The announcement that regional press giant Johnston Press was putting itself up for sale was the big media industry story of the past month.
But what happens next? Will the 251-year-old company be sold as a single entity, as its board would prefer – or could it be broken up, with prize assets such as the i, the Yorkshire Post and The Scotsman sold to different buyers?
Media analyst and former Scottish Newspaper Society director Jim Chisholm looks at what might happen to JP, and the wider lessons for the news industry today.
That Johnston Press is up for sale – in whole or parts – comes as no surprise to anyone.
The obvious question is what will happen now to JP, its excellent, long-suffering staff, and the communities they serve.
But the big question is what this says about the state and future of news provision in the UK.
Let me split this into three parts:
- How we got here?
- What might happen to JP?
- Lessons for the news industry today.
How we got here?
From local beginnings in 1846, Johnston Press oversaw its fiefdom of Falkirk, Scotland. A cautious stream of acquisitions of local weeklies began in the 1970s.
In 1988, Chairman Freddie Johnston, a gregarious, much-loved and passionate advocate of community journalism led the company onto the stock-market.
In 1994, JP purchased its first daily, the Halifax Courier. In the same year Freddie appointed Tim Bowdler, a businessman, not newspaperman, as CEO.
Tim’s brief from his board was simple: Grow the business, achieve “synergies”, then use the cash generated to make more acquisitions. JP’s relentless path included EMAP in 1996, then Portsmouth & Sunderland in 1999.
But by the time JP acquired the Yorkshire Post Group in 2002, the alarm bells were ringing.
Could this “buy-milk-buy” strategy survive when every acquisition was a declining business.
Could JP, a proven publisher of weekly papers, adapt to the far more complex intricacies of major regional dailies?
By the time JP acquired The Scotsman, in 2005 (without its premises) for double the price paid by the Barclays ten years earlier, Tim was being described as “King of the Regional Press”. He had delivered to his brief.
…. Except his brief was flawed.
Because of the milk to buy policy, the overall declines accelerated necessitating further cost cuts in an ever-plummeting spiral.
And so, as the markets plummeted in 2008, newspaper share prices in the UK and North America collapsed.
Tim resigned in 2009. Then following a short tenure by a respected successor, JP’s chairman Ian Russell appointed Ashley Highfield, saying “His combined online and media sector pedigree will be a major strength in enabling us to grow our business again.”
While Tim’s brief from shareholders was to build the business, so Ashley’s brief was to use this “pedigree” to grow the business.
The company achieved significant improvements in its balance sheet, due to some smart, if controversial steps, by then CFO, now CEO David King that plastered over the strategic cracks. But top-line performance was a long way from Ian Russell’s expectations.
What might happen to JP?
To quote Tom Peters: “If I knew where I was going I wouldn’t start from here.”
The elephants in the room are the, possibly negotiable, £200m of debt, plus the longer-term £40m pension deficit.
The unquantifiable opportunity for any owner(s) has to be to rectify JP’s poor top-line performance:
- Under-average circulation variance.
- Poor digital audiences and engagement.
- JP’s overall revenue offtake; that is revenue, relative to its print and digital audience appears to be below that of Reach.
Then there is the issue of the digital supremacists’ plundering of the digital value chain, which, if resolved, could transform the industry’s fortunes.
No-one in their right-mind would value any media business on the illusion that these two scenarios will happen. So what are the options:
Option 1. JP sold as a single entity.
Undoubtedly from JP’s perspective a sale of the group as a whole would be preferable, and is the preferred option of leading shareholder and contender, Christen Ager-Hanssen, But some crude book figures are not encouraging.
- JP’s current Market Cap of £3 m is clearly an under-valuation.
- The share-price sits at 3.2p, but various traders, and analysts have consistently set a price target of c 36p. At this price, JP would be valued at £38m.
- If JP were able to achieve a benchmark Value-to-Turnover, or Value-to-Audience ratio, this would place the company’s value at between £41m to £62m.
- In the very unlikely event of JP benefiting from TM’s strong target price, this could take the value nearer £100m, nowhere close to £200m.
Option 2. Sell strategic packages
JP’s parts are undoubtedly of greater value than its whole. And in many cases will be very attractive to different types of prospect.
There have been improbable suggestions that the ‘i’ acquired by JP for £25m could be worth £60m, but only “only once the newspaper is decoupled from its parent’s debt burden.”
There will undoubtedly be bidding wars between a range of current and prospective players for the likes of The Scotsman, Yorkshire Post, Belfast Newsletter.
Then there are strategic clusters of titles, that will appeal to the major publishing groups.
Map of JP title clusters
As this map shows JP’s business in tight geographical groupings which overlap or border with other regional groups similarly clustered units.
Perhaps in February 2016, as the company value was falling at a record pace, if the company had chosen to sell one of these clusters, rather than spent most of their available cash on acquiring the “i”, the picture today would be very different.
Option 3. Local intervention
There is also a possibility of local interest,
- Some of the smaller pond’s bigger fishes may be tempted to buy their local paper either for altruistic, commercial, or egotistical reasons.
- Local co-operatives are proving to be successful community and specialist publishers, often in not-for-profit entities.
Option 4. Staff intervention
One fanciful notion is of the staff trading their pensions for the paper which is as much theirs’ as JP’s shareholders. There are many examples of discarded staff exacting revenge by setting up in competition with their previous employers.
Option 5. Sit and wait
One feature of any bargaining arena is time and time is not on JP’s side.
- What if all the major players all sit and wait? A poker game, anticipating JP’s not unlikely collapse.
- Alternatively, they could substitute market acquisition with invasion, bringing the incumbent further to its knees?
Lessons for the news industry today.
Another backdrop is the prognosis for print. The average UK print title has until 2021/2 before the decline in print advertising makes titles unviable. Is JP our industry’s harbinger of what could follow?
So, the immediate imperative is realising a “point of inflection [POI]” where digital revenue growth exceeds the losses in print.
- The Guardian have passed that point, largely due to the success of their voluntary subscriber programme.
- The Mail, with its scale and high engagement is looks encouraging.
- Reach will likely come through their POI, after some further short-term decline,
- I have insufficient data to comment on Newsquest.
The government’s announcement of a “digital services tax”, is one small recognition of abuse of power of the supremacists.
The Cairncross Review promises a range of insights and recommendations.
But publishers – and advertisers – must take control of their destiny by standing up to the supremacists, and intermediaries taking back control of their much-pillaged value chain.
The JP story is a sad one. But it is only an exaggerated version of what has been happening across the increasingly corporate news industry over the last thirty years.
There are now countless examples of what I call the “New News”, in which individuals are grasping markets or titles that are proving to be more successful than the corporate incumbent.
For the future of press-freedom and diversity, it is vital that these “new-newsers” are given the freedom, social and economic support to flourish. Perhaps the Government’s proposed “digital services tax” for global companies over £500m, should be reinvested in incentives and tax relief for new news ventures under, say, £2m.
The notion of shareholders trousering 30 pence of every pound spent by customers at the expense of news provision is long past.
They need to ask why so many individuals, co-operatives, and digital new entrants are creating vibrant, viable new news ventures, where their own heavily centralised, commoditised models are struggling.
JP is as much a story of mis-ownership as mis-management, against a backdrop of rapidly changes in customer demand, and the disruption of digital giants. But the pioneering ‘New Newsers’ and ongoing reinvention by the major players, offers plenty of room for optimism.
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“…publishers – and advertisers – must take control of their destiny by standing up to the supremacists…”
In case he hasn’t noticed,advertisers have already taken control of their destiny by voting with their feet and using the many alternate advertising mediums based on lack of response lack of ROI from local papers due to the pitiful small amount of copies being sold.
As for “….The average UK print title has until 2021/2 before the decline in print advertising makes titles unviable”
He’s wildly out on that one,many titles are being propped up by other parts of the business,themselves under huge financial strain,or running at a loss hence the constant cost savings and job cuts being rolled out,so the end of some titles will come much sooner,I estimate by the end of 2019 many local , particularly weekly,titles will cease to be published in print form.
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“ staff trading their pensions for the paper which is as much theirs’ as JP’s”
I think mr Chisholm must be living on fantasy island if he thinks hard working and long standing staff would invest their money into a local newspaper when regional daily and weekly papers are on their last legs with no audiences and therfore no future.
Those making a go of community news publishing are those wiping the slate clean and giving folk the hyper local news the bigger groups no longer provide, not giving old titles a lick of paint and trying to trade in past glories.
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If a strategic break-up happens, which seems the most likely outcome, the most likely deal to watch for would be DC Thompson buying the Scotsman titles, giving them a morning/evening suite running down the North and East coasts.
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The Guardian is making huge losses and forces its staff to take a month off unpaid (they have 11 month contracts) to save cash.
Don’t use them as an example of good governance.
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‘So, the immediate imperative is realising a “point of inflection [POI]” where digital revenue growth exceeds the losses in print.’
When I left, print revenues were still above digital by some margin.
Print ads were selling for far more than digital ads, yet all efforts were put into selling digital ads.
Print ads were far more useful and localised for readers. They had relevance.
It’s the concentration on national advertising across multiple titles, losing all sense of local identity for local newspaper titles, which has seen the spiralling fall in revenues.
Lack of local content? Loss of reader. Loss of vital statistic which means you can charge more for your advert.
Yes, the internet happened. It should not have meant the total abandonment of print advertising, especially not given the (still) appalling state of JP’s online offerings. The websites are incredibly poor.
There was still a culture while I was there that journalists were a cost attributed to the print product. That cost needs to be shared by the digital side of the business as well.
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Lapsely. Interesting point about selling of Scotsman. It was its purchase for way too much that crippled the entire company, ruining some once highly profitable papers. Its other fault was its tardy reaction to digital. Too late and too awful and a schoolboy could design a better website.
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Johnston Press: What next for Jim Chisholm?
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I agree with your points @Christor but it’s the huge drop in newspaper copy sales coupled with the many new,more effective and less expensive alternative advertising options available which have triggered the biggest loss in ad revenues, not the bundling up of national adverts into regional titles.
Print was always the most effective medium for local businesses to promote themselves in but that was when papers,now selling a few thousand copies were selling tens of thousands and dominated the area, those days, and buyers/readers are long gone leaving digital advertising which has failed to take off other than as a bolt on to already planned ad budgets,even then as an after thought rather than an effective way of getting response.
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JP is beyond repair. The only thing that may save it is a buyout and merged with another publisher. Which will result in loads of job losses. What JP should have done is closed the loss making ones years ago. I was shocked to hear the numbers of staff at The Scotsman a few years ago when they barely sell any papers.
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Yes advertisers were & are moving to digital just like they moved to TV & radio when those mediums arrived. However that led to growth in the overall market or new opportunities. JP have deserted their newspapers forcing loyal advertisers to buy digital at their expense. Papers have seen massive pagination cuts & huge cover price increases. So in effect they now have a huge digital audience that nobody will pay for & pathetic newspaper circulations that don’t deliver response. A classi tale of a management team badly led & populated by yes men who have no newspaper background. Anybody who argued for maintaining the papers strength while growing the digital audience was hacked out of the business. Whatever happens now those that have ruined the company have either walked away with huge payouts or will soon. There is still hope as many print advertisers still exist in local markets while an aggregation of the i, Scotsman, YP and major city titles delivers a viable digital package. Just needs someone brave(or foolish) enough to believe.
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Caesar is right. Print advertisers still exist. Of course they do. It’s just that JP chiefs with absolutely no local or regional experience thought local and regional advertisers preferred their ads to appear in a tiny smart phone screen and now they are paying for their ridiculous decision. To reduce ad sales staff to insignificance and expect advertisers to deal with a call centre in the real world is so sad.
In a very short time now the apple OHH (open hand hologram) will replace smart phones altogether. Please remember, we were once told that 1, Commercial tv would take all national advertising away from newspapers and that 2.Free newspapers (remember them?) would kill off paid for newspapers. Yes, there is a future for print advertising if we WAKE UP and bother to make it available again.
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I have constantly been mocked on here by the digital devotees for standing up for print. Print is dead they said. The current state of JP is totally down to the digifiles like Ah pushing digital so hard and at the same time running good papers into the ground. I have always said that advertisers do not like using newspaper websites., especially smaller town traders. So far (almost 10 years) it has been virtually impossible to monetise digital. JP have failed at it miserably and at the same time created needless competition for their own papers by giving news away free on their websites without any guarantees of income (especially in weeklies). Letting their papers wither on the vine was a fatal strategy when digital was unproven. Mis-management dosent even come close!! Say print is dead if you wish but digital is on life support with a bad prognosis. Soon prj t will be the only way because digital will have died without regaining consciousness!
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@Philip Yes. It’s a spiral. Go for digital ads, lose local advertisers in the paper product. Lose some readers. Cut the editorial budget in response and carry non local stories. Lose more readers. Repeat ad nauseum. My title was seeing paper sales increase when Newsroom and Salesroom of the Future were launched. JP senior staff told us it made no difference. We’d still get cuts. It destroyed the product.
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Jim Chisholm actually succeeded in reversing sales decline aim Newcastle in particular & across Thomson’s in general. It was a time of great editors like Magnus Linklater, Andrew Jaspen, Peter Charlton, John McClellan, Neil Fowler, Ed Curran et al. All were joined by equally great commercial leaders such as Joe Logan, Alan Scott, Warwick Brindle, Tony Hill, Steve Auckland & then the new wave of Margaret Hilton, Chris Green, Mike Pennington, Gary Fearon Ian Clark, Anne Kidd, Bob Cuffe etc. Most left either exasperated by being derided as dinasaurs or were forced out because they still believed there was another way, while a few still fight the good fight but are lone voices in a sea of mediocrity. Many are long gone but enough remain for whoever the new owners are to recruit back in & save this once great company
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@caesar mentions an oft overlooked point when considering the steep decline in the fortunes of the bigger regional press groups; great commercial leaders.
Where I am we had some first class ad managers at one time,those who knew the territory, had the contacts, were respected by business community and knew how to lead and motivate teams to achieve.now all we have are yes men and women,far too concerned about their own jobs and not rocking the boat which has been a big part in the collapse of commercial revenues over the past few years.
Instead of valuing these commercial leaders at a time when they were most needed they were allowed to go or were moved on, and look what we are left with…..
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I left accounts last year because I was so stunned by the amazing obsticle courses for the few remaining ad sales people to actually get an ad in one of JP;s papers. There were an astonishing amount of non productive “managers” up the chain who only thought digital and forgot (or didn’t want to know) that ad print revenues were their biggest source of income. Digital was what it was all about. Print, they were constantly told, is finished. So out went loads of brilliant journalists, ad sales, newspaper sales, bill boards and of course the baby with the bath water. And out went JP.
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First a correction! The word “pension” should have read “redundancy payment”, which is based on a great success story of a JP journalist who did just that. That doesn’t mean of course that Prospectus is wrong!
Good to read so many comments, and likes, reflecting I think the passion and connection with Newspapers, that so many of us enjoyed. Of the eighteen names in Caesar’s comment. I was able to email 14 of them, despite having effectively left the UK newspaper industry 16 years ago.
I expand on my views re the “New News” in Open Democracy at
https://www.opendemocracy.net/uk/jim-chisholm/news-is-dead-long-live-news
It’s one chapter from a new book “Anti Social Media”, edited by John Mair, Neil Fowler, Ray Snoddy and Richard Tait. 40 chapters from the likes of Mark Thomson to Gina Miller. ISBN 978-1-84549-729-3
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