Future for local and regional media - Culture, Media and Sport Committee Contents

Examination of Witnesses (Question Numbers 140-160)


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 competitors?

  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 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 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 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 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 sector.

  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 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 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 positive.

  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. 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 video—people 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 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 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 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 poverty—we all have limited time nowadays—and 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 iPhone—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 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 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 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 produce anything?

  Mr Newell: If there are any statistics 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. 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 adults—that 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 years—and 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 press—and I think the same things apply in the national press—are 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.

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