Long way back: Advertising revenues carry on falling at Johnston Press

Posted by Peter Kirwan on 12 May 2010 at 16:01
Tags: Media

What happened to the traditional logic of the business cycle?

Local newspapers used to be first into a recession, and first out. This time, they were first in. But it looks like they will be last out — always assuming, of course, that they return to growth at all.

This morning’s trading statement from JP covered the period from January to early May. With lots of other media companies reporting recovery, it came at a significant moment.

The result was disappointment. Ad revenues declined by 7.1% YOY. Trying to put a gloss on the situation, management argued that advertising was “fairly stable” during Q1, but “a little more subdued during April”.

We were also told not to expect “any significant improvements in the current trend until Q3 2010”.

Ad revenues comprise two-thirds of JP’s revenue base. It’s here, rather than in circulation revenues, that the effects of recovery will be felt.

Yet this carefully-worded statement posed some difficulties. If advertising was “fairly stable” during Q1, why the 7% YOY decline in ad revenues between January and early May?

The answer seems to be that ad revenues in the early part of this year only seem “fairly stable” if you look at them sequentially, in the wake of Q409.

In other words, ad revenues bumped along the bottom during Q1 — at best. In April, things got worse. This is not a pretty picture.

The suggestion of a return to growth in the autumn isn’t foolish, but it is brave.

The supporting arguments include a resurgence of digital revenues at JP, up by 13% YOY.

Note, too, yesterday’s news of the biggest rise on manufacturing output since 2002, which suggests that the real economy — beyond London’s service sector bubble — is shrugging off recession. This is good news for those parts of Britain where people still make things and read local newspapers.

By autumn, however, a Con-Lib government will be scything down public sector budgets and jobs. In London, where I live, local councillors are anticipating an immediate order to reduce their budgets by 15%-20%. The effect on those parts of the country that have grown dependent on public subsidy will be grim.

Small businesses generate the bulk of local newspapers’ revenue base. They also underpin the economy’s ability to generate new jobs. But they remain constrained by the banks.

During early 2010, demand for credit skyrocketed among sub-£1m-turnover businesses. In the early stages of a recovery, you’d expect this. Small businesses need credit to cope with new contracts, or to expand production.

In response, the banks actually restricted lending. Even when money is dirt cheap, the banks aren’t lending, because their balance sheets remain an unholy mess.

The question of whether recovery is sufficiently well-established for the economy to withstand big public spending cuts lay at the heart of the election. It turns out to be a crucial question for local newspapers.

Will we witness an autumnal happy ending? Tomorrow, when Trinity Mirror produces its own trading update, we’ll get Sly Bailey’s opinion.

Laying down the gauntlet: The Guardian’s anti-Indy ad creative

Posted by Peter Kirwan on 30 March 2010 at 18:12
Tags: Media

There’s a grand old tradition among marketers that’s rarely ignored: never diss the competition. A corollary of the rule insists that you should never, ever, diss the competition if you’re the more powerful competitor.

Tony Blair observed this rule in his anti-Cameroon speech at Trimdon Labour Club today. Not once did he mention the Conservative leader by name.

Arguably, the Guardian doesn’t name Alexander Lebedev in this creative currently doing the rounds at Campaign, Marketing and Press Gazette.

Adam Freeman, director of consumer media at Guardian News & Media, describes the ad as “a bit of fun”. And yes, there’s a fine old tradition of nationals – mostly tabloids – poking “fun” at each other in this way.

Yet the ad folk who read Campaign couldn’t give two hoots about Lebedev’s editorial agenda. The hacks who read Press Gazette will raise a sceptical eyebrow. Everyone understands the purpose of The Scott Trust. And nothing has happened at Evening Standard to suggest undue proprietorial influence.

Points scored? Few, if any. By running this ad, the Guardian is signalling that it’s up for a fight. Fair enough. But it’s also signalling its concern about the Independent to an audience of advertisers. Perhaps that’s not so wise.

What will the Guardian do if Murdoch’s paywall succeeds?

Posted by Peter Kirwan on 29 March 2010 at 23:52
Tags: Guardian Media Group, Media

Conventional wisdom suggests that the Guardian will emerge as one of the champions of free-to-air digital content when the Times and Sunday Times erect their paywalls in June.

This, after all, is a newspaper that employs Jeff Jarvis as a columnist. We’ve also witnessed Emily Bell, GNM’s director of digital content, arguing that general news paywalls are a “stupid idea”. In January, the Guardian depicted Alan Rusbridger, its own editor, as “the poster boy of the free web movement”.

It’s often said that the Guardian will become the world’s biggest liberal news site when the New York Times introduces its paywall in 2011. The expectation seems near-universal.

But what if Murdoch’s paywall is successful? What if the combination of digital advertising revenue and subscription charges generated by Times Newspapers Ltd exceeds the £25m a year that guardian.co.uk brings in from advertising? What if the ad spend diverted from Times Online doesn’t benefit the Guardian or the Telegraph as much as everyone expects?

What then?

If the dilemma does arise, it’s worth remembering that there’s a difference between writing about business and running one. If ideology often makes for a good think piece, pragmatism is the preferred approach of publishers.

This weekend, I even started to wonder whether the Guardian is preparing for the possible success of Rupert Murdoch’s paywalls. This would trigger a feisty internal debate. Indeed, that debate may already be under way. Here are three potential straws in the wind:

Exhibit No.1: Monthly charges for the Guardian’s iPhone app

The FT broke this story on Saturday, but then buried it within a re-hashed treatment of News International’s paywall announcement. Here’s the quote the FT serves up from a “senior Guardian executive”:

“We’ll enhance the app, and then the whole aim will be to get that on monthly subscription because it has been amazingly successful and . . . a fantastic experiment.”

Will the Guardian charge for an app, or for its stories? On one level, it hardly matters: what’s involved is a recurring payment for enhanced access to content. Rupert Murdoch would happily describe this as a paywall.

Intriguingly, the FT goes on to suggest that the Guardian is just one of many newspapers “considering similar moves [to News International] in the wake of falling advertising demand and lower circulations as readers migrate online”.

Oh really?

Exhibit No.2: Alan Rusbridger is “not entrenched”

This weekend, the Independent On Sunday asked Carolyn McCall about paywalls. The first paragraph of McCall’s response reiterates the Guardian’s standard position. The second is more interesting.

“At the moment, we have said we are not going to have a pay-wall for general content, but for specialist content there is a model to charge.

“We’re not as polarised as you might think. This is our strategy at the moment, but, of course, we will watch what happens. Alan is a visionary, but he is not entrenched. He is open-minded about these things.”

Not entrenched, not polarised, but open-minded. On this basis, the Guardian will surely consider following Murdoch’s example if he meets with success.

Exhibit No.3: Is Emily Bell coming over all pragmatic, too?

If Alan Rusbridger isn’t polarized, what about Emily Bell? The Guardian’s director of digital content has been a trenchant critic of widely-drawn paywalls. Bell’s opposition is both sophisticated and ideological. Not so long ago, a Guardian executive told me that the paper would introduce a paywall “over Emily’s dead body”.

Today, however, Bell filed a column that seemed to strike a different tone. In it, Bell sketched out a battleground in shades of grey, rather than black and white. She pointed to “many businesses” that operate “a number of ‘hybrid’ models”. . . including the Guardian. The case for paid content, Bell admitted, is “partly pragmatic”.

Somewhat defensively, Bell fell back on the ideological argument against paywalls. Those who argue against paywalls, she pointed out, are asking whether journalism is “a commodity or a democratic necessity”.

“I am happy to be proved wrong, but I still find it hard to understand how deliberately downsizing your audience is ever going to help with [this] broader problem.”

Happy to be proved wrong? It’s not going to happen. That’s because what we’re dealing with here is an article of faith, not a matter of fact.

Yet if Rupert Murdoch’s approach does work, it won’t be easy to deploy ideology against the potential for enhanced revenues. In the long run, even democratic necessities need to break even.

UPDATE: 31/03/2010: From Alan Rusbridger’s “Illegitimi” email to all staff, written (I think) on Tuesday, and quoted at Dan Sabbagh’s Beehive City:

What’s right for Murdoch (with Sky as a digital subscription model in the background and infinitely deep corporate cross-subsidies) may well not work for us at GNM, and vice versa. There may be different models within one newspaper. We’ll all make some mistakes along the way. We can all learn from each other.

…

The editorial, web development and commercial sides of the business are united in the strategy for print and digital going forward. We talk all the time. On pay walls there is no difference between the editorial vision and the commercial imperative. From GMG chief executive and financial director, to GNM managing director to advertising director to editor we all believe pretty much the same.

Lebedev’s Independent: Past, present & future

Posted by Peter Kirwan on 26 March 2010 at 13:08
Tags: Media

A few things about the Indy-Lebedev deal:

1) Gavin O’Reilly: a “most satisfactory” deal for INM

This phrase, contained in the INM’s statement about the deal, makes O’Reilly sound like a Victorian schoolmaster.

It’s accurate, though. Shutting the Indies would have cost £30m. It would also have generated lots of bad press.

INM has lost a couple of hundred million euros on the Independent since the mid-1990s. It remains remarkable that O’Reillys sustained these losses for so long in the context of running a public company.

On this basis, getting away with a cash payment of £9.25m, rather than a bill for £30m, represents a decent outcome. Even INM’s shareholders seem pleased: the company’s shares rose by 12% yesterday.

2) Is that £9.25m really the end of it for INM?

That’s what INM’s press release suggests. The payment to Lebedev’s company, we’re told, should cover “all future trading liabilities and obligations”.

But what about non-trading liabilities? In addition to the £9.25m payment, INM is still (potentially) on the hook for some of these.

INM appears to be acting as a guarantor for the Independent’s print contract with Trinity Mirror, for example.

INM will also guarantee the payments that Lebedev will make on behalf of the Independent to Daily Mail & General Trust for rent and back office services.

Why would a billionaire like Alexander Lebedev need someone to guarantee his ability to make these payments?

Even mighty tycoons, I suppose, are subject to credit checks. Lebedev will own the Independent through a new shell company with no trading history. These arrangements suggest a degree of caution among beancounters about the sources of his funding.

3) Lebedev’s camp is making the right kind of noises

The statement from the Lebedev camp was devoid of any hint about business strategy. But the PR team at Maitland had the sense to report these words from Alexander Lebedev:

“I invest in institutions which contribute to democracy and transparency and, at the heart of that, are newspapers which report independently and campaign for the truth to be revealed. I am a supporter of in-depth investigative reporting and campaigns which promote transparency and seek to fight international corruption.”

Some will be sceptical. But let’s judge the Lebedevs on their actions. The Evening Standard’s recent campaign on poverty in London, for example, contained some riveting coverage. It made good on the Lebedevs’ apology for the Standard’s traditionally one-eyed coverage of the capital.

4) It’s worth looking again at the idea of a digital-only Independent

What might the Independent might become in the future? (I’ve written about this elsewhere.)

Two years ago, Roy Greenslade reported that INM had considered ditching print and turning the paper into an online-only outlet. But the idea was mothballed because — in Greenslade’s words — INM believed it would be “ruinous financially ”.

The same scepticism hangs in the air today. The renegotiated print contract with Trinity Mirror suggests that the Independent will continue in print for some time to come. At Paid Content, Robert Andrews has this to say:

If Lebedev’s London Evening Standard acquisition is anything to go by, then, far from taking the Indy online-only - as has been a common expectation over the last two years - Ledebev is likely to want to reinvigorate the printed edition and leave the web firmly a second-tier medium for now.

Yet since 2008, print-based ad revenues at the Indy and the Sindy have probably halved. This should make the switch to digital easier. If going fully digital isn’t on Lebedev’s radar, it should be.

5) The coverage mentions Rod Liddle as often as the Indy’s founders

These days, Matthew Symonds is industry editor at the Economist. Stephen Glover writes for the Mail and the Independent. Likewise, Andreas Whittam-Smith, now 72, still contributes to the Independent. He also looks after the Church of England’s £5bn investment fund.

Whittam-Smith remains a non-executive director of Independent News & Media Ltd, which owned the Independent on behalf of INM until yesterday.

By the mid-1990s, the trio’s involvement with the Indy was mostly at an end. So their names aren’t mentioned much on the web in connection with the Indy. And if you can’t find it via Google, you ain’t going to find it in today’s coverage (not much, anyway).

But there are other places to turn. One of them is Stephen Glover’s wistful memoir Paper Dreams. Less constrained by propriety, the cartoonist Nicholas Garland wrote his own racy account of the Independent’s early days. He called it Not Many Dead: Journal Of A Year In Fleet Street.

I once mentioned Garland’s book to a member of the Utley family, who reacted as if someone had farted loudly in the reading room of the British Library. To say the least, there was some history involved.

Launching the Independent in 1986 was a heroic undertaking. Garland’s waspish book has several moments of high comedy. It’s out of print, but available here. Read it to get a taste of the vanished world from which the Independent originally sprang.

Good luck, Mr Lebedev: You’re going to need it

Posted by Peter Kirwan on 25 March 2010 at 17:21
Tags: Independent News & Media, Media

Brave man, Mr Lebedev.

With today’s sale announcement, it’s now clear why INM started to row back from its ambition to bring the Independent and the Independent On Sunday to breakeven point by the end of 2010.

Originally, that target emerged last summer as part of the effort to placate renegade investor Denis O’Brien. But towards the end of last year, the mood music from inside INM changed. From January onwards, one-third of the papers’ ad revenues were vapourized by recession. Perhaps the target wouldn’t be reached after all.

Now INM has disclosed that the Indies made an operating loss of £12.4m during the year to December 2009. That’s on the back of revenues of less than £70m (as we found out courtesy of the Office of Fair Trading last week.) These numbers followed cost cuts of £20m between 2007 and last year.

Huge cost cuts, a dwindling revenue base and a thumping great big loss: the advertising downturn has battered the Independent like no other broadsheet.

Neither is this the first time that the Independent has failed to reach a break even target. Last year’s promises sounded eerily like those advanced by INM during the mid-noughties.

If Alexander Lebedev can turn this one around without going free, it’ll be an astonishing achievement. If he does it with free distribution, well, that will merely be remarkable.

The Russian billionaire deserves thanks for saving a large number of journalists’ jobs. But surely he will need to continue INM’s cost-cutting. In addition, the prospect of a round-the-clock working arrangement with the Standard looms large.

The honeymoon, if there is one, will be short.

BBC Strategy Review promises more, not less, competition for newspapers

Posted by Peter Kirwan on 3 March 2010 at 14:59
Tags: BBC, Media

I love the BBC, but I tend to worry about it a lot.

On p70 of Mark Thompson’s Strategic Review, I found the kind of evidence that supports my fears. The paragraph that gripped me refers to the future of BBC Online. It goes like this:

There will be no specialist content for a specialist audience, such as business-critical information in specialist fields, legal, financial (including trading tools) or other professional content.

Whoa. Trading tools? Specialist legal and financial content? Business-critical information? The idea of the BBC becoming a large-scale B2B publisher is sufficiently bonkers that it should have been suppressed violently the minute it surfaced in conversation at Broadcasting House.

But no: here it is, incendiary to the last, disclosed in an apparently serious document about the future of the BBC.

This is the kind of thing that makes you wonder about how far the BBC’s ambitions ran at the high point of the Long Boom. It also makes you wonder about how the Strategy Review will change the balance of power between the BBC and commercial rivals who largely make a living from the written word.

Much remains to be clarified. But here is what Mark Thompson is promising:

• BBC Online’s budget will be cut by 25% by 2013, “with a corresponding reduction in staffing levels”

• BBC Online will cut “whole categories of online activity such as web search, communications and non-content related social networking”.

• The number of sections on BBC Online ( ‘top-level directories’, in the form of bbc.co.uk/sitename) will be halved by 2012, with many sites closed and others consolidated. There will be far fewer bespoke programme websites.

• “Removing generic content [from BBC Online] in areas such as the Recipe Finder and /film.

• BBC Online will feed more traffic to the nationals: “by 2012, an external link on every page and at least double the current rate of ‘click-throughs’ to external sites”

• Local BBC sites in England restricted to news, sport, weather, travel and local coverage of national projects like Coast and A History of the World in 100 Objects. The BBC “will not provide listings, local guides or similar feature material”.

• “Leaving room for local newspapers and others to develop in a digital world by keeping the BBC’s current pattern of local services, and not launching new services in England at any more local a level than today.”

Potentially, there’s some important stuff here. Yet Mark Thompson’s Strategy Review also contains what diplomats would describe as “red lines”. These are fundamental points of principle from which the Corporation will not budge.

News is non-negotiable. As the BBC’s own research demonstrates, taxpayers want the Corporation to generate news more than anything else. The graphic reproduced at the top of this post –- extracted from the Strategic Review — underlines that fact.

Although the researchers asked respondents what they wanted from the BBC on their television sets, the BBC regards online as an indivisible part of the whole. On p33 of the Strategy Review, directly beneath the graph I’ve reproduced here, Thompson’s document contains the following words: “Content delivered via digital platforms is a vital part of this story.”

Elsewhere, the language is stronger. Consider, for example, the Review’s (eminently sensible) suggestion that the web “may [become] the only platform and delivery system that the BBC needs to fulfil its public purposes”. When it comes to the clash of civilisations between TV, text and audio, the BBC intends to be a fully-committed combatant.

Indeed, if all goes according to plan, the BBC’s Great Reprioritisation should intensify competition with private sector news organisations. Take a look, for example, at these priorities, laid out for BBC news journalism across all media:

• Stronger specialist analysis of science, the environment and social affairs

• More business coverage (local and global)

• More international news

• More coverage of local UK politics (”multiplatform coverage of local government and politics through Democracy Live”)

Specifically, for BBC Online, the report promises:

• “More prominence” for audiovisual content, original journalism, expertise and analysis

• Better quality local news websites

• “Stronger” consolidated “knowledge” output in areas like Nature and Music

• BBC News Online to focus “on a generalist, not specialist, audience”

• Entertainment news to become “more serious and concise” with stronger coverage of the media industry, culture and the arts

That’s some shopping list. Consider, too, the hint (on p50) that many of the redundancies at BBC Online will affect technical staff, rather than journalists. (The job cuts, we’re told, will partly reflect “the growing maturity and commoditisation of web design and technology”).

Notably, too, many of the sub-domains earmarked for closure provide readers with entertainment, rather than news. Rival publishers will find it hard to get excited by the prospect of sites like /robinhood being “consolidated under larger audience-facing propositions”. (p49).

So the basic conflict, sharpened by recession, still exists. It’s unlikely to ever be resolved. On the one hand, commercial publishers argue that the BBC is crowding them out of the market. On the other, the BBC argues that taxpayers want it to provide news more than anything else.

At first, the BBC’s Strategy Review looked like a retreat under pressure. But a steely bureaucratic determination runs through the core of this document. Where it matters most, the BBC will not be moved and may even succeed in upping its game.

Manchester Evening News: Did GMG invest in “things that matter”?

Posted by Peter Kirwan on 11 February 2010 at 15:39
Tags: Guardian Media Group, Media, Trinity Mirror

Over at t’other place, newsquestslave casts a critical eye on yesterday’s post comparing GMG and Trinity Mirror as owners of the Manchester Evening News.

(S)he takes issue with my suggestion that GMG invested steadily in its regionals during the late noughties, even as revenues and profits declined.

1) Operating expenditure isn’t everything

I looked at GMG’s track record in terms of operating costs (wages, rent, print contracts etc). But newsquestslave suggests another dimension:

“There is no ‘investment’ as in new capital raised from shareholders - as there hasn’t been anywhere in the regional press for decades.”

The argument seems to be that GMG’s regionals were just as bad as everyone else in this respect.

But newspaper companies generate lots of cash: this is one of the reasons so few have gone bust during the recession. It’s very rare indeed for them to ask shareholders for additional capital. Johnston Press did it in extreme circumstances, to pay off debts. But elsewhere, even the huge investment in new printing presses that’s taken place in recent years has been financed out of cash flow and debt.

In any event, you’d be hard-pressed to locate shareholders who would hand over new capital to finance operating expenditure (in the form of money to hire more journalists, for example).

On this basis, criticising newspaper companies for not raising more capital from shareholders is a red herring.

By looking at operating costs, I was trying to narrow the focus to factors that affect the quality of journalism on a day-to-day basis. It still think this is a valid way of looking at GMG’s track record as a regional newspaper proprietor.

2) What did GMG’s regionals spend all that money on?

Here, newsquestslave offers two arguments:

Given that things like newsprint have gone up in price, and that GMG regional has squandered cash on the Channel M disaster and other ego projects the investment/spending in the things that matter to newspaper readers, ie newspaper editorial, have declined sharply.

On “disaster/ego projects”: yep, it’s certainly possible that GMG chose to spend money on the wrong things. Yesterday, I suggested that this might have been the case. Of course, lots of companies do this. It’s called risk-taking. The question is whether GMG took more risks, or worse risks, for longer than its rivals.

On paper costs, Newsquestslave has a point. Buying paper accounts for 15%-20% of costs at a typical newspaper. So even though GMG maintained operational expenditure between 2004-2009, the rising cost of newsprint probably did squeeze out some investment in journalism at GMG’s regionals. Yet rising paper costs were a common factor for everyone.

That said, Newsquestslave’s points did make me backtrack on the numbers I dug out yesterday. I wanted to see whether I could reinforce my argument.

So today, I’ve got two graphs for you. The first is identical to yesterday’s effort. It shows how operating costs remained fairly static at GMG’s regionals as profit (and revenues) declined between 2004 and 2009.

The second graph shows how Trinity Mirror’s managers responded to declining profitability in a very different way. Trinity Mirror squeezed operating costs in a way that GMG simply didn’t, or couldn’t. On this basis, I stand by the suggestion I made yesterday:

GMG’s exit from the market is worrying for anyone who believes that sustained investment by large companies with deep pockets is the only thing that will save local journalism. The numbers suggest that GMG has been there, done that — and met with little or no success. The notion isn’t yet dead: but it has sustained serious damage.

As I hinted earlier, there’s one proviso. Did GMG’s regionals take too many risks? If more had been invested in “newspaper editorial”, and less on peripheral projects, would things have turned out differently?

Could the Manchester Evening News have remained a viable part of Guardian Media Group? Was Channel M responsible for that not happening? Some, including AndrewT23at Media Guardian, have suggested that this was the case:

As for GMG having to support a regional title, the MEN is still very capable of making money, even for a cash sieve like the Guardian, but saddling it with the basketcase TV channel that is Channel M was just too much.

If you look around the MEN newsroom at present you can see the damage caused by making a profitable regional newspaper prop up a vanity project TV station and, indeed, The (non Manchester or Northern) Guardian.

If you’ve got a view, leave a comment below, or send me a suitably anonymous email here:mediamonied@googlemail.com

Footnote: On the Trinity Mirror graphs, you’ll note a few asterisks. For the detail-oriented among you, here’s what they mean:

* = adjusted retained businesses

** = operating costs assumption for 2009 = 2 x 1H09 operating costs (reality will be lower).

GMG & The Manchester Evening News: “C’est magnifique, mais ce n’est pas la guerre”

Posted by Peter Kirwan on 10 February 2010 at 13:19
Tags: Guardian Media Group, Media, Trinity Mirror

A few kind souls at Hold The Front Page are predicting what awaits employees of Guardian Media Group who will soon start working for Trinity Mirror:

“For those who thought [GMG Regional Media chief executive Mark] Dodson was a ruthless hatchet man, you ain’t seen nothing yet…”

“God help them….If they think they’ve been squeezed in the past, wait til TM get their mitts on them, then they will understand that it is possible to get blood out of a stone.”

Among other things, the perception that GMG’s regionals have already been “squeezed” by a “hatchet man” feeds into the suggestion that the Manchester Evening News and its stablemates have been plundered relentlessly to sustain outsized losses at the Guardian and the Observer.

Ratcheting up the rhetoric a notch or two, Ian King, at the Times, even suggests that “for many MEN staffers, the new owners could scarcely be worse than the old ones”.

The news coverage certainly suggests that cost cutting became endemic at GMG’s regionals during the late noughties. Disputes over job losses flared up repeatedly as revenues declined: in 2006, 2007 and again in 2009.

Yet the numbers in GMG’s annual reports suggest a different picture. Remarkably, GMG held operating costs at its regional newspapers static between 2004 and 2009. Year after year, as revenues and profits declined, GMG carried on ploughing the same amount — more than £100m a year — into reporting, presenting and distributing the news at its regionals.

The contrast between steady investment and the downward trajectory of operating profits during the same period is painful. (In the graph accompanying this piece, I’ve rebased both sets of numbers to 100 as of 2004 to make comparison easier).

GMG’s exit from the market is worrying for anyone who believes that sustained investment by large companies with deep pockets is the only thing that will save local journalism. The numbers suggest that GMG has been there, done that — and met with little or no success. The notion isn’t yet dead: but it has sustained serious damage.

Did GMG simply invest in the wrong stuff? Or were GMG’s regional journalists living in a relative paradise? I suspect that the commenters at HTFP are probably closer to the truth than the deputy business editor of the Times. Working for Trinity Mirror will be a whole lot different.

Bosquet, the French general, famously described the charge of the Light Brigade at the Battle of Balaclava in 1854 in the following terms: “C’est magnifique, mais ce n’est pas la guerre”.

No doubt Sly Bailey, the chief executive of Trinity Mirror, thinks similarly about GMG’s recent track record as regional newspaper proprietor.

Online ad recovery will make life tricky for paid content publishers

Posted by Peter Kirwan on 8 February 2010 at 14:52
Tags: Media

As inevitably as night follows day, the debate about paywalls started in earnest during early 2009, a few months after the collapse of Lehmann Brothers, and several months after online display advertising stopped growing.

Publishers have spent the past year obsessing about paid content. Yet in the meantime, something wholly inevitable and largely unnoticed has happened to online advertising. In the UK, the market entered recovery mode in Q309. During Q409, combined search and display revenues surged by 10.4%.

Double-digit growth (or something close to it) may even prove sustainable. In the US, eMarketer forecasts that online display will grow at 8.2% this year — faster than search.

Is something similar happening to online display CPMs? Last year, conventional wisdom insisted that the price publishers could charge advertisers for reaching 1,000 users had collapsed on a permanent basis, thanks to a vast influx of cheap display inventory. In a pro-paywall column written last month, the FT’s John Gapper laid out the contours of disaster:

Rates for online display ads have been falling steadily as competition has proliferated, with most sites now finding it hard to get more than $4 per 1,000 impressions on their pages (or $14m for the 3.5bn hits on all US newspaper sites monthly).

Yet other sources contradict this view, suggesting a recovery in pricing power. It’s particularly interesting that this evidence comes from the ad networks, who were blamed so aggressively in the first place for bringing vast amounts of new inventory on to the market.

Forrester offers a similarly surprising forecast for US online display advertising. Between 2009 and 2014, the analyst firm suggests, expenditure on online display will more than double, to $16.9bn.

Forrester forecasts that online display expenditure will grow by annualised average of 17% during the same period. Once again, that’s faster than the growth expected of search (15%).

Of course, these are just forecasts. There are plenty of publishers who still dismiss the long-term potential of online display (including, for example, Meredith Corporation, the US magazine publisher).

Yet there’s something more than rebound psychology behind these optimistic forecasts. There’s a widespread faith that Google will succeed in becoming a powerhouse in online display.

Notably, Google’s advertising exchange — a trading platform for advertisers and media owners — appears to be gaining traction. There’s even a suggestion that real-time bidding for inventory on ad exchanges forces up the price of impressions. Google — and its rivals — have always claimed that this would be the case. Perhaps soon, we’ll start to see hard evidence.

This apparent revival of online display comes at an awkward moment for those who are devoting all, or most, of their energy to erecting paywalls.

A trade-off exists between selling online advertising and building up paid content revenues. You can choose to do both. But you cannot hope to maximise revenues from both.

Perhaps paywall publishers will soon find themselves grappling with more than the challenge of getting readers to open their wallets. Soon enough, they may also have to fend off criticism that the recovery in online advertising revenues has passed them by.

Times Online: Supporting the big profits of pay TV

Posted by Peter Kirwan on 2 February 2010 at 23:49
Tags: BSkyB, Media, News International

So Times Newspapers has just hired Paul Gilshan from BSkyB as marketing director. Gilshan was previously head of marketing for Sky Movies and Sky Box Office. At Wapping, Media Week notes, Gilshan will be reunited with his former boss Alex Lewis, who was a director of marketing at BSkyB before moving across to Times Newspapers last year.

Another significant (and much-noted) arrival at Wapping: Gurtej Sandhu, who is joining as director of Times Digital from News Corp-owned Star TV.

Down under, the trends seem similar: Richard Freudenstein, whose CV includes a seven year stint at BSkyB, has just been made chief executive of The Australian.

The influx of pay-TV types is striking. Of course, there’s an existing line of thought which suggests that paywalls around the Times and the Sunday Times will be engineered to boost print sales as much as anything else. (Buy a newsprint subscription and get access on t’internet for free.)

But what if the cordon was thrown wider? Peter Preston may have a point when he suggests that BSkyB could be brought into equation.

Now watch closely as 12 million Sky subscribers get an offer they can’t reasonably refuse. How about beyond-the-wall access to four big British papers (plus an array of tempting other goodies) for as little as 50p extra a month? £6m a month for that is £72m – in a trice the losses on Wapping’s more upmarket offerings are turned to profit. . .

This is an interesting idea. It would certainly enhance the attractiveness of Sky for subscribers who might be lured away soon by cheaper footie elsewhere. In addition, News Corp could bolt on newspaper subscriptions for a triple-play subscription offer (Sky/newspapers/online access).

Sky has been selling consumers a triple-play of its own (broadband/telephony/pay TV) for quite a while: the executives making the switch to Wapping know all about the fiddly mechanics of maximising profits in this kind of environment.

But if News International goes down this route, what price the coalition of national newspapers that Murdoch wanted to assemble last year?

That plan is dead in the water. It’s no coincidence that Murdoch’s thinly-veiled appeals for a concerted uprising against the free web have died away.

The Guardian can’t see how the economics stack up (no surprises there, if the missing ingredient is 12m viewers). The Telegraph has all but ruled itself out. DMGT has maintained a studied silence. Trinity Mirror might follow News International, but only if convinced by results on the ground.

A subscription link between Sky and News International would be designed to limit the risks of a go-it-alone policy. Harnessing the huge popularity of Sky might well make the unpalatable idea of paid content acceptable to the general public. (And for rivals, doing deals with Virgin Media or BT Vision really wouldn’t be the same).

But 50p a month: surely that’s too little? Selling online access to the Times and the Sunday Times at something like that price would cannibalize print copy sales just as rapidly as free access on the web.

Perhaps the low price point owes something to Preston’s inspiration: Newsday, owned by the same company that sells cable TV and broadband to 75% of Long Island’s subscribers. Late last year, Newsday erected a $5-a-week paywall. But it offered free access to customers of the parent company’s cable and broadband operations.

The parallel isn’t straightforward, though. Newsday’s paywall might as well have been accompanied by a suicide note declaring that the paper had no value other than as a gimmick intended to sell something else. Times Newspapers Ltd may be losing north of £1m a week, but its position is slightly different.

Still, leveraging what you’ve got makes sense. Cross-selling TV and news subscriptions would involve giving Murdoch’s newspapers – unloved by investors – a new purpose in life: to support the profitability of pay TV.

Circle the wagons and find some new and unexpected synergy: it’s a classic media conglomerate tactic. If successful, It might even help to convince News Corp’s investors that owning both newspapers and a pay TV platform remains a sensible idea.