MANAGEMENT’S DISCUSSION & ANALYSIS DISCUSSION AND ANALYSIS The rate a newspaper can charge for advertising depends on the market position of the newspaper and its  readership base$^{1}$. Total number of readers as well as exclusive readers and readers in key demographics are important factors in establishing market positioning for newspapers. Should long-term readership of newspapers continue to decline, market share will become more important to the individual newspaper Details on the average weekday readership for Torstar’s daily newspapers can be found in Torstar’s 2005 Annual Information F orm. Circulation revenue is a combination of the number  of copies sold and the net selling price per copy . Circulation statistics are important as they support  readership levels and market positioning Newspapers are sold via home delivery, single copy (in stores and street boxes) and in bulk (primarily for promotional  and sampling purposes). Circulation results for Torstar ’s daily newspapers can be found in Torstar’s 2005 Annual Information Form. The Internet competes with printed newspapers for advertising particularly in the employment and other classified categories. Recognizing that there has been a structural shift in advertising, Torstar’s newspapers have all established Internet operations to complement their printed products. In addition, partial ownership of workopolis.com – Canada’s largest employment website – ensures that Torstar maintains its share of the employment advertising market. In 2005, Torstar has established T orstar Digital as a reporting unit within the Newspaper Segment. Torstar Digital newspapers to develop integrated online solutions in the areas of local advertising classifieds, news, information and business processes that will meet the needs of online advertisers, consumers and readers. Newsprint pricing has a significant impact on the results of the Newspaper Segment. Torstar’s newspapers  consume approximately 150,000 tonnes of newsprint each year A $10 change in the price per tonne affects operating profits by $1.5 million. In 2004, Torstar’s newsprint prices were on average 1% higher than in 2003. Current market expectations are that the average newsprint price will increase by 4% in 2005. This could be higher if the U.S. economy strengthens significantly thereby increasing the demand for newsprint. Changes in the Canadian/U.S. dollar exchange rate could also impact pricing in 2005. Labour is the other significant cost for the newspaper segment. Salary and wage cost increases are subject to several collective agreements and have been generally tied to cost of living increases. The Toronto Star’s collective agreements covering approximately 1,300 employees all expired at the end of 2004. Negotiations for a new agreement began in the fourth quarter of 2004 and are continuing. During 2004, CityMedia reached three-year collective agreements with staff at The Record and the Brabant newspapers and five-year agreements at the Fairway newspapers. These agreements, covering approximately 270 employees, provide for a first-year wage increase between 1.1% and 2.5% and a CPI formula with a minimum of 1.5% and a maximum of 3.0% for the later years. Contract negotiations are ongoing with The Hamilton Spectator’s editorial and part-time mailroom employees (approximately 210 employees) whose collective agreement expired on December 31, 2003. Production and mailroom staff at the Hamilton Web printing facility have been on strike since December 5, 2004. Hamilton Web has  continued operations throughout the duration of the strike. CityMedia has two collective agreements covering  24 employees at the Guelph Mercury and one covering 95 advertising employees at The Hamilton Spectator that will expire during 2005. Metroland reached three new collective agreements during 2004, covering 142 employees that provided for an increase of 2.5% in the first year and an increase between 2% and 3% in the later years, based on Ontario cost of living. A collective agreement covering 45 employees at one printing plant expired at the end of 2004 and negotiations began in February 2005. Sing Tao reached a three-year collective agreement with their employees during 2004. The agreement provided for an increase of 2.5% in the first year and an increase between 2% and 3% in  the later years, based on Toronto CPI. Metroland has no collective agreements that will expire during 2005. $^{1}$Readership statistics for Canadian daily newspapers are independently reported by the Newspaper Audience Databank (“NADbank”) twice a year. 25 TORSTAR 2004