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Let the big publishers default on their debts says former newspaper boss
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Owners should follow Northcliffe model and convert more dailies to weeklies
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Ditch ‘fancy website names’ and use valued newspaper brands online
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DMGT needs to decide whether it is “in or out” of regional newspapers
Former regional editor Neil Fowler has outlined a radical survival plan for the local press industry while admitting it ‘failed to look ahead’ during the pre-internet boom years.
Delivering the 2011 Guardian Lecture at Nuffield College, Oxford, the former boss of four regional dailies set out a series of measures designed to stop the beleaguered industry from ‘falling over the precipice.’
They include allowing Johnston Press, Trinity Mirror and Newsquest parent company Gannett to have “an orderly default on their debts” to prevent further “long-term damage” to their businesses.
And he called for more titles to be returned to local ownership, suggesting his former employer DMGT could lead the way if it decides it wants “out” of regional newspapers.
In a hard-hitting address from which few local press stakeholders emerged unscathed, Neil was highly critical both of the industry of which he was a part and the government’s attempts to address the crisis now facing it.
He said its attempts to change ownership regulations to make it easier for groups to buy and sell titles had “failed at the first hurdle” with the collapse of the KM Group’s bid to buy Northcliffe’s Kent Regional News and Media titles.
He was also dismissive of Culture Secretary Jeremy Hunt’s advocacy of local TV as the solution to the industry’s problems, saying that he had not met a single senior executive who believed it would help them.
And he accused politicians of preferring to “pontificate about Rupert Murdoch” and phone-hacking than address the “real issue” facing journalism – funding the provision of local news.
But Neil was also candid about the industry’s own failure to look ahead during what he called “the golden years of high profits” before the internet.
And he was scathing about its forays into online publishing, saying: “If I want to read the Leicester Mercury online I have to go to the thisisleicestershire.co.uk website and then struggle to be sure that it actually is the same brand that has been established for well over 125 years.”
During a 30-year career in the UK regional press, Neil successively edited the Lincolnshire Echo, Derby Telegraph, The Journal, Newcastle, and The Western Mail. He later edited the consumer magazine Which? before winning the Guardian research fellowship two years ago.
His speech was entitled ‘Have They Got News for You? The rise, the fall and the future of regional and local newspapers in the United Kingdom.’ Here are some extracts.
On phone-hacking:
“The Milly Dowler affair was a new low in journalism in this country and one that horrified all those with links to any part of the news industry – but all this act of criminality has done is to divert time, money and, most importantly, policy thinking away from the real issue facing journalism in this country – and this is the current and future funding of the provision of general news. And that is an issue that is magnified in the regional daily news sector, one of the principal areas of my research.
“Of course the ethics of how we work are fundamental in any open society like ours, and is a vitally important issue, but if there isn’t a news industry to be ethical about, we are somewhat missing the point.
“The political hierarchy in this country find it more fun to pontificate about Rupert Murdoch and his businesses; and as an industry the media has always found it more interesting to discuss the Manchester Guardian rather than the Winsford and Middlewich Guardian.
“I’ve lost count of the number of different judicial and parliamentary inquiries that are taking place in to phone hacking and its first cousins of privacy and injunctions, but who is looking at the real issue – not journalism itself, but the business of journalism? Precious few, I’m sorry to say. ”
On the KM Group-Northcliffe deal:
“The current coalition government has said it recognises the difficulties the regional and local press is facing. It has said that it intends to change ownership regulations to make it easier for groups to buy, sell, and swap titles to enable some greater geographical grouping – well, it has failed at the first attempt with what should have been a logical, easy and straightforward decision.
“The Kent Messenger is not a business that has milked huge profits over the years. Arguably if it had been more ruthless and driven for higher margins in the 1989 to 2007 period, its path through the last four years would have been easier. As its profit margins didn’t have so far to fall, once the pincers of structural and economic change came it had immediate problems.
“This deal would have been good for Kent, good for the industry and a sign that the government actually understood what the position of the sector is.
“Consolidation and title swapping should be made easier, especially geographically. Plurality is a red herring with the competition for both advertising and comment created by the internet and should not used to hold up further mergers. These changes will not necessarily produce vast savings – but will help.”
On the ‘mistakes’ of the regional press industry:
“The regional and local newspaper sector did not research the future in the way that almost every other sector of industry does as a matter of course. During the golden years of high profits between 1989 and 2005 it could have looked ahead but failed to do so. It did not research its customer base effectively. It looked at how they interacted with the newspaper products themselves but did not look at how their lifestyles were changing.
“The groups failed to experiment as the changing market place became apparent. Having 13 or 14 daily centres meant that different business models could have been tried. They weren’t. The sole attempt to be truly radical was by the Manchester Evening News in the mid 2000s when it launched its part-paid/part-free distribution system. Few other trials of any other radical note ever took place.
“Giving all a newspaper’s output away for free on the web has been a disaster. The message that the internet would be the new rivers of gold was always false. Dreaming up new brands for newspaper websites has also been and continues to be, with a few exceptions, a disaster too. I can buy a Mars bar in a variety of forms, I can buy Fairy detergent in different styles – but if want to read the Leicester Mercury online I have to go to the thisisleicestershire.co.uk website and then struggle to be sure that it actually is the same brand that has been established for well over 125 years.
“An end to boom and bust was not just a parliamentary cry. Senior executives did not see the damage that the internet would bring. They did not see that its arrival would merely conclude what had been happening for decades. ”
On what the industry did correctly:
“The industry has been right to cut costs as much as possible. The mistakes of high operating margins was not in making them, it was not using some of them for genuine research and development. Press sharing should have taken place years ago and back office centralisation is a necessity that every business of whatever sector seeks to achieve.
“No-one I have spoken on all sides of the debate has been able to say what could have been done differently to prevent the advertising model changing so radically with the internet. It may be that local newspapers are a victim of a vicious combination of a changed socio-economic environment and advanced technology. Even the most far-sighted of managements may not have proved to be up to the challenge.
“There was an attempt by the industry to seek unity of purpose when it developed the Fish4 brand for classified advertising – but no agreement could be reached and that it is why it struggled until it came under one owner in Trinity Mirror. But to have succeeded it would have had to have done something so counter-intuitive that it would have been almost impossible to sell to its shareholders and to maintain credibility – and that would have been to have included jobs advertising at knock-down prices – and so losing vast amounts of revenue before the power of the internet really became apparent. They would have had to invent Monster.com or even eBay before they’d been invented themselves.
“Small can be beautiful. Sir Ray Tindle has proved that success can come about with careful husbandry and without acquiring huge debt. His papers may be small – but they have retained their markets and look after them. He also has a paywall on his websites. Some news is offered – but you pay if you want to read the product in full.”
On what the industry should do now:
“The industry should continue the bold moves instigated by Northcliffe in turning some of its daily titles to weekly production. In the last few months it has converted four of its daily titles to weeklies – on the back of a successful change to the Bath Chronicle four years ago. These are radical attempts to find solutions for the long-term and should be encouraged.
“Moves should be made to help the three PLCs – Johnston Press and Trinity Mirror in this country – and Gannett in the US – to have, in the words of the moment, an orderly default on their debts. They are all stuck in a no-man’s land of inertia. Their shares are all very low – the individual parts of their companies are clearly more than the present sums – Johnston has a market capitilisation of around £30m and Trinity Mirror just over £100m – but their debts are holding them down. They are having to pull as much cash as possible out of their businesses to service those debts – which is in turn causing those businesses long-term damage.
“They have futures as news business brokers, providing print, back office and technology services to the industry – but I believe a way of returning titles to local ownership is required. The case must be made for the return of the locally owned news business, supported by local enterprises, so that local engagement is maximised. It is good that towns and cities have their own newspapers.
“And in the case of DMGT it must decide whether it is in or out. Its Northcliffe division has made handsome profits for it for 90 years and propped up its Daily Mail for decades. To be fair Northcliffe is now highly innovative in its approach to the market – but for DMGT it barely merits a mention in the annual report. DMGT could lead the way and find a home for these titles amongst local businesses.
“The industry still has time to experiment, to try new models and be brave. There remains a demand for local and regional news and no one else can provide it with the same level of expertise and independence than the existing news businesses. It should work together more to share risk and results – what will work for one may well work for another.
“Start charging for some online content – and hold your nerve. Ditch fancy website names and use your brands – their value is immense. And it may be the time to restrict mass free distribution of titles. Competition law does not allow rival titles to co-operate but with the cost of newsprint the move towards pick-up must be accelerated as well as the move back to some form of paywall.”
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Hardly anybody in the industry has had the foresight or creativity to react the changing world around them. Spot on. Now good luck putting all that into practice. I hear the Carlisle job is still available…
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I’d have to correct Neil on one thing, if you want to read the Leicester Mercury online you can also go to
http://www.leicestermercury.co.uk/
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What a wonderful academic world Neil lives in. He tells us what we already know and doesn’t really have any answers to the fundamental question: how can we get more people to buy (and read) more newspapers and how do we get advertisers to spend their hard gotten cash with us in the eye of an economic storm and a structural shift that touches everyone? No-one in the world has resolved either of these two issues and reverting newspapers back to local ownership will achieve nothing other than help some local multi millionaire lose money in a very short space of time.
The problem is the business model for newspapers is bust and it needs to change …. and fast before one of the major titles can no longer be sustained – which is getting nearer by the day.
Oh and by the way…. Neil was once one of the Senior Executives who ‘failed to see the damage the internet would bring’.
You stay in the world of academia Neil: its the best place for you!
How can inviting companies to default on their debts and asking bankers to take a bath on these loans shore up confidence in the sector?
Whatever the future holds, the owners of local and regional news businesses – whether new or established – will require access to capital and that comes from banks. They will only get the money they need to invest in the sector if the financiers are confident they will get their cash back.
On the other hand, the banks need to remember that business is for the long term. I can see no future in banks continuing to charge companies like Johnston Press penal rates of interest simply because they can in a sclerotic loans market. Johnston Press is paying roughly twice the market rate of interest. So, while to its credit Johnston Press has never missed an interest repayment, it is no surprise the business is being drained of free cash and finds itself forced on to a hamster wheel of constant cost cutting.
Surely the sensible course of action here is for companies to honour their debts but, at the same time, banks to put aside the mentality that sees them chase the quick short term buck and instead charge sustainable rates of interest that allow the industry plan for the long term.
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As much as I agree with Neil’s comments, I wonder if he would have criticised the big publishers in this way while still employed by them. Those of us that did were thrown on the scrapheap pretty quickly.
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Lots of criticism of ‘newspaper executives’ here – but surely Neil is as much to blame as anyone – editor at a time when the internet first emerged?
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As someone who did what Neil advocates – ie ultra local newspaper ownership – I would advise everyone to stay well well well clear.
Sounds great in theory but comes down to commercial prowess pure and simple.
When you are small you have a cost base which is prohibitive – basic economies of scale.
You can tell he has never owned a newspaper. Editing is the easy bit
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Big talk from a Dinosaur who helped bring all this mess about. That doesn’t qualify his rant for me.
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Disappointingly snide, unhelpful comments so far. No one offering a solution. Neil has contributed some good ideas. To his I would add: Value journalism. In the age of everyone saying what they want without regard to balance/defamation/contempt etc, and people getting buried in information, it is of supreme value to have trained journalists giving fair, accurate, credible synopses of important issues and helping consumers decide what is important.
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Mike when you say Value Journalism don’t you really mean in the sense of Tesco Value – -ie cheap?
Because in my experience that what’s happening on most provincial dailies/weeklies now.
And of course most of the comments here are snide and helpful. Most of us
a.) no longer have a journalism job
b.) are hanging on by the skin of out teeth wandering if the letter will land on our desk yet with the magic word
or
c.) have taken a hefty pay cut to stay in a job that may not be around anyway in 12 months time
and have little time for someone telling us what’s wrong and what should have been done with the industry when we already know.
A true case of No Sh*t Sherlock
I mean what do you expect from a bitter and twisted workforce who have seen successive waves of management (in my case Northcliffe) balls it up every five years as a new maangement team comes and goes.
Rant mode off
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The reactions above are probably what I expected, so no real surprise.
But what I will say is that, actually, when editing and running newspapers I always argued that we should not give everything away, fearing what would happen – sadly it was an argument that I was not to win.
And yes I was there when this mess was in its infancy but, from everyone I have spoken to over the last year and all I have read on sites such as this, I have not come across anyone who has any idea that could have prevented the advertising model changing in the structural way in which it has. That is the fundamental problem to all of this – and nothing else.
The industry has paid the price for its decades of reliance on subsidy from advertising – and has to work hard to find a way out.
We are at time that the cost of entry in to publishing, whether in print or online, is at an all time low. You don’t need much capital to start up – and there is plenty of print capacity, for example, on offer at the big press sites. That’s why there are plenty of examples of small entrepreneurs around the country coming in, producing low cost and good quality magazines, supported by very local advertising.
That’s what makes the Tindle business so interesting. His start-ups don’t cost too much to launch – and can be closed quickly if they don’t succeed. It may not work in every area – his rural papers tend to perform better than many in the London region, for example – but they are more than surviving.
I’m not saying I have there answer. What I’m trying to provoke is a sensibe debate that is realistic in its views and its solutions.
For example throwing more reporters at newspapers may be a solution – but equally it may not be. Look at The Guardian and the Daily Mail. Both are extraordinarily well resourced yet their sales are down and their classified has all but disappeared. And in The Guardian’s case, the financial prospects are horrendous.
But the debate has to be open and honest and willing to take on some difficult truths. And it has to avoid the temptation to descend in to personal barbs and attacks.
The regional and local news industry is where it is. More of the same is not an option – neither is the burying of heads in the sand nor the rose-tinted view of the past.
There is still the chance for the industry to experiment and to try new
ways of working. Regional and local newspapers are not, as Liz Forgan, chair of the Scott Trust, said the other day, gone like snow in the summer. There is plenty of life left – but something radical needs to happen to make sure that that life doesn’t end too prematurely.
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A focus on quality reporting, writing, photography and design could still be the future – as well as the past. Regional newspapers used to be chock-a-block of local news. What do many offer today? Rewritten press releases in a lot of cases.
What about design? How many newspapers have gone to templates rather than allowing quality designers loose on a virgin page – to work round advertising, of course.
What about great photography from people trained to understand newspapers? As I understand it, a number of local titles have put cameras in the hands of reporters given a rudimentary lesson in photography and sent out into the thick of things, or use submitted pictures sent in by readers.
But quality needs investment and it would be a brave man, or woman, who invested in newspapers today, especially in the economic downturn.
I’m proud to be a journalist. Always have been. Proud of the regional press and its part in British journalism. Sometimes, I don’t think the owners have shared my sentiments.
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The problem is that for local newspapers to survive they need adverising to support them which unfortunately is not happening in this climate – so in the absence of revenue, businesses have to address the cost base – not because of greed but because of neccessity to survive. Quality journalism is just not enough – sorry – there is not one example of any regional title which has invested in journalism turning back the circulation decline tide – so trying to find a new business model is the only answer and that has to be at a much lower cost base to mitigate for lower ad revenues – the Tindle low cost model might just be the answer – but it will be at the loss of a significant number of people – sad but inevitable I’m afraid. We need to face up to this and start to help each other find the new model so that as an industry we have a future instead of keep talking about fixing a model that is obviously bust.
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Every month I get through my letterbox a glossy-covered A5 magazine that carries parish council reports, gardening tips, church reports, etc and it is STUFFED with local adverts. It goes to 8,000 households locally and as far as I can see has just one full time member of staff. A lesson for local newspapers. It CAN be done with the right business model. Meanwhile, my local Guardian series paper is suffering, carries dull stories and looks awful…
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