Examination of Witnesses (Question Numbers
7 JULY 2009
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, quite how it
will work through. And I am not satisfied that the sense of urgency
has actually come across, in particular that newspaper groups
of all sizes would like to be able to have discussions with one
another about titles, the possibility of title swapping, 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,
Adrian asked how many titles are expected to close over the next
five years and you were understandably cautious to give a figure.
How do you see the merger market going? How many mergers and what
sort of title mergers can we expect to see over the next five
years in your view?
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. Regardless of the size of
the company at the moment, up until recently, it has been hard
for 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 Kent.
There are sometimes three, sometimes four different publications
in some of the marketplaces, sometimes two. I cannot see that
we and our competitors will continue to be able to operate in
those marketplaces in that same way. Michael competes with me
in quite a few of them, so the battle is really between us and
some others to see who is going to actually win. The difficulty
in that is what David has referred to in that, if you are fighting
in a marketplace, there is the possibility that you both get weaker
and weaker and weaker and then there is nothing whereas the better
outcome could possibly be that there is some agreement or some
changes in ownership or something like that to make independent
journalism still very viable within that marketplace.
Q144 Philip Davies: Michael, are
you on the hunt for extra titles to swallow up or swallow up other
Mr Pelosi: No, is the answer.
Just coming back to the 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 they are 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 some
owners will try and sell to private equity or to another owner
but, as I say, there is not a lot of money [available for newspaper
transactions]. 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 share. 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 we have had discussions with
the BBCand it is an ongoing process as it were and individual
companies at the moment are currently having discussion with the
BBCbut 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 makes 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 decisionsI think that the consultation
is over in the middle of Septemberabout 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
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 England
starting at the same time. First of all so that we can get things
off the ground quickly and secondly because of some of the issues
that I raised earlier. As there is not a geographic logic to the
ownership of newspapers, actually getting all the newspapers for
example in the Granada TV area together in a way that complies
with competition law and allows them to, in partnership, possibly
come up with a proposition requires a lot of work. It would be
the same if you looked at any of the ITV regions. I think that
there is willingness by the industry to go in for this experiment
and to make it work. I think that it should then play out, if
it is successful, in other areas of the UK. However, I would make
the point that, even if the Independently Funded News Consortium
proposal is successful, it will contribute to the local news and
journalism and contribute to the possible success of the industry,
but the sums of money involved are not all that significant versus
some of the challenges that the industry actually faces. So, to
run a pilot in the Granada area, one might be talking about £6
million or £8 million a year. If there were a total figure
of £130 million for the whole of the UK, it is significant
money but, as against an industry that had a total revenue of
£4 billion and that £4 billion is going down very, very
quickly indeed, it is not a magic wand. But I think that it does
allow psychologically the industry to actually accelerate the
dynamic of becoming a multimedia business and I think that it
is one ray of light, as it were, within Digital Britain in terms
of a positive development with which the industry can experiment.
A lot of the other stuff in Digital Britain is stuff that has
been around in our terms for some time: reforming the ownership
laws, trying to do something about local authority publications
and some of the issues we covered earlier in relation to the BBC.
This is a new idea and a new concept. It may be one of the ways
in which local news and information provision can be safeguarded
and developed within a construct that still allows this industry
to be fundamentally independent of the state and independent of
local authorities and a commercial sector rather than a public
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 Kent, they go through that website and you could get
paid by the adverts. It would attract people through the British
Broadcasting Corporation website and they would get through to
the Kent Messenger. Would that not be a way to do it? That would
stop Google taking that advertising revenue. You could get advertising
revenue when the viewers got through to your individual website
using the BBC. People trust the BBC and they would be happy to
go from that instead of Google to get to your individual areas
whether it be stuff for people to read or whether it be videos
and films or whatever it is, and then you could get the advertising
revenue, so people would be attracted whenever they wanted news
of any sort to go through that BBC channel instead of Google.
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. The 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. 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. Moreover, because of the limited amount
of time people have even if it actually 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
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 think things should be done because if it
is taking revenue away from you and obviously a 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 there is co-operation
with some of the local authorities. Certainly in my part of the
world, civic events and major developments by the local councils
or whatever may well be publicised in the form of supplements
or whatever. I would like to see the local authorities not taking
advertising from the local newspaper because that is undermining
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 Westminster are doing the same thing with their communications
allowance or whatever it may be and I find that very valuable.
I think that if you go beyond that and you go to the point of
producing something on a weekly or a monthly basis and shoving
it through people's letter boxes and taking advertising on that
basis, then you will undermine the local newspaper. The other
point is, how objective and independent are these local authority
publications? How credible are they? In fact, it should surely
be in the interest of the local council to have independent assessment
of the good works that it is doing to get the brickbats but also
get the praise. Most weekly papers and regional papers do not
spend their time undermining local authorities. I think that the
vast majority of publicity that we give to local authorities is
Mr Newell: May I say, just so
that you have some statistics, that the Local Government Associationand
these are their figures, not ourssay that 94% of councils
produce a publication of some sort but that as many as 64% of
those publications carry third-party advertising. The regularity
of the publication is of concern, together with third-party advertising,
whether the publications are carrying news and information about
local authorities or whether they are doing general news and information.
And the further issue which is of particular 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, the Council
publication becomes a device to avoid a cost including 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. 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: Kent County Council
launched Kent TV two Septembers ago. It is up for review as a
two-year trial. The project morphed into the provision of videopeople
can upload video and things like that on the site. It is a very
interesting site but, when they launched it, they said they were
going to take sponsorship and advertising on it and, at that stage,
we said that we were not prepared to work with them on it and,
until that stage, we had worked with them with the idea and concept.
We believe that it competes for eyeballs and also, although it
is something that we do not see as a huge competitor at the moment,
apart from in audience, they will not put in writing to me that
they will never take advertising and sponsorship on it. So, we
therefore have to agree to disagree over Kent TV. Although we
do partner on lots of other things, Kent TV is something that
is seriously concerning.
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
industryand I am talking about print; it has taken you
a long time to move from print to media newsI 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 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
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 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 they still deliver
a critical mass of audience. Take one of our newspapers that serves
the community of Chelmsford, we sell almost 40,000 copies a week.
Q155 Chairman: Probably because there
is a column from me in it!
Mr Pelosi: And a very well written
column, may I say. That title 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 povertywe all have limited
time nowadaysand so we have to share the audience and we
have to share the revenue cake with more media channels. Print
drives our online offerings. If our print assets fail, 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 and the industry
do online brilliantly. There will be one or two examples of 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 iPhoneit is
an electronic version but it is still printand 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 it's 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 the issue is trying to balance that action 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
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 read 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
Mr Newell: If there are any statistics
on it, we will make them available to you.
Janet Anderson: That would be really
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. My part
of the world is about the size of Yorkshire, I think that reports
of our death are grossly exaggerated. Today, about 140,000-150,000
regional daily newspapers will be sold in Northern Ireland to
a population of 1.1 million adultsthat is the electorate,
(there is a 1.7 million population overall) which is still staggering
by any standards, plus about 300,000-400,000 weekly newspapers
plus Sunday newspapers. The reach, as has been stated, may be
underestimated today. We begin to think that we are actually going
out of business when in fact we are a very, very strong product.
Sometimes old stagers in my business have come up to me when I
was Editor of the Belfast Telegraph and they said, "You
know that newspaper you edit is not what it used to be" and
I would say to them, "You are darn right it isn't what it
used to be" because, when I started on the newspaper, there
were only a handful of pages published daily and now it is probably
sometimes up to 70, 80 or 100 pages. I launched for example a
Sunday newspaper in Northern Ireland in 1988 and I remember that
in the week we launched it there were 48 pages of content in it.
Most weeks now that newspaper has had 128 pages of content. So,
there has been a huge change. Quantity and quality of journalism
has substantially improved in my lifetime; it has not diminished
and it has not been diminished by the rationalisation of the industry
in the last four or five yearsand I have been involved
in this myself. What we have done is concentrate on the people
who actually put pen to paper or put their finger on the typewriter
or put it on a computer screen and who actually write something.
If I looked at a cross-section of the regional newspaper industry
four or five years ago, I would have found that maybe a third
and more of the journalists actually did not write anything at
all. They designed the pages and put headlines on and so on. What
we are getting to now is a situation where you have purist journalism
where the people who work in the regional pressand I think
the same things apply in the national pressare writers,
reporters, commentators et cetera. Newspapers are not squandering
so much of their revenue and their expenditure on a production
process that they do not require anymore.
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 10 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 happens to be the father of a member of the Committee! That
is all we have for you. Thank you very much.