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Postmedia plans online paywalls, sale of Toronto headquarters

Some of Postmedia's newspapers are displayed in Ottawa on January 8, 2010.

Adrian Wyld/THE CANADIAN PRESS

The Ottawa Citizen and Vancouver Sun are putting up online paywalls and the National Post will sell its headquarters as Postmedia Network Inc. struggles in a bleak advertising market that it doesn't see improving any time soon.

Print advertising has fallen so steeply in the last several quarters that chief executive officer Paul Godfrey said he has been making personal sales calls to bank executives to help him understand why they are spending their money elsewhere.

"A lot of them are trying out other things and they can at this point track their performances better there than they can in the mass media audience of a newspaper," Mr. Godfrey said Thursday. "There is some experimenting going on, and whether it continues in the long haul we'll have to see."

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Advertisers looking for new and less-expensive ways to reach consumers are a problem for newspaper publishers, which are desperate to replace lost print revenues with online sales. A recent study suggested that for every $7 newspaper publishers are losing in print advertising, they are earning only $1 in digital revenue.

Postmedia Network, which publishes the National Post and big city dailies across the country, lost $11-million in the second quarter due to weakness in both print and digital advertising. The newspaper chain said print advertising revenue decreased 10 per cent, to $122-million, in the second quarter compared with the same period in 2011.

The company's digital revenue – which publishers around the world are counting on to help offset print losses – grew only 0.5 per cent from the same quarter last year, to $20.9-million.

Almost 70 per cent of Postmedia's lost advertising revenue came from national advertisers pulling back their spending, and financial institutions were "by far" the biggest holdouts. Mr. Godfrey said things aren't likely to improve on the print advertising side for at least another six months, as he announced plans to charge for online content at the Ottawa Citizen and Vancouver Sun's websites and to sell the National Post's Toronto headquarters.

He did not provide details about the paywall plans for websites, but last year the company installed metered systems at the Montreal Gazette and Victoria Times Colonist (which it later sold). Those papers allowed readers to access a small number of articles each month for free, and then they were asked to pay a fee.

"It's had some degree of success," said Mr. Godfrey.

The newspaper chain has been working to pay down its debt, which stood at $516-million at the end of February. That makes the National Post's suburban Toronto headquarters an attractive asset, Mr. Godfrey said, adding that he has been handling negotiations with possible buyers himself.

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"It's probably our biggest asset because it's sitting on a very valuable property," he said of the building in Don Mills. "We've had some level of interest, and we'd like to relocate into smaller premises."

Media companies across the country have reported difficulties securing advertising in the last two quarters as companies try to wait out any lingering economic uncertainty. Still, Corus Entertainment chief executive officer John Cassaday was more positive than Mr. Godfrey as he reported Corus's earnings Thursday.

Mr. Cassaday said television companies such as Corus have seen weakness over the last several quarters, but advertisers who have been sitting on the sidelines are slowly venturing back into the market. "I can allay some fears about any fundamental changes in the advertising economy," he said.

Still, some media companies have reduced staff to save money. Toronto-based newspaper Sing Tao Daily laid off 15 Canadian copy editors and translators this week, opting to do the work at its Chinese headquarters rather than keep the workers on staff. Reuters recently shut its Toronto online news desk, moving about 20 jobs to India.

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