Bill Doskoch: Media, BPS*, Film, Minutiae

Curated knowledge, trenchant insights & witty bon mots

The financial woes of Torstar aren’t getting better

Reporter James Bradshaw wrote a lengthy feature on the woes of Torstar, which owns the Toronto Star. Among the highlights: Torstar lacks a CEO, it has an outside investor circling around and it’s struggling to move from print to pixels.

I’ll excerpt a few points on the underperformance of StarTouch and the failure of the paywall.

From the Globe and Mail (“Torstar at a crossroads“):

As Star Touch made its debut in 2015, a heavily-trafficked hallway off the Star’s fifth-floor newsroom had a wall covered with eight-by-10-inch pages, each featuring biographies for the 60-odd journalists hired to get the tablet product off the ground. The tableau of smiling faces conveyed a sense of optimism and excitement, a “startup feel” that had been lacking in the newsroom, as one Star journalist put it. Less than a year later, the biographies were replaced by sheets bearing a different set of names – this time, it was the union’s seniority list, outlining who was most vulnerable as the company cut 52 jobs, including 26 contracts to work on Star Touch.

The tablet edition’s troubled launch was only the latest in an array of digital experiments Torstar has undertaken, but it produced a familiar result. Most of those ventures existed outside of the newspaper division, as the company searched for the next cash cow. Starting in 2000, when Torstar and The Globe created the job-search site Workopolis (The Globe later sold its stake), Torstar acquired, launched or invested in a number of businesses, such as Olive Media, Insurancehotline.ca, Eye Return Marketing, Wagjag.ca and Shop.ca Network Inc.. For a time, under Mr. Prichard, these investments were carved out under a separate arm, Torstar Digital, almost like a venture-capital shop.

The score card reveals few home runs, and some of the ventures have been outright failures: Shop.ca had backing from prominent investors and ambitions to create a billion-dollar e-commerce marketplace in Canada, but blew through $70-million in investor capital while piling up $72-million in losses, and wound up in bankruptcy court.

“Have we had a lot of successes? The answer is no. But we’ve gone out and we’ve tried,” Mr. Honderich said. “I think you can see there’s a history. We haven’t been sitting back saying, oh my God, the world’s falling down, what are we going to do?” …

By the fall of 2013, Torstar was hungry for a new revenue stream inside its newsrooms, and the Star launched a metered digital paywall with $9.99 monthly subscriptions. Even some of its own executives were skeptical. All major dailies in Toronto would try paywalls, including The Globe and Mail, but none would pull the plug so quickly as the Star.

Torstar reversed course after only 14 months. Paying digital subscribers numbered not much more than 10,000, and the Star had lost more online readers than expected, which was worrisome as the paper pivoted to offer a free, daily tablet edition – Star Touch. “Middle-level newspapers across North America have all discovered that paywall doesn’t work. We all tried it,” Mr. Honderich said. …

But Star Touch, which many expected would be Torstar’s most important digital gamble of all, hasn’t been so lucky. Inside the company, the wisdom of the tablet strategy was vigorously debated: Some worried that smartphones were already running away with the market, as growth in tablet sales was slowing noticeably. Torstar executives had mostly unfettered access to study La Presse+, the successful French-language tablet edition that provided the template for Star Touch, and were impressed. But they understood that Toronto and Montreal are dramatically different news markets.

La Presse axed its print edition from Monday to Friday, cutting ties with the past and driving readers to the tablet. But the Star still prints editions seven days a week, largely because 42 per cent of the company’s revenue still comes from the print product. “While we were encouraged by the success of La Presse, there was a real acknowledgment by John Honderich and the board that this was a risky proposition,” Mr. Cruickshank said. “There was no sense that, ‘hey, we’ve got all the answers, here we go.’”

Ultimately, Torstar’s board put their faith in the tablet. Star Touch arrived to great fanfare in September, 2015, with Mr. Cruickshank proclaiming it was “the biggest change in storytelling in a century,” and a way to reach out to a new, younger audience.

The Star hired dozens of new staff and rolled out an aggressive marketing campaign, spending at least $25-million in the first year and then doling out another $10-million in 2016. But building a daily habit with readers was hard. Six months after the app’s debut, it was being opened only 26,000 times each day, while 55,000 to 60,000 readers were using it each week – far short of internal projections. And while Torstar says it has had modest growth ever since, the total readership hasn’t increased enough to matter.

The low readership is particularly frustrating to Torstar because many advertisers love it. The tablet offers large, rich, sometimes interactive ads that can command a cost per mille – or CPM, a measure of the cost to reach 1,000 readers – of between $50 and $90 for a full tablet page, depending on its placement, according to two sources. In some cases, that’s more lucrative than a full page in print, which typically has a CPM closer to $70. At current levels, that means Torstar earns only a few thousand dollars a screen each day from Star Touch, which isn’t nearly enough to justify the original investment, and the company has retrenched on its plans. “The numbers are just too small to make it a breakaway success at this point,” Mr. Cruickshank said.

Read the whole thing.

Sat, January 21 2017 » Main Page, Media