Monday, 12 August 2013

Fowler: 'Government must act to help regional press - which should start charging for online'

Neil Fowler, who has edited the Lincolnshire Echo, Derby Telegraph and Western Mail, says Government ministers must show they that understand the real media issue of our times is a crisis in the funding of general news in this country – specifically for regional dailies as well as the quality end of the national market.

Writing an article in an updated edition of the book "What do we mean by local? the rise, fall and possible rise again of local journalism", Fowler claims: "The model of news being subsidised by advertising is broken and cannot be fixed, but more than just platitudes from our policy-makers is now required. There needs to be a minister with an overview of the industry – so that the government may actually be seen to be acting with some understanding and serious intent."

He also argues that papers should start charging for online content, stating: "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."

Fowler starts his article with a look back at the regional press since the war:  "In the time since the end of the last war, the regional newspaper industry was basically held back by a combination of weak management and the intransigence of the print craft unions. This meant that three golden eggs were laid in the 1980s – the sale of Reuters shares being the first, which funded the second by buying out the unions and investing in new technology and colour presses, all of which was followed by the third ‘egg’ of economic growth during the second and third Thatcher governments.

There were some innovations – notably the launching of a ring of suburban evening newspapers around London in the 1960s – but there was little else. Research and development, the staple of most other industries, was simply ignored.

Essentially the long-term decline in readership, which began in the early 1960s, and the decline in the sales of regional daily newspapers, in particular, which began in the late 1970s, was masked by the massive growth in classified advertising – and especially the situations vacant category. Newspaper paginations mushroomed, profits grew massively and all was rosy – and then the internet came along and stole those rivers of gold, as Rupert Murdoch named them – and the dam broke. So technology and economic factors combined there, along with some gross managerial misjudgement.

Politically, ownership rules have lain untouched for a generation or more. Misguided views on plurality amongst policy makers have, I believe, held back the industry. And all the while society and people’s lifestyles were changing. The industry knew it but hoped that its superficial responses would allow it to carry on it the same old way. It was wrong.

The Questions that Need to be Answered…

A surprising revival happened in May 2011. Driven by the Society of Editors, new life was breathed in to the UK Regional Press Awards. Two years earlier, in 2009, the event had been like a wake, and a miserable wake at that.

In 2010 the National Union of Journalists had arranged its own event, but it not been able to match the glamour or excitement of previous years when under the stewardship of Press Gazette it had been a genuine industry highlight. But in 2011, some 350 journalists from reporter through to editor, with a few managing directors thrown in for good measure, attended a remarkably upbeat lunch at a London hotel to celebrate the best of the local newspaper industry. But was the optimistic atmosphere merely a cheerful pre-death rattle of a sector mortally wounded in the maelstrom created by the effects of the growth of the internet? Or was it an indication that there was still resilience of some kind still propping up the industry’s somewhat shaky foundations?

Interestingly, the winners of most of the twenty-three categories showed that if regional and local newspapers were dying, some of them, at least, were going down with a fight. Before making my recommendations I think it is important to summarise the mistakes that I believe have been made following my interviews and discussions. 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.
  • New Product Development was seen as short-term way of making more money, rather than a long-term way of possibly finding new routes for the business.
  • The groups failed to experiment as the changing marketplace became apparent. Having thirteen or fourteen 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, in 2012, I wanted to read the Leicester Mercury online I had to go to thisisleicestershire website and then struggle to be sure that it actually was the same brand that had been established for well over one hundred and twenty five years. To be fair, Local World, the new owner of the Mercury and many other papers, has started changing things for the better, but there is considerable damage to put right first.
  • Politicians have believed that phone hacking on one newspaper out of twelve hundred is the real issue that bedevils the media. They are wrong and need to begin listening to the industry – and perhaps, to those who read newspapers, too. The oh-so-slow negotiations post-Leveson, where the political and judicial classes have all but ignored the needs and despairs of the local and regional press, exemplifies this.
  • The fear of the concentration of ownership and a lack of plurality has been overblown. The editor dancing to the tune of a power-crazed proprietor does not exist in the regions. And never has done. But still the debate goes on. Local World, the business vehicle established to take over the assets of Northcliffe Media and Iliffe Media, was subject to very detailed scrutiny over a period of six months by our old friends from the OFT before the deal was officially allowed.

However, the groups allowed distant ownership to become a problem, when careful management could easily have negated it.

Senior executives have been viewed by their staffs, both senior and junior, as being too focused on the bottom line and not taking a longer-term view. Even in 2012, in the depths of the economic decline, there were some (not many I admit) news businesses making 30 per cent margins. No one I spoke to understood how this would help the survival of brands in the future. At one point in the 1980s, the CEOs of the big four chains were all graduates of various parts of the Thomson empire – with Thomson-trained being worn as badge of honour – and Roy Thomson, in particular, as having been seen as businessman who combined care of the profit figure along with a desire for future security.

As those leaders left the industry they were replaced with those from a different school of business and from outside the industry. The fact that many were to enjoy substantial monetary rewards – and continue to enjoy them in times of austerity for many – has not helped their image at all. Most worrying of all is that they did not believe it would end. 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. But equally I must say what has been done 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.
  • Cost-cutting has been painful but has been necessary. Even the family-owned businesses that have seen their circulations perform better have not been protected from this assault. But managements must ensure that enough resource remains to provide the right kind of service that readers will pay for.
  • I say this because 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 – so losing vast amounts of revenue before the power of the Internet really became apparent.
  • There have been attempts to diversify – brand extensions have taken place in to books, events and other activities – but they were never going to replace the core purpose of the business – the collating and the passing on of local information. They have been right to become more aggressive on cover prices.
  • 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. And at the age of eighty three, he is not finished. In 2012, he was still launching products - with a new paid-for newspaper in Chepstow, his third new title of the year. He also has a paywall on his websites. Some news is offered – but you pay if you want to read the product in full.

But what must happen now? I hope people are willing to listen. There needs to be a fully rounded debate – and I hope that my recommendations can act as some form of catalyst. So far that debate is still to happen. The overblown nonsense that was Leveson still hangs a dark cloud over rational debate over how news will actually be funded in the future.

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. But it failed at the first attempt in Kent with what should have been a logical, easy and straightforward decision. With Local World it didn’t fall at the second attempt, but it needs to put forward a definite statement of intent.

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 did not have so far to fall, once the pincers of structural and economic 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.

A Matter of Priority

The government through Culture Secretary Maria Miller and Business Secretary Vince Cable, as well as Communities Secretary Eric Pickles, must show that it understands there is a crisis in the funding of general news in this country – specifically for regional dailies as well as the quality end of the national market and that this is the real media issue of our times.

Miller, Pickles and Cable should instigate the debate and do so as matter of priority. The model of news being subsidised by advertising is broken and cannot be fixed, but more than just platitudes from our policy-makers is now required. There needs to be a minister with an overview of the industry to bring together the disparate views of the three departments – so that the government may actually be seen to be acting with some understanding and serious intent.

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. The industry should press this case as soon as possible – and the government should make the right signals too.

The industry should continue the bold moves instigated by Northcliffe at Lincoln, Scunthorpe, Torquay and Exeter (and followed by Trinity Mirror with the Liverpool Daily Post) in turning some of its daily titles to weekly production. In 2011/12 it converted four of its daily titles to weeklies – on the back of a successful change to the Bath Chronicle five years ago. Johnston followed in late 2012 with five conversions in Northampton, Kettering, Scarborough, Halifax and Peterborough, accepting the economic reality of the real world. These are radical attempts to find solutions for the long-term and should be encouraged.

Readership, rather than sales and impressions, should become the new currency to sell to advertisers. In Canada, newspapers focus on NadBank, the agency that produces readership figures. ABC sales figures are very much second division.

The Issue of Debt

Moves should be made to help the three PLCs – Johnston Press and Trinity Mirror in this country and Gannett in the US – to have an orderly rescheduling of their debts (i.e. the lenders must take substantial losses) if there is to be a viable future. This is not to allow them off the hook in any way – nor to forge a path for them to continue as they have been operating.

But it is an acceptance for both the businesses themselves and those who own their debts that it is almost impossible for that debt ever to be paid off and to have any business of substance remaining. Ashley Highfield, the relatively new CEO at Johnston, has already said that attempts are being made to restructure its loans, but I can’t see that being enough.

All three are 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 capitalisation of around £50m and Trinity Mirror just around £200m. In March 2005, Trinity Mirror was in the FTSE 250 index with its shares at around £7.29. Since then the index has grown by 40 per cent yet Trinity Mirror shares have sunk by 90 per cent. They are pulling as much cash as possible out of their businesses, by very tight cost control (i.e. job losses) to service their debts, which is in turn causing those businesses long-term damage. The companies may argue that they are still profitable and that they have strategies in place to pay off this debt but, as one analyst told me, the City has lost interest in them.

There is hope, though. In July 2012 Dunfermline Press passed on a chunk of its business to Lloyds Bank in return for a £32.5m write down in its debts. The larger players need to find a route, too. And the establishment of Local World, by a merger of Northcliffe and Iliffe titles with the support of Trinity Mirror, and with virtually no debt or capital provision, offers a new example of what might happen.

A Return to Local

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. Here there is a very basic analogy with the 72 football clubs outside the Premiership that, in the main, are supported by groups of local business people. Those business people tend to believe often for vanity purposes, that it is good for their hometown to have a high profile football club. 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 news providers. This recommendation is not at odds with further consolidation. Having news business brokers providing cost effective support services will be a necessity for re-localised enterprises.

The government should include the recommendations of the 2011 Reuters Institute for the Study of Journalism report on the potential of charitable and trust ownership of newspapers in its forthcoming Communications Green Paper. This important piece of work sets out the case for a new way of looking at the funding of news and should become part of the agenda. In this Green Paper the government should also examine ways in which the tax system can be used to assist local entrepreneurs, business people and individuals to buy back into the ownership of local media. 

Study the business of journalism  

University media schools should move from their preoccupations with the study of journalism to include much more of the study of the business of journalism. They should work more with their sibling business schools to help the industry find real solutions to its woes. I believe there is a gap in the market here ripe for filling. The industry still has time to experiment, to try new models and be brave. Local World is trying with its new fast-track centres of for ‘transformation’ in Derby, Cambridge and Exeter. It should share its results with the wider sector. 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 Online

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 pay wall. There remains a level of local advertising that is available to traditional businesses. However, much of it is still being scooped under the radar by local entrepreneurs and franchises that are developing solid advertising-driven glossy magazines delivered to highly targeted areas.

An Intelligent Debate

In all this bloggers and members of the public will have their part to play, but the fundamental question remains: who will cover Hartlepool Magistrates’ Court on a wet Wednesday afternoon? It will not be a well-meaning amateur and has to be a professional journalist – the question is how will it be paid for?

And, finally...

Finally, let all of us in the industry have an intelligent and realistic debate about the real state of this business and how it got there. And let this debate be soon. There’s an awful lot of scrutiny, human interest and fact about our localities that we risk losing if we don’t get this right. Politicians and bankers have a role to play with the industry in getting this right for the future. This is a genuine societal issue – and society will lose if a route is not found through this current crisis."
  • What do we mean by local? The rise, fall and rise again of local journalism edited by John Mair, Richard Lance Keeble with Neil Fowler, published by Abramis on September1, 2013. ISBN 978-1-84549-593-0. Price £19.95 or in a special offer to readers of this blog £15.00 from

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