Turmoil at the top for struggling Toronto Star

National Post ^ | October 17, 2006 | Theresa Tedesco and Barbara Shecter

[Squawk 8888]

In an attempt to bolster its sagging fortunes, the Toronto Star cleaned out its senior management yesterday by firing its two top managers.

Michael Goldbloom, who joined Canada's largest daily newspaper as publisher in 2003, and Giles Gherson, who has been editor-in-chief for two years, were relieved of their duties by Robert Prichard, chief executive of Torstar Corp., amid speculation of a rift between some members of Torstar's board of directors.

The flagship Star had, until yesterday, largely escaped the scalpel that had dug into Torstar's other divisions in recent months in an attempt to cut costs and help boost profits.

In a farewell memo to staff yesterday, Mr. Goldbloom said he and Mr. Gherson had "resigned." However, Mr. Gherson told reporters and editors it was not his decision to leave. "It's a sad day for me."

Although both Messrs. Goldbloom and Gherson graciously thanked Mr. Prichard for his support, sources close to the Star say the two were casualties of a restructuring plan Mr. Prichard and his senior management have sold to Torstar's board of directors to improve the company's balance sheet.

Some sources say Torstar directors, including John Honderich, the Star's former president and publisher, have been agitating for changes.

Apparently, Mr. Honderich, a veteran journalist and chairman of the family trust that controls Torstar, and who left the board before Mr. Prichard arrived in 2001, has been unhappy with the stewardship of the media company.

At the same time, Mr. Prichard, the charismatic and well-connected former president of the University of Toronto, is also under fire from industry analysts and Torstar shareholders for the company's lacklustre performance and a flat share price that has been hovering around $20.

"He has done nothing for the stock," said a Torstar shareholder who asked not to be named. "Prichard's job is to increase the share value. And if you don't increase the share value after a certain time, you're out."

Reached yesterday, Mr. Prichard declined to comment.

Meanwhile, some industry observers are questioning the wisdom of Mr. Prichard's decision -- which was unanimously endorsed by the board -- to invest more than $283-million for a 20% minority stake in Bell Globemedia, which owns the CTV television network, TSN and The Globe and Mail newspaper.

When Bell Globemedia won a bidding war to acquire CHUM Ltd. this summer, owner of the irreverent Citytv channels and a network of radio stations, Torstar agreed to pay nearly $100-million more to maintain its holding in Bell Globemedia.

Analysts and some shareholders have criticized the move, saying it caused Torstar to take on debt without contributing to the company's earnings to help pay down that debt. And while it allows Torstar to participate in the consolidation of the media industry, the newspaper publisher remains a small player, critics say.

"Honderich is puzzled by the Bell Globemedia deal as is the rest of the world," said a source close to Torstar. "Watch out ... the showdown is already in the works."

However, a source close to one of the five families that control Torstar played down a split at the board level over the Bell Globemedia investment, saying "nobody's happy all the time."

Another source close to Torstar denied any rift in the boardroom, saying Mr. Prichard has "the full support and confidence" of the directors and the founding families.

When Torstar released its second-quarter results last August, they fell short of analyst expectations. Operating profit was $40.5-million, down 33.6% from $61-million during the same three-month period in 2005.

Analysts say the company's cash flow growth is being pinched at both its newspaper division and book publisher Harlequin Enterprises. Classified and national newspaper advertising are drifting to other media, and the romance book publishing business suffers from shifting demographics and higher costs of production.

Mr. Prichard conceded it had been a "difficult quarter," and promised to intensify efforts over the remainder of the year to trim costs and increase revenue.

In the past few months, Mr. Prichard has responded to the company's ailing balance sheet by restructuring businesses to slash costs and boost profits. Last month, Torstar merged its weekly publisher Metroland with CityMedia Group, a collection of smaller daily newspapers. Soon after, Torstar downsized operations at Harlequin Enterprises and reduced its staff by 4%.

It is not surprising the newspaper would undergo major changes after declines in revenue contributed to a drop in profit of $7.2-million in the second quarter, which ended June 30. Losses from a failed celebrity weekly magazine and investment spending at the publisher's digital division also contributed to the profit declines at the newspaper division.

According to a release from the Audit Bureau of Circulations in June, the Star's weekday circulation declined 1.5% to 436,447 copies. Its Saturday circulation was flat at 641,445 copies, while Sunday circulation fell 1% to 440,739 copies, despite an increase in the number of discounted copies sold.

Mr. Prichard's decision to fire Messrs. Goldbloom and Gherson were cemented at a recent two-day board retreat and supported by Torstar's directors.

At the time he hired Mr. Goldbloom as publisher in 2003, Mr. Prichard described the former publisher of The Gazette in Montreal as "superbly qualified for the role."

A year after his arrival, Mr. Goldbloom recruited Mr. Gherson, who at the time was editor of The Globe and Mail's business section and a former editor-in-chief of the Edmonton Journal.

According to insiders, Mr. Honderich, who rejoined the board in 2004, was not enthusiastic about the direction Mr. Gherson was taking the Star, with more emphasis on the business and international sections, and what he considered less emphasis on the public-service principles of former publisher Joseph Atkinson.

One shareholder mused that Mr. Honderich may view Torstar's lacklustre financial performance as an opportunity to stage a return to the company in a management role. "John wants to get [back] in there," said the shareholder, who asked not to be named.

Mr. Honderich did not return calls yesterday.

Jagoda Pike, who has worked at Torstar for 20 years, most recently as the Toronto Star's general manager, was named publisher. Fred Kuntz, former publisher of The Record in Kitchener-Waterloo, succeeds Mr. Gherson as editor-in-chief.

[Squawk 8888]

(((.)))

[fanfan]

Canada ping.

Please send me a FReepmail to get on or off this Canada ping list.

[Nextrush]

Hasn't this newspaper been pretty much a pro-Liberal Party rag?

I guess its just another dinousaur newspaper whose owners are dumping their dollars into more modern media as the ship goes down.

[hawkaw]

Yes it is a pro liberal rag but unfortunately it has the largest circulation of any paper in the country.

If you want your story read you either get it published in the Red Star or with CP (Canadian Press).