Postmedia seeking easier rules on foreign ownership

Back from a long Christmas break.

Postmedia has hired a lobbyist who will argue for easier rules on foreign ownership. Income tax laws don’t allow advertisers to deduct advertising costs unless the owners of newspapers are Canadian. Apparently Postmedia is looking for foreign investment simply because it can’t find Canadian investors. Torstar has long been rumored as an investor but if it did it would kill the National Post, which is a competitor.

From Jan. 10 2012 Globe and Mail

The publisher of Canada’s largest chain of newspapers is lobbying Ottawa to allow more foreign investment in the newspaper industry, a move that would have significant implications for the sector if it were successful.

Lobbyist David Angus of the Ottawa firm Capital Hill Group Inc. filed a new registration last month listing Postmedia Network Canada Corp. as a client. The document says Mr. Angus will work on behalf of Postmedia in “seeking to allow foreign investment in Canadian newspapers,” according to the public registry of lobbyists.

Ottawa’s foreign investment rules for the telecommunications industry have generated plenty of headlines since the government announced in its Throne Speech in March, 2010, that it would seek to open the sector to more foreign ownership. By comparison, there has been little discussion about the rules for owning newspapers.

But Postmedia, which publishes the National Post as well as urban daily newspapers, including the Calgary Herald and the Ottawa Citizen, is in the position of needing to find a committed owner in a difficult environment for print media.

The company’s current investors, led by New York-based Golden Tree Asset Management LP and other funds, are expected to want to sell their stakes in the company within the next few years. Some, such as RBC Dominion Securities Inc. analyst Drew McReynolds, have speculated that Torstar Corp. could be a potential buyer.

But others are not confident a Canadian buyer will emerge offering the right price.

“The only way [chief executive officer Paul Godfrey] is going to get something out of this is if the company gets bought out. And I can’t think of another company that would pay a premium in Canada,” said one media analyst, speaking on condition of anonymity. “It would have to be a foreign plan.”

Executives from Postmedia were not available for comment on Monday. Mr. Angus did not return calls requesting a comment.

Foreign investment in Canadian newspapers is not banned outright, but tax laws make Canada a hostile market for would-be foreign owners. That’s because the advertisers that keep newspapers afloat cannot deduct their spending on print ads for tax purposes, unless a newspaper’s owner qualifies as Canadian, under the Income Tax Act.

Currently, Postmedia has found a way around issues of foreign ownership with the dual-share structure of its stock, which keeps voting control of the company in Canadian hands.

If Postmedia were exploring the possibility of being foreign-owned, however, those tax restrictions would be front of mind in its lobbying efforts in Ottawa. The only other restriction is that, under the Investment Canada Act, any investment by a non-Canadian in the newspaper sector would trigger a review by the Minister of Heritage as to whether it would be of “net benefit” to Canada – assuming the asset is worth $5-million or more.

Mr. Angus’s registration listed Canadian Heritage, Industry Canada, the Prime Minister’s Office and the Privy Council Office as the federal departments he intends to communicate with on Postmedia’s behalf.

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National Post makes money; bleeds dailies dry

Well, PostMedia announced recently that the NP, after 13 years, was making money. It also announced that the “profit” are largely due to $17.3 million in costcutting across the chain, mostly for salaries in the dailies. I’m sure they feel real good about that across the chain; they are profitable, so they take staff cuts to prop up a “national” newspaper that wouldn’t float otherwise.

In other news, PostMedia announced again that it would start charging for users for on-line access, again following the crowd.

And in local news, I’ve let my subscription to the Leader Post lapse. I finally got fed up with paying $400 a year to read every morning what I read the day before on the web. I used to spend ten minutes a day on the L-P and eight minutes of that was on Wonderword.

Tomorrow, I’ll do something positive, and examine a newspaper model in Canada that works and should be emulated if the daily business wants to survive in the digital age.

Postmedia sells Victoria Times Colonist, weeklies

Well, the company that defines itself as “primarily in the large, urban newspaper business” (CEO Paul Godfrey), has sold the Victoria Times Colonist, a large urban newspaper, to Glacier Media, along with 20 community newspapers. The communities are a bit of an odd sale; they actually are profitable, money machines. Godfrey says he wants to pay down debt; surely one of the best ways to do that is keep your profitable enterprises and use them to pay down debt. And another way is to sell/close your unprofitable enterprises, like the National Post. The Times Colonist is another matter. The paper was added to the sale “following failed attempts to have the paper’s union agree to cost-cutting measures.” Might be tough times ahead for the union, though given it is a monopoly newspaper, the TC should be a money-maker anyway for Glacier. Maybe this is a harbinger of things to come; the Postmedia selling off its profitable bits until it’s left with the National Post, which then has to shut down because there is nobody left to subsidize it. Just hoping…

CEP challenges Postmedia investors

The Communications, Energy and Paperworkers Union has formally challenged Postmedia’s 92 per cent foreign ownership, citing 500 job losses and the potential of closures (though the closure of the National Post would be welcomed in each newsroom of the Postmedia dailies, which support the 13 year money pit.) CEP sent a letter to Heritage Minister James Moore, using the net benefit argument that killed the Potash takeover and threatens the TSX “merger”.  What effect this will have on the feds is dubious; they like the National Post’s neoconservative editorial line, and don’t have a consistent practice when it comes to foreign ownership. Still, nice to see someone standing up for Canadian ownership of a chain that was built and properly managed till the Aspers bought it and ran it into bankruptcy.

Digital Journal/CNW, Feb. 25 2011

Questions for Paul Godfrey

So,  Postmedia owner Paul Godfrey will be addressing the Regina Chamber of Commerce on Monday Dec. 20. I’d go, but I don’t want to waste $50 to hear the same blather about uniting the web and newspapers (it’s so 1999.) Some questions from the investment/business side that I hope the audience raises with him:

1. Why haven’t you fired everyone above the rank of publisher from the old CanWest days, for cause (the cause being they managed the company into bankruptcy)?

2. Why haven’t you shut down the National Post, which has consistently lost money for the past 12 years, and is leeching money from the profitable dailies?

3. Why are you giving your content away free on the net today while subscribers pay to read about it in tomorrow’s newspaper?

4. Why not adapt the New York Times model, and only allow subscribers to have free access to the website; anyone else who wants to visit your sites should pay a fee?

5. And why can’t you settle whatever problem you’re having with Greyhound so stores in Alberta and Saskatchewan can receive the National Post? And how do you expect to have a national newspaper that won’t provide home delivery in six provinces (Atlantic Canada, Manitoba and Saskatchewan) And one more time, why don’t you just shut it down? I haven’t read it in two months since I can’t buy it herer and can honestly say I’m not missing it.

New name, old tricks at Postmedia

So, CanWest cut 797 jobs last year, reducing their workforce to about 5,500. The “new” Postmedia is carrying on the tradition, whacking about 220 jobs this year. Will the last person to leave please put out the lights? How about firing all the executive suite, and all the really big salaries, instead of the lowly paid reporters and ad salesman?

Toronto Star/CP, Sept. 3 2010