Despite digital growth, Postmedia revenue drops 10%

President and COO Andrew MacLeod tells MiC it's "buying time" for the business as it fights to stand out in digital.
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Postmedia’s third quarter saw the media giant bring in $171 million – a 10% drop year-over-year (from $190 million).

The three-month period ending May 31 saw most of that drop come from a decline in print revenue ($14.8 million), as well as print circulation revenue ($4.5 million). Digital revenue increased 7.2%, gaining $2 million from Q3 2017, while digital ad revenue was up 10%. Postmedia noted that this is the sixth consecutive quarter of double-digit revenue growth for digital.

When excluding the financial impact of the various publications acquired and sold during Postmedia’s first quarter, the company’s revenue decreased 7.2% relative to last year. Print advertising fell by 13.6% and circulation revenue went down 4.4%. Digital revenue increased 11.5%.

Postmedia CEO Paul Godfrey said in a statement that the company is “encouraged” by the digital advertising growth. However, he said, “We continue to see a rate of legacy revenue declination that outpaces our digital revenue growth. That reality means we must continue to take the necessary steps to focus on areas where we can win and make the tough, yet decisive, decisions about where we need to make changes.”

Some of those changes include a recent decision to shutter six community papers and an aim to cut its salary costs by 10%. Other initiatives include consolidation of office space and outsourcing where possible.

Total operating expenses excluding depreciation, amortization, impairment and restructuring decreased $15.9 million or 9.3% for the quarter, relative to the same period in the prior year. This decrease was largely due to a compensation expense recovery and other cost reduction strategies.

President and COO Andrew MacLeod said Postmedia is not at all “abandoning” its print business.

“Research and results continue to show that print has an important role,” he said. Referencing the global duopoly of Google and Facebook, which pull in the vast majority of digital ad dollars, he said Postmedia is currently accelerating along two paths: leveraging its owned and operated platforms, as well as “learning how to coexist with Google and Facebook, because they’re not going anywhere.”

He told MiC that coexisting with the two platforms means working with them to provide tools for full-stack integrated campaigns, while also serving its own clients better.

“We have to ask, can we do a better job than most other players in the market in terms of fulfilling search, SEM and social advertising?” he said. “For small, medium and even large customers, we’re able to do a good job with most metrics in terms of search and social, and can prove it, empirically.”

He said there are currently no plans to build revenue from digital subscriptions similar to The Globe and Mail and Toronto Star. However, he said, the company could continue to invest in more diversified online verticals, be it within the Postmedia network or in new sites, like its new cannabis-focused digital publication, The Growth-Op.

“We’re going to be reactive,” he said. “Where it makes sense, we’ll create separate brands or separate verticals, create the content people seek so they can stay engaged and we can build custom segments and take action based on the content that they’re reading.”

However, he said there is “no dogma” or definite vow to create more sites and properties.

It’s all part of trying to keep Postmedia’s business thriving without its legacy print business depleting entirely, he said. “You have to keep your cost base adjusted, and that’s the hardest part of the job,” he said. “It’s about buying time.”

This story previously cited a 44.5 million decline in print circulation revenue. It has been corrected to properly reflect a $4.5 million decline in print circulation revenue. MiC regrets the error.