Behind Torstar's good numbers
Torstar’s latest financials are enough to make anybody giddy: profits grew big this summer and digital sales hugely compensated for continued declines in print advertising. But Kelly Toughill tells us why all the good news means zilch for journalists.
Torstar profits jumped sharply this summer, and digital sales more than made up for continued declines in print advertising.
Time for journalists to bookmark new car websites and get back into the housing market? Maybe not yet.
The recent quarterly report of Torstar Inc. was a fascinating glimpse into the efforts of an old newspaper company to become a new media powerhouse – something that companies across Canada, the United States and Europe are all struggling to do.
Torstar is a 19thcentury company that grew up around The Toronto Star, Canada’s most-read newspaper. It publishes Harlequin Books and a plethora of media, including the Star, three other Ontario dailies, dozens of community weeklies and a gaggle of specialty websites. It also owns most of the Metro chain of free papers in Canada and has a major stake in the Chinese media company Sing Tao.
The most significant statistic in the company’s third-quarter report was that digital advertising brought in more than 10 per cent of all media revenues in 2011. That’s a first, and an important psychological shift for a company that spent decades measuring profit in picas and ink, not clicks and impressions.
Digital revenues grew more than 30 per cent this year, compared to last. That’s a significant achievement in an economy that continues to meander toward the future. But many are wary of counting on digital growth to replace print advertising. That was the mistake of the early Internet. Digital sales boomed in newspaper companies at first, but then stalled, yet revenue from print advertising continued to fall. Specialty operations and niche media sucked up the new digital dollars and seemed to leave mass media companies behind.
At first glance, the quarterly Torstar report suggests that might not be true, that digital advertising is coming back to newspaper companies and websites. But you really can’t conclude that.
Torstar has moved aggressively in recent years to create, buy and foster niche websites that target narrow groups of people: parents, homeowners, fashionistas, car-buyers, job-hunters. In many cases, these websites are not connected to any of the old media brands. Few carry any of the public service watchdog journalism that was at the heart of old-fashioned newspaper companies. In many cases – just look at Wagjag and Workopolis -- they don’t carry any editorial content at all.
Consider Torstar’s recent buying spree. The company sold off its share of CTV and spent a bunch of the cash on Autocatch.ca, a classified site for autodealers; the Kit, a digital beauty site; Foodscrooge, a site for cheap food; and increased its stake in the couponing sites Save.ca and Tuango.ca. It also increased its stake in Metro.
This is a smart boardroom move. Torstar is capitalizing on the Internet’s ability to deliver ever-more-refined segments of the consuming public to discriminating advertisers. But it does nothing for journalism. It can’t be determined from the quarterly report, but it seems very unlikely that the growth in digital ad revenues is connected to the kind of stories that build a strong, open and honest society, the kind of stories that most journalists love to do.
The biggest overall increase in revenues this year has come from TMGTV, Torstar’s shopping channel, another part of the company that is divorced from journalism.
The quarterly report showed a 74 per cent increase in net profit compared to the same period a year ago, and that was the lede on much of the coverage. But the figure is misleading and masks another troubling trend.
Net profit increased because revenues jumped, but also because Torstar dumped its share of money-losing CTV. Operating profit was actually down.
That means that even though Torstar managed to take in more money this year than last, it spent more money than last year on basic expenses like salaries, newsprint, webhosting and utilities. Even though digital revenues are growing by 30 per cent and the shopping channel is doing well, profits before taxes, interest and depreciation are continuing to decline.
The good news is that Torstar is muddling through. It is trying new stuff and finding new ways to make money, and some of that money will surely flow to what used to be its core business. The bad news is that none of the good news is directly related to journalism – or journalists.