphasizes regular columnists, insights on hot topics and reworked sections that cater to niche audiences like luxury car enthusiasts.
"Whatever it is that our audiences value most, we’ll value most too," he said.
"And we know what those things are because we've done the research, by platform, by audience, by market."
Some of the changes in the works include redesigning eight of its 10 newspapers, with the National Post and tabloid Vancouver Province being the two exceptions.
Postmedia rose from the ashes of bankrupt media company Canwest when Godfrey culled together a group of investors in 2010.
Since then, the company has been focused on reworking its operations, which has included shutting down an in-house newswire service and expanding its Hamilton operations to handle the editorial production of newspaper pages.
Godfrey said the early thinking was that the company could replace its print losses by cutting its expenses and growing its digital revenue.
"Turns out it’s not that simple," he said.
Postmedia's first-quarter loss was equal to 29 cents per share versus 16 cents per share of net income in the comparable period.
Revenue fell eight per cent to $194 million from about $212 million, primarily from reduced print advertising sales, while digital revenue fell by $1.3 million or five per cent.
Restructuring expenses, and other items meant to lower its operational costs, grew to $20.1 million in the quarter from $4.8 million a year earlier.
However, Postmedia's overall operating expenses — excluding depreciation, amortization and restructuring items — fell by nine per cent, or $14.7 million, from a year before.