Canadian media woes as major company un-dergoes failed media convergence experiment by Mark Bourrie

Source: Xinhua General News Service

The Canadian media hopes its  fortunes take a turn for the better this year, after 2009's  firestorm that saw the collapse of the country's leading  broadcaster and newspaper publisher.

Canwest, a company that owns a chain of once-lucrative  newspapers in most of Canada's largest cities, several weekly  newspapers, a television net-work, specialty cable TV channels,  magazines and the web portal Canada.com, is being broken up after  a failed experiment with media convergence.

Possible or not, Canwest hopes that its television network and  newspaper chains will survive as single entities, rather than be  broken up and sold as pieces. Already, an investment group has  announced its interest in buying three of Canwest's seven major  Canadian daily newspapers, the National Post, Ottawa Citizen and  Montreal Gazette. 

"We've clearly stated that preference was given to bids for the  consoli-dated publishing group," said John Douglas, vice- president  of public affairs for Canwest. He argues there is "more value in  their collective grouping as op-posed to individual properties.

Ian Morrison, president of Friends of Canadian Broadcasting, a  group that advocates for Canadian control of the country's media,  told Xinhua he be-lieves it is unlikely that anyone will be able to  re-establish the Canwest newspaper and TV chain and restore it to  the market dominance it held a decade ago..

Morrison says he believes the break-up of Canwest is a good  thing for Canada. "Canwest, at one point, had 40 percent of all  newspaper circulation in the English language in Canada. By  comparison, Gannett, in the U.S., had about 10 percent," he said.

The politically-connected Asper family, which built the company  and held the largest block of voting stock, has seen its equity  wiped out.

Before the collapse, Leonard Asper, the president of Canwest,  had been urging investors to have faith in his company. He said,  "given our diversity and strength of our properties, I believe  that Canwest stock is significantly undervalued."

Asper, along with other private and state-owned Canadian  television net-work executives, have launched a campaign to  convince the federal government to impose fees on cable and  satellite companies for carrying signals from local television  networks. So far, the campaign has not been successful.

Recently, however, Prime Minister Stephen Harper said the  federal gov-ernment has increased its advertising spending to prop  up the ailing media sec-tor.

Canwest has been seen by analysts to have been over-leveraged  for years. Canwest started as a western Canadian television  network, expanded to Austra-lia, Turkey and Ireland, then embarked  on a string of deals in Canada. It was spurred on by media  convergence theories that were popular a decade ago, when the AOL  internet service provider bought up Time Warner in the U.S. in  what was the biggest media deal in history.

The AOL-Time Warner deal was a disaster for investors, and  Canwest's ac-quisition of the National Post newspaper and the  former Southam newspaper chain, which had papers in Ottawa,  Montreal, Vancouver, Calgary and other major Canadian cities,  turned out to be toxic for Canwest.

In 2007, in a partnership with the New York-based banking giant  Goldman Sachs, Canwest acquired Alliance-Atlantis, a Canadian film  production and dis-tribution company that owned several lucrative  cable television specialty chan-nels. Within months, Canwest showed  signs of collapsing under approximately 3.8 billion U.S. dollars  worth of debt, much of it high-interest "junk" bonds that had  consumed any profits that the company made in the past five years.

In October, the company's broadcast assets filed for creditor  protec-tion. The company's shares, which were worth about 15 U.S.  dollars at the time of the newspaper deal, were delisted from the  Toronto stock Exchange last fall. At that time, they traded for 10  cents.

At the beginning of this month, an Ontario court placed  Canwest's news-paper assets in bankruptcy protection. Canwest is  looking for a buyer for the newspaper chain, while the bankers  have come up with their plan to sell shares in a company that will  own them. The banks want at least 950 million U.S. dol-lars for the  newspapers.

In an internal memo to employees of the newspaper operations  sent out earlier this month, Dennis Skulsky, president and chief  executive officer of CanWest's publishing division, said there is  no danger the newspapers will have to close for lack of money to  meet payroll and other expenses. As what he called "an additional  safety measure," Canwest secured a 23-million U.S. dollar -debtor-  in-possession loan.

"That's why we can say with confidence we can continue to meet  our obli-gations to suppliers who provide goods and services after  the filing date," Skulsky said.  

© Xinhua News Agency