UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 699-iiHouse of COMMONSMINUTES OF EVIDENCETAKEN BEFORECULTURE, MEDIA AND SPORT COMMITTEE
THE FUTURE FOR LOCAL AND REGIONAL MEDIA
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This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.
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Transcribed by the Official Shorthand Writers to the Houses of Parliament: W B Gurney & Sons LLP, Hope House, Telephone Number: 020 7233 1935
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Oral Evidence
Taken before the Culture, Media and Sport Committee
on
Members present
Mr John Whittingdale, in the Chair
Janet Anderson
Philip Davies
Mr Nigel Evans
Paul Farrelly
Alan Keen
Adam Price
Mr Adrian Sanders
________________
Examination of Witnesses
Witnesses: Mr Tony Watson, Managing Director, Mr Jonathan Grun, Editor, and Mr John Angeli, Head of Content, Press Association, gave evidence.
Chairman: Good morning. Welcome to this second session of the Committee's inquiry into the future for local and regional media, and we are focusing again on the print media this morning, although the Press Association of course does extend beyond the print media. Can I welcome as our first group of witnesses Tony Watson, the Managing Director of the Press Association, Jonathan Grun, the Editor, and John Angeli, the Head of Content.
Q70 Adam Price: Good morning. Many of the witnesses to this inquiry have painted a fairly depressing picture of the future for local and regional newspapers. Claire Enders in particular, you may have seen, predicted that up to half of the approximately 1,300 local and regional newspapers would close within the next five years. What is your assessment of the prospects for the sector?
Mr Watson: I do not think there is any doubt at all that the regional press is probably facing the greatest challenge in its history. Whether those predictions come true or not, I do not think anybody can reliably say at this stage. They are caught in the classic perfect storm. They are facing structural pressures which began to assert themselves on the sector some time before the beginning of the recession, and that is notably the migration of classified revenue to the Internet. The regional press has traditionally relied very heavily for a large income stream on the major pillars of classified: recruitment, promoters and property. So that process has been going on in the lead-up to the recession and I think it is fair to say that the effects of those changes are likely to be permanent. What nobody really knows at this stage is to what extent the cyclical downturn is responsible for the reduction in advertising revenues that we have seen over the last 18 months or so, and I think what is clear is that when the newspapers do emerge from recession they will be smaller businesses and they will be businesses that operate to much smaller margins than has hitherto been the case.
Q71 Adam
Price: You mentioned the perfect storm,
which many people have referred to. We
do not know to what extent the problems are cyclical in relation to the
recession or whether they are more structural.
Could I probe you a little bit further on that? What is your hunch? There are some straws in the wind which point
in different directions, just in the last week Trinity Mirror closing nine
titles in the
Mr Watson: If I understand it correctly, UBS's advice was that Trinity and others might see anything up to 100% of revenues coming back that were affected by the downturn. The question is to what extent the revenue losses have arisen as a result of structural changes, i.e. that revenue is never going to come back. Bear in mind the year-on-year comparisons are being made at a much slower base than they were before these businesses went into the recession. There is no doubt about it, titles will continue to close, particularly titles that are second or third within their local markets. I think the free newspapers are particularly vulnerable because they do not have the benefit of cover price revenue as part of their revenue mix. There will definitely be a slimming down of the sector. What I think is open to question at the moment is how far that is going to go. There is no doubt that the movement of revenue online, particularly classified revenue, is here to stay and that has put tremendous pressure on the business model of these publishers.
Q72 Alan Keen: Nick Davies, in our recent inquiry, which we have not even released a report on yet, was pretty critical of the standards. He said that standards had not only reduced but he particularly complained about "churnalism". I know you rely a great deal on local journalists, do you not, for stuff coming through to you which you then put out yourselves, or am I wrong?
Mr Watson: Yes, I think there are all sorts of sources for news and one of the most important functions of regional journalism is that it sits at the bottom of that news pyramid, and whether it is the broadcasters, agencies or national newspapers, there is no substitute for having people on the ground who understand their localities and the issues that resonate with those audiences. It is quite common practice for stories to be picked up that are run in local newspapers that then have to be checked and developed and brought on to wider audiences.
Q73 Alan Keen: How is that system developing then? We have just been talking about the critical state of the newspaper industry because of loss of revenue. Is that system changing now? How do you see that developing? Does it need more formal links than there are at the moment? For instance, we have seen the BBC, instead of having a lot of journalists covering the same story, now for all their news programmes tend to put it through one source. What are the developments like in the print industry?
Mr Watson: I do not sense that there has been any great change in the way that informal system operates. What is clearly the case is that in certain areas the reduction in the number of journalists that are out there gathering is bound to have an impact on the number of stories a newspaper can cover. It is clearly something we may wish to discuss, but the coverage of public institutions, for example, in certain areas has diminished over time and that certainly has an impact on democratic engagement and holding public institutions to account.
Q74 Alan Keen: Do you think that the pressure on local newspapers has meant that the standard has reduced? Has the standard reduced greatly, as Nick Davies said? He was pretty critical of the press at all levels.
Mr Watson: We would seek to disagree with a lot of what Nick Davies said in his book, and I do not accept that the quality of regional newspapers, in terms of the quality of the material that they produce, has suffered. There may be an issue around volume; clearly, editions have been lost, paginations are tighter than they were, so there is almost certainly an argument for saying that in some areas the breadth of coverage may not be what it was, but in terms of what is published I do not detect any reduction in quality at all. In fact, as an agency, in addition to training our own staff, we do recruit within the regional press and there are some exceptional journalists working in the regional press. You just need to look at some of the stories and the campaigns and the investigations that are run. You see them every year at Regional British Press Awards: fantastic endeavour, great attention to detail, taking on local issues. I do not see any evidence that that has collapsed but clearly, if the trends continue as they are at the moment, there has to be a question mark over whether the resources that are at the disposal of publishers will be adequate to discharge that function in the way that they have in the past.
Q75 Alan Keen: Some people say that desperation because of falling revenues, critical analysis, has brought about a difference in the type of local journalism. Have you noticed that?
Mr Watson: Jonathan, I do not know if you want to perhaps talk to this because you deal with this on a day-to-day basis more than I would.
Mr Grun: Yes. The actual subjects that regional newspapers report on have probably changed, evolved, in line with what they think their customers will be looking for. Just to reiterate what Tony said, I think the actual quality of regional journalism is as high now as it has ever been. Regional journalists are probably better qualified and better trained, probably harder working, than they have ever been and can be proud of the products that they produce. I was one of the judges at the Regional Press Awards this year and it was a very pleasurable experience to read the quality of the entries and also to see how regional newspapers were adapting so that some of the entries were not just in print; they were in multimedia format as well. I was very encouraged by what I saw, so I would not agree with some of the criticisms that have been levelled against the absolute quality of the regional media.
Q76 Alan Keen: I am reluctant to raise a personal issue but I experienced a local journalist using photographs taken over the back fence which showed the back of my house. He said it was dilapidated. He lied about the local council threatening to take possession of the house and use it for social housing, which led to squatters moving in, and they are still in there now. Clearly, quite a lot of lies were told. I do not know whether you have seen that story. How would you verify whether that was true or not?
Mr Grun: If we wanted to follow that story up, we would attempt to contact you, attempt to contact the authorities and attempt to establish what the facts were. Even with regard to the newspaper that would have originally published that story, you would still have the means of redress yourself because there are strict rules regarding things like long lens photography and accuracy. You have a means of recourse, if you want to take it.
Q77 Alan Keen: Finally, can you say how do you think the industry should address the problems? What reorganisation needs to take place? We do not want to see all the press shutting down so there is nothing left. What is the next step in the reorganisation in order for local papers to survive?
Mr Watson: I think a lot of the groups now are in the process of trying to migrate their newspaper brands online. They are now moving into areas like video. Obviously, there is the opportunity for them if this becomes policy to take part in the independently funded news consortia that have been talked about. There is no doubt that the future is uncertain and, at a time when large sums of money are being talked about to preserve 30 minutes of regional news on Channel 3, there is an argument to say if that is the priority that we attach to public service broadcasting, what about public service reporting? Is there not a case to recognise the role that local newspapers play in the life of their communities in holding public institutions to account for that contestable fund to extend to newspapers? The industry has always set its face against direct public funding, for all sorts of reasonable reasons, but I think things are getting so difficult in parts of the regional press now that there is a serious danger that courts and councils and other public bodies will not be covered to the extent that you would wish to be the case in a functioning democracy. I think for the policymakers and the regulators this is an issue to consider very carefully.
Q78 Chairman: You were ahead of many others in seeing the direction of the development of your industry and in providing multimedia content, and you have now established the digital pool. Can you tell us how that is going and what take-up you have had for that content, both from the traditional newspapers and also from the new online providers?
Mr Angeli: Yes, just going back, we started video gathering as an agency round about
five years ago. I would not describe it
as a broadcast model. Many of our
journalists now are covering events both in text and video. We provide that video content to a number of
national newspapers in packaged form, and also we are beginning to make
available raw video content to our regional clients. The setting up of the digital pool was really
to ensure that where there were events of national and local interest, particularly
local news providers were getting some of the access to that content. In the past the broadcast pool has operated
around the Prime Minister's monthly briefings, political party events,
Q79 Chairman: Why could they not have access to the broadcast pool?
Mr Angeli: The conversations that we have had with BBC, Sky and ITN are around those core news events where only one camera is allowed in. Because we and many of our clients are not part of the broadcast pool, therefore there is not access to that content.
Q80 Chairman: Is that not old thinking that there is broadcast journalism and non-broadcast? The two are coming together. Surely there should now be one camera supplying content to anybody wants it.
Mr Angeli: Yes.
Mr Watson: Yes, we would not argue with that.
Mr Angeli: I think it is an issue of convergence. In the same way the broadcasters now develop text-based services online, regional and national newspapers develop multimedia content online as well, and, as a consequence of convergence, some of the demarcation of who gets to do what really needs some clarifying.
Mr Watson: To be frank, we are, and from a very friendly perspective, in dispute with the broadcasters on this issue. Single camera assignments where we are offering to make our camera available will always tend to go to the broadcast pool and all we are saying is if you are permitted to move that material to your own online operations, in BBC, Sky, and ITN, and, in the case of ITN, sell that on, that footage ought to be made available to us or to whoever else wants to do the digital pool to on-pass to their online audience. We are talking sometimes about assignments of real national importance. One recently was the filming around the advice to manage the spread of swine flu. To our mind, the access holder would have a reasonable expectation that that information was going to get out to as wide an audience as possible. It is a public health emergency. We were not allowed access to that material so, therefore, huge swathes of audience, users, on newspaper websites and digital portals were not able to see that information. There are many examples.
Q81 Chairman: So it was not just that you were not given access; you were not able to obtain it from the people who were given access?
Mr Watson: No. That would be shared amongst the members of the digital pool, the three broadcasters, and they will use it on their own online properties but we were not allowed access to that to pass on to our customers. We would pass that on to both customers and non-customers on the basis of public service.
Q82 Chairman: So the case would be that newspapers, online providers who were trying to develop an online offering are denied material which is made available to traditional broadcasters, which is clearly of a public service nature.
Mr Watson: Precisely.
Mr Angeli: In describing it as a broadcast pool, yet the content makes its way onto the online properties of the broadcasters themselves, means that in a local area a story which has been filmed under the auspices of the broadcast pool may appear on a local BBC - well, it is probably going to be the BBC local website but not available to the local newspaper website in the same patch.
Q83 Ms Anderson: Could we just turn to the Ofcom proposal for independently financed news consortia, and I think you will know in the Digital Britain report there was a proposal that there should be three pilots. Do you think this is the answer to the continued delivery of regional news, and how do you think it will work out?
Mr Watson: I do not think it is the complete answer. The exact shape of the news consortia is yet to be determined and I think the discussions and consultations between DCMS and Ofcom around the criteria for pilots will begin to frame what that might look like. I think what is positive is that it gives an opportunity for the first time for a wider range of media players to contribute content around regional news. I think one of the opportunities that ought to fall out of that is that it should not simply be a replica for regional news programming as we know it now because I think there is an acceptance that as a model that has failed to deliver to audiences. One of the things that we would hope to see in the awarding of those bids is some commitment to a more granular approach, at least a sub-regional service, so that the stories that are being covered there resonate more closely to those audiences. If you look at the size of some of the regions now that form the current ITV regions, there is no geographic compatibility in the stories from one end of a region to another, which mean absolutely nothing to the people receiving the news. Clearly, one of the challenges for news consortia is to deal with that but I do think that, of the options that were open to Ofcom, this has the best chance of safeguarding plurality of provision within the regions. I think the other point to make is that there has to be an expectation that the technology platform that operates within a consortium has to be a lower cost option than the legacy broadcast provision that we have seen in the past. Finally, the replacement of the 30 minutes of programming on Channel 3 should be seen as just one step on a roadmap which leads to more on-demand, more multi‑platform provision for that content. It is not the destination. As Stephen Carter acknowledged, that linear output would decline in its importance over time, but that is the issue that the policymakers have to deal with right now with ITV in effect being given the green light to walk away from those licences by 2013.
Q84 Ms Anderson: Would PA want to be involved?
Mr Watson: We certainly see ourselves as a player in that proposition from the point of view of a content provider because one of the things that we have done over the last four years is invest heavily in our video gathering capability. I think we are well placed to help the newspapers to play a meaningful part in that proposition. Because we have the technical links into all of the newsrooms, so there will be an issue about moving video around, I think we can help, working alongside the BBC, to set industry standards around format and metadata. I think there is a training aspect to this as well for us and other training providers. There is no doubt that whilst the regional press have got on to the first rung of the ladder, if you like, in terms of video gathering, there is a quality threshold to be met if you are gathering video for output on a broadcast medium but it is not the leap that some people in broadcast will have you believe.
Q85 Ms Anderson: So you think your video wire service will be quite important?
Mr Watson: Absolutely, yes. We are
covering anything up to 30 stories a day around the
Q86 Ms Anderson: How do you think the cost of these consortia would compare with the cost of delivering regional news at the moment? You have mentioned the demand for more local and sub-regional news, would that not be more expensive?
Mr Watson: Yes, it would, and not least there would be transmission costs involved there but what you would hope to do is to make up that gap, if you like, by reducing the cost of the technology platform that you are operating so that, for instance, you are gathering a moving video on a file-based technology platform rather than predominantly satellite. There is really no reason to do that now. Satellite trucks, engineers, heavyweight cameras, all of that, whilst there will be a place for that, it should not be the dominant technology platform going forward. That is where I think you will begin to depress, quite rightly, those costs.
Q87 Ms Anderson: You mentioned earlier that traditionally the industry has set its face against public funding but it may be that in the light of current circumstances that is changing. If there were to be public funding provided for the regional press, do you think that would have a chilling effect in any way? Do you think it would affect the way they reported news?
Mr Watson: I do not think so. I think it would have to be done centrally and you would probably have to find some indirect mechanism. Setting the criteria would be very challenging. Whatever their views of the BBC are, I do not think anybody would argue, because it is in effect centrally funded, that affects its ability to discharge its functions in terms of impartial journalism, and I do not think it would in the case of the newspapers.
Q88 Ms
Anderson: Finally, can I just ask you one
question about the pilots? The proposal
in Digital Britain is that there should be one in
Mr Watson: I think it would be more challenging. You would probably find ITN would agree with that. I think it is such a big undertaking and, of course, the way in which Ofcom are envisaging, subject to consultation, this actually happening is that the contestability around the pilot would actually happen before the pilots were awarded and that, assuming the quality thresholds were met, at the end of that pilot process they would run into live transmission, so they would simply take over that service. To do that on a national basis I think would be pretty challenging. I think you would want to try to do that in a manageable area, to be able to do a little bit of experimentation, and I think to do that in a contained area, it need not necessarily be one English region but that is what Ofcom and DCMS have determined.
Q89 Ms Anderson: Do you have an opinion about which region that should be?
Mr Watson: I think any region would have its merits, but I think what you have
in the
Ms Anderson: Thank you very much.
Chairman: That was the right answer for Janet.
Ms Anderson: And Nigel.
Q90 Mr
Evans: It is the right answer for me
too. The BBC had 400 people at
Mr Watson: I do not think it is for us to pronounce on the way in which the BBC deploys its journalists. I can only talk about the potential impact in relation to us at the Press Association. I would frame these comments in terms of being a critical friend, if you like. I think what we have found is that, having promised partnerships for the last couple of years, the BBC now seems to be stirred into action. We are finding offers of free video to our customers who we have been trying to build an investment around for a commercial solution, and that is potentially very damaging to us. We feel there is a chance that the market will be distorted as a result of that. It puts the BBC in the position of effectively operating like an agency and I do not think that is what its purpose is. I do not think the way in which they are making that material available answers the issue of plurality, and there are all sorts of issues around the content itself. It is geo-blocked, it has to be BBC branded, you cannot monetise around it, and it will have been on bbc.co.uk first. The BBC is a very important customer to us. We have a very good relationship with the Corporation. In this respect, we feel very strongly that the way in which they are conducting their business in this particular area is not helpful.
Q91 Mr Evans: Have you made representations to the Trust about this?
Mr Watson: We have made representations to both the BBC management and the Trust, and that conversation is ongoing, shall we say.
Q92 Mr Evans: You would prefer that the BBC outsourced some of their own newsgathering to commercial organisations?
Mr Watson: It is nothing new for the BBC to do this. It does it in terms of its foreign coverage in video already. It does it in text and photos in relation to online and broadcast. What agencies typically do are those heavy lifting jobs, which are not about distinctive content, but you need it in your programming, and so we would say, rather than have three crews watching some individual coming in and out of a building, why not outsource that and point your resources at what makes your output distinctive. That is a well trodden path, the agency model. The BBC makes a lot of its commitment, quite rightly, to outsourcing to independent producers in non-news. We would not ever go as far as saying that they should pursue quotas but there does seem to be something in the DNA of the BBC that says, "We cannot possibly allow anybody else to do this." This principle was, in effect, conceded under the Memorandum of Understanding between the ITV and BBC when they were talking about sharing facilities up to and including content. That said to us well, if you have conceded the principle that it does not matter which one of you covers a certain type of diary or non-exclusive assignment, what is the difference between outsourcing that to an agency. The regions of the BBC do commission us on an ad hoc basis to cover certain jobs. What we have yet to establish is a principle that we have established here a video agency for the UK for the benefit of not only online but for broadcasters as well to help them reduce the cost of doing those diary, non-exclusive jobs, to allow them then to work at what is really at the heart of plurality: distinctive journalism.
Q93 Mr Evans: But then you get the idea that because they have access to so much of the licence fee money they are able to throw lots of money at things. Online is a perfect example. Online BBC news, I suspect, is one of the best in the world and that is because they can just throw a disproportionate amount of money at it which then thwarts other commercial news organisations from being able to offer anything like what they do.
Mr Watson: It is certainly true that BBC news online is the only, by some considerable distance, online property in the UK that gets into the top ten sites, and there is no question that the ubiquity of BBC news online makes life difficult for us when we roll into a customer selling news services for their online for properties because often the answer is "Well, we will do a little bit of news but we are not going to do it in any depth because everybody goes to the BBC anyway." There is no question that that is an issue for us.
Q94 Mr Evans: The answer to that is what the Government is now doing, which is top‑slicing the licence fee.
Mr Watson: That is one solution. We believe it is an innovative solution. We believe that it is a reasonable suggestion and worthy of detailed consultation.
Q95 Chairman: Can I come back to the concept that you have suggested, and that is public service reporting. Can you say what you see as public service reporting and how you think in the future you can assist to ensure that it continues if it is under threat, as it seems to be now?
Mr Watson: I would class public service reporting as the coverage of those public institutions that have power and influence over people's lives, and the coverage of those activities is essential to the functioning of a healthy democracy. We would say on the courts that there is a very important principle of justice being seen to be done and yet there are courts up and down the land, as we know, where reporters are not covering those proceedings, and it raises the principle of people being sent to prison without anybody being there to record that fact. I think also local authorities, although there is a suggestion that local authorities in some cases have not helped themselves in terms of opening up their proceedings, and then there is the plethora of bodies, health trusts, police authorities, et cetera. That is broadly how I would define that activity and there is no question that because of the pressure on resource that is going to itself come under pressure. I think what we would say is that the contestable fund offers a unique opportunity here. There is a paragraph within the CMS consultation document which speaks about are there other public purposes that would be an appropriate use of those funds over and above the independently funded news consortia, and we would say very definitely that it is worth further examination of whether there could be some mechanism of recognising that very important role - just as important as public service broadcasting - that the newspapers perform. We would not seek to be prescriptive about how that might work. What we are trying to suggest is that there is a principle here that needs to be recognised, there needs to be some equivalence here if we are potentially talking about spending up to £100 million of public money to support, in the first instance, linear TV output for regional television news. There is a question mark here as to whether newspapers are equally deserving of some recognition in that regard. The picture is very patchy here but it is quite anecdotal. There are many places, and MPs will see this themselves in their own constituencies, where coverage is patchier than it used to be. I think we need more information around this. We have conducted our own snapshot research. I would not suggest it is statistically robust but it certainly does back up the notion that this coverage has diminished. We are proposing, alongside this, to launch a pilot project which is aimed at trying to really get to grips with whether there is content out there around public institutions that is not finding its way into the media at the moment as a result of the pressure on resources, and the only way to do that is to stick a bunch of reporters into an area for a defined period and point them at those institutions and just see what comes out and see what take-up there might be from the regional news media. Helpfully, Trinity Mirror, one of the largest publishers, has agreed to join us in this project and will make their papers in the defined area available to take part in this. They are very happy for the local authorities and other public bodies to be involved in this so that we get a much better handle on the extent of this problem and then a discussion about what might be meaningful solutions. We would hope ideally to launch that in the autumn. At the moment we are seeking a source of independent funding.
Q96 Chairman: So you are going to deploy PA journalists in a particular locality to report on the kinds of institutions that you described and then that content is made available to anybody?
Mr Watson: Yes. That would have to be the basis on which you would do that. I think for regional newspapers, they would have to have confidence in their ability to package that content more quickly and in a more interesting way than other media players. That would have to be part of the ground rules there.
Q97 Chairman: Is it made available free?
Mr Watson: Yes. We are talking about a pilot here at the moment.
Q98 Chairman: I understand that, although essentially different because in a sense that is what you do anyway but at the moment newspapers pay for it.
Mr Watson: Yes.
Q99 Chairman: Whereas this, you are going to go and do it.
Mr Watson: Yes. We would not typically cover public institutions at that level of localness. That is their role. Crown Courts and High Courts and so on, yes, that is our role. Just on a point of information, we would not deploy or redeploy our PA journalist into that project, we would actually go out and recruit those specifically for that project.
Q100 Chairman: Where do you see the money to support this coming from?
Mr Watson: We have a couple of conversations going on at the moment. I would hesitate to mention them because I do not want to seem to put them under pressure and jeopardise the opportunity.
Q101 Chairman: But it will not be the industry?
Mr Watson: No.
Q102 Chairman: The people who get this information do not have to contribute to the cost of it?
Mr Watson: No, and I think there is something to be said for it to be independently funded. It makes it a lot easier to say that this information is more widely available. Were there to be a public funding solution ultimately around this, I think there would have to be some acceptance on the part of the industry that you make that information widely available.
Q103 Philip Davies: Can you just touch on the impact that local authority publications and publications by people like police authorities and things like that are having on the local newspaper industry.
Mr Watson: Yes, I think they are having a considerable effect. We picked up a document from the Local Government Association recently which said that something like 66% of all authorities had some form of publication, whether it be a magazine or a newspaper. I think that local authorities have a perfect right and, indeed, an obligation to talk to their council tax payers, but I think there is a world of difference between that and seeking to set yourself up as a bona fide newspaper competing with the local titles. I think where it is particularly damaging to local press is where these publications are chasing advertising, chasing the same advertising, particularly at a time when they are in such distressed circumstances. So I think the decision to ask the Audit Commission to look at this is right and proper.
Q104 Philip Davies: Of course, it is not just the competing advertising. Lots of people do consider these things to be just propaganda anyway. It is not just the competing advertising but it is actually the advertising of local authority jobs and things, which has always traditionally been a big revenue stream for local papers.
Mr Watson: Indeed.
Q105 Philip Davies: Some people have expressed a concern that, because many local papers have become so dependent on local authority advertising for things like jobs, it means that the local paper becomes less critical of the local authority in case that advertising revenue disappears. Do you think there is any truth in that?
Mr Watson: That is a danger the papers have had to live with throughout their history, and it is not just related to local authorities. It is not unusual for a powerful local motor dealer to threaten to pull their advertising because the paper has written something that it takes exception to. When I worked in newspapers, the advertising departments would often be in total exasperation to see an article that they knew nothing about - and it speaks volumes about the separation of advertising and editorial in local newspapers - would appear on page 1 and they would take the call from the local advertiser saying, "Well, I am going to pull." In my experience, newspapers have been very strong at resisting this because where do you stop with that? If you have an issue around credibility in terms of council-run newspapers, if all you have to do is to threaten to pull your advertising to in effect emasculate a local newspaper, then you are not going to have a lot of credibility within the marketplace. So in my experience, if it is a serious newspaper, it will tend to tough those things out. Obviously, what is a lot more difficult these days is that there is much more competition and advertisers have much more choice as to where to place their business.
Q106 Philip Davies: Are you in favour of the relaxation of the newspaper merger and cross‑ownership issues?
Mr Watson: We would support that. I think for a long time those rules, in the way in which local markets are defined, have been too narrow and it has not taken into account the fact, for example, that online news aggregators operate across geographical boundaries. I think a review was long overdue and I think that the market guidance given in the Digital Britain report and the role specified for Ofcom on behalf of the OFT to conduct local media assessments when merger and acquisitions are discussed is to be welcomed. I do not think it is a panacea for the regional media's difficulties but I think what it will do is give them scale and synergy to allow them to make the investments that they need to do to re-skill and to develop their properties on other platforms.
Q107 Philip Davies: Finally, can I just ask you what the impact of the problems that the local newspaper industry has been having is on the Press Association. Has it been negative, in the sense that local papers can now no longer afford to put things in the paper that you provide that they once did, or has it been beneficial because whereas once upon a time local papers would employ their own people to do things, now they cannot afford to and so pool the costs and employ somebody from the Press Association? Has this been positive or negative?
Mr Watson: Absolutely. That is a very good question. The answer is both actually. There has been a trend towards outsourcing certain types of activity. We would supply more on the data manipulation side, so you are talking about TV listings, sports data, race cards, that kind of thing, which if you invest in database technology and you have the economies of scale that we have within our production operation, we can do it more cheaply than the publisher, but we will never replicate the ability of local newspapers to cover their own patch. They have more people on the ground, even in these distressed times, than we would ever have, and that is not our game. To answer the other part of your question, yes, we have also been a victim of this process as well. There is no question that our revenues from traditional media within the regions have declined as a result of the pressures that they felt themselves.
Q108 Mr Sanders: I wanted to ask that question the other way round. To what extent do you rely on the local press and local journalists for your source material?
Mr Grun: I think, along with any other national news organisation, we would happily acknowledge that the regional media are incredibly important. They are the solid foundation for the whole of what you could describe as the news pyramid in this country. Many of the stories that you read in the national media or indeed see on the Press Association wire started, originated, in a local newspaper and were then picked up or followed up by national news organisations.
Q109 Mr Sanders: It is a symbiotic relationship, is it not, between yourselves and regional and local papers, and therefore you suffer if there is a closure of titles or there are fewer people beavering away, finding stories at a local level?
Mr Watson: Yes, I think the whole media ecology would suffer. If you talk to anybody that has worked in local broadcasting, they will tell you that one of the first things they would do when they were planning their programme output for the following day is to get the local newspaper, because there are all sorts of leads there for them to develop into their own video legend, so the local and regional press is a massive resource for the rest of regional broadcast media and for national media, and there is an army of local agency journalists - less than there used to be - that spend all of their time combing the local newspapers for stories that they can develop and sell on to national newspapers.
Q110 Mr Sanders: Do you foresee a future, if there are fewer local newspapers, of people starting to trawl blogs and the internet for stories?
Mr Watson: Some of that is happening already.
The big question is - and it was raised by John and I in this Committee's
public meeting in
Chairman: Thank you.
Examination of Witnesses
Witnesses: Mr David Newell, Director, The
Newspaper Society, Mr Michael Pelosi, Managing Director, Northcliffe
Media, Ms Geraldine Allinson, Chairman,
Chairman: Good morning. For the second part of this morning's session, I welcome David Newell, the Director of The Newspaper Society, Michael Pelosi, Managing Director of Northcliffe Media, Geraldine Allinson of the Kent Messenger Group and Ed Curran, the Editor of the Belfast Telegraph.
Q111 Mr Sanders: Is the current downturn the biggest crisis that the local press has ever faced?
Mr Newell: I think in terms of financial position of the industry, yes. Not only in terms of the size of the downturn but also the suddenness of it and that is replicated in terms of the overall position of the industry which is then demonstrated by the challenges that are faced by individual companies. In bringing along today Michael, Geraldine and Ed, what The Newspaper Society has tried to do is try to have before you a representative of one of the largest companies, Northcliffe Media, Geraldine Allinson, one of the privately owned companies in Kent, and Ed who has deep editorial experience. We hope during this session to give some of the texture and some of the flavour of the issues that are facing the industry.
Q112 Mr Sanders: What sets this apart from other downturns that the industry has had to face
Mr Newell: I think the sheer scale of the loss of advertising revenue and it is a paradox because it comes at a time where our audience is growing but our revenues are declining. At one level, the plus side that the industry has is that if you aggregate our circulations with our web traffic to our websites, there are now more people with an interest in local information than ever before and the companies represented here and within the industry have access to a greater audience than ever before, which shows that there is a consumer demand and interest in local news and information, and the challenge for the industry is to find the revenue stream that actually supports that where our traditional revenue stream is under challenge I think structurally in terms of cycle, but Michael may want to say something.
Mr Pelosi: May I help with some data? Just looking at trends, which I am sure you could dig out for yourselves if you access public records, our industry's advertising revenues peaked in the spring of 2005. If you look at current trends, we are beginning to see the ad revenue downturn bottom out. Someone once asked me if that was a floor or a ledge and I do not know at this stage. I think it is a floor. If you just project it forward to the middle of next calendar year, our industry will have suffered a decline in advertising revenues of between 45% and 50% and I think that any industry facing that level of advertising revenue decline would be struggling. So, I would say that this is the biggest crisis that our industry is facing.
Q113 Mr Sanders: How many of the 1,300 local and regional newspaper titles do you expect to close in the next five years?
Mr Newell: I can give a global figure. At the moment, we think that the figure is around 100 will close, getting on for 100. What the trend will be over the next five years I think is hard to estimate. Claire Enders gave evidence to this Committee and gave a very alarming figure of around 500. I think from our perspective it would be very hard for us to say whether that is a correct figure or not. I think that it is an overly pessimistic figure in the sense that we do believe very strongly with the right environment, both regulatory and otherwise, that the traditional model of local media companies providing independent news and information is a model that will sustain and be sustained if it gets the right level of support from government.
Q114 Mr Sanders: So, you do not see a future without government changing either the rules or indeed changing how companies are funded. Are there any particular rules which you think government need to change in order to help the newspaper industry survive?
Mr Newell: There are a number of things that government can do. Government for example believe very much in the role of local newspapers and spends a lot of time trying to get stories into local newspapers, but the way in which they allocate their advertising spend is completely unrelated to that. The Government at the moment I think spends through COI getting on for £193 million a year on government advertising. Of that total, only between 3%/4% of it finds its way into local and regional newspapers. That is an example of something that can be done which is not related to the need for legal or statutory change but would undoubtedly help.
Q115 Mr Sanders: How would that compare with, say, a large corporation in its advertising budget and percentage that it might spend on local newspapers? Is it the case that the COI is actually just doing its job properly in making sure that taxpayers' money is being spent most effectively or is there something you can compare it against to show that actually it would get better value from taxpayers' money were it to spend more on local advertising?
Mr Newell: We recognise - and others may want to contribute to this - that we have to fight our corner with COI in terms of showing what the advantages are of the Government public authorities using regional and local newspapers as opposed to other media, but we feel that there should be more of a political steer that COI should actually open their door to these sorts of messages.
Q116 Mr Evans: Hearing about the number of losses you are predicting of about 100, Ofcom in their evidence to us said that they felt that, of the closures that had happened already, the majority of them were either free sheets or weekly newspapers with low circulations. Do you think that they are being too optimistic?
Mr Newell: Of the closures that have happened so far, the majority of them are free newspapers or weekly newspapers and often in areas where there are other newspapers in circulation. As I said, I think that it is very hard to predict this. I think probably the truth may in the end be somewhere between Ofcom's analysis and Claire Enders's analysis.
Mr Pelosi: In our case, we have closed 21 newspapers and they have been free newspapers and they have been our weaker titles.
Q117 Mr Evans: Were they all loss making?
Mr Pelosi: They were loss making, yes. I believe that advertising revenues are now bumbling along the bottom. That is what we have seen over the last 20 weeks. I believe that when there is an upturn in the economy, then we will see an improvement in our advertising uptake. Undoubtedly, some of our revenues have been lost forever; that is the migration to online. What we do not know is how much is migration and how much relates to the economic downturn, but I believe that we will see additional revenues in our papers when the economy recovers but that could well be two years from now. I do believe that more titles will close; again they will be the weaker titles that will close. I do believe that publishers will look at different publishing models. For example, they may take some of their daily titles to a weekly model. We have done that with one newspaper, the Bath Chronicle. It was not making money in a daily format and we took it weekly. It could well be that some weekly pay for titles will be taken through. I think that publishers will look at different models and therefore I think that over the next five years to say that half the regional press will close is too pessimistic. I do believe however that fundamental issues will remain. Those fundamental issues are that there has been a long-term gentle decline of the sale of newspapers, not just local newspapers but also nationals, and that gentle decline has accelerated over the last few years. I think that is inescapable and is ongoing. We are going to see the sale of newspapers going down. So, the reach that we will have in print will be less. I think that that is going to be a challenge for our industry. How do we deliver the reach that advertisers want that they find value for money? There is no doubt that our online audiences are growing. We say that in print you enjoy pound notes whereas online you enjoy shillings. So, it is very difficult at this stage to monetise online audiences and, whilst I can see our online audiences growing and growing and growing, it is very difficult to see how we are going to make money from online activities.
Q118 Mr Evans: If you cannot make money from online at the moment, then this really reinforces the dire projections because, if you say that is going to be another two years before there is an upturn in your advertising revenue and you cannot monetise online and it is all costing you money to do all this ---
Mr Pelosi: The online.
Q119 Mr Evans: The online as well, yes. It is going to cost you a lot of money. Do you see perhaps in five years' time a total migration away from some titles just to the online productions if you can monetise them?
Mr Pelosi: That caveat is the right one, if you can monetise them. I do not think that there is a proven model yet that you can take a newspaper online and make money out of it.
Mr Newell: Particularly given the
construct in the
Q120 Mr Evans: What would you do about that? Is the BBC the number one bogeyman for you?
Mr Newell: There are a number of bogeymen. Ed is better at bogeymen than I am but, yes, the BBC is a big, big, powerful beast in the sense that its total licence fee income is greater than the whole revenue of the regional press put together and we in that sense are a fragmented industry trying to compete against a national institution.
Mr Curran: My career spans about 40
years and, in
Q121 Mr Evans: So, over the years, the BBC has had its hand on your neck and it has slowly been closing its grip.
Mr Curran: Yes. The final tourniquet, if I may use the phrase, is really the internet in the sense that we are all struggling to find some means of monetising the internet and, even if we all collectively got together tomorrow morning, Rupert Murdoch, Associated Newspapers, the independent news and media, and said, "We are all going to charge for the internet", we would be undermined by the BBC.
Q122 Mr Evans: We know the problem, what is the solution?
Mr Curran: My personal view is that I think that the BBC needs to be restricted in the way it expands particularly in the regions. All of us have a huge appreciation for the BBC nationally, for its international service and its national service throughout our lives - the model 'nation shall speak peace unto nation', all of that and everything. However, since the 1960s, I think that its expansion in the regions has been detrimental to the overall regional media and is inevitably leading to journalists and newspapers being diminished, either journalists losing their jobs or newspapers closing eventually.
Q123 Alan
Keen: I can go back even longer as a consumer of
news. I used to work for Middlesbrough
Football Club; I used to be in
Mr Curran: I would suggest that if in fact what was happening in the media industry with what is a pseudo-nationalised industry, namely the BBC, was happening in any other sector of our society, there would probably be a hue and cry. In reality, we know for example at the moment how important private industry is and if in fact, in any other area of it, we had a taxpayer-funded organisation that was basically going to a point where it was actually damaging the future of that private industry, I think there would be questions raised all over the place.
Q124 Alan
Keen: It is the technology has changed. Print media has to come to an end. I also go back a long time and I have photos
of me with my mother and father walking down the prom at
Mr Newell: I do not think we take that degree of pessimism really. We think that the future is a combination of print products and website products and the problem about the BBC is that the BBC crowds out our ability to make our website offering financially successful. It is there and it is changing fast. There are now 1,200 websites run by regional and local newspapers of varying degrees of expertise, but the degree of expertise is increasing. Some of the issues that you discussed earlier this morning with the Press Association will actually hopefully accelerate that and the pilots that were referred to in terms of Digital Britain and all the rest of it will help the journey, but there are things on the journey that make things difficult. The BBC is one of those things. It may be interesting to hear from Geraldine whose Kent Messenger is a company that actually concentrates on Kent but concentrates on Kent in a way that does cover not only newspapers but other media.
Ms Allinson: We are a company that has
newspapers, radio stations and websites primarily but we do have mobile
magazines and things like that, but we do concentrate on
Q125 Alan
Keen: If I lived in
Ms Allinson: Yes, it is.
Q126 Alan Keen: There must be still a lot of pride in it.
Ms Allinson: Huge.
Q127 Alan Keen: With the national groups of newspapers, there cannot be the same pride as there is around a family-run business. Can you contrast the Kent Messenger with the newspapers owned by a national who are really, apart from a few owners, interested in money?
Ms Allinson: It is a really difficult thing to quantity. My shareholders nearly all live in Kent and they absolutely are committed to the company and what it is able to do and the activities that the company have. I think you find that in the national companies like Northcliffe - and I worked in Northcliffe - there is also local pride with all the people who work in those titles. I do not think that there is any difference with regard to the people who work in those titles and actually what they are delivering to the local communities. I do not think that that is different. Maybe with the commitment from the shareholders when it comes to the returns they expect from their investment, that is different and maybe the big groups are driven differently to my company with regard to that. We have always thought that 10% profit to turnover would sustain our independence but clearly, when we face situations like we are facing now, if I am making a smaller profit when we go into a decline like we have, I have bigger problems to get back to profitability, which is what I have now.
Q128 Janet Anderson: May I touch on something which I think is a very important part of this discussion and that is the protection of creative intellectual property rights because essentially the BBC have this huge public subsidy, they lift a lot of your creative content and use it to cross-advertise their different services and pay absolutely nothing for it. You talked earlier about there not being a model that is useable for monetising your online services, so what is the answer to this because it seems almost insufferable because, if you try and monetise and the BBC continues to provide everything for nothing because they have this huge public subsidy, what is the solution?
Mr Pelosi: I think 'twas ever thus. Our local journalists obviously have access
and do gather a lot of content and a lot of unique content which is published
daily. I did not know that in
Q129 Janet Anderson: But it is true to say that this huge public subsidy that the BBC has puts you in a very unfair disadvantage, is it not?
Mr Pelosi: Absolutely.
Q130 Janet Anderson: So, when the BBC claim that they have to pay large salaries to people in order to compete, that is just not true at all.
Mr Pelosi: They certainly have to pay the salaries et cetera, et cetera, but of course they do not have to generate any revenues so as to pay for these services. They are publicly funded.
Mr Newell: I think that one of the things that concerns us about the BBC - and we must not just talk about the BBC, I know - is that, in all their public comments, they talk the language of partnership and yet the discussions that they have had with the regional and local newspaper industry have been fairly superficial and do not start off with the premise we think they should start off with that a partnership to work to be discussed should start off from the premise of the BBC acknowledging how reliant they are on regional and local newspapers as the premier news-gathering resource in the country. I think that there has been too much language talk that the BBC have content to offer us whereas actually de facto we have the content that the BBC use on a daily basis.
Q131 Mr Sanders: May I say that there is a lot of BBC bashing here. The reality is that the BBC has always been there. Is not the new threat now the new kid on the block something like Google that takes your content, puts it on the web and gets lots and lots of people looking at it?
Mr Newell: I think that some of the issues that we have raised vis-à-vis the BBC could apply in the same way to Google and of course I think where government can help is to ensure that there is a firm copyright regime that allows a content owner to control the destiny of their content and ---
Q132 Mr Sanders: How can the Government do that in a global environment?
Mr Newell: ... in addition to that an
ability for the content owners to have dialogue with Google. Ed earlier on referred to the interesting
prospect of all the national newspaper owners and regional newspaper owners
getting in a room together to decide how they should handle the BBC. You could also say getting into a room
together to try to handle Google. The
basic issue is that competition law does not allow that to happen at the moment
and there is a fundamental imbalance, I think, that exists between a large, in
the case of the BBC, public corporation that is a unitary body and, in the case
of Google, a world-wide enormous company.
To do business with those institutions on your own, whether you are an
independent, whether you are Northcliffe or Kent Messenger, is extremely
difficult. To be able to do it by way of
co-operation and collaboration, existing competition law makes that hard and I
think that one of the disappointments we would have with the Digital Britain
report is that although on the whole it identifies the right issues or a lot of
the right issues, although it is pretty light on Google, it does not with any
degree of urgency suggest what the solutions will be and although the OFT
review and the possibility of Ofcom being involved will be helpful, I do not
think that it really addresses the fundamental issue that it is very hard for
newspaper companies, regardless of their size, to discuss with one another
rationalisation, whether it is a sharing of resource in some areas and the
swapping of titles in some areas. The
geography of individual newspaper groups in this country is a geography of
history. It is not a rational geography
in terms of regional areas. Kent
Messenger is very unusual in that
Q133 Chairman: May I pursue this because Google is clearly the bogeyman in the room, but there is a certain amount of confusion in your industry about what we are complaining about. Is it a question of fact that Google is taking content, so it is an intellectual property question in that essentially Google is stealing your content and putting it up for nothing and therefore diverting eyes from your sites, or is that actually Google is taking on advertising revenue and we know that the majority of advertising online is spent on search and by far the biggest provider of that is Google and that therefore the advertising is not being put onto your sites, it is being taken over by Google?
Mr Newell: I think you are right in characterising the position as one at the moment that individual companies have different views on this and different arrangements with Google, but I think that what would unite the industry is the importance of a strong copyright regime and the need in practice using technology to make certain that individual companies are in control of their content so that, if they do not want Google to actually take their content, there are conventions and means to prevent that happening.
Q134 Chairman: Surely you have to have Google otherwise most people are not going to find your site. People are not necessarily going to go directly to the Kent Messenger Group site or the Northcliffe site, they are going to Google, and actually Google is driving people to your sites.
Mr Newell: And, within that, the way in which advertising revenue relates to that is extremely important. I think the more general point that I am making is that we need a strong copyright regime that works in practice and we need to find a way, which I do not think the industry has yet found, partly for the reasons I indicated because of competition law, so that there can be more generic discussion with Google about some of these issues.
Q135 Chairman: When you say stronger intellectual property law, you are not suggesting that Google should not be able to carry the first sentence of an article because that actually is to your benefit and not to your detriment.
Mr Newell: I think that it should be within the sovereignty of individual companies to decide whether they want Google to be a vehicle that they use or not.
Q136 Chairman: I think the evidence we received last week was that however much people did not necessarily like Google, they accepted that they had to have Google if they were going to get people to their websites.
Mr Newell: I think that would be the view of the majority of companies, but I think that they are in that position because of the sheer power of Google.
Q137 Chairman: Google has been immensely successful and dominates search but there is not very much that you can do about that. The advertising issue is one perhaps where there is an imbalance and that may well be a competition issue.
Mr Pelosi: There is no doubt that we need Google and the way in which we compile pages online are such that they are search engine friendly so that when people are searching for, say, cricket scores in Cheltenham, then they will go to our site first. Yes, we do need Google, but Google has this aggregation service which of course means that traffic eyeballs can stay on Google and scan the news without coming to individual sites. Again, I suppose that we are where we are now because how can you get a snapshot of news other than through an aggregator but it is through an aggregator that we are denied traffic because traffic will go to Google first to look at Google News and then, as a result of an aggregator having that traffic, then they have the primary opportunity to monetise the eyeballs. Again, I think that we are in a very difficult situation and it is rather difficult to see how we are going to find a solution to this. We need Google for the search. As a result, we can have Google News, which is an aggregated content, and, as a result, they are going to get a lot of the eyeballs.
Q138 Chairman: But you can always offer more than Google can in terms of depth of coverage and quality.
Mr Pelosi: Yes, absolutely, and obviously we do. When somebody clicks onto that story, they click through to our website but it is whether they stay on that website or click back so that they can go on to the next story.
Q139 Chairman: I am left with the impression that you see Google as being a serious threat in terms of taking eyeballs and indeed revenue, but it is not immediately obvious what we can do about it. Is that fair?
Mr Pelosi: Certainly I feel that it is not obvious what we can do about it. We can stop Google taking our content - I think you can just block their robots - but, if we do that, then we do not have access to the Google search engine when someone keys in 'cricket in Cheltenham' because we want them to come to our sites.
Q140 Philip Davies: Are you satisfied with the recommendations of the Digital Britain report about mergers and cross ownership?
Mr Newell: As I said earlier, I am satisfied that the work that has been done means that the regulatory authorities are now more in tune about how local media markets operate and I am satisfied that the process that will emerge will be more satisfactory than the current process. What I am not certain of is, when the system is tested, how quite it will work through and I am not satisfied that actually the sense of urgency has come across, in particular that newspaper groups of all sizes would like to be able to have discussions with one another about titles, possibility of title swapping and the possibility of rationalisation and whether the right environment has been created or not. It will take one company to test it and then we will know whether we are satisfied.
Q141 Philip Davies: But you are not sure whether it goes far enough.
Mr Newell: No.
Q142 Philip
Davies: At the beginning,
Mr Newell: Different people have different views on it. I think that there will be a whole texture of things that will go on if the regulatory regime works in a more realistic way. In some areas, it will be marginal increases in size of companies or rationalising their geography to which I referred earlier and then there is a possibility that some big companies might get larger or some medium-sized companies themselves might get larger. I think that there will be a choice there. If you ask what I think the shape of the industry will be in five years' time, I would hope that there would be the type of mix of players that there are at the moment. I do not think that it is a one size fits all solution, that you end up with one company owning every single regional and local newspaper in the country. I think that it is absolutely good and healthy that there will be a variety of ownership regimes, some companies in public ownership, some companies in private ownership, and, regardless of the size of the company at the moment, up until recently, it has been hard for those companies to navigate themselves through the competition regime. There is an amber light that has been given I think by Digital Britain but whether it is an amber light that gives enough comfort to people to rationalise their businesses remains to be seen.
Q143 Philip Davies: Geraldine, I wonder if you see an independent future for companies like yours or whether you actually felt that, in the medium to long term, there was only a matter of time before companies like yours are swallowed up by bigger players in the market.
Ms Allinson: There are definitely
differing views on that. We do see an
independent future but what has happened in the last couple of years has been
pretty significant and we need to change the shape of our business over the
next few years, otherwise there probably is not an independent future. We know that our reliance on ad revenue in
our printed publications will continue to decline and we have to find other
revenue streams to grow our revenues and that may be through mobile or all
sorts of different things which we will be experimenting with and trialling
over the next few years. Yes, I do see
an independent future. The marketplaces
in which we operate are very competitive in
Q144 Philip Davies: Michael, are you on the hunt for extra titles to swallow up or swallow up other competitors?
Mr Pelosi: No, is the answer. Just coming back of line of questioning, it is impossible to tell what the shape of the industry is going to be like, as I think you have asked, five years from now. There is no money for mergers if it is going to involve cash. It might be that there could be some kind of merger recourse and we can only wait and see if that comes about. It could well be that if there is an upturn in advertising revenues and therefore in fortunes and some owners will try and sell to private equity or to another owner but, as I say, there is not a lot of money. I think you are aware of the debt issues in some of the regional press at the moment and that has to be addressed. David has alluded to swaps. I think that there could be some swaps but where you are swapping titles in continuous areas, I do believe that the opportunity for cost reduction is limited. I think that the only opportunity for making serious cost reduction is where Geraldine has alluded to and that is where you have two or more titles in one market and are fighting it out and, as a result, are fighting for a much lower revenue cake. It may make sense for there to be rationalisation so that there is only one title serving that market, but of course that goes against all that the OFT stands for. They will want to see no diminution in competition in a market where there are two or more titles serving that community. I think that it is very difficult to tell how this is all going to pan out in the next few years.
Q145 Philip Davies: David, I was struck by your comment on the disappointing nature of the discussion you had with the BBC about the partnership and I just wonder if you could tell us a little more about those discussions and whether or not you have raised your concerns about those disappointing discussions with the BBC Trust.
Mr Newell: Obviously, we were engaged in a process that happily we won with the BBC Trust and Ofcom in relation to BBC local video. We have not gone back to the BBC Trust for the moment because have had discussions with the BBC - and it is an ongoing process as it were and individual companies at the moment are currently having discussion with the BBC - but I do not hold out, for reasons I have indicated, much optimism that those discussions will lead to a fundamental change in the issues that we have already raised. In terms of where we go from there with the BBC, I think that a lot depends on the decisions that the Government make on Digital Britain. We are optimistic and we hope that the Government will actually come forward with top-slicing proposals which will allow for the funding of independently funded news consortia pilots and we hope that regional and local newspapers will be part of those pilots. It is clear in terms of the discussion that we have had with the BBC that, to a certain extent, the BBC have put on hold any further discussions that they will have with us until they know the outcome of the Government's decisions - I think that the consultation is over in the middle of September - about how the Government will respond on independently funded news consortia and on top slicing. We would feel that area of experimentation, and for that to happen sooner rather than later, would be a very positive encouragement to the regional and local newspaper industry and I know that a number of companies, in co-operation with the Press Association and looking at other vehicles, are very keen to do something in this area. What we hope is that this does not become another example of an industry initiative that could possibly be smothered by the BBC who are clearly against the idea of these pilots going ahead and being funded out of licence fee money.
Q146 Philip Davies: Do you feel that the Government are going to have to force the issue and that the BBC itself is not going to do anything meaningful of its own volition?
Mr Newell: I think that there has been a pattern where that is the case and I do not see the pattern changing.
Q147 Chairman: Just on the independently funded news consortia, the English pilot explicitly rules out participation of the existing ITV news provider. How do you see the consortia coming about? Do you see a local newspaper as being the sort of organiser and co-ordinator and presumably, if the pilots work successfully, you would want to see more than one in order that you can have contestable funding?
Mr Newell: In our discussions with
Ofcom, we have been very keen that there should be a pilot rather than there
being a one size fits all for the whole of
Q148 Alan
Keen: I have a fairly boring question to ask. Google is a problem because they are taking
revenue, are they not? The BBC website
does not take any revenue. Why do we not
re-organise it altogether? We can do it
through the market; we do not need to enforce it. Why do we not use the BBC website as the
channel for your websites? So, if they
want news, they go to the BBC and then, if they want the Kent Messenger,
comment and news in
Ms Allinson: The problem with the BBC is that first of all they would prefer the traffic to stay on their website. I do not think that they particularly like the idea of just being an area where you go and then move on to somewhere else though it is probably something that is worth exploring. The other issue is that we have huge commercial sides to our organisation and a lot of people go searching on Google for commercial things, not just news. BBC is well known for the news side of things. I think it would completely cut out a whole area of our business that we obviously want people to go on to Google to search for because we also help our commercial partners to find things on Google as well as on our websites that are actually for sale. So, it does not tick the commercial box. What I would love the BBC to do is to actually give credit where credit is due. If they do cover a lot of stories which they source from us, I wish they would tell everyone they sourced it from us. Every time they sell a story or publish a story or put it on the internet, if they would say "sourced from", I think that would be one thing that would be great.
Q149 Alan Keen: I expect you to say that you do not trust the BBC and that they would not want to do it, but we could make the BBC do it, could we not?
Mr Newell: In fairness, in terms of partnership discussions, it is one area that the BBC have discussed with us and they do actually put links through to regional and local newspaper websites, but the research that was done both by Ofcom and the BBC Trust and the BBC local video application was that the drive through of traffic from the BBC to local newspapers is not all that great and that because of the limited amount of time people have, actually, even if it drives the eyeball from the BBC to the local newspaper website, the person who gets there then does not spend as much time on that local website and therefore the commercial value of that eyeball, as it were, to the local website is not as great as if you had not come through the BBC. I think that there are issues there that mean that publishers do not necessarily feel that the BBC driving traffic through is a way in which they are going to be able to monetise their audience.
Alan Keen: Can I come on to my boring question.
Chairman: It is not a boring question, it is an important question.
Q150 Alan Keen: We touched in the previous session on what local authorities should be allowed to produce. What would you like to see? It is the same with the Health Service. How do you see that things should be done because if it is taking revenue away from you and obviously local authority weekly newsletter would be less boring if it was being done in co-operation with people like you? How do you see that?
Mr Curran: I think in some instances
there is co-operation between some of the local authorities. Certainly in part of the world, civic weeks
and all sorts of things and major kinds of developments by the local council or
whatever may well be done. Publicity
relating to them may well be done in the form of supplements or whatever. A thing that I would like to see would be the
local authorities not taking advertising from the local newspaper because that
is undermining its revenue completely. I
do not think any of us have any objections to local authorities putting out a
glossy booklet or whatever once a year.
I receive it from my own local council in Northern Ireland telling me
who the councillors are et cetera and what good works they have all done et
cetera. Increasingly, I find that MPs in
Mr Newell: May I say, just so that you have some statistics, that the Local Government Association - and these are their figures, not ours - say that 94% of councils produce a publication of some sort but that as many as 64% of those publications carry third-party advertising and I think that it is the regularity of the publication that is of concern. Third-party advertising, whether they are carrying news and information about local authority or whether they are doing general news and information, and the fourth issue which is of concern to us is the way in which local authorities, in creating a newspaper, then use that as the place in which they put statutory notices which would otherwise go in regional and local newspapers. So, it becomes a device to avoid a cost and the public cost of statutory notices, which are meant to appear in bona fide newspapers so that they reach an audience. I would hope that the Audit Commission review will tighten up on codes and any recommendations that you, as a committee, can give in this area we would find very helpful. We are not saying that local authorities cannot have websites and that they cannot have publications, but we do think that there should be a fairly commonsense clear set of rules by which they should abide and it is not only the issue of local authority publications, I do not know whether Geraldine would like to say something about the concept of local authorities becoming television companies.
Ms Allinson:
Q151 Alan Keen: We have a heavy responsibility here. Despite sometimes not being happy with the print media, we care about it. We have a responsibility and, with a failing industry - and I am talking about print; it has taken you a long time to move from print to media news - I think we have failing technology which is history really. I think that it is going to need more and more intervention than there has been so far, whether we are heavily involved with schools and universities and local communication through local authorities to help us to combine with like the commercial print and broadcasting media. We have a duty to provide news for people and proper news but also comment as well. I think you would agree with me that there has to be some invention and some more intervention than we have had so far otherwise we will see a decline in print media and we do not know what it is going to be replacing it. I have worked in the private sector and I am a great believer in the private sector as it drives efficiency, but we have reached a critical point. Do you agree with me that we really have to look at much more intervention than we have had before, not to save the commercial companies but in order to provide the best for the public? It is our duty.
Ms Allinson: Intervention in what regard?
Q152 Alan Keen: Obviously Ofcom have a responsibility but we are going to have to get together. You are saying that you are hampered by the competition rules and that you cannot talk to each other or get together. We have to come up with something that really does save the news industry and not just leave it to the politicians. You agree yourself that you want to be able to talk to competitors unrestricted.
Ms Allinson: Yes.
Q153 Alan Keen: So, really, we are going to have to open our arms completely to change.
Mr Pelosi: You say that the print media is a failing industry. It is interesting that local authorities use print to communicate.
Q154 Alan Keen: I mean commercially.
Mr Pelosi: Yes, but obviously they are
trying to take revenues from us in print.
Secondly, print still delivers to an enormous critical mass of audience
today. I am not arguing that there has
not been long-term decline in the sale of newspapers, of course there has been,
but it is still the lowest critical mass of audience. To take one of our newspapers that serves the
community of
Q155 Chairman: Probably because there is a column from me in it!
Mr Pelosi: And a very well written column, may I say. That will reach over 100,000 people a week in that community. So, it still delivers critical mass. You could argue that television is therefore a failing industry and that radio is a failing industry because they are losing their audiences. I think what is happening is that there is just greater media choice and there is time poverty - we all have limited time nowadays - and so we have to share the audience and we have to share the cake with more media channels. Print drives our online offerings. If our print asset fails, I fear that we will not be able to cover local communities at all because currently our online properties pay nothing for the news and information that we post online. I would not want you to think that we do not embrace online. I think that we do and that we, the industry, do online brilliantly. There will be one or two examples where there will be poor websites, but we do online brilliantly and we have a lot more content online than we do have in print. What we have to do is to try and find ways of print journalism surviving so that the online services that we offer will benefit from that print journalism so that we can make our news and information available to the market, however the market wants to consume it. There are still a lot of people out there who want to consume their news and information in print; the serendipity of print is there versus the immediacy of online. I do not know if you can have government intervention to help us there because, as an industry, as David says, we still enjoy about £2 billion from advertising revenues and therefore we have a very big cost base to sustain. I do not see how we can have some kind of intervention from government to help us ---
Q156 Alan Keen: Can I change two words? When I said "failing technology", I meant changing technology. I read print on my PDA and on my i-phone - it is an electronic version but it is still print - and it is often better than listening to somebody speaking. The other word is "intervention"; I do not mean government intervention, I mean that the Government should facilitate the industry getting together with everything.
Mr Newell: What we would say, although we have been slightly critical of some of Digital Britain in that it does not go far enough and its not speedy enough, is that the momentum that was created by Lord Carter and Andy Burnham in looking at the local news industry and the work of this Committee, we value and we think that it is important because I think that there are things that the Government can do but it is trying to balance that through in such a way that it is not the case that we become suborned by government and become dependent on government subsidy. There are quite a few things that we have mentioned this morning where government could help and that would make a difference. At the end of the day, what happens in the marketplace will be the determinant of the industry.
Q157 Janet Anderson: I am going to go back to local authority newspapers and I agree with you that they contain useful things like how to contact your councillors and when the bins are going to be emptied, but they do not need to produce a whole newspaper to do that. I know that when I get home on Thursday night, there will probably be one on my doormat which I will pick up and put straight into the bin. I hardly ever read it. Yet, the Chief Executive of the local council tells me that it is more widely ready than the local daily newspaper. Is there any evidence about how many people actually read these publications?
Mr Newell: I do not have evidence available here as to the readership of local authority newspapers.
Q158 Janet Anderson: The LGA do not produce anything?
Mr Newell: If there are any stats on it, we will make them available to you.
Janet Anderson: That would be really useful.
Q159 Chairman: We have the LGA coming in due course.
Mr Curran: Obviously the newspapers
themselves, the weekly and daily newspapers, do produce readership surveys on a
regular basis. I think it is
interesting. Part of the world where I
come from which is about the size of
Q160 Janet Anderson: You know how many people are reading your newspapers and my point about local authority ones is that I think they assume that just because they shove one through everyone's door it is read and I do not think that it is.
Ms Allinson: I would completely agree with that. One of the ways to evaluate whether it is value for the money they are spending on it is what the readership will view. In terms of Kent TV, how many people are actually looking at it and have it measured by a third party and independently audited by the media.
Janet Anderson: I think that would be very useful because, as has been said before, most of it is propaganda for whichever the ruling political party is anyway.
Philip Davies: There is good news on Lancashire County Council which is, since its new control in May, they are going down from ten editions to two, so at least it is a step in the right direction.
Chairman: Can we at this point pay tribute to the Mayor of Doncaster who has scrapped the council newsletter who happened to be the father member of the Committee! That is all we have for you. Thank you very much.