Postmedia Scales Back Gazette Layoffs
Cuts won't be as deep as announced last month but the newspaper chain continues its long road towards insolvency
If you could look past his complete lack of experience in journalism, Larry Smith was the perfect man to lead the Montreal Gazette through uncertain times.
Smith was a winner.
Not only in his youth, when he took home two Grey Cups as a running back for the Montreal Alouettes. He was that rare former athlete who could work the front office better than the playing field.
Smith was part of the management group that brought the Alouettes back to Montreal after a decade in exile. Following a few seasons at the cavernous Olympic Stadium, Smith moved the team to a smaller, open air venue perched above McGill University's downtown campus. The atmosphere was electric, there was no better place to watch a game in all the Canadian Football league.
Almost overnight, the Als became the hottest ticket in Montreal, eclipsing the lowly Canadiens of the late 90s and the crisis-stricken Expos — who were inching closer to the grave with each passing year. As president of the Alouettes, he built the team that won the Grey Cup in 2002, a time when sports fans in Montreal were desperate for something to cheer about.
So when Smith was tapped to be the Gazette's publisher that same year, he brought with him an air of cool confidence — stalking the hallways of the paper’s Ste-Catherine Street office in a perfectly tailored suit, immaculate hair and a Grey Cup ring to boot.
“That was the beginning of the end for us,” said Sue Montgomery, an award-winning journalist who worked under Smith. “I remember we had a meeting his first day and he kept referring to the newspaper as a product. It was just ‘the product, the product, the product.’
“So I said, ‘Larry, you keep talking about the product what about the paper? What do you think about the paper?’ I'll never forget his answer. He said, ‘Sue, I'm just like everybody else, I'm too busy to read the paper. I look at the front page, I go to the editorial pages and then I go right to sports. But my wife is a crossword nut!’
"At that moment, I knew we were fucked."
Smith did not return The Rover’s interview request.
The tenure of Larry Smith — a newspaper publisher who didn’t have time to read newspapers — lasted all of two years. His hiring was meant to usher in a new era for Quebec’s oldest daily newspaper. The Winnipeg-based Asper family installed him after their media empire, CanWest, bought the Gazette and a bundle of newspapers off Hollinger Inc. in a deal worth $3.2 billion.
But instead of the start of something great, Smith’s hiring was a footnote in one of the biggest business flops in Canadian history. A decade after buying Hollinger at the peak of its value, CanWest was circling the drain with $500 million in debt weighing it down and creditors ready to pick apart its carcass when the bankruptcy hearings would inevitably begin.
Postmedia Network swooped in and bought the chain off CanWest after a decade of losses and layoffs, picking up where the Asper family left off. More losses, more layoffs, more executives with little to no experience in the trenches of a newsroom, who froze reporters wages indefinitely as they lined their pockets with seven-figure bonuses.
As I write these words, hundreds of workers across Postmedia’s 120 plus newspapers have either been laid off or are in the process of applying for severance. In Montreal, where the paper was expected to lose some 10 to 12 workers, public pressure has managed to scale back cuts to five full time employees and a part-timer.
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Photographer Allen McInnis, reporters Katherine Wilton, Pat Hickey and John Meagher as well as veteran managers Edie Austin and Dave Peters will all be without a job in the coming weeks. I worked with all of these people for nearly 10 years and can’t begin to describe their contributions to journalism in Quebec. But to Postmedia, they were all just liabilities on a sinking ship.
Shortly after making the cuts official Friday, Postmedia announced the launch of an advisory committee to “save jobs” at the Gazette. The committee is made up of local business leaders and politicians, including former Canadian Senator Joan Frasier, Andrew Molson and Jonathan Goldbloom. In theory, they’ll help build bridges between advertisers and a newspaper that could sorely use them.
In practice, their job is to help Postmedia and its American shareholders stave off bankruptcy.
“I guess we were spared a worse fate but for how long?” said one Gazette staffer, who wished to remain anonymous. “Maybe we won a moral victory but, long term, it’s hard to see us not becoming some small version of the Huffington Post. Opinion, news curation and some local journalism. It’s sad.”
They have a point.
Under its current ownership structure, the Gazette — as Montgomery so eloquently put it — is fucked.
Once among the most-read papers in Canada, the Gazette’s print circulation is down to 18,000 and, despite substantial growth in its digital product, the paper’s revenue is cratering. It’s the same story across Postmedia Network, where newsrooms are being gutted and assets sold off to keep the creditors at bay.
“Postmedia is in a deep, deep hole. They’re posting losses year after year, they’re paying $23 million a year just in interest on their debt. It’s not good,” said Lawrence Kryzanowski, a professor at the John Molson School of Business.
Kryzanowski, who reviewed the media empire’s latest quarterly reports and its last annual filings, says the company is gradually being swallowed by Chatham Asset Management — a New Jersey-based hedge fund that owns two thirds of Postmedia’s shares. Every time Postmedia gets an extension on repaying its $260 million debt, Chatham gets a larger share of Canada’s largest newspaper chain.
To his point, Postmedia’s last quarterly report shows assets totalling $218 million and liabilities of $434 million. No amount of cost-cutting can keep up with the combination of plummeting revenue, millions in unpaid severance and a quarter billion in debt at interest rates that float between 8 and 10 per cent.
But what about the Montreal Gazette being bought off Postmedia by a local ownership group?
After the network announced last month that it would be laying off 25 per cent of the Gazette’s remaining 40 employees, Montreal investor Mitch Garber made a series of overtures to Postmedia executives, inquiring about buying the paper. His offer was ignored. He made the details of his interactions with Postmedia CEO Andrew MacLeod public in an interview with The Rover last week.
The Rover has learned that Garber was subsequently approached by Shopify founder Harley Finkelstein to inquire about a partnership bid to purchase the embattled newspaper. As a kid growing up in Montreal, Finkelstein had a paper route delivering the Gazette and his experience in digital sales would dovetail nicely with the newspaper’s needs. Shares in Shopify, an e-commerce giant headquartered in Ottawa, trade for $55 apiece on the Toronto Stock Exchange. Postmedia’s share price was $1.61 at end of trading Thursday.
Privately, Garber will admit that his chances of buying the paper are slim. Sources inside Postmedia say there is an openness, on the part of its board of directors, to sell off the newspapers but not before layoffs come into effect.
Kryzanowski says that, moving forward, Postmedia’s only chance at survival may be more government bailouts. There is no small irony here in the fact that a newspaper chain whose parent company champions free market capitalism and small government has been kept afloat by at least $35 million in federal subsidies and tax credits since the beginning of the pandemic.
“I think the political cost of Postmedia going under is too high for the Liberals,” said Kryzanowski.
The conservative newspaper chain — which posted $74 million in losses last year — is by far the largest beneficiary of the Liberal government’s media bailout money. Should Bill C-18 make it into law this year, Postmedia will receive millions more even as they continue to layoff workers and freeze salaries during an inflation crisis. The bill is meant to tax Facebook and Google for profiting off local journalism and redistribute the money to journalists.
In practice, there’s nothing preventing Postmedia from using the money on debt repayments and executive bonuses.
“Essentially what happens is money goes into a pot and everything comes out of that pot,” Kryzanowski said. “It makes for good public relations but in reality its impossible for (the Liberals) to control how Postmedia spends the money.”
If its track record is any indication, Postmedia’s board of directors is on track to reward its board of directors with fat bonuses despite crying poor on Parliament Hill. In 2021, company CEO MacLeod was awarded $900,000 for “extraordinary financial success” despite posting millions in losses that year. MacLeod has raked in $5.5 million in compensation since the beginning of the pandemic.
While it may be ethically dubious to report losses to the Canada Revenue Agency while getting rich off that same government, Kryzanowski says there’s nothing illegal about the practice. The same applies to the Postmedia executives who received retention bonuses in 2017 but left months after cashing their cheques. That year, five executives were paid a total of $2.275 million as an incentive to stay with the company. Three of them left the company just a few months after cashing in.
That same year, Postmedia cut 54 jobs across the chain.
“I would imagine the contracts outlining those bonuses weren’t very good,” Kryzanowski said. “It certainly doesn’t look good and you can question the ethics of it but it’s legal.”
This brings me back to Larry Smith.
Though his short tenure at the paper was unremarkable, employees recall Smith’s time as the beginning of a corporate culture that became increasingly detached from the mission of producing quality journalism. Asked to point to any of Smith’s major contributions to the office, workers will tell you about his insistence that no one leave newspapers piled on their desks or photos of their family pinned to their cubicle walls.
After leaving the Gazette, Smith returned to the Alouettes front office between 2004 and 2010, winning two more Grey Cups as president of the club. He was appointed to the Senate by Stephen Harper in 2010 before running as a Conservative candidate in Montreal’s Lac-St-Louis riding the following year. Asked why he would risk his Senate seat to run for office, Smith declared that his $135,000 a year senator salary represented a “dramatic, catastrophic” pay cut.
Smith placed third in the election and returned to the Senate, where he remains to this day.
There are little if any consequences for the people perched atop the failing news empire’s corporate structure. Just as workers bore the brunt of CanWest’s failures, they continue to suffer under MacLeod’s leadership. The more things change…
“We never really recovered from those early CanWest years,” said Montgomery, who served as mayor of Montreal’s Côte-des-Neiges-Notre-Dame-de-Grace borough after leaving the Gazette. “And you look at what they’ve done to the paper and you have to wonder what the end game is. It’s going to get a lot uglier.”
Larry Smith had zero understanding of newspapers in general or The Gazette in particular. He made the rounds on the business lunch circuit while publisher and after being publisher. His standard speech was about how the reporters were not bilingual (?!!!), did not speak to francophone sources (?!!!!) and hadn't updated their Rolodexes (!?) in 20 years. He was there to change that.
Also, he mused about instituting a dress code because he noticed many female reporters wore pants, not skirts and didn't shave their legs.
Spent more time getting his car detailed every week than he spent reading the paper.
What a moron.
Time to let Postmedia go the way of the dodo. Something better will come out of its demise.