Thank you, Mr. Mayr, for that generous
introduction, and hello everyone.
Seriously, I want you to know how
honoured I am to find myself here today. The list
of corporate leaders who have preceded me over the
years is really quite impressive. It goes to show
that the luncheon presentations here at the Canadian
Club of Montreal are considered to be very prestigious.
I also have the pleasure of speaking
to an audience made up of representatives from Montreal’s
large business community. Even though Transcontinental
has become North-American in scope, our roots are
in Montreal, and we’re very proud of that.
Thank you everyone for being with
us today.
-- -- --
I’m addressing you in an economic
climate that was unforeseen when I accepted the
invitation 14 months ago. At that time, very few
people would have expected us to be in the middle
of a huge recession today.
The impact of this recession on our
financial performance has fuelled the perception
that Transcontinental’s two core activities
– publishing and printing – are in decline.
Some people are even saying that the latest communications
platforms will make printed material obsolete.
As you can see, there’s no
lack of challenges to address here at my first presentation
to this forum.
First, I will start by explaining
the impact of the current recession on Transcontinental.
Second, I will look more specifically at the future
of our industry and the new growth opportunities
it offers. I will then finish with some personal
thoughts on the future of newspapers.
PART A
Revisiting the Recession
It’s hard not to start with
today’s recessionary climate, which affects
all of us – if only to see whether we can
draw some lessons from it.
Recessions are cyclical. This is
the third one in Transcontinental’s history.
The first was in the early 1980s, and the second
was a decade later. In both cases, our business
was growing fast. To give you some idea, from 1985
to 1995, our annual revenue from printing increased
from $83 million to $747 million. That’s 800%!
Even though our stock price was heavily depreciated
at the time, Rémi Marcoux, our founder, held
his course. If he hadn’t, Transcontinental
would not have achieved the kind of scope or potential
it has today.
The first big lesson I take from
that is that you must never lose sight of the corporation’s
long-term development, regardless of negative impacts
in the short term.
-- -- --
That said, I have to admit that this
current recession is the worst of the lot. To cope
with it, we established a rationalization plan and
have been implementing it since then. This plan
includes annual cost reductions of $75 million,
including $50 million in 2009. We have reviewed
our procedures, adjusted our production capacity
to demand, and refocused our operations on our most
profitable and promising assets.
As the chief executive officer, I
had no choice. The decision to eliminate 1,500 jobs
– that’s 10% of our workforce –
is not one that can be taken lightly. For our employees
who were affected, it can’t be said too often
that this recession is tragic. But these measures
are intended to secure Transcontinental’s
future and take into account the best interests
of all our employees.
The recession forces us to make hard
choices.
-- -- --
I’ve learned three other big
lessons in the past year.
First, there’s no substitute
for a prudent balance between profits, costs, debt,
and investments. These are communicating vessels
that need constant adjustment to remain in balance.
Rain or shine. And that’s what we will continue
to do.
As well, I have realized to what
extent the solidarity of our managers and employees
is a unique strength for Transcontinental. Everyone
understands the situation and has pitched in to
deal with it. Adversity often gives rise to the
most innovative ideas. It’s showing me another
aspect of the entrepreneurial spirit we look for
in our managers.
Lastly, businesses in Canada benefit
from an economic environment that is the envy of
many other countries. Our banking system is among
the most stable in the world, and our economic underpinnings
are healthy. As for Transcontinental, we have the
added advantage of being a dominant player in all
of our niches in Canada.
Our goal is to come out of the recession
stronger than ever and to regain our historic rate
of growth.
PART B
Two industries undergoing transformation and still
offering good growth potential
Now we have come to the heart of
my challenge today, and that is to show that our
industry continues to offer development potential
in this era of the Internet, the cell phone, the
BlackBerry, iPod, iPhone, et cetera, et cetera.
Right off the bat, I can tell you
this: the printed word will continue to be a key
element of any communications, sales, and marketing
strategy for a long time to come. But it will be
complementary to the new media. And vice-versa:
the new media are even more effective when combined
with print. The future is both, completing each
other and working towards the same ends. And I would
add: driving each other.
Let’s do a test right now.
How many of you here get your information from the
Internet alone? Only from print newspapers? Exclusively
from radio or TV? Most of us use all of these media,
depending on the time of day and what we’re
looking for: a headline, a news report, straight
information, or an in-depth analysis.
That’s the case for most consumers.
And advertisers are paying attention.
It used to be that advertising budgets were split
among three media: radio, television, and print.
Today, there’s a fourth player: the Internet
and all that revolves around it.
By 2012, it’s expected that
the Internet will absorb about 25% of Canada’s
total advertising pie. Some people see that as a
threat. At Transcontinental, we’d rather take
it as an exciting challenge that’s opening
up new growth opportunities.
And we’re convinced that we’re
in a good position to make the most of these opportunities:
we have customers who already come to us for their
printed product needs, we have the business credibility,
we have the corporate culture, and we have developed
or acquired the necessary expertise in a number
of areas.
That’s our game plan. We are
now defining ourselves as a provider of marketing
solutions on different platforms, and we are doing
so in line with what has been our mission from the
very beginning, which is to help our customers reach
and keep their target consumers.
-- -- --
Our strategy consists of two complementary
parts: to strengthen our core activities and to
build new ones. One and the other.
Strengthening our core
activities
Let’s start
with the first part.
We often hear that print is in decline.
Yet for the past three years, our printing and publishing
sectors have experienced average organic growth
of about three percent a year. So the so-called
products of an earlier era are actually doing quite
well. For example, despite the recession, this year
our flyer printing business will generate about
$500 million, and those sales will be more profitable
thanks to our ongoing investments in the latest
technologies and in making ourselves more efficient.
Furthermore, we hold the dominant
position in Canada in all of our printing and publishing
niches and we are continuing to win market share,
as shown by our recent printing contracts signed
with Rogers Communications and Shoppers Drug Mart-Pharmaprix.
As a publisher, our strategy is focused
on communities: local communities for our newspapers,
and communities of interest for our magazines. Thanks
to our excellent brands and highly relevant content,
we have successfully established a presence on the
Internet over the past several years.
In short, Transcontinental will remain
a solid and reliable printer and a highly creative
publisher, and we will continue to gain a significant
part of our future growth from these areas.
But at the same time, we have undertaken
to expand our service offering to integrate new
communications platforms and new marketing services.
Our financial strength allows us to pursue this
migration, even in the current economic context.
Building the new
This brings us to the second part
of our strategy: “Building the new”.
Last November we created the Marketing
Communications Sector to develop services based
on advertising personalization and the new communications
platforms. Transcontinental is the only company
that has taken this approach to combining database
analysis, personalized digital printing, permission-based
e-mail marketing, e-flyers, custom publishing, and
the creation and management of image banks. This
new sector has annualized revenues of about $400
million.
In our opinion, the big winners in
this fast-changing advertising market will be those
who manage to make the traditional and the new,
print and digital, mass marketing and personalized
marketing work together. As a printer and publisher,
Transcontinental is in a unique position to take
advantage of these business opportunities demanded
by our customers.
Did you know that not only is the
Internet a natural complement for print, but it
can even drive our printing operations?
For instance, in 2008 we printed
millions of personalized photo albums that were
put together entirely online by individual users.
You use photo editing software to enter your own
pictures and text, and with a simple click you send
the whole thing to one of our digital printing plants.
In a few days, you receive your photo album in the
mail.
-- -- --
“Building the new” also
applies to our publishing operations. These days,
it isn’t enough to produce high-quality content,
that content has to reach the target consumers where
they are and when they want it.
We’ve already made a good deal
of progress.
How many companies do you know of
in Canada that own over 120 websites? That reach
an average of more than six million unique visitors
per month? In the beginning, our sites were carbon
copies of our print publications. Now, their content
is very different. What people are looking for online
is to satisfy other human needs, such as sharing,
trading ideas or tips, or the thrill of being publishers
themselves. Web 2.0 makes all that possible.
In 2008, Transcontinental generated
$17 million in revenue from its websites, an increase
of 30% compared to 2007. I hasten to add that our
online operations are turning a profit and still
growing. A number of our magazines have also migrated
to mobile technology.
But that’s just the tip of
the iceberg.
Our magazines are read each month
by more than 18 million readers all over the country,
and 11 million of these are women. Over 50% are
in the 25-to-54 age group, with children under 18.
They form an immense database that can be used by
our advertising customers to establish a personalized
relationship with these consumers. The potential
is enormous.
Of course we will continue to sell
advertising space in our magazines, and this will
continue to generate growth. But we will also offer
advertisers our reader and online user databases.
That’s another opportunity for growth.
I’ll give you an example.
In the old days, for $100,000, we
could print an advertiser several hundred thousand
copies of a flyer for a wide audience. It was mass
marketing. Today, for the same price, we’re
only going to print half as many copies. But with
our databases, we can target the right consumer
profile for that advertiser, and also design an
e-mail marketing campaign to get it all going. That’s
what we call personalized marketing. For the same
$100,000, the advertiser gets a much higher return
on investment, and Transcontinental, through three
services instead of one, gets a better profit margin.
That’s the Transcontinental
difference! An integrated marketing service offering.
PART C
The Future of Newspapers
I don’t want to leave without
sharing my thoughts about the future of print newspapers.
Newspapers account for 20% of Transcontinental’s
business: 10% as a printer and 10% as a publisher.
These days, everyone seems to be talking about the
imminent death of the newspaper. It’s as if
we’re on the verge of getting our information
exclusively from the BlackBerries of the world,
as if all advertising will soon be entirely online.
Once again, the reality is not nearly
so black and white. You have to make a distinction
between the daily newspapers in large urban centres
and free regional newspapers, and between the situation
in Canada and that in the United States.
First, let me say a few words about
regional newspapers.
-- -- --
Transcontinental publishes community
newspapers for small urban areas, neighbourhoods,
and regions, and these generate annual revenues
of $250 million. People are attached to their local
papers, which keep them informed about local issues
and events. For local advertisers, it’s the
most efficient and cost-effective way to make the
community aware of their products and services.
To give you an idea, our newspapers
have about 60,000 advertisers, and they spend an
average of $250 per ad purchase. This is completely
different from the situation in major cities.
Despite this special role, these
newspapers will be under pressure if they don’t
keep up with the times. Their future lies in a print-Internet
duo, with each working to complement the other.
Today, all of our newspapers have their own websites.
But already that isn’t enough
to satisfy the new needs of local advertisers and
our readers. For example, we have seen that small
businesses don’t always have the resources
to set up their own websites, while consumers are
looking for places to share and exchange information
online.
So last November we launched weblocal.ca,
a Canada-wide online search site. We offer local
advertisers a unique online platform that goes well
beyond simply listing their products and services.
And consumers can quickly find the local service
they’re looking for, evaluate it, and then
exchange comments rating their experience. weblocal.ca
is already attracting 1.8 million unique visitors
per month, which is an outstanding start.
Similar initiatives will allow Transcontinental
to generate new revenue and enrich its multiplatform
offering for local advertisers. From a revenue model
where we only sold ad space in our print newspapers,
we have gone to also selling banner ads on our websites
and weblocal.ca subscriptions to advertisers.
-- -- --
But what about the major daily newspapers?
Are they facing major challenges?
You bet they are. Especially in the United States
– but Canada won’t get off scot-free
either. Will these newspapers disappear? That will
depend on their ability to adapt to their new reality.
Not only because of the Internet, but also because
of new consumer habits that are upsetting traditional
business models.
U.S. dailies have lost about 30%
of their revenue in recent years: about half of
that is due to reduced advertising budgets, amplified
by the recession, and the other half is due to classified
ads migrating to the Internet. They are experiencing
an advertiser crunch much more than a reader crunch.
They need to adjust their cost structure to deal
with this new reality, and produce high-quality
content that consumers are willing to pay for.
In addition to facing a significant
drop in revenue with a cost structure from another
era, the major dailies also have to invest their
profits in their Web presence so that their brands
and content keep pace with consumers’ changing
habits.
It’s a difficult and decisive
time for the future of newspapers. The winners will
be those able to reduce their costs and monetize
their online offering. I’m convinced that
the publishers with the best chance of succeeding
are already showing up as the leaders in their markets
based on the quality of their product and their
established credibility. Moreover, publishers that
can focus on their core activity, i.e. the production
of quality content, while delegating associated
tasks to suppliers, will be that much more likely
to renew their growth.
-- -- --
Our model of newspaper printing outsourcing
is made to measure to help publishers reduce their
costs while offering a printed product that is more
in line with the expectations of readers and advertisers.
We also associate ourselves with visionaries offering
high-quality content, a strong Internet presence,
and financial stability. In fact, in my opinion,
these will be the future winners coming out of the
current crisis, and they will see their content
living for a long time to come in print and on the
Web.
CONCLUSION
In closing, I’ll repeat that
Transcontinental is in an excellent position to
profit from the new avenues of growth associated
with the corporation’s role as an intermediary
between businesses and advertisers on one hand,
and consumers on the other.
We are in the best position to round
out our traditional printing and publishing services
with the addition of new marketing services based
on personalization and on the new communications
platforms.
Of course, the recession and the
structural changes within our industry present substantial
challenges on a day-to-day basis. I can assure you
that the people at Transcontinental are doing everything
possible to deal with this in the short term, without
neglecting to seize any growth opportunities that
present themselves to ensure the long-term success
of our business.
Thank you for your attention.
