Torstar cuts jobs, internship programs; board chair says the company is fighting for survival

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John Honderich won't mince words: Torstar Corp. is fighting for survival.

The chair of Torstar's board, and a member of one of the five families that control the company that owns the Toronto Star, The Hamilton Spectator, and a collection of community newspapers, sat down with The Globe and Mail last week to discuss the state of the news industry.

Mr. Honderich was part of an industry-wide effort to encourage Heritage Minister Mélanie Joly to include funding for journalism in her vision for the future of Canadian cultural policy. Ms. Joly rejected many of the suggested measures, saying the government would not "bail out industry models that are no longer viable."

The struggles precipitated by declining print advertising, and by a booming digital economy that has been dominated largely by Facebook and Google – at the expense of others who would survive on digital advertising – have led to widespread job cuts. On Monday, the company tightened its belt one more notch, cutting 13 jobs in its digital and sales operations, slashing the Toronto Star's travel and freelance budgets and suspending its summer and year-long internship programs. The Star's internships were among the most prestigious in the country for training young journalists.

While cutting costs, Torstar is also attempting to establish its digital future. Other news outlets, including The Globe and Mail, have focused on getting readers to pay for digital subscriptions – recognizing that digital advertising is not enough to maintain the cost of running newsrooms.

The Toronto Star scrapped its online paywall in 2015, betting instead that the development of a tablet edition – later dubbed Star Touch – would attract new readers and more advertising revenue. Last June, Torstar abandoned the project after two years and a $40-million investment, and laid off roughly 30 staff. Now, Mr. Honderich said, every news organization has to find a way to make paywalls work.

How imperative are digital subscriptions to the survival of news organizations?

In terms of newspapers today, survival does not rest with print advertising, nor does it rest with digital advertising. Everyone has to look at subscription revenue, paywalls. We've done careful analysis of examples where paywalls are working. I've often said we are the authors of our own misfortune; we put all that news online for free, thinking that the number of hits on the banner ads would pay for it to survive. We were wrong.

How many publications can digital subscription revenue really support in this market? Is it just a few, or more?

I'd like to think it's more. But it's an open question as to how many traditional newspapers in electronic form can hold a subscription. And added to the dynamic is something that is the greatest competitor to newspapers online and subscription: CBC.ca. It's government subsidized. That provides a competitor for free, which makes the equation that much more complicated. We're seeing in the States, the "Trump bump" for the [Washington] Post and the [New York] Times, that they're getting from covering perhaps the greatest story of the century. What is that value proposition in Canada? That's what we're trying to figure out.

You've suggested that the CBC's government funding should mean it does not compete with other news outlets for digital advertising dollars. Why?

It's about $37-million in digital advertising that they get. If CBC were to stop, where would that advertising go? Eighty per cent would go to Facebook and Google. But there's a more fundamental issue. The government has accused newspapers of being a failed business model. What about the CBC? The only way the CBC survives is with government grants. The only way the film industry in Canada survives is through the grants. Look at the Canadian Periodical Fund: the largest benefactor today is Maclean's magazine. That's the difference between survival and collapse at Maclean's. Does that make them a successful business model or a failed business model? Countries around the globe have argued that, often, culture does not pay for itself and it requires some form of public subsidy. We accept that for TV production for the CBC, for the Canadian film industry, we see it for magazines, we see it for some weekly newspapers. But we don't see it for daily newspapers. Help me understand how that makes sense. One per cent of what the CBC gets from the government – which is $1.1-billion, so 1 per cent is $11-million – that would pay for one half of the Toronto Star newsroom.

Look at other jurisdictions in the world. In the United Kingdom, the Prime Minister herself has called for an investigation into the basis for quality journalism. Australia has launched an inquiry into Facebook and Google, worrying about the cuts at Australian newspapers. You look at the European community. Everyone is worried about this. The silence from Ottawa is deafening.

During the Heritage consultations on the possible changes to Canada's creative policy, you were among a group of people representing the newspaper industry that went to Ottawa to advocate for funding. That group also included Paul Godfrey. Given that some have raised concerns about the management of that company – the fact, for example, that in the Sun acquisition the company promised not to close newsrooms but later did, or the payment of sizable retention bonuses to executives during a time of widespread job cuts – do you think that having him there with you was in any way a liability to your pitch?

At the meeting, everyone spoke their piece. Mr. Godfrey wanted to emphasize the fact that no relief would go to either dividends or executive compensation. I think everyone in the room was aware that had been a concern. He addressed it dead on.

You and others have also suggested that tax rules should be amended so that advertising spending with Canadian publications online should be tax deductible the way it is for print advertising. But given the sheer scale of the money flowing to Facebook and Google, would such a deduction even make a difference in convincing advertisers to spend money on Canadian sites?

I think it would make some difference.

Another proposal was to change the rules around philanthropic donations to open them up to journalism outlets. If we had that, do you think realistically the donations would be robust enough to, say, support a Canadian ProPublica? Or that donors would want to direct money to entities like the Star?

I think there's great potential. It was dismissed, [the government] saw no purpose in doing it. I don't get the reason for the reticence.

It's interesting, work was done for the Shattered Mirror report – if you ask Canadians, "Is quality journalism a precondition for a healthy democracy?" over 80 per cent agree with that statement. However, if you flip it, and say, "Should the government bail out failing newspapers?" 80 per cent are opposed. It matters how you frame it. And the government has been framing the issue in terms of a "failed business model."

What is your view of the impact consolidation has had in Canadian media? How much more consolidation is to come?

As you know, we just announced a consolidation deal. [In November, Torstar and Postmedia Network Canada Corp. swapped 41 newspapers and subsequently shut down most of them.] Publishing newspapers – dailies and weeklies – is becoming more and more challenging. In an effort to lengthen the runway, give us more time, these amalgamation deals have been done. That has meant some of the voices that have been around are no longer there. Unfortunately, we've just got to the point where many of these small papers, people just aren't subscribing and buying any more. In some of these places we now have news deserts. In Ontario, there were often competing media outlets and so now you have one, but there are areas such as Moose Jaw and others, where there's nothing. I can't argue that it's healthy for journalism. It isn't. I'd like to see a world where there are as many voices in as many places as possible. That's just not viable.

What is the health of community papers?

Community papers are on a bit better grounding simply because the insert business is remarkably resilient. People getting their weekly package of flyers is something that's been part of the Canadian buying tradition, and it's held up relatively well. There's been a decline, but it's held up. That has been a bulwark for weekly newspapers. But we also know that retailers are trying to establish a direct digital connection with their customers to bypass the [advertising] go-between. You can see some companies like Loblaw that are well down the road on that. But it's still in progress. There's some runway for the weeklies because of the flyer business.

The New York Times has been extremely aggressive in courting Canadian readers. Is that a concern?

Absolutely. I'm a subscriber to both the Post and the Times. I do so because I'm interested in the greatest story of the century. I don't do it for my Canadian news and information. Yes, we're competing. But ultimately, whether they're going to get the Star or not is a different issue.

Facebook and Google draw roughly 70 per cent of digital ad spending. The Bank of Canada's deputy governor has just said that antitrust and competition laws may have to change to cope with how tech giants are reaping all the benefits of innovation. What are your views?

Here you have giants soaking up such an incredible share of the advertising, who are able to replicate files from our newspapers and put them on there as aggregators and do so for free. Doesn't that raise public policy concerns? It raises financial concerns. These people aren't paying much corporate tax, or sales tax, or doing anything in this country. To me, that raises very legitimate public policy concerns.

The job losses in Canadian media are significant. What's the runway here? How long before we see more jobs lost, more publications closing down?

We have very little time left. More cuts will be coming, guaranteed. I'm not going to speculate on various competitors, but we're very, very close to the end. We've seen what owners can do in terms of maintaining quality journalism. I don't think enough credit or recognition is given to what the Thomson and Desmarais families have done in terms of maintaining The Globe and Mail and La Presse.

Are there benefactors in Canada who would be prepared to buy and maintain a newspaper the way that Jeff Bezos has done with The Washington Post?

Quite frankly, I'd be derelict if I hadn't been trying to find, is there a Jeff Bezos around who wanted to come in. There are certain people who can afford to do that and feel it's important. There aren't many of those around. And Canada's a small place.

This interview has been edited and condensed.