Wednesday, August 21, 2013

73 days and counting - the frustrations of the Freedom of Information Act

The law is quite clear: public bodies must respond within 20 working days to a request for information under the Freedom of Information Act.

Despite this, I've been waiting 73 working days for a response to a fairly straightforward request sent to the Crown Prosecution Service on May 10.

What makes me say my request was straightforward?  I asked for information that the CPS stated publicly it had been collating centrally.

I sent my request by email on Friday May 10.  

I heard nothing until July 5, 30 working days later, when I received the following note:

"I am writing to apologise that your request dated 10 May seems to have been overlooked in our mailbox.  Please can you confirm whether you are still interested in the information requested?  If you are I will aim to progress a response to your request as soon as possible."

Encouraged by the apology

I responded on the same day to say that I did indeed still want the information.  At that point, I took the view that the delay was due to a simple oversight.  Human error.  We all make them.  I was encouraged by the apology and the statement that if I still wanted the information the CPS would 'aim to progress a response to (my) request as soon as possible.'

Hmmm ...

Having heard nothing by July 31, I sent another email:

"You said you would aim to progress my request as 'soon as possible' - it is now 18 working days since this exchange - and more than 55 since my original request.  Please could you update me on your response?"
The response on August 5 was not encouraging:
"I am sorry that I have still been unable to provide you with a response to your request.  I have read your email today after returning from a short period of leave.  
I thought I should briefly confirm that my email of 5th July was to inform you that unfortunately our Department had not actioned your request at all up until this date, because it had been missed.  
As soon as you confirmed, on the same date, that you were still interested in the information requested we started processing it.  
Within the last 20 days please be assured that this has been receiving our attention.  
Having made further enquiries today I am still unable to give you a precise date of when we will be able to respond but as soon as I have an update I will let you know.  
Thank you for your continued patience."

Formal complaint to the Information Commissioner 

 To be honest, my patience was running out.  My request related to something in the news and the delays simply meant that the news was moving on - this is perhaps the most frustrating thing for journalists using the FoIA: information often takes so long to arrive that its impact is lessened.

At this point (August 6), I also sent a complaint to the Information Commissioner: the public official charged with overseeing the FoIA.  I received an automated response ... and nothing since.

So today, I wrote again to the CPS and got an immediate response:

"Sorry for the continued delay.  We have scheduled a further meeting to discuss the request later today.  I would hope that we should be in a position to respond in the first week of September, or possibly by the latter part of next week."
A further meeting?  Clearly the CPS doesn't think my request is as straightforward as I do.

The first week of September? More than 80 days since my original request.

Should I hold my breath?  Any advice on next steps gratefully accepted.

Friday, June 07, 2013

HoldtheFrontPage article on my blogpost

Regional newspaper website HoldtheFrontPage picked up on my post about the interim statements of Johnston Press and Trinity Mirror today and my conclusion that, in the end, readers are going to have to pay for local news.

I did, of course, put a couple of caveats on that assertion, the most important of which was that local news companies would have to produce something which people valued highly enough to pay for - and I did point out that this would inevitably lead to smaller businesses.

The article brought a flurry of readers to my blog and some comment on Twitter, some of which can be seen here on Storify.

Local World's David Montgomery: Local papers are in a fight for survival

Above is a short clip from the Culture, Media and Sport Select Committee hearing where Local World chairman David Montgomery spells out the issue facing local newspaper companies: it is a fight for survival.

What was clear from all of those who gave evidence to the committee was that they see more cuts coming.  Montgomery caused a furore over his suggestions that much of the 'human interface' will have disappeared within the next three or four years and that journalists currently work using a model from 'the middle ages, virtually', but the starting point for this comment was his statement that 'we can't keep taking costs out, but employing the same production techniques.'

Below is a clip in which he explains his vision for a future without human interface.  Sadly, when the chair of the committee, the Conservative John Whittingdale, presses him on exactly what he means, Montgomery gives a politician's answer and Whittingdale lets it go:

The general secretary of the National Union of Journalists, Michelle Stanistreet, described Montgomery's plan as 'a nightmare vision of journalism's future.'

Writing on the Guardian's Media Blog, Stanistreet said:
Amid the management-speak, Montgomery's vision is a chilling one. Does he really have so little inkling that it is high-quality journalism and top-quality writing that is the key to successful newspapers and websites? His thinking is sadly not unique; it is a pattern we are already seeing. Journalists are being reduced to pouring words – sorry content – into pre-determined grids, with the danger of turning newspapers into open sewers.
While many might not usually side with the NUJ, I doubt there are many journalists out there who would disagree with Stanistreet's comments.   She also repeats a gag I've heard from a few Local World journalists recently: 'We call him Rommel' Why? 'Because if we called him Monty it would mean he was on our side!'

It's all good knockabout fun, but, at the risk of upsetting the journalists out there, Montgomery is right.  Well, he's right to the extent that the newspaper companies cannot just keep taking costs out and continuing to do what they currently do .. which is to try to do what they've always done AND a whole lot more with fewer staff.

I've illustrated the catastrophic downturn in revenues faced by local newspaper companies over the past five years on this blog a number of times and pointed out that there was little they could do to prevent classified advertising - the hitherto funder of local journalism - from fleeing to the web where it works so much better.

The companies' response - to cut jobs and the quality of their product (fewer, smaller editions on cheaper paper and with less content) - has inevitably hastened many of their readers' decisions to flee likewise.

And, all the signs are that revenues are still falling (see the interim reports of two companies here) and that is going to lead to more cuts (a fact that was re-iterated by Montgomery in the clips above).  Given that, it is obvious that the newspapers cannot continue to operate the way they do today: people might not like the sound of Montgomery's plan, but nobody seems to have an alternative that makes any sense.

Saturday, May 18, 2013

No sign of digital rescue as newspaper revenues continue to collapse

Two interim statements from newspaper companies last week further demonstrate how their digital strategies won't save their businesses.

Here was how Trinity Mirror (PDF) trumpeted its highlights of the first 17 weeks of this year:

  • Improving revenue trends, in particular circulation revenues
  • Good growth in digital audience with unique users up 25% year on year to 31 million and page views up 36% year on year to 163 million
  • Continued strong cash generation with net debt falling by £25 million to £132 million
  • On track to deliver targeted structural cost savings of £10 million in 2013
  • We remain confident in the outlook for the Group's performance in 2013

Here's my version of the same figures:

  • Advertising revenues fell by 13% - accelerating over last year's fall of 10%
  • Digital revenues fell by 13% - despite all the focus on growing this area
  • Circulation revenues fell by 8% despite significant cover price increases
  • High debt levels continue to hamstring attempts to invest
  • Cost cutting remains the only way of keeping the business going.

Three days earlier, Johnston Press delivered a slightly more up-front (if equally depressing) set of highlights for the first 18 weeks of its financial year:

  • First increase in operating profit for almost 7 years - despite challenging economic environment
  • Total revenues down 11.4% on a like-for-like basis - revenue declines slowing month-on-month
  • Costs on track to reduce by over £20 million in 2013
  • 183 titles now successfully relaunched
  • New website rollout commenced for every title
  • Continued digital audience and revenue growth in the period
  • Focus on debt reduction maintained 

Put another way:

  • Total revenues fell by 11.4% - fractionally better than last year's 12.1%
  • Advertising revenues were down 15.1% - worse than last year's 12.7%
  • Display advertising was down 12.7% - worse than last year's 11.9%
  • Classified advertising was down 16.8% - worse than last year's 13.3%
  • Digital revenues grew by 8.1% - which is a lot better than Trinity, but is less than the 20% gained last year
  • Circulation revenues fell by 0.8% despite huge cover price increases
  • Massive cost cutting remains the only way to grow profit and repay debt

There's not enough detail in either report to be too specific, but it is clear that revenues are still falling at an alarming rate.  At Johnston Press, the full year extrapolation of the first 18 weeks would suggest revenue falls in excess of £37 million.

Newspapers losing £21 of print advertising for every £1 of digital

Earlier this year, JP CEO Ashley Highfield stated clearly that he saw online display advertising as the future of the business, indeed he said that by 2015, online would account for £52 million of revenues - just how difficult that task is can be seen from extrapolating this week's figures out for the rest of this year.

Ashley Highfield
Ashley Highfield:
photo by Ian Forrester
An increase in digital revenues of 8.1% across the whole year would bring in an extra £1.7 million, taking digital revenues for the full year to just £22 million.

As I've pointed out before, print revenues are draining away at a far faster rate: it looks as if £37 million will disappear this year - put another way, Johnston Press is gaining just £1 in digital sales for every £21 in print sales lost.

There can be little doubt that newspaper companies are shrinking in size.  Indeed, it is my belief that the only way local newspaper companies are going to survive is if they become small, low cost, digital and print businesses.

Readers will have to pay for journalism

That's not going to happen unless:

Firstly, readers value news enough to pay the cost of its production.  Journalism is expensive. Traditionally, news has been paid for by advertising, particularly classified advertising such as recruitment, property and motors.  That's not going to happen any more - classified advertising works better online than it does in print.

And, newspaper companies that think that they can build big online classified businesses are deluded.

The internet atomises information - someone looking for a job is not going to go to a news site to find it.  They will go to a specialist job site.  Therefore, businesses that want to make money out of jobs advertising do not need journalists to create an audience.  It follows that they can focus all their attention, and marketing, on producing a far better experience online for job seekers than any newspaper company ever will.

The same is true for every category of classified advertising.  Get used to it.

In fact, anything that you can wrap around news in the hope of subsidising journalism can probably be done better away from news.

So, the best way to pay for journalism is for the reader to pay for it.  In print, that means a much higher cover price.  That, in turn, will mean a much smaller readership as far fewer people will value news at the higher price.

Online, it means some form of paywall. But those who will not pay £1 (or £2 or whatever other price is needed) a day for a print package are not likely to pay £1 a day for a digital package either - news providers, particularly local news providers, are going to have to find a way to let people pay for what they want and nothing else.

That is going to mean a much smaller audience.  A much smaller business.  Which takes me on to my second point:

Secondly, local news companies will be owned by small local businesses.  There just won't be enough money in them to make it worthwhile for large national or international businesses, especially for those with big debts.

Warren Buffett
Warren Buffett: photo by Mark Hirschey
via  Wikimedia  Commons
The current owners look for 20-30% returns on turnover.  Renowned billionaire investor Warren Buffett, recently said he expects a 10% return on local newspapers he has bought, and that he expects that margin to reduce.

It works for him because he says he bought the papers cheaply, but, if he's right, and returns drop to below 10%, it is difficult to see any large business with debt and head office costs, wanting to be part of the local media scene.

If that happens, it seems to me that the most likely scenario is that more newspapers will close down, but will probably be replaced by much smaller, locally-owned businesses.

Wednesday, March 27, 2013

Newspapers' digital strategy amounts to clutching at straws

[Update: I wrote this post on Sunday and was going to publish it later in the week once I'd had a chance to add a few other points, but yesterday's announcement that another 30 editorial jobs were under threat at Johnston Press, has made me bring it forward]

Johnston Press clearly hasn't covered itself in glory over the past decade as it has cast about for a digital strategy, but has it now found the answer to the devastating disappearance of print advertising?

The company was far too slow off the blocks in the transition to digital and, in more recent years, growth has stuttered with revenue reaching £19.8 in 2008, before falling back to £18.4 million over the next three years.  Revenues finally got back above the 2008 figure last year when JP reported £20.6 million in its preliminary results.

However, what worries me most is that I cannot make the numbers add up.

Don't get me wrong.  I am not claiming to have any more foresight than anyone else and trying to read too much into annual accounts is a dangerous thing as they are complex, confusing and, of course, are there to try to persuade investors that the business is on the right track.

Nevertheless, this is the slide which Johnston Press was most excited about in the presentation it gave to investors last week.

CEO Ashley Highfield was pulling no punches.  This is what he said: "In our digital business, the most important number to focus on is that 39% - 39% growth in local online digital display.  This is the future of our business, advertising online and this, for me, is the most encouraging number in the entire deck."

And again, a few moments later in case you missed it the first time round, he said: "The most important number, the engine of our future growth, digital advertising, digital display, up 39%."

So there we have it - online display is the future of Johnston Press.

It might be the journalist in me, but I always worry when somebody gives me a percentage without giving me a base figure.  Digital display is up 39% - on the face of it, that's great news, but what does it mean in hard cash?

Well, luckily, last year, in the presentation of the 2011 accounts, Highfield gave a few more details around actual numbers.  In 2011, online display amounted to a nice round £5 million.  So, a 39% increase would add another 1.95 million, taking the total to just below £7 million.

It's clear from what Highfield said in the presentation that most of this increase has come from bundling digital advertising along with print advertising.  "When I joined [November 2011], just 10% of the time did we include a digital upsell when we sold a print advert. By the end of last year, 40% of the time we bundled print along with digital."

There's a sum in there somewhere which ought to give us an idea of the potential revenues that upselling might bring. 

In the worst case scenario, the extra upsells (ie 30%, as the upsells increased from 10% to 40%) equate to about £2 million, giving a maximum potential revenue from upsell of about £6.7 million.  

In the best case scenario, the extra upselling was all done in the last month of the year and only accounts for about 8.5% of what is available from the extra 30% - that means that the full 30% would be equal to something like £24 million and the total potential is nearer £80 million.

It seems likely that the upsell has been building through the year and the real potential is somewhere in the middle of these numbers.  And indeed, this is supported by the note in the preliminary results presentation below:

This says that the total increase in digital revenue will be £32 million over the next three years - which is the timespan given by Highfield for moving from 40% upsell to 100% - suggesting upsell of print ads might come in at, say, £20 million as Highfield also makes a big play about new national verticals around what's on (a 'sort of Time Out for the provinces') and a wannabe Groupon.

Whatever the exact figures, my concern is two-fold.  Firstly, even at the high end, digital display would not be the saviour of the business.  JP has lost more than £220 million of advertising revenue ... and the print numbers are still falling. £30 million might stabilise the situation momentarily, but it is not going to give the company the sort of money it needs to invest in the future.  And, according to Highfield, it will take three years to get to 100% upsell: in the past three years, print advertising revenues at JP have fallen more than £75 million.

Secondly, JP is too late to this particular bandwagon.  At least one wheel is probably already off.  Banner advertising is hated by consumers, is almost as unpopular with publishers and barely works for advertisers. Plenty of people who are far more qualified than me, believe the end is nigh for the unloved banner.  And as for Groupon ...

So, what's going to happen at JP?

I wish I knew.  Unless there is an extraordinary turnaround on print advertising (unlikely) or the massive hikes in newspaper cover prices (up to 50%) bring in pots of new money (equally unlikely), there are going to be more cuts.

Indeed, Highfield acknowledged as much.  He told investors: "We don't anticipate, or need, 2013 to be as strong a year in terms of cost or headcount reduction."

Cuts made last year will bring another £10 million of savings this year.  "We are probably going to be making something like another £15 million savings over and above that."

Will £15 million in cuts be enough?  Not if Highfield wants to keep his promise to investors that JP will move back into profit growth and print advertising remains on a downward trend.

Although about £7 million will be re-invested in the business (mostly on 'technology and infrastructure'), that £15 million of savings this year will be painful and will involve more job cuts - it's difficult to say how many, but with average FTE costs of about £25,000, it would take 600 to make up £15 million.

I hope I'm wrong, but I don't see how this can be the year that JP halts the profit slide without making far more than £15 million cuts if it is relying on its flawed digital strategy.

Let's hope Highfield has a different trick up his sleeve.

Sunday, March 24, 2013

Newspapers lose £228 million in print advertising and replace it with just £20 million of digital revenue

The full brutality of the collapse of revenues at local newspapers was exposed in the announcement of preliminary results for 2012 by Johnston Press earlier this week.

The company publishes 13 daily papers including The Scotsman, The Yorkshire Post, The Star, in Sheffield, and The News, in Portsmouth.  It also has 230 weekly newspapers.

The most salient points for me were these:

  • Advertising revenues at Johnston Press have fallen £228 million since 2006
  • Recruitment revenues have fallen £120 million since their peak
  • Every lost print pound is being replaced by just 9p of digital revenue
  • Total revenue has fallen £280 million in just five years

As a result:

  • The number of journalists employed by Johnston Press has been cut by 1,000 to 1,558 in four years
  • Overall staffing has fallen by half in five years, from 8,823 to 4,392
  • Total costs have been cut by £144 million
  • Leaving an operating profit of £57 million compared to a peak of £186 million

Which is barely enough to allow the company to pay the interest on the loans it took out when it went on an acquisition spree in the early and middle part of the decade.

I've said before that the depth and speed of the falls in revenue have been such that the major regional newspaper companies in the UK have had little choice but to cut their costs if they were to survive.  I constantly read comments from journalists who blame senior management for the current state of our newspapers, but it is difficult to see what they could have done.

(See also why I believe newspaper digital strategies are doomed to failure).

Recruitment advertising has gone online because it works better on the internet than it does in a newspaper

Look at Johnston Press - according the company's annual accounts, recruitment advertising has dropped by £120 million in not much more than five years.  That money did not disappear because of decisions made by management: it disappeared because recruitment advertising works better online than it does in paper.

Waiting til next Wednesday to browse through a couple of hundred ads in the supplement of your local paper, just doesn't stack up against the always-there, searchable, thousands of vacancies on Jobsite or any of the other big jobs boards.  Add to that the ability to set up alerts or post your CV and, in truth, it's amazing that Johnston Press still has £14.6 million of recruitment advertising in print.

It's possible to argue that the company - or at least, its managers - have done a pretty poor job of building up the online recruitment business.  While £120 million jobs advertising has disappeared from print, the company has attracted barely £7 million from that category online.  And, while the company seems to take the somewhat quaint view that much of the fall in recruitment revenues is cyclical and will return when the economy recovers, evidence elsewhere suggests that much more could have been done.  Over at my former employer DMGT, for example, its preliminary results (PDF) for 2012 report that its recruitment business, Evenbase, brought in £11 million operating PROFIT.

As an aside, DMGT reported total digital revenues of £93 million as opposed to the £20 million reported by Johnston Press.  JP's business case would look very different if they had grown digital in the way that DMGT has.
However, don't be fooled into thinking this would have saved the journalists' jobs.
It appears that DMGT noted very early on that recruitment online was a standalone business and did not require the expensive baggage of a newspaper - and all its journalists - to succeed. It wasn't just chance that DMGT moved its big classified online businesses away from Northcliffe about 10 years ago. Nor was it just chance that when Northcliffe (DMGT's regional newspaper business) was sold off at Christmas, the digital classified money-makers were not included in the deal.

(I said at the time that I thought that this made it difficult to see how the new owners, Local World, could make the regional business work).

It's also worth noting that Northcliffe's slashing of journalists' jobs has been the equal of Johnston Press.

There was a time when recruitment advertising was the biggest advertising category in a regional newspaper and, combined with the rest of classified (property, motors and other), it made up well in excess of 50% of all revenues.  Back in 2004 (PDF), for example, Johnston's had £117 million of recruitment ads in a total of £281 million of classified ads.  Display ads took the total advertising revenues up to £370 million, with just £70 million coming from newspaper sales.

The perfect storm for regional newspapers arose because they had such a heavy reliance on classified advertising and classified advertising works so much better online than in paper.  Add the fact that without the need for expensive journalism, online classified operators could charge advertisers far less, and it is hardly surprising that almost 90% of JP's in print recruitment advertising has disappeared.

Some classified has fared slightly better, notably property advertising.  This is probably because not all property advertising is about listing properties for sale.  Estate agents have long argued that the main purpose of their advertising was not to sell houses, but to build their brand so that people would put their houses up for sale through them rather than their competitors.

Nevertheless, classified advertising in print has fallen by more than two-thirds at JP in the past six or seven years.

Last year, at just £14.6 million Johnston Press' in-print recruitment advertising had fallen from being the highest category of revenue for the business to the lowest.

Nobody asked cart makers to save carts when Henry Ford came along

I guess the point that I am trying to make is that the problem facing regional newspapers is largely not of their own making.  The disruptive force of the internet has destroyed the very foundations on which the business was built.

People like to compare what is happening to newspaper companies with what happened to cart makers when Henry Ford came along, but it is not the same.  Cart makers could become car makers, or even just service garages for the big manufacturers - nobody asked them to save the cart.  The problem for the hitherto newspaper publishers is that they are businesses, but they are being asked to save the newspaper or, at the very least, journalism.  However, we have to accept that it is simply not their job to save anything other than their own businesses.

Thursday, February 14, 2013

Trinity Mirror move to digital focus means 40 fewer jobs

Trinity Mirror's move to a focus on a digital future will see 92 journalists losing their jobs in the company's regional newspaper business.

However, 52 jobs will be created  - 26 at the company's national operation and 26 in the regionals - meaning that the net loss will be 40.

The difference between the value of online advertising and that in the print medium is such that any newspaper company switching its focus from newspaper to digital must make huge cuts to its workforce.

In line with most companies, Trinity Mirror says that new, more efficient ways of working mean that cuts in the number of journalists does not necessarily mean a reduction in the quality of its journalism.

Can that be true? And does Trinity Mirror have any choice?

It is difficult to do direct comparisons with the past because of the number of acquisitions and disposals, but a measure of the collapse in revenues at regional newspaper companies can be found by looking at Trinity's annual accounts for 2000 and 2011 (the most recent available).

Total revenues in the regional business in 2000 grew by 3.7% to £424.7 million.  Last year, they fell by 8% to £139 million. In other words, two-thirds of the revenues have disappeared in the past 12 years.

Revenues have fallen by almost £286 million.  In the 'good old days', profit was £106 million - last year, it was just £16.9 million.

In lots of ways, £16.9 million profit is an amazing performance, but it shows the brutal depth of the cuts that have already been made.  I know the business has changed enormously over the past 12 years, but, if costs had remained at a similar level, the revenue fall of £286 million would have meant the company would have lost £180 million last year!

Add back the £16.9 million profit that the company made last year and you can see that the costs have come down by a staggering £197 million in just 12 years.

Of course, some of these costs will have fallen away naturally: if your circulation falls by 10%, you can print 10% fewer papers (in fact some Trinity titles, like the Newcastle Chronicle, have fallen by more than 50%); if you are selling far fewer advertisements, you can print far fewer pages.

But massive savings have come from reducing staff numbers in all areas of the newspaper.  According to the annual reports for the year 2000 and 2011, the number of people employed in 'production and editorial' has fallen from 6,898 to 3,001 - a fall of 57%.

Again, I have to stress that Trinity Mirror has made a number of acquisitions and disposals during that decade so we are not comparing like with like, but a fall of 57% does not feel out of step with my own experience in the newspaper industry over that period.

(For one view of what the drastic cut in the number of journalists has done to local (and, to a certain extent, national) newspapers, read Nick Davies book, Flat Earth News, which I have talked about on this blog previously)

And that brings me all the way back to Trinity Mirror's statement that changing the way staff work will mean that it can cut the number of journalists it employs without cutting the quality of its journalism.  More than that, while taking out another 40 editorial jobs, the company will launch a drive to increase and improve its digital offerings.

What are the changes that Trinity Mirror will make to create the spare resource to step up its digital work at the same time as further reducing its staff?    They are listed below.  For what it's worth, I think it will simply add to the downward spiral which sees falling revenues matched by cuts in the quality of the product, leading to further falls in revenue ... and further cuts in costs.

So, the changes:
  • Closer working between the national and regional titles, with more content being shared across all of Trinity Mirror's newspapers and digital platforms. (ie fewer local stories)
  • Greater emphasis on the production of digital content, including breaking news, pictures and video.
  • A much enhanced focus in the regional titles on the curation of community content, which has already proved popular with readers. (Plenty of self-interest news)
  • A shared content unit based in Liverpool, producing high-quality, non-local material for all of Trinity Mirror's regional newspapers and digital channels. (Non-local content for the local papers?  What could go wrong?)
  • The creation of a number of new roles at the national titles for writers and photographer/videographers, plus a number of new digital roles. (92 jobs lost in the regional papers, some of the new jobs (26) going to the national titles, means that, in fact, the number of jobs lost in the regions is 66).  However, it does mean that there are 52 new 'digital' roles - jobs which Trinity Mirror thinks cannot be done by traditionally trained journalists - they want people with a wider skill set.
Does that make the decision to go 'digital first' wrong?  I don't necessarily think so - I don't believe that traditional print companies have much in the way of options.  They have to move more and more into digital: it's clearly where the future is.  From the point of view of journalists, those new offerings at a local level are always going to be a smaller business - we will never get back to the situation where cities like Leicester, or even Derby, can support 120+ journalists for a local news service.

The huge classified revenues that supported the cost of journalism have gone online and they don't require the expensive editorial costs to make them work (they sit on standalone sites like Jobsite or Rightmove).

That pretty much leaves the journalists on their own, trying to make a living out of news.  Perhaps people will pay, but not enough to support big numbers.  The newspaper companies will try to keep their papers going to bring in revenues, but without cuts, they would already be making a loss and, as Nick Davies points out, the big publicly quoted companies simply cannot stomach that.

Monday, February 11, 2013

Newspapers losing print revenue far faster than they can gain digital income

One of the biggest problems facing newspaper companies as they seek to move to a digital future is highlighted by a report published last year by the US Pew Research Centre.

In a study of 40 newspapers - based on data supplied and interviews with newspaper executives - Pew discovered that for every $1 gained in internet revenues, the newspapers were losing $7 in print revenue.

In an article published today, Pew says that the situation has got worse: "By the end of 2012, the numbers were considerably grimmer for the sector as a whole - $16 in print losses for every digital dollar gained."

"The case studies come from  "The Search for a New Business Model" released by Pew Research Center in March 2012," says today's article.

"Based on data provided by nearly 40 newspapers and interviews with executives at 13 newspaper companies, that study found that in general, the effort to replace losses in print ad revenue with new digital revenue was taking longer and proving more difficult than executives wanted."

Despite this fairly depressing outcome, the report did highlight what it thought was a few signs of hope with six 'outliers' either managing to offset print losses with digital gains, or at least coming very close to doing so.

However, even this glimmer of hope may have been extinguished.

"Pew Research tracked those outliers and found, as a reminder of the fragility of the business, that in the course of several months, two had suffered significant revenue declines and three others were part of a company undergoing a major organizational restructuring that made it difficult to draw conclusions about their economic health," says today's report.

Editor tells FT journalists he's cutting jobs to secure a 'world class, financially sustainable news organisation'

The Financial Times is cutting 35 journalists from its staff as it shifts to a strategy which puts the web ahead of its newspaper.

In an email to staff, editor Lionel Barber says that net reduction in editorial staff numbers would be about 25 people 'after the introduction of 10 more digital jobs.'

"We need to ensure that we are serving a digital platform first, and a newspaper second. This is a big cultural shift for the FT that is only likely to be achieved with further structural change," he said.

In an earlier message to staff, Barber had said that 2013 would test the newspaper's resolve to move further and faster to support top quality journalism in a rapidly changing media landscape.

"I now want to set out in detail how we propose to reshape the FT for the digital age. We need to do less in certain areas and more in others, we need to be much more nimble, and we need to reshape our teams.

"Today we have started consultations with the NUJ with the aim of opening up an initial voluntary redundancy scheme. The intention is is to reduce the cost of producing the newspaper and give us the flexibility to invest more online.

"Our common cause is to secure the FT's future in an increasingly competitive market, where old titles are being routinely disrupted by new entrants such as Google and LinkedIn and Twitter.

"The FT's brand of accurate, authoritative journalism can thrive, but only if it adapts to the demands of our readers in digital and in print, still a vital source of advertising revenues," he said in the email sent on January 21st 2013.

Barber revealed that a visit to Silicon Valley had convinced him of the speed of change, with competitors harnessing technology to revolutionise the news business through aggregation, personalisation and social media.  "It would be reckless for us to stand still."

"Of course, we must stick to the tested practices of good journalism: deep and original reporting based on multiple sources and a sharp eye for the scoop.

"But we must also recognise that the internet offers new avenues and platforms for the richer delivery and sharing of information. We are moving from a news business to a networked business," he continued.

The paper will now shift resource from night work and from print to digital.

"I am determined that we do everything we can to secure the FT's future as a world class, financially sustainable news organisation.

"Our earlier decisions to raise prices, charge for content, and build a subscription business have proven to be bold and wise.

"While many of our rivals have struggled to find a profitable business model, and have therefore announced heavy job losses, we have been industry pioneers. This is not the moment to falter," said Barber.

He is now seeking to introduce a number of changes aimed at reducing the resource needed to produce the newspaper so that, despite the reduction in staff numbers, more people can work on the web. Those changes include:
  • Common ad shapes across editions to reduce the number of 'tweaks' made to pages
  • A more common international edition with common fronts and second fronts (ie far fewer changes in editions)
  • A restriction in the number of changes between two US editions
  • A 'paring back' of the UK 3rd edition
  • Tighter control of pagination (ie fewer pages)
"We must rethink how we publish our content, when and in what form, whether conventional news, blogs, video or social media," he said.

In common with all newspaper companies moving to a 'digital first' strategy - recognising that online revenues are almost always smaller than print revenues around news - the changes are designed to create savings, about £1.6m a year in the case of the FT.

"This will be an opportunity for all of us to think harder about a more dynamic and inter-active form of FT journalism beyond the printed word. This is vital to drive deeper engagement with readers and build our subscriptions business," he added.

Sunday, February 10, 2013

Why does a digital-first strategy for newspaper companies always mean fewer staff?

This article is under construction!  I am trying to marshal my thoughts on the subject, but thought I'd put them out there in the hope of attracting constructive ideas and responses.  Please feel free to leave comments.

The FT is the latest in a number of newspaper companies to announce a digital-first strategy, shifting its focus from the traditional print product to 'a more dynamic and inter-active form of journalism.'

In an email to staff, FT editor Lionel Barber said the move would mean the loss of about 35 editorial jobs, although this would be offset by the employment of 10 more digital jobs. "We need to do less in certain areas and more in others, we need to be much more nimble, and we need to reshape our teams," he said.

This followed a trend that has been going on for some time now and comes fast on the heels of similar announcements by both Trinity Mirror and Local World, the new-formed company which recently bought Northcliffe from  DMGT and Iliffe from Yattendon, giving it control of titles such as the Leicester Mercury, Nottingham Post, Derby Telegraph and Bristol Post.

The issue facing regional and local newspapers has been more pressing than that faced by national newspapers because of the different make-up of their main revenue streams.

Most people tend to think the biggest issue facing local papers is the fall in readership.  That may be the case now, but it was not what plunged the industry into crisis in the first place.  Regional papers have been losing readers for several decades now and yet their most prosperous era was in the early 90s when advertising was plentiful and costs had come down through a combination of new technologies and smaller print runs because of the falling audience.

No, on the face of it, what threatened the very existence of local newspapers was not falling readership, but the sudden and complete migration of certain parts of their advertising revenues to the internet.

Traditionally, local papers have received a far greater proportion of their income from advertising than circulation revenue (perhaps as much as 60:40) as opposed to the situation in the national press where the position is reversed (possibly 40:60).

The threat to local papers has been exacerbated by the fact that the majority of their most-profitable advertising came from the main classified verticals: jobs, property and motors, the very advertising that works best online. As a result, this has been the advertising that has moved most quickly, and most completely, to the web, leaving the local papers with a massive hole in their budgets.  In the late 90s, some of the bigger regional titles were making anything up to £15m profit a year, but this was underpinned by recruitment advertising of a similar level.

Over the past decade, almost all of that recruitment advertising has disappeared.  I doubt now that any regional paper is attracting even £1m from jobs advertising.  Property and motors advertising has suffered in a similar way.

Not only has the advertising disappeared online - mostly to competitors - but that which the newspapers have managed to attract on to their own digital offerings, has been sold at a far lower rate than anything in the papers.  See my post on the Pew research into this.

With a limited appetite for pushing up the cover price of their newspapers, regional publishers have reacted by slashing costs to keep their newspapers in profit.

The most obvious place this has shown is in the number of redundancies in local papers.  These have come in all areas of the business, but the journalists have not been immune.  Newspapers like the Derby Telegraph would have had more than 110 journalists 15 years ago.  Larger papers - the Nottingham Post, the Leicester Mercury - would have had even more.  Now, they operate with perhaps half or even a third of that number.

Costs have also been cut by reducing the number of editions.  Almost all regional papers used to publish multiple editions, some based on geography (allowing greater coverage of each area), others based on time.  The first newspaper I worked on, the Grimsby Evening Telegraph, had a late edition that went to press at about 4pm.  Now, the geographic editions have (almost) all disappeared and most regional dailies print a single edition in the middle of the night so that it can be distributed with the national papers first thing in the morning.

With fewer journalists producing fewer pages in fewer editions, newspaper sales have collapsed.  According to HoldtheFrontPage, audited circulation figures for major regional papers looked like this in 1999: 

Wolverhampton Express and Star  183,759       
Manchester Evening News            173,179
Liverpool Echo                            155,920
Newcastle Chronicle                     107,511
Leicester Mercury                         102,640

By the middle of last year, those same titles were selling:

Wolverhampton Express and Star  100,244       
Manchester Evening News            78,984
Liverpool Echo                            80,762
Newcastle Chronicle                    49,199
Leicester Mercury                        45,465

That represents a fall of more than 50%.

The regional newspapers now find themselves caught in the perfect storm - key advertising streams have disappeared, they've responded by cutting the quality of their products and their readers have fled to the internet.

The affect on national newspapers has not been as pronounced simply because they did not have the same reliance on classified advertising as the regional papers.  But the latest circulation figures for national papers do not make good reading.

The Independent is down 34% in a single year - perhaps partly explained by the growth in its sister title, the i, which is up 20%.  Everything else is down: the FT by 13%, the Daily Star by 14%, the Sun 12%, the Guardian 11% and the Daily Mail by 7%.

So, although the nationals do not have the same reliance on classified advertising as the regionals, they are finding their key revenue stream - circulation income - under attack.

Which brings us to the FT announcement and why all newspapers are not only looking to digital for their future, but are having to do it with fewer staff.