Rightsizing helps media giant compete in changing marketplace.
by Marianne Hale
It’s no secret that the news industry is changing. Print is less profitable, and media companies are adapting to keep up with the 24-hour news cycle on digital platforms.
But say you’re a major media company that’s inherited a slew of print facilities (now superfluous with the digital push). How do you radically change the way you deliver news in the face of debt? If you’re one of the largest news publishers in Canada, you change it through a creative real estate strategy.
That’s exactly what Postmedia Network did when the media enterprise purchased the largest network of paid English-language daily newspapers in Canada from newspaper publisher Canwest, which filed for Companies’ Creditors Arrangement Act (CCAA) protection in 2010.
Postmedia owns nine major metro newspapers and one national newspaper (National Post), in addition to community newspapers, magazines and digital properties. The company also owns eight buildings, four of which are currently up for sale.
“Postmedia, like a lot of companies, owns a lot of property,” Postmedia CEO Paul Godfrey says. “But we also have a lot of debt. We’ve got to generate some money to pay off our debt. That’s why real estate is a prime asset to own.”
Postmedia is in the middle of a major restructuring that involves evaluating its real estate portfolio and determining where it makes sense to lease properties rather than own them. Part of this plan is selling off print facilities in industrial locales and outsourcing printing to third parties.
The problem with print, Godfrey explains, is that advertising revenue is in major decline. With digital platforms, papers can ditch newsprint, ink and distribution costs.
“When companies have too much debt, it’s like having too big a mortgage on your house,” Godfrey says. “If suddenly income starts dropping from $70,000 to $45,000, you say, ‘Oh my God, I can’t pay my mortgage now.’”
“We’re in a situation in that market where we just do not need the space or manufacturing facilities because we’ve outsourced,” says Craig Barnard, senior vice president for Reader Sales and Service at Postmedia, who also oversees real estate. “There’s been space that’s unused and underutilized in a lot of our buildings.”
Of the company’s real estate holdings currently up for sale, three are manufacturing plants; the fourth is a newspaper building that will downsize from five to two floors.
“They have made a strategic decision to exit from real estate ownership and redeploy capital back into their core business lines,” says Tim Bristow, senior vice president at Colliers International in Toronto. “For the most part, they had owned most of the print and office facilities they occupied, and have made significant progress at cutting real estate costs and optimizing their workplace environment in all major markets in Canada.”
Postmedia’s Toronto headquarters is the prototype for this real estate restructure. In December, the company moved to 80,000 square feet spread across five leased floors in downtown Toronto after selling its 150,000-square-foot corporate headquarters for $24 million Canadian dollars. The former headquarters had been located in the suburban Don Mills neighbourhood and was approximately 30 percent underused prior to Postmedia’s move.
While debt repayment is one driving force behind this restructuring, there are much sweeter slices of this pie. For one, moving from suburban areas to more metropolitan locales helps Postmedia attract the young, tech-savvy employees who can help Postmedia produce content and products for its four distinct platforms: print, Web, tablet and smartphone.
“The decision to relocate to a more transit-connected urban location will allow Postmedia to become more competitive in attracting Gen Y employees,” says Steve Keyzer, associate vice president at Colliers International in Toronto. “Gen Y employees do not want the cost of commuting to suburban areas in vehicles, and would rather pay more rent to live downtown, which gives them a 24-hour lifestyle, while walking or taking a short commute to work on public transit.”
“Newspapers’ demographics have been changing dramatically. Older people still love the feel of a newspaper, while younger individuals want the news on the electronic device of their choice,” Godfrey says. “The location of our working offices is very important because usually, younger people want to be closer to the action.”
The downtown location is also closer to public transit lines, as well as cultural and sports attractions, he explains.
This real estate strategy has allowed the company to stay fresh in other ways, too, largely by reconfiguring office space to complement the work its employees do.
Joanne Chan with SDI Interiors developed an interior design plan for the Toronto offices. Chan’s firm worked with the Postmedia crew to create a work environment that maximizes performance in the new Toronto space, a hub for 600 Postmedia employees spread across approximately 20 different departments.
“It’s not just about real estate,” Chan says. “It’s also about your culture, about your future, about how you see your business and how you see your business grow. The end result is they want to look like they’re above the trend.”
In the new headquarters, closed-door offices have disappeared for the most part. Instead, each floor subscribes to a form-meets-function model, by which workspaces are designed specifically for the employees who use them.
“A lot of our reporters and columnists don’t come to the office,” Barnard explains. “They file remotely. A lot of our salespeople are out on the streets every day, and they don’t need to be in every day.” The headquarters has several flex workstations, where these employees can come and go as needed. Many senior staff members have private offices, while other staffers have cubicles or private workspaces that encourage collaboration via P-shaped tables, where co-workers can pull up a chair for a meeting.
The National Post lives on the third floor; marketing, research, advertising sales teams on the fourth; digital teams on the fifth; with executive offices on the 12th floor. On the 11th floor are the accounting and IT departments, along with the multifunctional Collaboration Café.
The innovative space—flanked with wall-mounted televisions, communal tables and a mesh curtain, which can be used to separate the space from an adjoining reading lounge—was designed with a number of different uses in mind, ranging from a training and events space and a café where staff can lounge, to a hub for town hall broadcasts, Chan says.
The real estate strategy also reflects the company’s cultural restructuring. For example, while all of Postmedia’s newsrooms focus on local content, there is more content sharing between publications than ever before, Barnard says.
“A national story is a national story, and doesn’t need to necessarily be written 10 times,” Barnard says. “We have more content sharing than we ever had before. We don’t do everything 10 times anymore.”
In the past two years, the company has made a shift to “functional reporting” in which departments no longer report to publishers. Instead, for example, all Reader Sales and Service branches report directly to Barnard, the senior vice president of that business unit.
“The key word is collaboration,” Barnard says. “Working together, delivering content on four different platforms.”
Up next for the Toronto space is a multifunctional public space, which will be located on the main floor of the building. The idea is that this would be a space for Postmedia to engage with the community and readers—a key element in staying competitive in the media business, Barnard says.
“We are with the consumer from 6 in the morning until 8 or 9 at night and longer,” Barnard says. “We have content 24/7, depending on what platform it is. We spend a lot of time doing research on print readers versus Web, smartphone and tablet readers. We’re really now an audience-based company—it’s a fundamental competitive shift.”
This article appears in Colliers International's Summer 2014 edition of Knowledge Leader Magazine.
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