We need to take a measure of the agony of the regional press in the UK at this point: it will never get worse. 2013 will be the Annus Horribilis – or Mirabilis. If it does succeed in crossing the Chasm into digital profit, then it will be much smaller, with better margins, lower debt and worse cashflow. And it will employ far less people. And if it fails, then it will just become media history, a fascinating story of the failure of the media to re-wrap content for changing audiences. The first British newspapers, the coffee house prints of the early eighteenth century (Lloyds List is the classic) are now B2B data services. And my litmus paper remains, as ever, Johnston Press. Trinity Mirror’s issues are confused by its national interests, LocalWorld (David Montgomery and Northcliffe) has too much to do across a vast range of very different titles to be in with a reasonable chance. But Johnston (Scotsman, Yorkshire Post and 200 or so other titles) was a well-run business with a reputation for squeezing every extra penny from advertising sales. Markets loved it: this was a a 350p share price in 2007 (as Media Guardian reminded us on 25 March), valuing the company at over £1 billion. The share price was down as far as 4p two years ago, but the current management team have recovered it with good decisions on debt and staffing to 16p, valuing the company at around £100m. Staff is cut by a third, the albatross is still the debt and the interest rates, and there appears no likelihood of a print advertising recovery (15% down last year, 16 % down in the first 10 weeks of 2013). This will never now return. The big plus is an industry-leading 17% margin and £57m in operating profits. Digital advertising is growing fast but is still only £20.6m in revenue. So what do we do in make or break year?
In charge at Johnston Press is Ashley Highfield, and as I have commented several times already he has some huge advantages: he has no experience of the regional press (a vital quality for a clear mind), he was the Big Idea man who gave the BBC the iPlayer, and, as an ex-Microsoft man, he understands software and consumers. And he has survived a most difficult and dangerous year with a degree of success that would have surprized investors in 2011 when he arrived. So far so good. But this year will be another steep climb. If advertising continues in print in this way then more titles must close and overall manning has to be reduced: it is hard to argue against the proposition that the headcount of 4350, reduced by 23% last year, must fall again by up to 1000. This is a tragedy, but one of the roads to survival which does not work well in a traditionally-organized, heavily unionized industry is the idea that the future is freelance and outsourced. Where titles close they have to leave behind digital space fillers to try to hold the constituency and the brand in place while new communities are built online. Johnston has plenty of websites but few real communities, so the current push in the group towards mobile apps is very valuable, and could help with the dying demographic, where readers are still expiring faster than they are being created.
So far the digital push has amounted to some 20 tablet and mobile apps and some 200 “mobile websites”. And DealMonster, a coupon-based bargains site that I have been playing with for the past week (www.dealmonster.co.uk). There digital display works very well. It needs video and could well develop a “magazine” feel around its regions, but if the idea is that digital display answers everything then I must declare myself agnostic. What I really miss so far in the Johnston response is the evidence of re-invention nationally inside new models and disciplines for hyperlocal-to-national device-based news. DealMonster is good, but if display eats all the energies that the struggling company can expend, then the drive to subscription-based news, the only high ground in this territory, will suffer. DealMonster is good, as long as it does not eat the CEO and his ability to think outside of the regional box.
Now, if you were going to build a subscription -based hyperlocal news environment, would you start with a regional newspaper? Its a moot point, but I could argue that if Johnston can keep their local brands visible on the device then they start at a good point for attracting user-generated content, and freelance attention. But notice how perversely un-local much of the local press in the UK has become. Great if you want what happened in the local courts, or local government, fine on local professional sport and all football, wholly inadequate on what happened after the car crashed into a lamp post at the corner of your street. Local news has a social media dimension wholly missing from the things that local newspapers do online. We are always told that local advertising has huge value in introducing buyers and sellers: years spent discussing online classifieds at Fish4 convinced me that buyers have their own local boundaries and only online can release the flexibility they need. If you live this side of the motorway you don’t go food shopping on the other side. You will travel 50 miles for cheap tyres but only 3 miles for cheap shoe repairs. The whole business of circulation territories defeats what digital does best for user convenience.
So can Johnston Press do all of this fast enough to successfully cross the chasm? Cost-cutting and the return to break-even buys time. But the Project is not transitional – it is simply about Re-invention. Time now is very short indeed. Next year it will be easier to re-invent without the constraints of owning all these failing assets.keep looking »