Steve Ladurantaye/Globe and Mail media reporter Paul Godfrey/Postmedia Network Inc.
CEO Glow, August 15 2012 http://www.theglobeandmail.com/report-on-business/careers/paul-godfrey-rewriting-adire-news-story/article4487112/ How did you debt issue go? The roadshow went well. We were pleased. It gives us a lot of flexibility in changing the way we do business and gets rid of the covenants. When you do refinancing, you've got to get something out of it. What you don't want to do is eat up all your cash and be afraid you're going to crush up against your covenants. So we're in good shape now. When you plan these things, it takes a couple of months to get the book and find out what interest rate you can get it at. We used Scotia, and it was superb. We got oversubscribed and had to cut people back under ask. We got some existing bondholders rolling their debt, a lot of new ones. What kind of reaction did you get in the U.S.? In New York they knew our story better than Boston, some of the people we pitched to were present debtholders. Boston we had to explain a little more. We explained the difference between Canadian newspapers and American newspapers and talked about how penetration rates for Canadian newspapers are in the mid-70s while in the mid-50s in the U.S. What else did you tell them? Well we have to learn two things. There is more competition from media outlets in the U.S. than there is in Canada, especially in magazines and radio. A lot more. Secondly, I think the unfortunate things U.S. newspapers did when they started cutting costs they cut editorial. People buy newspapers for the editorial product and you have to have compelling content at all times or people will abandon you. That’s what happened at a lot of the American papers – they cheated on content and look where they are now. We’re the largest newspaper chain in English Canada, fact is if we don't supply compelling content people will abandon us. You've got to have content from good journalists and good comment on that news. You don't get that in a lot U.S. newspapers, the regular metropolitan newspapers that have basically cheated. These brands are 125 years old, ex the national post, and they've got brand equity in the communities. That's where it starts and starts. That story impressed them, they looked at our cost reduction plans. We were very upfront. We said "Look, newspapers everywhere are seeing a decline in print ad revenue. It may not come back to where it was, in fact the truth is it's not. We have an increase in digital revenue which we're seeing. How do you balance the fact - look in next three years print revenue will decline more than digital revenue is going to increase. There will be a time when it will cross over, but not in the next three years. You have got to take it out of the cost side to be viable. The way you do it is reduce legacy costs of the old way you do business. Take down the debt. We sold the building up here, announce in next few days where we are going. We got the deal done, we're very happy with what we've done. We'll tell our staff two days from now, it's not a material change. It's nothing we have to publicly report. But everyone is guessing. We'll probably move by December 2013, the building we're in they are doing some renovations. If we can stay even on every other front our brand equity will be the difference. All these websites who report news you know how careful editors have to be about taking someone's blog and believing that's gospel. Your editors almost have to be curators.
How involved are you in the day-to-day operations at head office? Very. All of those decisions get reported up the chain. Wayne oversees and he reports to me. Any outsourcing matter would need my sign off. Negotiations with Pacific Newspaper Group I insist on being hands on, I don't sit at the bargaining table but I have gone out and spoken to the union people but also at townhall meetings. I make sure I know what's going on. It's very important to me that there be no surprises. Do we get involved in the editorial product, no we don't on a day-to-day basis but we are going to a one-touch newsroom in Hamilton. There's national news, international news, business news, travel news, entertainment news, arts and sciences. Stories will have common pages in all our newspapers. What the local guys are going to do is local news and local sports. People buy newspapers for local news. Going forward, their full focus will be local. Three papers, by the end of the month all will be on there. By the end of the month Post will be too. So what happens in Hamilton? These people will do editing, photo layout, editorial layout too. All out of Hamilton. It's been a surprisingly seamless transition. A local news story out of Montreal will get the priority in Montreal, we're not suggesting we will tamper with local news at all. But this is money saving consolidation. So maybe we'll have a national news story we like, maybe it'll be a story about Harper and Flaherty on mortgage rates. If it's a front page story, we'll play in on the front everywhere. But that would be local decision, right? Yes, but if we decide in Hamilton it's going to go on the front ev erywhere then it's going to go on the front everywhere. Wait, there will be that level of control out of Hamilton? Who gets to make that call? Lou Clancy. So you're saying he'll look at the daily news mix and make the calls? He may not make the actual calls, he's got staff. But he's the guy in charge. That's a lot more power in Hamilton than I thought. I thought they were just doing pages. It's a little different. Look, if a publisher or an editor says "You know what this shooting tragedy where someone shot six people is so big here we got to move it up" then fine. They'll have some flexibility. But if Israel bombs Iran, that's a pretty big national story. That cuts out a lot of planning at the local level. Yes, but Wayne Parrish did a good job of bringing all the editors together and explaining the necessity of this and talking about reducing legacy costs. Criticism would be you are taking away local decision making. It's a less local paper. It's a more local paper, those editors at those papers will have more opportunity to provide on the street local news. But the editor in Ottawa would have a better idea of what international news people in Ottawa want to read. You're willing to sacrifice that? Yes. So who still works at a newspaper in a few years from now?
Ultimately newspapers will be content providers - I'll go one further and say compelling content providers - and sales and marketing people. It's not that you want to do this, you have to do this. So you didn't build this debt problem, how do you solve it? There's a lot less debt that when company went into CCAA and it was $1.4-billion. It was $700 two years ago now just under $500. Last five pounds are the hardest to lose. Always. But we still produce a lot of cash and our projections are reasonable going forward. So what do you do these days, again? I'm up at five when the dog wakes me, I'd like to sleep till six. I'm on the Astral board, Cargo Jet board, chairman of RioCan, Mobilicity, OLG. You were synonymous with the Sun. Do you miss it? Working for Doug Creighton. Nothing away from guys now, but he was very special. He treated every one of his employees like family and we all loved him. You don't see that so much anymore. You don't. What other place could you go to if you worked ten years you got your four weeks off and then two extra months of sabbatical leave. Do what you want, the job would be there when you got back. At Christmas, every employee at the Sun two weeks before Christmas Santa Claus would come and you'd get a week of your salary in cash so you'd have money for Christmas. If a reporter did a good job, he'd send him and his wife away from the weekend to New York. Everyone cared about each other. Parties galore. Have you watched the Sun News Network? I've seen it once or twice. I get home so late that I watch the 11 o'clock news or the last two innings of the baseball game. I'm still very dedicated to the Blue Jays. Being involved in bringing the team and knowing the organization. I got home last night at 9:40 I guess and they were just going into extra innings. I'm going tonight, Joe Carter invited me. I don't have a close, close relationship but when he played with the Blue Jays he brought in his daughter who wanted to be a journalist to talk about journalism. He has a golf tournament. Do you own all your buildings? Most. We own printing plant in Vancouver but not the office building. In Edmonton we own both the plant and offices. Calgary same building. Regina and Saskatoon are in buildings we own. In Windsor we just sold the building to the University of Windsor and have taken over an old movie theatre we'll get into in November or December of this year. Ottawa we own. Montreal we're in a rental, we own the plant. You must be thinking about selling the Ottawa building. It's in the middle of a booming area. Oh for sure. But the key thing is, if you have presses it's a little bit more difficult unless you outsource. You've done that in Edmonton. Mm-hmm. That is done. There's a lot of things going on. Ok, fine. What about paywalls?
We're going to expand to Ottawa and the two Vancouver papers next few months. It's slow. We have the meter system, 15 or 20 for free and if you want more then fine. How do you educate people to pay for news? Slowly. But they sure got them to do it with music. Remember how people were pirating? You can't spend millions of dollars on content and just give it away. Otherwise you're not going to stick around. You don't see the competitiveness as much. In 1998 when Ben Johnson had his medal taken away, I got a call from a lawyer who has now passed on Ed. He says to me "How do you call a press conference." He was a very close friend of my late mother. He was sort of a Liberal campaign fundraiser in the area I lived. I said "Well, put a notification out to the papers and tell them the topic and time. And by the way, what's the topic?" And then he tells me he's got Ben Johnson. I says hold on a second, before you do anything. I convinced him by phone - I was on my way to black tie event and was just taking my pants on - so standing in my underwear with a tuxedo shirt on when I said why call a press conference? Is there anyone at the Sun that Ben really likes? Let's arrange an exclusive interview with George Gross that was it will be less frantic. He says that's a good idea. Everyone will follow afterwards. So calls back, I skipped the black tie dinner and he said OK. He'll meet us in Scarborough tomorrow morning, George was in Ottawa at the Ottawa Sun that had just launched so I got him to hop on an airplane to go find Ben Johnson the next morning. The place we met in Scarborough was the Jamaican consul general. She got in the car and led us out to east Gwillingbury township to a farm. It was gorgeous. Sun provided me with a chauffeur driven car in those days. A great perk for many years. Go inside met Ben's sisters and mother. Then Ben comes into the room we spoke. We were there for about four hours. Made small talk for first hour. I said Ben: Did you take steroids. He said no. I says are you telling us the truth? There may be a public investigation into this and you don't want to go and lie under oath. He started to cry, and his mother got very upset with me. At the time, we maintained his story. But the headline in the Sun said "I didn't do it." We took his word. When it turned out that wasn’t true… We just went out there and told everyone that he lied to us first. That was an exclusive, too. It was the most fascinating day. They had the inquiry. Great news story. Everyone was trying to figure out who had the story, Globe and Star were coming to the paper trying to find out. I didn't know this was happening, but we exchanged papers with the Star. But we didn't want anybody to know, so we made decision to run the first 100 copies off without the story in it and send them to the Star. Now someone would blast it out on Twitter. For sure. Our pictures went all around the world. That was probably the most unique moment I dealt with. It became a worldwide story. I remember the look on Carl Lewis' face having been beaten. And it's interesting, the follow up was Ed coming up to me and saying he wanted to set up a race between Carl Lewis and Ben Johnson afterwards. I flew to California to meet Carl Lewis's people and it was a different era then. The cab driver didn't want to take me to the "bad area of town." I kept asking him why, but he never really said. I didn't understand why he was so hesitant, but it was a gay club he was taking me to - today nobody would even think about that. He decided he would wait outside for me to make sure I was OK. Anyway, Carl Lewis wanted no part of it. He wasn't there, but his agent was there. We were willing to pay them each a million dollars, and a million more to the winner. I was only doing it because I chased baseball teams and NFL teams, so they thought I could do some chasing.
Can you produce good papers with fewer people in the building? You have that one page that will appear in all of the papers touched once [instead of being done in each paper]. This is editorial production, not editorial creators. Copy editors would argue they are very much involved in creation. Yeah, they would. It’s not that we want to do this, we have to do this. So the copy editors will all be in Hamilton. You can see how they think they are losing local flavour? The cross streets, landmarks. Local street names under local news - in Calgary the writer is in Calgary. The editor in Hamilton may have no idea about Calgary. Will there be mistakes in the beginning? I'm sure. Any change, even with a new printing press and the old printing press guys who have 30 years experience make mistakes. But we'll only make the mistakes once. Look, is everyone comfortable with this? We're all creatures of habit. Look, I get up in the morning and do the same routine. Would I ever consider brushing my teeth before I shave in the morning? No, I've always done it that way. We all have these things in life. When you change the process, there's resistance. But I must say when we started talking about this months ago and explained the reasons why and about controlling legacy costs when your top line is going that way you need to talk about change. Are you optimistic about the future of your newspapers? Yeah you know what, I think we can see a pathway to make success happen. Will it be easy? No. I joined the newspaper business in 1984 and stood in the ad meeting three months later and reporting "National advertising - up. Retail advertising - up. Classified advertising - up. Circulation - up. Inserts - up. One joker on the board stood up said 'I told you guys, this paper is so good even this guy couldn’t fuck it up.'" That’s how things used to be. Things were a little easier back then. Will papers look the same though? Well if I had a crystal ball… “I think newspapers will evolve more into media companies than anything else. with maybe some sales and marketing people, too. But I think we’ll see more strategic alliances between competitors than we have today on things like national sales. We’ve already crossed the barrier in distributing each other’s papers, and people can get creative when times get tough. These are trying times. But people can get more creative when times are tough I like our position in every market that we are in. What about the Post? Post is making money, in spite of all the problems. It is still in the black. It only got there in 2011, but it's there. It didn't make money for 10 years. When I took over the Post was losing, we made changes and contracting out printing where we could and got rid of a lot of costs the other papers are dealing with now. When I came in I was a board member, I could see the company in trouble and there was discussion around getting rid of your losing assets. Gord Fisher had a plan to reduce costs. We managed to bring down the losses, and advertising is still the lifeblood.