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Papers "will go out of business" warns GMG chief

A leading regional and national newspaper publishing boss has predicted that “many” local and regional titles will go out of business in the current economic downturn.

In a bleak prognosis of the industry’s future, Guardian Media Group chief executive Carolyn McCall said the provision of local news was becoming “increasingly uneconomic.”

She said regional newspapers will need to be “re-engineered completely” with lower costs and fewer staff – and that some titles will “inevitably” need to merge and close.

Ms McCall’s comments, which are certain to provoke lively debate within the industry, came in a speech to Cardiff Business Club, originally reported in yesterday’s Western Mail.

In her speech on Monday night, Ms McCall outlined how online advertising has “decimated” revenues for the UK’s regional press.

She predicted that many well-known regional and local titles, which have often been the cornerstone of their communities for more than a century, will go out of business.

Ms McCall said: “Although the national press is under huge pressure in terms of advertising revenues and readers, and although I think there will be some casualties in the not-too-distant future, I believe that the UK’s quality national press, as a multimedia industry, is in relatively good shape and a long way from being on its knees.”

She added: “Sadly, I’m not convinced that the same can be said for parts of the regional press.”

Ms McCall claimed that the big stock market listed publishers have insisted for years that the changes occurring in local and regional media markets were predominantly cyclical, not structural.

But she said: “This has been wrong for at least ten years and is now universally accepted as such.

“The changes are structural – they are permanent and result from fundamental changes in consumer behaviour, communications and technology. The situation is exacerbated by the current cyclical downturn, but neither the readers nor the revenues are ever coming back, at least not to anything like previous levels.

“This is a bitter pill to swallow for businesses and shareholders that have enjoyed margins of over 30pc. But those days are gone. We have already seen local titles close and this will continue. Certain owners will struggle to continue in their current forms.”

Ms McCall launched a partial defence of publishers and managers who have been criticised for making cutbacks, demanding unsustainable margins, downgrading the product and under-investing in journalism.

She said: “This may or may not be true. The more important point is that the provision of local and regional news is becoming increasingly uneconomic.

“The growth of the internet has not only decimated the staple diet of local and regional papers across the country – classified advertising revenues – it is detaching advertising from content altogether.

“Online search advertising doesn’t need to peg itself to any form of content, let alone journalism.”

But despite her gloomy forecast, Ms McCall said that a strong local and regional press was “a really important part of a properly functioning society.”

“Who will hold politicians, councils and other authorities to account? Who will invest the time and effort in impartial newsgathering within communities? Who gives citizens their voice on all community issues – the very local included? It won’t be Google Local, that’s for sure,” she said.

“The future for regional press must be about consolidation. Fewer owners, who are able to make savings through scale and compete on a more level playing field with other media, will result in a more sustainable model.

“Regional newspapers will have to be re-engineered completely – costs will need to come out, staff numbers will have to fall, some titles will inevitably need to merge and close, owners will have to accept much lower margins. This is unpalatable for journalists and shareholders alike, but it is the only realistic way forward.”

Comments

Joe Slade (05/11/2008 09:24:28)
“Who will hold politicians, councils and other authorities to account? Who will invest the time and effort in impartial newsgathering within communities? Who gives citizens their voice on all community issues – the very local included?”
If costs are to fall and staff numbers have to fall, than local newspapers will not have the time or staff to do any of that. It will become a machine for churning out press relseases, if the newspapers aren’t already.

F. Johnston (05/11/2008 10:05:14)
Ms McCall seems to want it both ways: a regional press that it is an important part of a properly-functioning society and yet is consolidated into monolithic corporations becoming ever-more distanced from the communities they are supposed to be serving. This consolidation has been going on for some time and it patently doesn’t work. What we need is smaller, community-based organisations which are no longer in thrall to shareholders and the markets. Re-engineer by all means, Ms McCall, but this blueprint is bad for the press, bad for the public and, ultimately, won’t work.

George Kelly (05/11/2008 10:44:45)
The future of the regional press, as predicted many years ago, will be a return to small independent publishers sited within their communities who do not demand the huge returns on investments of the larger corporations. These real newspaper people will maintain the industry even further into its inevitable long-term decline.
But, as rightly expressed, we haven’t yet seen the replacement model.

Bob Hope (05/11/2008 10:49:00)
There will be fewer staff but don’t expect the chief executive bonuses to stop rising and rising and rising!
Cutting staff is always the first go to solution for unimaginative morons more obsessed with their own obscene salary.

RETIRED HACK (05/11/2008 11:22:56)
What’s all this fuss about online advertising? For many local papers it’s a pitifully small percentage of income for newspapers, especially in relation to the increasing amount of staff time spent on it. That’s been the downfall of local papers. Cyberspace is not the land of milk and honey that large companies thought it was and now they are stuck with declining newspaper income and not a lot of money from the internet.
Online ads income may increase from its current low levels but never high enough to save the neglected newspapers from closure in many cases.
I still miss being a hack after a couple of years out, but from what I hear from those facing increasing workloads with fewer staff and declining writing and subbing standards I am glad I am not in it any more and amongst the panic.
I hope we are all wrong and local papers can turn it around, and I certainly agree they need to get out of the clutches of greedy large companies. But who will invest in them in these current times?

Dan Depan (05/11/2008 11:45:25)
The reason the regional press in Manchester is on its knees is years of being slashed, squeezed and having its profits siezed so that The Guardian and The Observer can continue to lose money hand over fist.
Take these leeches out of the equation and plenty of money has been – and continues to be -racked up, even taking into account the obscene bonuses paid to GMG’s fat cat bosses

James (05/11/2008 12:26:54)
What McCall describes is not a ‘realistic way forward’ at all, but exactly what has been happening for the last 15 years or more. Economies of scale and staff cuts will not lead to the “impartial newsgathering” and “holding to account” of politicians she speaks of so dreamily. She is describing the death of local and regional newspaper. Period.

JD (05/11/2008 12:30:15)
Actually, the reason local press is on it’s uppers is, as a species, we’re lazy.
It’s a lot easier to log on and watch/read the news on your own terms in your own time from local resources including the opinion of real people than get the party line from some tired old local rag regurgitating news about local
fires and fun runs.
Let the people hold the councils etc. to account, through blogging and mass media delivery and social networking. The BBC have it right with iPlayer, Sky+ news etc., entertainment/news when we want it. This is setting a president that’ll be reflect on a local level (wait ’till the BBC starts delivering local video news, then we’re proper sh*fted).
Plus, the public takes honest unreserved opinion as truth, and no longer trust the transparent left or right wing print media.
Get used to it folks, it’s called the 21st C.
Come on, lets face it, even this site is starting to look tired compared to what a genuinely keen local nobody can do in their back bedroom if they can live off the AdSence sales and get a following on Twitter.
Anyway, I’m off to but my head back in the fire bucket and pretend print isn’t dead for another couple of years, maybe it’ll all blow over before my kidneys finally pack in. Maybe…

P Brightman (05/11/2008 12:32:14)
“Papers “will go out of business”…”. No sh!t Sherlock.

Lockers (05/11/2008 16:18:39)
SO JD thinks the BBC is “setting a president”. Either JD has overdosed on Obama or needs to attend a subbing course urgently.

MD (05/11/2008 16:20:50)
A story of growth based on acquisition fuelled by easy credit and greedy publishers who have a JR Ewing complex.
The publishing industry in recent years has mirrored the banking industry and they are now in a similar situation, the only difference is the government will not be rushing to bale out the newspaper industry.
Perhaps this ‘little local difficulty’ will make publishers remember that local news is exactly that. Owning a big glossy office, usually on an industrial estate way out of town, that you over staff with too many journalists who have lost touch with their readers because the editor is trying to produce the next local edition of the Sun and sales reps who don’t even know where the high street is or middle management who are always in meetings discussing the date of the next meeting doesn’t mean that local press is dying and doomed to failure it just means that you need to change the model and remember who your customers are.
In recent years the excesses of forming groups to clean up advertising revenues in the same way that massive trawlers have over fished the world’s oceans have given advertisers headaches and not solutions. The group answer is not always the right one and publishers have started to offer a more targeted local offering with rates to match. Gone are the days when a rate increase meant add another 10% on to last years rates because we always do it that way while at the other end of the business the circulations are falling like a stone. People will pay more if they think they are getting more and not because some accountant tells them that an advert in a group that covers a vast area will benefit their local business that has a very localised catchment area.
To finish then Local Newspapers are far from dead they just need a transfusion of common sense management who have an idea of what they are publishing, who their readers actually are and not some computer model of what they should be and a rate card that reflects what should be paid and not what is required to pay for the chief execs lifestyle in other words get real.

Roy Challis (05/11/2008 16:25:19)
JD – “It’s a lot easier to log on and watch/read the news on your own terms in your own time from local resources including the opinion of real people than get the party line from some tired old local rag regurgitating news about local fires and fun runs. Let the people hold the councils etc. to account, through blogging and mass media delivery and social networking.”
I can only assume that you don’t work for a local or regional paper, based on your hackneyed view of what they are about. If you do, you evidently don’t work for a very good one.
And do you really think our nation of hairdressers and bank assistants is ever going to hold anyone to account or expose scandal or unjustice using Facebook?

Chris Youett, Esq (05/11/2008 19:05:15)
Those managers who predict doom for traditional newspapers should be sacked with immediate effect.
The is only one reason why cierculations are declining: poor or non-existance marketing. Even a badly-run trans-national firm like For would increase marketing budgets by at least a factor of 10 – as well as taking on more senior reporters on professional rates of pay. Big firms like Ford, IBM or General Motors would also force all newspaper owners to either charge realistic rates for multi-platform news or close it down!

Hilary Jones (05/11/2008 22:46:20)
Could lower margins be the clue for new, privately owned, ultra local papers to sprout where the big, shareholder-shackled groups have pulled out?

P Morgan (06/11/2008 17:04:09)
Chris Youett, Esq – “The is only one reason why cierculations are declining: poor or non-existance marketing.” Yes, budgets are miniscule and always have been, apart from the occasional relaunch, but there are far more subtle influences at work the result of which can be summarised by saying “People don’t want to buy newspapers anymore”. There are better alternatives. Notably it is *not* simply that “They don’t know about their local newspaper”. Go ahead, market buggy whips as mucha s you like with staggering budgets. Guess what? People will not want to buy them.

Dan Depan (07/11/2008 09:51:40)
JD any relation to MD the Krusty the Klown chief of GMG? Your views seem very similar. However, I do notice that the Manchester Evening News put out a rush hour print edition marking Obama’s election.
Strasnge really surely everyone was sat on buses, trains, trams, aeroplanes reading it online?
Newspapers have a future but only if they are run to succeed rather than just to subsidise the online community who want it all but won’t pay a penny

JD (07/11/2008 10:26:37)
“…our nation of hairdressers and bank assistants is ever going to hold anyone to account or expose scandal or unjustice using Facebook?” – Yeah, big difference between the regional press and Facebook. People read Facebook. I mean, is your only retort to correct spelling there people? It’s no wonder we’re dying out…