Newspaper War Hurts Globe

Newspaper War Hurts Globe

PHILLIP CRAWLEY came to Canada in 1998 with a simple mission: kill the upstart National Post. As publisher of the GLOBE AND MAIL, he was heralded as a battle-hardened veteran of newspaper wars in his native Britain and was given the support and considerable resources of the Globe's owner and Canada's richest man, Ken THOMSON, to repulse the challenge of Conrad BLACK's cheeky and ambitious new daily. He embraced that task with the determination of a terrier.

Six years later, the National Post is still alive. It is battered and weakened. It has amassed well over $200 million in operating losses since inception. Its circulation has fallen so far behind the Globe's that overtaking its rival now seems unfathomable. But, like the Black Knight in Monty Python and the Holy Grail who insists on fighting even after all his limbs have been lopped off, the Post struggles on - and the Globe continues to suffer because of it.

Most media observers are quick to say the Globe has won the newspaper war, but Crawley knows better. After years dedicated to driving the Post out of business, he now suspects the mission he accepted back in 1998 might be impossible. That leaves him facing the prospect of failure wrapped in the superficial trappings of victory.

"I think with any newspaper with a national platform, there's usually somebody else who will come along and want to have that platform," Crawley said last week in his Toronto office. "The Aspers bought it from Conrad Black even though it's losing money. And if the Aspers ever got to the point that they wanted to sell it, I would not be at all surprised if someone else wanted to take it off their hands. I don't necessarily expect it to die."

Coming from anyone else, this would seem an unremarkable assessment. But from Crawley, it is an astonishing admission. Ever since the Post first hit the streets in 1998, he has steadfastly maintained the same combative footing, always speaking about its inevitable demise. Now he finds himself trying to restore the health of the Globe's business, having grudgingly joined a growing group of industry observers who have given up waiting for the Post's surrender.

William Thorsell was editor-in-chief of the Globe for 10 years before he was eased out the door by Crawley back in 1999. He, too, believes the Post will remain, in one form or another, a fixture in Canada's media business. "I liken it to a sports franchise," says Thorsell, who is now head of Royal Ontario Museum in Toronto. "Why do people buy sports franchises when everybody knows that most lose money? There are other reasons to want to own one, and there's always lots of interest when one comes up for sale."

If Crawley and Thorsell are right and the Post is here for good, it not only has deep significance for Crawley's legacy as publisher - it has enormous implications for the Globe's business, and for the sector as a whole. Simply put, the Post has hobbled the newspaper industry's profitability since its debut, and continues to do so. And no one has been harder hit than the Globe.

When the Post came on the scene, its managers were determined to build its readership as quickly as possible. Tens of thousands of free or deeply discounted copies were distributed every day. Conventional ad rates were slashed to win the business of loyal Globe advertisers. Top journalists were recruited - many of them from the Globe - with generous salaries and perks. And every step of the way, Crawley responded in kind. The result: a mutually destructive battle.

Looking back, much of it was "lunacy," Crawley admits. "Their aim was to overtake us, and we made it our business not to be overtaken," he explains. "The rational business case would've been just to preserve the readership you really want. But when someone tries to overtake you, you have to show some fighting spirit."

Not only was the Globe investing enormous amounts of money in the battle, it was also changing its approach to news in hopes of matching the Post's irreverent energy. Suddenly, the Good Grey Globe featured more colour, better photographs and more sports coverage. In an effort to lure a younger audience, it hired lifestyle columnists such as twentysomething Leah McLaren to expound on the merits of Brazilian bikini waxes. In other words, the Globe was trying to find its sense of fun. It didn't always work, but at least Crawley instilled a competitive grit the paper had long been missing.

Given the enormous costs of the war to both sides, perhaps it shouldn't have come as a huge surprise when Conrad Black bailed after three years, selling the paper to the Asper family's CanWest Global Communications in 2001. Then, mere weeks after taking over, CanWest handed the Globe its most pivotal victory - slashing several sections and more than 100 jobs from the Post in hopes of cutting financial losses. Its readership plunged, and it has never recovered.

With hindsight, however, it's clear Crawley's winning circulation campaign came at a grievous cost. In the mid-1990s, just before the Post's debut, the daily had a profit margin of 15 per cent on annual revenues of approximately $250 million, meaning roughly $37 million in profits, according to Thorsell. But in the heat of competition, the Globe's bottom line withered away. Crawley refuses to provide detailed financial information, saying only that the Globe is a "profitable business" today, and that financial results have improved in each of the past three years. But that declaration isn't as definitive as it sounds. He will not explain how the Globe defines profit, and won't say how much money the paper is supposedly making.

Outsiders are skeptical. Three Toronto financial analysts, all of whom spoke on the condition of anonymity, said the business is not as healthy as Crawley claims. Each agreed that the Globe is either making a small amount of money - perhaps $5 million a year - or is losing about that much. Essentially, the paper appears to be bumping along near the break-even mark.

More unsettling still is the notion that the entire industry's profitability may be permanently impaired by the scorched-earth battle between the two national dailies. The war has changed the economics of the business, inflating what printers charge, what top journalists command, what advertisers demand and what the public is willing to pay for the product. "As long as the Post is in there, there is going to be a huge cost to the whole industry," Thorsell says.

The Globe's corporate masters at BCE Inc. appear weary of the battle. For the past three years, the paper has been part of Bell Globemedia, majority-owned by BCE with the Thomson family retaining a minority stake. Since new CEO Michael Sabia took over in 2002, it's been an open secret that BCE has been looking to sell Globemedia, but the Thomson family isn't willing to let go. As a result, BCE is stuck with a business it doesn't want. "My understanding is a sale is off the table for now," one analyst says.

That leaves Crawley looking for ways to eke out what profits he can in a media landscape that is likely to remain as crowded and cutthroat as ever. Recent circulation numbers show a slight decline in the Globe's readership, largely due to the elimination of cut-rate subscriptions and giveaways. Crawley has fought to keep spending under control, despite a costly campaign to hire away key journalists from the Post, including Christie Blatchford, and top editors like Mark Stevenson and David Thomas. But that has meant belt-tightening in the newsroom and fewer freelance stories. The Globe is also offering voluntary buyouts to trim its staff, and management recently began reducing the newspaper's page count to save money, such as eliminating stock tables.

Can cost trimming and discipline bring back the days of 15-per-cent profit margins? Not as long as the advertising market remains in a funk and the Post is around trying to pull away what business there is. And that only underscores the importance of Crawley's original, as-yet-unfulfilled mandate.

This has been a tough year for Phillip Crawley. His wife died in July after a long battle with cancer. And though he is clearly showing the fatigue of his personal and professional battles, he isn't giving up. At 60, he looks fit and trim, and says he has no plans to retire any time soon. The man who first took on the Post six years ago seems more subdued these days, but he still likes to lob the odd dart at his crosstown rival. "On any logical business grounds, if you look at their losses, I think it's pretty clear who lost the war," Crawley says.

What's less clear is who won it.

Maclean's November 1, 2004