A personal view on newspaper groups as Reach's ‘shares tank on profit warning’ - chalk up another victory for defeatism as management and owners ‘manage decline’
By Harry Mottram: As a one-time news reporter and feature writer at some of Reach’s titles – formerly Trinity Mirror – my attention was grabbed when I saw Jo Francis’ article on Print Week that the firm’s shares had lost 25% on an announcement of a profit warning.
The journalist wrote: “In a Q4 trading update this morning (11 January), Reach said that it expected operating profit for the full year to fall below market expectations ‘by mid-single digits’. Analysts had been expecting the group to post sales of £602.5m and an operating profit of £112.8m. Reach’s shares tanked in early trading, falling by 30%. The price was down 28% at 78.67p at the time of writing. The 52-week high is 282p, low 64.40p. Despite Reach’s focus on growth in its digital offering, digital revenue fell by 5.9% in the three months to 25 December, while print sales were down 3.6%. Print circulation revenue was up 1.8% on the back of cover price increases, while print advertising was down 20.2%.”
The newspaper industry has been in decline since the late 1990s when the internet began to take advertising revenue with sites like e-bay, Facebook etc cleaning up the classifieds. As websites began publishing news online for free and 24hr news became the norm on TV readership began to fall off. At the Bristol Evening Post the news of declines in circulation were greeted with gloomy faces in the newsroom – because every fall led to redundancies and cuts to the number of sections in the newspaper.
Not just at Reach but at Newsquest and other newspaper groups I had worked at as staff were shed and cuts were made to all aspects of the business. From vacating town centre offices for smaller units where hot desking was the norm to salaries kept down and printing centralised at print hubs. It has been 25 years of a downward spiral.
But it didn’t have to be like that. I always remember my line manager telling me as he handed out redundancy notices to me other editorial staff that he was ‘managing decline.’ Chalk up another victory for defeatism. This was in a publishing company that didn’t see websites as the future and gave away the news for free without a pay wall. Ian Hislop of Private Eye summed it up when he said (and I am paraphrasing his words) that gathering news is a very labour intensive and expensive business – so why give it away? Private Eye for example only has a basic website and has seen its circulation rise as it features an increasing amount of serious investigative journalism that is not readily available in some newspapers - that are a pale shadow of their past selves.
The main casualty (apart from staff cuts) with this ‘managing decline’ mentality has been scrutiny of public and private organisations. From town councils to county councils – there are too few reporters to attend meetings and ask questions. Local Democracy Reporters funded by the BBC are great but each time they have been embedded in newsrooms the owners of the newspapers have often sacked their own reporters.
It is a universal problem for newspapers but paywalls and subscription models for The Times and The Guardian have had some effect in generating income but advertising revenues from online ads don’t match the premium value on ads in newspapers. Advertisers prefer paper as they know the reader will look at all the pages and having either paid for the title or had a free newspaper come through the letterbox are more likely to be influenced. Most publishers have always relied on associated products from magazines to supplements – today those spin-offs include podcasts, blogs, online radio and TV news along with promotions for holidays, wine – you name it.
I was told on several occasions at different newspapers by managers that the newspaper would continue to be published despite the near lack of news inside as they were the cash cow for the owners. Shareholders demand profits and if that meant cuts then so be it – a policy which was destroying the very product they prized in the long run.
There has been an increase in smaller niche local newspapers – often free and sometime paid for community publications but these do not replace the traditional local newspaper that were seen as publications of record. I recall writing up flower show results, all the local planning applications and even GCSE results. That has largely gone – along with detailed accounts of council meetings when gaffs could reveal serious stories – now largely not covered. That’s a loss – and the news that Reach are planning another £30 million pounds in savings sounds the death of many a local, regional and even a national title. Reach like other newspaper groups and have raised the white flag as they look to diversify away from newsprint to an uncertain future.
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