Postmedia's merger talks with Toronto Star owner a 'Hail Mary pass': expert

One expert says talks between Canada's two largest newspaper chains about a potential merger are akin to a "Hail Mary pass" amid declining readership and advertising revenue. Toronto Star and National Post newspaper boxes are shown in downtown Toronto on Friday, October 29, 1999. THE CANADIAN PRESS/Kevin Frayer

A potential merger between Canada's two largest newspaper chains could mark the next step in the decimation of Canadian news, which has seen dwindling jobs and widening coverage gaps, say those who study the industry.

Postmedia Network Canada Corp. said Tuesday that it's in talks to merge with Nordstar Capital LP, the owner of Metroland Media Group and the Toronto Star.

The two publishers said the proposed deal is a bid to create greater scale so they can respond to the "existential threat" facing the media industry.

Postmedia, which owns publications including the National Post, Vancouver Sun and Calgary Herald, said the proposal would see the Toronto Star maintain editorial independence through the incorporation of a new company that would manage its editorial operations. It said terms of the proposed deal have not been finalized.

But even with such assurances, the talks raise alarm bells for those who say they've heard similar promises before.

"We saw the merger between the old Postmedia Southam newspapers and the Sun chain and it certainly didn't add anything to local coverage. It just resulted in more lost jobs, more amalgamation and less news and that's kind of how I see this going again," said Brad Clark, a journalism professor at Calgary's Mount Royal University.

"I'm deeply concerned that we'll see newsrooms combined, we'll see fewer people in legislative assemblies and House of Commons covering the important news of the day. I think this is quite a blow."

In 2015, Postmedia purchased 175 Sun Media newspapers from Quebecor for $316 million, saying it planned to keep separate newsrooms in markets where it would operate multiple dailies. The following year, it cut 90 jobs as it merged newsrooms in four major cities, where once-rival newspapers began publishing often identical content as one another.

Job losses at the company have continued, with Postmedia laying off 11 per cent of its editorial staff earlier this year, less than a week after employees were told it was grappling with "economic contraction.''

"I don't think anyone is optimistic enough to see that there's a great future here," noted Toronto Sun sports columnist Steve Simmons, who has spent 36 years with the company.

"It's hopefully, 'What is it and where are we heading and how are we getting there?'"

Simmons said it's overwhelming to constantly be grappling with questions about the company's future.

"It's 'Are we publishing tomorrow? Are we being sold? Who owns us? Are people losing their jobs?'"

Dwayne Winseck, a professor at Carleton University's School of Journalism and Communication, said Canada's media landscape has been victim to a combination of bad decision-making, the rise of big tech and economic downturns.

"It's a Hail Mary pass," he said of the discussions of a potential merger.

"To me, what that does is it first legitimates consolidation and then second, it diverts attention from the role that these actors themselves have played in creating the conditions that have ended up in such a poor state."

If there’s one potential winner from the proposed deal, it’s the Toronto Star, said Carleton journalism professor emeritus Christopher Waddell, who also serves as the publisher of Canadian journalism news publication J-Source.

The structure laid out in Tuesday’s release appears to separate the Toronto Star from the merging entity. That could be a boost to the paper as it seeks to gain subscribers in the digital age, said Waddell.

“The Star has a chance to survive. But if you take everything else that’s not the Star, it appears to be trying to preserve the positions of all these other entities … without a clear indication of how they have the financial investment to improve their editorial content,” said Waddell.

“What it may be doing is delaying the inevitable,” he said, adding, “it may be blocking entrepreneurs or with new ideas and new approaches to coming into the marketplaces.”

Prime Minister Justin Trudeau weighed in Wednesday, calling the negotiations a "significant step" and noting the Competition Bureau would likely examine any proposed deal.

"I won't comment on it right now but I will say we need to continue to make sure we are supporting the ability of Canadians to get local news, to get quality journalism, to keep them informed about how our country is doing," Trudeau told reporters.

Keldon Bester, co-founder of the Canadian Anti-Monopoly Project, said it's unlikely the Competition Bureau will stop the companies from combining, just as it allowed for the previous merger of Postmedia and Sun Media to go through.

Bester noted that after Postmedia and Torstar Corp. agreed in 2017 to swap 41 community and daily newspapers, 36 of which were subsequently closed, the bureau determined no intervention was necessary.

“To refer a case for prosecution under the criminal conspiracy provisions of the Competition Act, the Bureau must find clear evidence demonstrating that competitors reached an agreement to fix prices, allocate markets, or lessen or eliminate the supply of a product or service," the watchdog said in 2021 after ending its probe into the deal.

Bester said Canadian law focuses on competition for the advertising market rather than editorial diversity, but the 2017 swap essentially created "Postmedia towns and Torstar towns" where advertisers wouldn't need to compete with one another.

"We really can't count on the bureau, especially when you look at that swap. It really created territories that will make it difficult for the bureau to argue a reduction in competition," he said.

"The bureau is absolutely on the backfoot here and I think the federal government, through either informal or formal action, needs to step in and make it clear to these parties that this is a non-starter."

—With files from Rosa Saba and Gregory Strong in Toronto and Nojoud Al Mallees in Ottawa

This report by The Canadian Press was first published June 28, 2023.