At Trinity Mirror’s nationals, the worst recession in living memory feels like a blip

Posted by Peter Kirwan on 4 March 2010 at 13:08
Tags: Associated Newspapers, News International, Trinity Mirror

Some news organisations have had a half-decent recession. Trinity Mirror’s nationals rank among them.

This morning, Trinity Mirror released its final results for the year to December 2009. Ad revenues at the Daily Mirror and its stablemates fell by 8% during 2009. That’s far less than the chunky double-digit percentage declines that afflicted many broadsheets.

But at tabloids like the Mirror, circulation is more important than advertising. At Trinity Mirror’s nationals, for example, circulation comprises almost two-thirds of overall revenues. During 2009, these revenues held steady at the Mirror and its stablemates, declining by a mere 0.5%.

Add it all up, and Trinity Mirror’s nationals have emerged relatively unscathed from the worst recession in living memory. Overall, revenues declined by just 3.2% YOY to £460m. On the bottom line, operating margins were barely disturbed. In 2009, these declined to 18.2% from 18.7% during the previous year.

It’s hard to call this a recession: it feels more like a blip.

Sly Bailey and her management team will feel good about this performance. The comparison with the Mail and the Mail On Sunday is suggestive.

At Associated Newspapers, home to the Mail and the Mail On Sunday, like-for-like ad revenues fell by 15% during the year to October 2009, and then by a further 11% during Q409. Although it’s hard to make a direct comparison, circulation revenues seem to have fallen more rapidly at Associated, too.

As always, however, there’s a sting in the tail. Readers have stopped buying newspapers during this recession in big numbers.

Between July and December alone, the number of national newspapers sold by Trinity Mirror declined by up to 10%.

Trinity Mirror mitigated these big declines by hiking cover prices. During 2009, the Daily Mirror rose from 40p to 45p, and the Daily Record from 60p to 65p.

But if readers’ willingness to buy newspapers continues to decline at the current rate, an awkward question presents itself.

In a world where the Daily Mail costs 50p and the Sun costs anywhere between 20p and 35p, what’s the most that Sly Bailey can charge for a copy of the Daily Mirror?

London Lite may be dead, but free distribution has a big future

Posted by Peter Kirwan on 10 November 2009 at 16:41
Tags: Associated Newspapers, Daily Mail & General Trust

Farewell then, London Lite.

In a column in this month’s print edition, I argue that the freesheet’s demise doesn’t signal the end of large-scale free distribution. More likely, it’s the end of the beginning.

Journalists look down their noses at freesheets for all kinds of reasons. In particular, we tend to think of paid circulation and free circulation as polar opposites.

Buying a newspaper involves a considered choice. It’s a transaction that involves brand loyalty, something advertisers are keen to piggyback upon. Affinity is implicit in the deal: readers of paid-for newspapers are typically regarded as self-selecting demographic communities.

By contrast, freesheet distribution looks like a classic case of interruption marketing. Street vendors shove copies under the noses of consumers, apparently indiscriminately. It’s easy for advertisers – and the rest of us – to believe that freesheet readers are less engaged, and therefore less valuable.

Increasingly, though, I wonder about this. Recently, I talked to an editor — on a paid-for title — who argued the merits of free distribution. He had this to say about the circulation of one London freesheet:

They know how many copies each of their distributors is likely to hand out on a given day, at a given time, on a given street corner. They know that putting their distributors in certain locations at certain times of the day will maximise their distribution. They’re getting very close to a situation in which they physically hand a copy of the magazine to everyone who wants one.

His point was that freesheet distribution is more efficient than paid-for distribution.

It may also be just as effective. Last month, Frederic Filloux, a former Liberation journalist who now works as a consultant for Schibsted, had this to say about the launch of 20 Minutes, the Parisian freesheet:

We had detailed sets of data showing, who, where, at what time of the day, people where passing by 800 points of the greater Paris; we picked the spots — entrances of subway or commuter train stations, high density street corners —  that were of the highest interest to us.

Note that mention of “who”. The science of free distribution isn’t just about numbers. It’s about the demographics of footfall, too.

For example: shortly after launching 20 Minutes in 2002, Filloux’s researchers noticed that the paper’s circulation was skewed towards male readers.

They quickly discovered the reason for the skew: women tend to turn up at train stations later than men in the mornings (because they have to take the kids to school or nursery). Keeping the distribution bins stocked with copies for half-an-hour longer in the mornings solved the problem.

Filloux continues:

After a while, our distribution and marketing team were able to pinpoint exactly where a certain category of people would show up. That proved to be of great value to advertisers; when they wanted to target a particular segment for a commercial operation, such as distributing samples of their product, the yield we delivered was unprecedented.

When editors and publishers insist they’ve achieved “unprecedented” results on behalf of advertisers, it’s worth being wary.

But still: the distribution system that Filloux describes is far from random. Arguably, there’s just as much intelligence operating behind the scenes here as there is in the ancient and venerable business of newsstand distribution. Perhaps more.

It’s easy enough to deride the content of freesheets. But it’s harder to deride the distribution mechanism, which secures both reach (and if Filloux is to be believed) desirable demographics. Advertisers lust after both.

Free distribution has a big future ahead of it. If the Evening Standard succeeds in replacing £12m or so in lost circulation revenue with additional advertising revenue, that future could arrive sooner rather than later.

Deal or no deal: DMGT emerges £20m ahead after freesheet wars

Posted by Peter Kirwan on 29 October 2009 at 14:11
Tags: Associated Newspapers, Daily Mail & General Trust, News Corp

Unlikely as it might seem, the disappearance of The London Paper, the pending closure of London Lite and the Evening Standard’s switch to free distribution represents a enviable trio of victories for Daily Mail & General Trust.

Compare DMGT’s current situation with its context a year ago:

• The Evening Standard is no longer costing DMGT’s shareholders £10m a year in losses. . .

• . . . but DMGT retains a 25% stake in the Standard, and will therefore benefit if its free distribution model succeeds.

• Following the closure of The London Paper, News Corporation is no longer a tiresome irritant in London.

• DMGT’s London Lite will soon be gone, taking annual losses of £10m with it.

• DMGT should now be able to nurse Metro — rumoured to have made profits of £8m a year when times were good — through the rest of the recession. Cutting losses elsewhere should allow DMGT to bid handsomely for a renewed distribution deal with Transport for London.

• Presumably, the future also looks slightly brighter for the Mail and the Mail On Sunday.

DMGT’s hold on London continues to look reasonably strong, and the balance of risks has improved. For good measure, DMGT has improved the annualised profit potential of Associated Newspapers by £20m or so.

This is important. The speed with which newspaper owners can cut costs remains the only factor that differentiates them from one another in the eyes of short-termist investors. It will take Trinity Mirror’s bean-counters months to grind out the same kind of savings at Fort Dunlop and elsewhere.

No wonder some see this sequence of events as too good to be true. Hence the nods and winks delivered by Steve Busfield at Media Guardian this week:

Was a deal done to end the ear-bleedingly expensive London freesheet wars? Will DMGT now offer a shared ownership or printing deal to News International for Metro? I’m sure that such a deal, were it to have been done, would breach some kind of anti-competitive rules.

No doubt. But consider the risks of an anti-competitive side-deal. If discovered, it would provoke a huge outcry. With good reason, the chief executives of quoted companies (and their lawyers) tend to be very worried about the risk of discovery.

In any event, the rough equivalence in terms of the outcome for DMGT and News Corporation suggests that there was limited room for a stitch up.

In the year to June 2008, The London Paper lost £12.9m on News Corporation’s behalf. This year’s losses will have been larger. They might even have approached £20m — roughly the amount that DMGT has saved on an annual basis by selling the Standard and shutting Lite.

If News Corporation wanted a side-deal, its only bargaining chip would have been the nuisance value of continuing to publish The London Paper. With News Corporation under pressure from investors to bolster margins within its newspaper division, that threat had lost much of its credibility.

If DMGT and News Corporation agreed something on the side, no doubt we’ll find out soon enough. But the numbers suggest that it really wasn’t necessary.

Ad revenue gloom continues at DMGT

Posted by Peter Kirwan on 29 September 2009 at 10:19
Tags: Associated Newspapers, Daily Mail & General Trust, Northcliffe Media

This morning brings a carefully-worded trading update from Daily Mail & General Trust. Quoted companies use trading updates to “guide” the market toward reasonable expectations for full-year results. DMGT’s financial year finishes in early October. The company will report full-year results on 26^th November.

I said the statement was carefully-worded. Actually, the lack of any sign of an improvement in national newspaper ad revenues is disappointing.

Some relative improvement is visible at Northcliffe (smaller YOY declines in ad revenues). Yet local newspaper revenues continue to decline at an alarming rate.

It bears repeating: with circulation revenues stagnant at best, we need an improvement in ad revenues before we can start talking about any kind of sustainable recovery for the newspaper industry. At DMGT, there’s no real sign of this happening yet.

Associated Newspapers:

This is what we knew about ad revenues at Associated up until this morning:

Q408: -8%

Q109: -23%

Q209: -15%

And this is what we learned this morning:

Q309: -16%

Interestingly, DMGT didn’t offer a number for display advertising performance at Associated during Q3. Nor is there any mention of digital revenues. Depending on your perspective, you might choose to find this worrying.

July and August, it seems, were a nightmare:

Whilst Associated’s total advertising revenues in July and August were down by 21%. September has been better, although trading remains volatile from week to week with little visibility on future advertising performance.

Note that suggestion of “little visibility”. Associated said the same in July about Q2. The coded implication? Despite the talk of economic recovery, the slump in national ad markets continues unabated.

Northcliffe Media:

Here’s what we knew up until this morning:

Q408 (UK ad revenues): -27%

Q109 (UK ad revenues): -36%

Q209 (UK ad revenues): -33%

And here’s what DMGT told us this morning about Northcliffe in Q3:

July & August 2009: -26%

September 2009: “continuing improving trend”

And here’s what we’re told about that “continuing improving trend”:

Absolute weekly levels of advertising revenue have stabilised and year-on-year rates of decline are now showing improvements.

This sounds positive enough. Typically, local newspapers are are an early-stage recovery play. Yet these YOY declines still feel stubbornly high.

Remember, too, that DMGT’s local newspaper ad revenues have been declining at a significant rate for well over a year now. In July and August 2008, for example, the YOY decline was 23% — not much different from what’s happening now.

The only real bright spot was reserved for investors. DMGT has cut its costs by £150m this year. Across Associated Newspapers and Northcliffe Media, 1,500 jobs (around 15% of the workforce) have gone during the past 11 months.

As a result, DMGT says that it “confident” that it won’t disappoint market expectations of profitability for the full year. In particular, cost-cutting means that Northcliffe’s profitability actually improved YOY during August and September.

For small mercies like this, if that’s how to describe them, we should be grateful.

The 20/20 Scenario: After a year of recession, what’s next for ad revenues?

Posted by Peter Kirwan on 2 September 2009 at 12:51
Tags: Associated Newspapers, Independent News & Media, Johnston Press

Deflation will put an end to the supermarkets’ advertising jamboree

Posted by Peter Kirwan on 22 June 2009 at 22:51
Tags: Associated Newspapers, Media, Northcliffe Media, Trinity Mirror

Northcliffe & Associated: Desperately seeking an upturn

Posted by Peter Kirwan on 22 May 2009 at 12:17
Tags: Associated Newspapers, Daily Mail & General Trust, Northcliffe Media

Bang: this is where things get really tricky. DMGT’s results for the six months to 29^th March demonstrate how badly the news business needs a post-Christmas upturn, as forecast by the Chancellor.

Northcliffe Media avoided lurching into the red by the narrowest of margins.

DMGT’s regional newspaper arm announced UK-based operating profits of £3.2m on revenues of £142m. I’ll bet Michael Pelosi’s bean-counters scrutinized the underside of every stone on Derry Street to squeeze out that £3.2m.

At Northcliffe, operating costs are already 20% down on last year. “Further significant reductions” are planned.

Where are the green shoots? Conspicuous by their absence. During the six months as a whole, Northcliffe’s ad revenues declined by 31%. For April, the number was worse: -36%. Here’s what passes for a positive:

In total, advertising revenues in the last 15 weeks have remained steady with the exception of recruitment.

So rising unemployment — it started late, and will continue for a long time — is what’s now pulling down the numbers at Northcliffe. For the six months, recruitment ads were down 47%. In April? Down by 63%.

Look, too, at how the downturn is squeezing the rest of DMGT’s business. Overall revenues are down by 7% YOY, but operating profits collapsed by 30% YOY, from £166m to £116m.

Even if Lord Rothermere wanted to cut Northcliffe some slack based on good results elsewhere, he can’t. Cost cutting must be universal now.

To be fair, the rest of the damage for DMGT (in terms of profitability) is all down to Associated Newspapers, which is rapidly heading down the curve in Northcliffe’s wake. (Operating profits down from £44m to £18m YOY).

Ad revenues at Associated Newspapers were down by 15% YOY during the six-month period. For Northcliffe, DMGT offers a glimpse at April’s data. For Associated, it doesn’t. This suggests cause for concern: presumably, ad trading at Associated during April wasn’t impressive.

Mr Dacre, I’ve got a gentleman from the marketing department on the line for you. . .

Posted by Peter Kirwan on 24 February 2009 at 17:53
Tags: Associated Newspapers, Daily Mail & General Trust

Seen the Daily Mail’s front page splash today? 

Social websites “harm a child’s brain”.

This follows last week’s corker on Facebook as a cause of cancer. 

I’ll leave you to catch up on the reaction (it’s plastered all over the place, although sadly, Ben Goldacre appears to be exercising some self-restraint).

In passing, however, I thought I’d link to the views of two mainstream PR professionals — Will Sturgeon and Stephen Waddington — who seem content to criticise the Mail publicly. 

PRs critising the Mail publicly for “lazy” reporting? Oh yes.

And there’s more. Sturgeon suggests that David Derbyshire, the author of the splash, is “as coherent as a holocaust denier at the end of a ‘drink your own bodyweight in Absinthe’ competition”.

Presumably, Sturgeon wasn’t thinking about Ken Livingstone and Oliver Finegold when he wrote that.

But still. . . here’s what I want to know: how does the Mail’s attack dog coverage square with its demographics?

In commercial terms, this is a woefully regressive editorial line. It boxes the Mail into a demographic trap populated by know-nothingers, flat earth enthusiasts, the elderly and hypochondriacs (among others).

Facebook is now the Britain’s second most-visited website after Google UK. On Christmas Day (no less), the site received one in 22 of UK internet visits.

As Hitwise attests, social networking sites now account for over 10% of all Internet visits.

This is one hell of a constituency to alienate — both numerically, and in terms of relative attractiveness to advertisers. It includes a fair old dollop of Middle England, too.

All of which makes me curious about whether the Mail has run any research on its readers’ attitudes to social networking in the recent past. 

Perhaps it has. At the very least, you’d hope executives took note of the negative tone of so many of the comments appended by readers to last week’s Facebook story.

This morning’s splash seems to be attracting similar levels of ridicule.

Notably, the “kids’ brains” story dominated the front page of the Mail’s print edition this morning. But as of 4pm this evening, I can’t find a link to it on Mail Online’s homepage.

Odd, that.

Does employment law cease to exist when Lord Rothermere sells an ailing newspaper?

Posted by Peter Kirwan on 3 February 2009 at 18:45
Tags: Associated Newspapers, Daily Mail & General Trust

Yesterday, the Guardian ran a story describing how Evening Standard employees fear that their new boss, Alexander Lebedev, will offer redundancy payments that are “far less generous” than those they would have received from DMGT.

The original story was written by James Robinson. In short order, Roy Greenslade laid into Lord Rothermere on his Guardian blog:

About a fifth of them face mandatory redundancy on terms far more disadvantageous than they would have expected under DMGT’s employ. All of them have lost their previous pension rights.

Fulminating royally, Greenslade called Rothermere a “disgrace” and “contemptible”. He went on to compare the chairman of DMGT to Pontius Pilate.

Some Standard journalists, Greenslade suggested, “face financial ruin if their pay-offs do not match those previously agreed, or if forced into retirement.” 

No doubt they would. But is this really likely to happen?

According to Robinson’s story, DMGT routinely offers redundnacy terms of two weeks’ pay for every year worked, with no upper limit. (Presumably, DMGT uses actual weekly pay in its calculations, rather than HM Government’s derisory statutory yardstick of £350 per week.)

By contrast, Robinson hints darkly that Lebedev might be considering capping redundancy payments at £12,000.

Now I’m no lawyer, but the Transfer of Undertakings (Protection of Employment) Regulations – otherwise known as TUPE — do seem relevant here.

On this score, the news isn’t all good. TUPE probably would allow Lebedev to move Standard staff off DMGT’s old final salary pensions. This, however, is a fate they would share with millions of other British employees.

In addition, Greenslade’s suggestion that Standard staff would lose their “previous pension rights” needs to be handled with care. Under Lebedev, the contributions paid into DMGT’s old-style pensions would be protected by law. 

The situation on redundancy payments is different, however.

TUPE suggests that currently-employed Standard hacks should receive the same redundancy payments from Lebedev that they would have received from Daily Mail & General Trust. As the legal site Outlaw puts it: 

TUPE states that “all the transferor’s rights, powers, duties and liabilities under or in connection with the transferring employees’ contracts of employment are transferred to the transferee”.

It’s possible, I suppose, that DMGT’s sale of the Evening Standard might have been structured in such a way that TUPE doesn’t apply. This might be the case if the deal was configured as a “share take-over”.

A spokesperson for the Lebedevs views this as “very unlikely” –- especially given the “commitments” Alexander Lebedev has made to Standard staff. Not to mention the £25m he expects to plough into the Standard between now and 2012.

Oddly, however, no-one involved in this controversy seems very interested in shedding further light on the situation.

DMGT’s response to Greenslade’s original post isn’t particularly informative. The company has yet to respond to my calls.

Predictably, Simmons & Simmons, the City law firm acting for the Lebedevs, isn’t feeling very talkative, either. As I write this, Mr Lebedev’s PRs are still working on eliciting some kind of clarification from their client.

So the mystery remains: why would DMGT and the Lebedevs try to engineer a situation in which Standard employees lose a significant slug of the employment rights they thought they enjoyed?

It makes no sense. For that noted paternalist Lord Rothermere, the internal fallout would be highly damaging. For Alexander Lebedev, there could hardly be a worse way of starting life as press baron.

UPDATE: 3/2/2009: I’ve just seen my editor’s suggestion that the Lebedevs might be arguing that [DMGT's standard redundancy terms] are “not a contractual benefit”. If this is Lebedev’s position, a bitter legal fight seems inevitable.

The Lebedev Standard, Part 4: Are former KGB officers “fit and proper”?

Posted by Peter Kirwan on 22 January 2009 at 13:39
Tags: Associated Newspapers, Daily Mail & General Trust

Time to confess. Last week, instead of checking out the potential for government oversight of Alexander Lebedev’s purchase of the Standard, I rambled on hazily about the possibilities. Mea culpa. 

Subsequently, there seems to have been a bit more haziness during discussions between DMGT and the FT, which reports that the deal is “not subject to regulatory approval”.

Amanda Andrews at the Telegraph has other ideas:

The Government can intervene in the potential takeover of the Evening Standard by former KGB spy Alexander Lebedev, if it thinks there are public interest issues. 

Government sources today said the Secretary of State. . . could intervene if [he] believes a takeover could give rise to concerns about the “plurality of views” or “the free expression of opinion”.

According to the Tory MP Richard Ottaway, national security is another of the “public interest” tests that could be applied by the government.

At the Times, Dan Sabbagh suggests that concerns over the deal will increase at Westminster. He’s probably correct about that. But there are some delicate political considerations in all of this.

It makes sense for a Tory backbencher like Ottaway to call for an inquiry. Whether the government will grant it remains to be seen.

From this perspective, the vague promise that Alexander Lebedev will impart a more “progressive” tone to the Standard feels like appropriate bait for a media-conscious minister like Lord Mandelson. Especially during the run-up to a general election.

By the same token, common sense suggests that Sabbagh is correct when he suggests that the “public interest test ought surely to be invoked when spies buy newspapers”. (Spies? Doesn’t he mean former spies? Or is there truly no escape for a career KGB man?)

Of course, it’s in News International’s interest that concerns should multiply. Wapping is presumably curious about any side deals that might have been designed to limit the options available to The London Paper.

If Lord Mandelson refers the Standard deal to Ofcom, he will be creating the perfect conditions for leaks and/or disclosure.

Cleverly, Sabbagh points out that failing to invoke the public interest test would lead some observers to “question not only why it does not apply but also whether it should exist at all”.

You’d have to guess that Rupert Murdoch — no stranger to this kind of thing — would be among those asking both questions.