Postmedia reports $54.1 million loss in Q4 report, decides to shutter evening tablet editions
The Canadian newspaper chain gives up on ‘four platforms’ strategy as digital ad revenue and website paywall growth proves too slow to boost its revenue and earnings performance
The Postmedia newspaper group is having a really bad week. First it went to bat for the Conservatives, forcing all its dailies to endorse Stephen Harper (the Liberals won a stunning victory Monday), then it released its earnings.
The Canadian newspaper chain said that it lost $263.4 million in the year that concluded August 31, as compared to $107.5 million in the prior year. The increase in net loss was mostly the result of a $153.0 million non-cash impairment charge tied to the acquisition of the Sun Media newspapers, which includes papers in Calgary, Edmonton, Toronto, Ottawa and Winnipeg.
What caught my attention, though, was this paragraph from the earnings release, the emphasis at the end I added:
Total operating expenses excluding depreciation, amortization and restructuring increased $76.8 million for the quarter, relative to the same period in the prior year. Excluding the impact of the Sun Acquisition, total operating expenses excluding depreciation, amortization and restructuring decreased $6.9 million (5.2%). These expense decreases occurred in most operating expense categories including compensation, newsprint and distribution expenses. Production expenses increased as a result of outsourcing of the production of the Montreal Gazette in August 2014 and both The Vancouver Sun and The Province in February 2015.
With Postmedia looking to cut costs, it is not surprising that they would also announce today that they are shuttering their evening tablet editions for the Calgary Herald, Ottawa Citizen and Montreal Gazette.
The first of the apps, built using the Adobe DPS, was released last May for the Ottawa Citizen, with the tablet edition for Montreal appearing in October (see original TNM post here of the release of Montreal Gazette for iPad).
The Montreal Gazette for iPad takes an interactive approach to exploring your city, your country and your world. Each weekday evening you’ll find fresh creative approaches to news, entertainment and analysis that illustrate and illuminate the top stories of the day in a touch and explore format only the iPad can deliver. – Montreal Gazette for iPad app description
“They’re beautiful products and we’re incredibly proud of how they look, but they didn’t reach a critical mass of audience or advertisers,” Phyllise Gelfand told The Canadian Press.
At the time Postmedia was committing to what it called its four-platform strategy. The idea was to reach readers throughout the day, in print and via digital devices. The evening editions served the after work hours reader who would be leaning back with their tablets to read the “paper”.
The concept first was broached by the Orange County Register in Southern California, who launched a evening tablet edition that was eventually called “The Peel.” But the tablet edition, like those from Postmedia, could not survive newspapers that were constantly cutting costs. Those involved with The Peel soon moved on to other jobs, including one digital designer who joined Next Issue Media.
Based on Postmedia’s numbers released today, the publisher is really nowhere when it comes to digital. It reported that digital revenue increased $6.8 million to $27.0 million, but when you take out the Sun Media acquisition, digital revenue actually fell 2.4 percent.
(It should also be said that the Postmedia chain is probably the last publisher that should have tried to make its four-platform strategy work. Its newspapers, as this election cycle proved, are out of touch with younger Canadians, who should have been the target audience for a new digital publishing initiative. Ironically, the one of the last issues of the digital editions featured Justin Trudeau on the front.)
The tablet edition apps have now been pulled from the App Store and users today received a notice, inside the apps, to download the publisher’s mobile news apps (see above). That could be a problem if the reviews of Canadian readers are accurate. Ratings for all the apps I saw were negative inside the Canadian App Store, with the most common complaints involving app crashes and subscription fulfillment issues.
It may be a shame that Postmedia gave up so quickly on its tablet editions, but the newspaper chain is really the wrong publisher to give this an honest try. Anyone who wants to launch an evening tablet newspapers would need to understand that they would need to do many of these things:
- Include the ad sales team on meetings well before the launch, bringing in creative services, ready to build spec ads for the tablet/mobile edition (there is no reason the evening edition could not also support smartphones).
- Build a separate P&L for the product and be prepared to be shocked to learn that the costs are not really that high when compared to those of printing and distributing a print newspaper, and neither will be the revenue sold. (Which is why shuttering the tab editions will not save Postmedia much in expenses.)
- Let digital natives build the appd and add the features. Most tablet newspapers look and feel like they were designed by print veterans. It has taken the NYT Cooking app, for instance, a long time to add the features it should have had at launch.
- Show patience: print newspapers have been around for a long time, giving a tablet newspaper a year to make it is silly.
- And finally, give the tablet edition editorial independence, one might find that an alternative audience may be attracted to the product, one really not that interested in the print newspaper
Many print veterans, and more than a few web-only writers, will no doubt say “I told you so” when hearing about Postmedia’s shuttering of the evening tablet editions. But how many of these media people have personally been involved in creating a tablet publication? My bet is that none of them have ever even been tempted to do so. Those most enthusiastic about the platform are those with experience with it. Few say they have the answer to a successful business model yet, but they are eager to keep trying.
For more on Postmedia’s move, Laura Hazard Owen has a nice piece up at Nieman Lab.
A video from better days for the tablet edition from the Montreal Gazette: