The Guardian’s Roy Greenlade reflects about the state of the regional newspaper business in the UK.
A must-read post.
The final paragraphs:
A succession of poor annual results from newspaper companies in Britain and the United States in the past month have underlined the fact that there is no way back for newsprint.
Sensible owners understand that, and they are now engaged in a race to transfer newsprint brand loyalty from print to online in the hope that they can build sufficiently large audiences to attract advertising revenue.
Time is not on their side because investors are impatient.
They want profits now.
Even those who see the logic in what newspaper companies are doing are unhappy at falling returns.
Worse still, they are unconvinced as to whether there will be adequate profits in future.
This came to mind as I noted the City’s reaction yesterday to the latest set of results from Johnston Press, Britain’s third largest regional newspaper company by circulation.
It has not buried its head in the sand. Just the reverse.
It has adapted with more enthusiasm than most in a digital future by pouring resources into the net.
It is clearly engaged in an exercise that has already enlarged audiences for many of its outlets.
Yet look at reaction from the City?
As I write the company’s share price stands at just 174.25p.
In April last year it was 490p. Profits in 2007 fell by 6.3% compared to the year before while print advertising fell by 2.1% (and it should be noted that the company relies on ads for 73% of its income).
And there are early signs that 2008 isn’t going to improve matters.
On the plus side, Johnston’s 323 websites recorded a year-on-year growth of 24% in user numbers.
And it is doing all it can to boost its online revenue with a dedicated sales team. Johnston’s chairman Roger Parry and its chief executive Tim Bowdler remain convinced that their digital investment, combined with a hyper-local strategy, will eventually prove beneficial.
But the overall economic climate is obviously not helpful.
A Financial Times comment on Johnston was somewhat downbeat in describing it as “one of the most shorted stocks on the FTSE 250″ and adding: “With the group’s net debt of £692m in excess of its market capitalisation of £524m, management may come under pressure to sell some non-core businesses.”
Then again, noted the FT, the inability of Trinity Mirror to sell all of its regional newspaper portfolio last year indicates that there is little appetite for such assets.
In other words, regional newspapers, in spite of their falling value, can’t find buyers.
In an odd way that might just help their managements by giving them time and space to pursue their strategic moves from newsprint to screen.
Publishers can learn lessons from the Johnston Press experience.
Unless they accept the inevitability of an online future they will suffer.
But the lesson for us all is that in this transition stage, profits will go on decreasing.
It is naive to imagine that newspaper publishers can go on generating 33%-plus profit margins that were, let’s face it, one of the reasons for the City’s earlier support.
Some of us were crying out that it was foolish to squeeze so much from companies rather than investing in the journalistic content.
On the other hand, would that really have made a difference?
