Postmedia signage is pictured at the head office in Toronto, on Wednesday, June 28, 2023. Postmedia Network Canada Corp. and Nordstar Capital LP, the company that owns the Toronto Star, say they have terminated discussions about a potential merger, saying they were unable to come to an agreement. THE CANADIAN PRESS/Andrew Lahodynskyj

TORONTO - Canadian media companies Postmedia Network Canada Corp. and Nordstar Capital LP, the company that owns the Toronto Star, have ended discussions about a potential merger, saying they were unable to come to an agreement.

Both companies issued press releases disclosing the change, with Torstar Corp. noting that the added backdrop of regulatory and financial uncertainty contributed to the talks ending.

"These are challenging times for media companies, but we intend to keep working hard to give Canadians the news they need to stay informed, which is essential to our communities and to the functioning of our democracy," said Nordstar owner and Toronto Star publisher Jordan Bitove in a press release.

Postmedia president and CEO Andrew MacLeod said in a statement that the "need for creative solutions and foundational transformation in our industry remains."

The two companies announced in late June that they were discussing a deal that would have seen Postmedia and Metroland Media Group combine forces, while the Toronto Star would be managed by a new company.

They had said the proposed deal would help them scale up in order to respond to the "existential threat" facing the media industry.

But experts sounded the alarm over what such a deal could do for local news coverage and for competition in journalism.

Postmedia and Nordstar's talks came amid a wave of layoffs at media companies, including Postmedia, Bell and the Athletic and Vice.

Each have seen their revenues strained in recent years as newspaper and cable subscribers have dropped and digital giants like Google and Facebook owner Meta have swooped in, swallowing up advertising dollars.

News Media Canada calculated advertising revenue for community newspapers in the country dropped to $411 million in 2020 from $1.21 billion in 2011. Over that span, almost 300 papers either disappeared or merged with other publications.

To combat such ramifications, the federal government recently passed the Online News Act, which will force digital giants to pay media outlets for content they share or repurpose on their platforms when it comes into effect later this year.

Meta and Google responded to the legislation by announcing they will block content from Canadian news publishers from their services before the law comes into force.

Last week, the federal government, province of Quebec and city of Montreal said they were pausing advertising on Meta platforms in response to the company's plans to remove news content. Torstar and Postmedia, as well as media companies Cogeco Inc. and TVA and Videotron owner Quebecor Inc. also said last week they were suspending advertising on Meta's platforms.

The federal government is in the midst of drafting regulations for the Online News Act. On Monday, Ottawa said Heritage Minister Pablo Rodriguez intends to propose regulations that will, among other aims, establish a financial threshold for contributions to "sustainability of the Canadian news marketplace," based on a platform's estimated Canadian revenue.

Other goals for the intended regulations include considering existing agreements between digital platforms and news businesses, clarifying certain details of the Act, and reaffirming that non-monetary offerings to news organizations, such as training or other products, be included in the evaluation of exemption criteria.

Rodriguez has previously said the government is in talks with Google and believes its concerns will be managed by the coming regulations as the bill is implemented, but he suggested the conversation with Meta was different.

A spokesperson for Meta previously said the regulatory process won't address its concerns, with the bill set to come into force in under six months.

This report by The Canadian Press was first published July 10, 2023.

Companies in this story: (TSX:PNC.A)

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News from © The Canadian Press, 2023