Growth in digital ads for newspapers has not been fast enough to offset the decline in print advertising, according to data released Friday by Statistics Canada.

The federal agency reported that digital advertising sales reached $295.6 million in 2018, a 20.8 per cent increase from 2016. Print advertising sales totalled $1.2 billion, down from $1.6 billion in 2016 and from $2.1 billion in 2014. StatsCan said total advertising sales were $1.5 billion in 2018, down 18.2 per cent from 2016. 

“One of the challenges facing newspapers is that their main competitors have changed. As they endeavour to generate additional revenue from digital advertising, many newspapers find themselves competing not only with other newspapers, but also with other services such as online search engines, social media and programmatic advertising services. These other services are capable of reaching larger audiences and, in some cases, delivering advertising at lower costs,” said the report.

Overall, newspaper publishers’ operating revenue declined to $2.7 billion in 2018, down 12.9 per cent from 2016, said Statistics Canada. Operating expenses, down 10.6 per cent from 2016, did not keep pace with declining revenues, further lowering the industry’s profit margin. 

“The operating profit margin decreased to 3.3 per cent in 2018, down from 5.7 per cent in 2016 and 9.3 per cent in 2014. Declining advertising sales had the largest impact on the industry’s profitability,” it said.

“Salaries, wages, commissions and benefits continued to account for the largest share (34.9 per cent) of operating expenses in 2018. However, this was down from 36.6 per cent in 2016. Over the past several years, many companies in the newspaper industry have reorganized to reduce compensation expenses through employee layoffs and severance packages. Subcontracting accounted for 14.8 per cent of total operating expenses in 2018, as some companies outsourced certain activities that were deemed less profitable or that could be performed efficiently by a third-party provider. Some examples included distribution services, production and printing activities.”

The report said Canadian newspapers earned $52.7 million from online circulation, up 23.1 per cent from 2016. However, circulation sales from print newspapers declined 5.5 per cent over the same period to $595.7 million.

“The newspaper publishing industry has been characterized by a high number of transactions in recent years, including sales of assets, and mergers and acquisitions. Newspapers have also sold or closed printing facilities, partly because of reduced demand for print circulation. The cost of newsprint, an important factor in the industry’s profitability, also increased in 2018,” the report stated.

Mario Toneguzzi is a business reporter in Calgary.

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