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

2  Regional and local newspapers

12. Regional and local newspapers perform an important role in the UK. They provide more coverage of local news, local events and local people than any other medium. The vast majority of local newspapers are politically independent, something which is partly driven by financial common sense since alienating large sections of a local community could be commercially unwise. However, this independence and objectivity is one of the most significant features of the local press, as local newspapers are the primary source of reporting of local politics and public bodies facilitating independent scrutiny and accountability.

13. In July 2009 we held an open public meeting in York as part of this inquiry. It was the first time we had held such an informal meeting with the public, and we would like to thank the over 100 people who attended and shared their views with us. We heard first-hand the importance to them of regional media, and one of the overriding themes of the meeting was the opinion that local newspapers, in hardcopy, were still relevant to communities.

14. Local newspapers, and more specifically the journalists who work on them, also underpin the national news industry forming the bottom layer of what has been described as the 'news pyramid' as John Fry , Chief Executive of Johnston Press, explained to us:

    There is a bit of a news pyramid really, where locally we create the bottom layer of that pyramid. We have 11,000 journalists around the country and they create huge numbers of local stories. People further up the pyramid then take some of them and develop them. At BBC News what they do every day is they come into work. They buy the local newspaper. They look on our websites and they select from that. "There are 50 stories there. Let's take these three." They will develop those three stories during the day and that is what you will get on your evening news. If you do not have our journalists doing those 50 stories at the bottom, the whole pyramid does not work anymore.[11]

15. In addition, many journalists working on national newspapers and television broadcasters started their professional careers on local newspapers. This further demonstrates the importance of the role performed by local newspapers as a source of entry and training in the profession of journalism.

The state of the local newspaper industry

16. As of January 2009, there were approximately 1,300 local and regional newspaper titles in the UK, published by 87 publishers.[12] Most of these local and regional newspapers (70%), up until recently, were published by the five largest local newspaper groups: Guardian Media Group (GMG), Trinity Mirror, Johnston Press, Newsquest Media (a subsidiary of US media company Gannett & Co.) and Northcliffe Media (a division of Daily Mail and General Trust). In February 2010, Trinity Mirror bought out GMG's regional operations which included 32 newspapers.[13]

17. We heard from representatives of these local and regional newspaper groups throughout the course of our inquiry, as well as from the Newspaper Society, which represents the publishers behind virtually all of the 1,300 titles. We also heard evidence from Enders Analysis, a UK media consultancy, and the Press Association which describes itself as the "national news agency of the UK."[14]

18. The evidence we heard from these publishers and representatives of the local newspapers in the UK painted a bleak picture of the industry. Claire Enders, Chief Executive of Enders Analysis, said that she expected up to half of the 1,300 titles to close within five years.[15] The recorded profits of GMG Regional Media fell by 85% in the last financial year (2008-09), while Trinity Mirror closed 27 newspapers in 2008 and another eight in 2009 (out of 150 local titles).[16] In March 2009, Johnston Press reported a loss of £429.3 million, compared to a profit of £124.7 million in the previous year,[17] although Johnston Press' interim report at the end of August 2009 did report a stabilising in advertising revenues in the middle of 2009.[18] The National Union of Journalists (NUJ) has documented the closure of 60 local newspapers and more than 1,500 job losses in local newspapers from May 2008 to May 2009,[19] and the Newspaper Society told us that the "industry currently faces an unprecedented combination of economic and structural challenges."[20]

Structural changes and declining advertising revenues

19. Ofcom has acknowledged that the local media sector is "facing significant economic pressure"[21] though it does not accept that that this necessarily means the fundamental model of local newspapers is broken, as the factors affecting the industry could be cyclical.[22] Ofcom states that recent newspaper closures need to be seen in the context of a significant expansion in the 1980s of the number of newspaper titles published, many of which were free weekly papers who took advantage of a boom in advertising revenues at that time, and that there is "no evidence of large scale closures among [local] dailies or paid weeklies".[23]

20. This is at odds with the views of Enders Analysis and the local newspaper groups who argued that not only had the current economic recession resulted in a contraction of advertising revenues and purchasing power from consumers but that this coincided with an ongoing structural change in the correlation between advertising spend and Gross Domestic Product (GDP). Traditionally, advertising has increased in line with GDP.[24] However, as explained by Claire Enders, since 2001 advertising spend has been growing at a slower rate and diverging from GDP.[25]

21. As well as the economic downturn and wider trends in advertising revenues, local media groups argue that other, recent, structural changes have contributed to the challenging environment that local newspapers find themselves in. The changing way in which people search for jobs, property, cars and other products has undoubtedly resulted in advertisers prioritising the internet as a host for their campaigns. Government recruitment advertising has increasingly migrated away from local newspapers, as Claire Enders told us:

    The main issue is with recruitment advertising and property advertising, but particularly recruitment advertising. The Government started to withdraw recruitment advertising from the local press in 2004 and that has been absolutely the most awful thing.[26]

22. The Scottish Daily Newspaper Society agreed:

    The industry's problems in Scotland are exacerbated by the loss of local authority recruitment advertising to an electronic portal operated by the Convention of Scottish Local Authorities (CoSLA). Based on analysis of advertising expenditure by the Scottish public sector relating to 2005-06 the loss of local government recruitment advertising will cost the newspaper industry £13.5 million.[27]

23. Online advertising revenues in the UK increased from £0.2 billion to £2.8 billion from 2002 to 2008 compared with a drop from £2.8 billion to £2 billion for local and regional newspapers.[28] Trinity Mirror described the situation from its perspective:

    […] advertisers have been shifting ever-increasing proportions of advertising budgets online to match these changing consumption habits. […] total regional newspaper advertising fell by -15% in 2008 and has been forecast to fall by -28% in 2009, reflecting the sharp decline in classified categories we and our competitors have been experiencing over the last year. This compares to just -1% decline in regional newspaper advertising revenues in 2007.[29]

24. John Fry, Chief Executive of Johnston Press, told us of the decline in advertising revenues for his businesses:

    Advertising has dropped 40% in the last two years […] that is over 80% of our revenue that has dropped by over 40%. You can work out the numbers. It is around a third of our revenue that has disappeared. To really understand the business, you have to understand what is cyclical and what is structural change. The structural change really got going for us with the adoption of broadband in 2003. What we found is that we were losing about 4% of our advertising each year due to structural change.[30]

25. There are mixed views in the local media industry about whether classified advertising in local newspapers will recover. Carolyn McCall, Chief Executive of Guardian Media Group, told us she was not optimistic:

    I do not believe the prospects for recovery particularly in classified advertising are strong. I think the structural change means that many people are now testing online media and using it quite effectively. I know that from one of our businesses in our portfolio which is Auto Trader. I do not expect to see a great deal of those three big markets [property, recruitment and cars] and they were the bedrock of a lot of regional newspapers.[31]

26. However, John Fry expressed the hope that although irreversible structural changes had impacted on classified advertising most of the decline in advertising revenues was cyclical and therefore could recover:

    Cumulatively by last year we reckon that we lost about 18% of our advertising due to structural change. Then we hit massive economic problems so the 40% drop that we have seen in the last couple of years I believe is more cyclical than structural. That implies therefore that there will be a bounce in advertising when the economy recovers. There will of course be further structural change. We reckon we will lose around a quarter in total of our advertising versus where we would have been. From here onwards, we are likely to bottom out this year and, as the economy recovers whenever that may be, we will see a recovery in our advertising.[32]

27. In a report produced by Johnston Press at the end of August 2009, John Fry did voice some cautious optimism about recovery and said "the timing of the economic upturn remains uncertain but advertising revenues are demonstrating greater stability and we expect the cyclical improvement when it comes to more than compensate any ongoing structural change."[33]

28. Tony Watson, Managing Director of the Press Association, also described the cyclical effect of the economic downturn on advertising:

    The regional press has traditionally relied very heavily for a large income stream on the major pillars of classified: recruitment, motors 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.[34]

29. Claire Enders told us that although economic forecasting could never be infallible, any further reductions of income of 20-30% (as was recorded in 2008) would jeopardise the survival of many local newspapers.[35]

30. As well as a shift towards the internet by consumers there has been a shift in consumer behaviour, shaped by changing retail structures, that has contributed to the deterioration in local newspaper sales. Supermarkets take much of the distribution of local newspapers, and supermarkets are often located out-of-town or a car journey away for many people, which has an impact on the access to local newspapers for potential readers. Trinity Mirror told us:

    As more and more of the national retail spend is attracted to the large supermarkets, consumer buying habits have changed. As consumers consolidate their shopping into one or two visits to a supermarket a week, they are no longer visiting small local shops on a daily basis. The habit of picking up a newspaper as they pass a newsagent or shop in a local general store is being broken.[36]

31. Given some of the bleak reports from local newspapers of advertising revenues that have already dropped by up to 40% and the forecasts for further decline that we have heard,[37] it would be easy to assume that the future for printed local newspapers is bleak. As we have heard, however, many local newspaper publishers are rising to the challenges and growing an online presence which compliments their publications, and utilising their position as key providers of local news, information and advertising.[38]

32. Ofcom statistics show that in 2002 32% of people used local newspapers as their main source of local news. By 2008 this had fallen to 23% over the same period. The internet as a primary source of local news had risen from 1% to 4%, and 25% of those accessing local newspaper websites did so instead of reading the hardcopy.[39] The Newspaper Society described the internet presence of local newspapers as a reason for "cautious optimism":

    While regional press print advertising revenues were down 15.8%, their internet advertising revenues (although still tiny in revenue terms in comparison with print) grew by an estimated 19% in 2008. Online recruitment advertising is growing at an even faster rate for local newspaper websites (+17.1% year on year) than for the big specialist recruitment sites like Monster, Jobsite and Fish4 (many of which are owned by newspaper companies) (+5.6% year on year). Local newspaper websites have positioned themselves well to capture advertising migration and are quietly stealing share from the specialist recruitment sites [which] demonstrates effectiveness of local newspaper website advertising.[40]

33. As highlighted by the Newspaper Society, a number of the large advertising websites in the UK are actually owned by local newspaper publishing groups. For example: Jobsite and Findaproperty are owned by Northcliffe Media; Exchange & Mart is owned by Newsquest; and Fish4 is co-owned by Newsquest and Trinity Mirror.[41]

34. Local newspaper publishers DC Thomson (DCT) described to us their own attempts at innovation using internet technologies:

    To meet these new demands, DCT have put into place a digital strategy consisting of website creation, development and integration with our print titles. We believe a complementary internet strategy is important for our future, although this strategy is costly to implement and the return from online publishing is way below that traditionally enjoyed by the print product.[42]

35. The development, maintenance and promotion of websites by local newspapers is costly, however some of that cost can be offset by recouping lost classified advertising from the print edition through the website. Trinity Mirror pointed out to us that the economies of scale which could be achieved through consolidation would enable them to develop local digital services,[43] which is something we examine later in this chapter.

36. Local newspapers' share of the online market could be helped by new BBC proposals. The BBC Executive's Putting Quality First report,[44] published in March 2010, outlined proposals to "refocus"[45] the BBC's online presence. This included a proposal to restrict local BBC websites in England to carrying just news, sport, weather, travel and local knowledge. The BBC report also proposed that by 2013:

  • [...] there is at least one external link on every page of the website where editorially appropriate, making the best of what is available elsewhere online an integral part of the BBC's offer to audiences;
  • Doubling the number of monthly 'click-throughs' to external sites from 10m a month to over 20m.[46]

37. We welcome the BBC's proposals to increase the number of external links on their websites. We recommend that every local BBC website should link to the local newspaper websites for that area.

38. The views of local media groups themselves about the structural and economic pressures they face have been well documented. However, there are some who believe that this crisis for local newspapers is partly of their own making. The NUJ have strong views on the reasons why the local newspaper industry is in such a dire position. It argues that local media groups failed to invest in new technologies when times were good in the 1980s and early 1990s when profit margins of 30-40% were commonplace.[47]

39. In January 2009 Nicolas Sarkozy, the President of France, announced a series of measures designed to help French national and local newspapers. President Sarkozy pledged €600m in aid to the French newspaper industry as well as a free subscription to a newspaper of their choice for all 18 year olds living in France.[48] The impact of these measures remains to be seen, but it is unlikely to be a model adopted in the UK, where state subsidy of the press has traditionally been regarded as a threat to its independence.

40. The long term impact of the recent loss of advertising income streams on local newspapers remains to be seen. The economic downturn shows signs of recovery, and this should manifest itself in some recovery of advertising revenues for local newspapers. However the adverse impact that the growth and popularity of the internet has had on newspaper purchasing and advertising does not look set to reverse. There is a significant generational shift in reading habits, and the internet is fostering a younger generation of electronic news consumers on which newspapers need to capitalise.

41. Local newspapers have recently suffered from an unprecedented downturn in revenues. Some local newspaper publishers have profited from diversifying their online presence with advertising websites such as Jobsite and Fish4, however, the industry is still in a precarious position. The state subsidy of national and local newspapers, as has been seen recently in France, is not the solution. Newspapers should remain independent of state funding and control and attempt to profit from diversifying their online presence as best as they can.

Consolidation and the media merger regime

42. Like all UK businesses, media companies are subject to merger regulations. The UK merger regime is designed to preserve both plurality and competitive rivalry between firms, and hence protect consumers from any negative competitive effects of consolidation.

43. The general framework for the assessment of mergers (including media mergers) under UK law is set out in the Enterprise Act 2002,[49] which came into force in 2003. The Office of Fair Trading (OFT) carries out a relatively short 'first phase' examination of a proposed merger, at the end of which a decision is taken on whether a more detailed 'second phase' examination by the Competition Commission is warranted, or whether the merger should instead be cleared by the OFT (with or without remedies). The Competition Commission determines the outcome (clearance, prohibition or remedies) of merger cases referred to it by the OFT.

44. The merger control regime applicable to newspaper mergers was significantly scaled back in 2003 to make it less burdensome. For the most part, therefore, UK newspaper-on-newspaper mergers are now subject to the same general merger regime as most other industries in the economy. Under the previous (Fair Trading Act 1973) regime, a transfer of a newspaper that met the criteria for the application of the regime was unlawful and void if it proceeded without the prior consent of the Secretary of State. With certain limited exceptions, the Secretary of State could not consent to qualifying newspaper transactions without a reference to the Competition Commission.

45. However, as Claire Enders pointed out to us, media firms are still subject to some additional, "heavier" burdens specific to the industry.[50] Cross-media ownership rules place certain restrictions on the ownership of different forms of local and regional media. The rules are complex, but are summarised below:

There is a national '20%' rule:

i.  no one controlling more than 20% of the national newspaper market may hold any licence for Channel 3;

ii.  no one controlling more than 20% of the national newspaper market may hold more than a 20% stake in any Channel 3 service;

iii.  a company may not own more than a 20% share in a Channel 3 service if more than 20% of its stock is in turn owned by a national newspaper proprietor with more than 20% of the market.

There is also a regional '20%' rule: no one owning a regional Channel 3 licence may own more than 20% of the local/regional newspaper market in the same region.

Rules on local radio ownership require that there are at least three/local/regional commercial media voices (in TV, radio and newspapers) in addition to the BBC in developed markets.[51]

46. The OFT's review of the local and regional media merger regime was published in June 2009[52] as a result of a recommendation made by the Government in its Digital Britain report and examined ownership and competition in regional media, focussing particularly on local newspapers. The OFT's report did not recommend any legislative changes and concluded that the current merger regime "is well placed to take into account developments such as competition from the internet because it is evidence-based and capable of reflecting market realities,"[53] and that no further OFT research was warranted in this area.

47. John Fry, Chief Executive of Johnston Press, disagreed. He told us that in applying the current merger rules the OFT look narrowly at just newspapers and regard everything else as outside the scope, "whereas we all know that we are competing with a wide range of media."[54] Mr Fry went on to give the example of local newspapers competing with national newspapers and the likes of eBay and Auto Trader. Sly Bailey, Chief Executive of Trinity Mirror, set out what she hoped would be changed:

    We are not asking for all the cards to be chucked up in the air and for there to be no control over mergers. What we are asking for simply is that there is an understanding that reflects the media markets that we now operate in.[55]

48. Media groups such as Trinity Mirror and DC Thomson supported consolidation,[56] and Enders Analysis argue that consolidation has "greatly aided the survival of some of those marginal titles which 10 years ago would otherwise have already folded"[57] and furthermore "is key to its [local media's] survival, and uppermost in the strategies of publishers for the near future."[58]

49. The benefits of consolidation for local newspaper groups were summarised by Trinity Mirror as being:

i.  Synergies [combinations with greater effect than the sum of their parts] in functional areas such as senior management, HR, IT, Finance, Marketing and office costs would lower the fixed cost base of the business and improve profitability;

ii.  In areas where there is an overlap of titles, cost-sharing in all departments, from editorial and sales to printing, distribution and premises would improve profitability of both titles and increase the likelihood of both titles surviving

iii.  In areas where the population and/or advertiser base cannot sustain two titles indefinitely, a merger may result in the closure of one title but a strengthened and sustainable improvement in the profitability of the other, thereby enabling communities to continue to be served by the regional press;

iv.  Benefits of scale across the business, from newsprint procurement to improved access to capital markets;

v.  Combined cash-flow providing greater stability for the combined entity and improved ability to service debts and pension liabilities in the face of increasing pressures of a declining advertising market;

vi.  additional cash to invest in digital development.[59]

50. Trinity Mirror went on to argue that the merger of local newspapers would not have a negative impact on the competition for local advertising, as advertisers can, and do, now go online.[60] The use of targeted advertising by internet sites such as Google has also increased competition as previously it was only local newspapers and the Yellow Pages that could match local adverts to local audiences.

51. In response to the criticisms of the media merger regime made by local newspaper groups John Fingleton, Chief Executive of the OFT, told us:

    I am not convinced that the mergers regime and the way it operates is a particular problem. It has not blocked any mergers, and we are very open to giving people advice, guidance and whatever else is needed, but we must protect consumers and businesses who in turn compete to supply consumers as advertisers, and if we ever had concerns, that is where we have raised them.[61]

52. Mr Fingleton said that the merger regime had allowed six newspaper mergers in recent years, four of which had been cleared by the OFT at Phase 1, one which had been remedied and subsequently allowed to go ahead, and one which had been referred to the Competition Commission and subsequently cleared. He also told us that in the past three years no local newspapers had taken up the OFT's offer of free confidential advice on mergers.[62]

53. With regards to the impact of mergers on competition for, Mr Fingleton said:

    We would have to make sure, for example, that if local businesses could only advertise through a particular medium, but, for example, national retailers had much wider options available, the ability of national retailers to have online and to be able to switch between online and internet-based, as opposed to local print media, would not necessarily protect the local person who is trying to get to the market. So you could end up with quite big distortions of competition at the retail level, whereby you say, well, we do not care about the small local business whose only means to the market is through these publications. So we are very centred on the customer, who in this case is the advertiser, who acts as a proxy for the final consumer.[63]

54. Other objections to the consolidation of local newspaper groups were voiced by the NUJ who opposed any relaxation of the merger regime on the grounds that it could impact on press standards and result in job losses:

    We do not believe newspaper media ownership regulations should be relaxed to allow greater concentration of local and regional newspaper ownership. Consolidation of newspaper groups has been a major factor in reducing resources for newsgathering. Further consolidation would accelerate the trend which saw Newsquest, for example, cut 2000 jobs in three years.[64]

55. In November 2009, after a public consultation, Ofcom published a report to the Secretary of State for Culture, Media and Sport reviewing the cross-media ownership rules. This report recommended some relaxation of the of the local ownership rules to "benefit citizens and consumers by helping to ensure that local content continues to be commercially provided."[65] Specifically Ofcom recommended:

    Liberalising the local cross media ownership rules so that the only restriction is on owning all three of: local newspapers (with 50% plus local market share); a local radio station; and a regional Channel 3 licence. This liberalisation will increase the flexibility of local media to respond to market pressures. Consumers still rely on television, radio and press for news so we are not recommending complete removal of the rules.[66]

56. Although these recommendations would not significantly alter the media merger regime, they could allow the cross-media ownership of local newspapers and either regional television news or radio. The Department for Culture, Media and Sport has not yet responded to these recommendations but we believe, if adopted, they would be beneficial to local media groups.

57. The evidence we have heard from local media groups about the need to modify the merger regime and cross-media ownership rules is persuasive. We welcome the recommendations made by Ofcom in their report to the Secretary of State on media cross-ownership rules, and urge the Government to implement them. However we believe more far-reaching reform is needed. In order for local newspapers to survive in a changing economic and technological world, they need to be regarded as competitors in a multi-media landscape. Despite the evidence given by the Office of Fair Trading, we believe that the current media merger regime does not fully reflect this. We recommend that the Government re-examine the arrangement by carrying out a consultation on a possible multi-media merger regime.

Local authority publications

58. During our inquiry we have heard much evidence of the increasing trend towards local authorities publishing and distributing their own free publications. The Local Government Association (LGA) actively encourages councils to operate their own newspapers or magazines as a means of communicating with the public, and in 2005 the LGA launched a 'Reputation Campaign', which sought to encourage local authorities to improve their communications with residents. One of the 'core actions' that formed part of this campaign was the publication of a council newspaper.[67]

59. The LGA conducted a survey of council publications in 2009 and nearly all respondent authorities (94.5%) produced a newsletter, magazine or newspaper. Of these, quarterly publications were most common, accounting for 32.4%, while 14.4% published editions monthly or more frequently. On average, it cost authorities £70,000 to produce the publication over the financial year 2008/09, employing the equivalent of one full-time person.[68]

60. All of the local newspaper groups who gave evidence to our inquiry commented on local authority newspapers, and the overwhelming consensus was critical. The principle arguments they made against council publications were:

  • Insufficient distinction between local authority publications and independent newspapers;
  • Diversion of advertising spend away from the traditional press;
  • The inclusion of public notices in council publications rather than the traditional press;
  • Content not sufficiently objective or independent (including allegations of "council propaganda"[69]).

61. Trinity Mirror reported that local authority publications had increasingly moved away from traditional four-page information sheets to publications that openly competed with commercial newspapers for advertising.[70] Tony Watson, the Managing Director of the Press Association, told us 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".[71]

62. However, there is another side to the argument. Hackney Borough Council pointed out that although there might be an element of competition for advertising between council papers and local commercial newspapers, often the production of council newspapers was contracted out. Hackney Council had awarded a four year £4 million print contract to Trinity Mirror for the production of Hackney Today.[72]

63. We held an evidence session with local councillors representing the LGA on 27 October 2009. They brought along some examples of the publications produced by their councils. Two of those which we saw were in a magazine format and clearly stated they were council publications, one did not: Hammersmith and Fulham Borough Council's H&F News looks very much like a local newspaper. It is a tabloid in format and, in the 20 October 2009 edition which we saw, there was nothing on the front cover that indicated it was a local authority publication. H&F News follows the format of a local newspaper, with news, features and sport, as well as carrying a substantial amount of classified advertising, including extensive recruitment and property adverts. This is a very different format from other council publications. For example, Stevenage Borough Council's Chronicle and Portsmouth City Council's Flagship are quarterly and monthly publications respectively, both in magazine format, clearly state they are published by the local authority, carry no classified advertising and are solely for the purpose of providing public information on local authority services.

64. The edition of H&F News that we saw also contained an article entitled: "Businesses brace for huge rates rise,"[73] which contained extensive quotes from Conservative Councillor Mark Loveday, of Hammersmith and Fulham Council, on Government policy, with no balancing viewpoint. We questioned Councillor Loveday about this and he said:

    I would be surprised if you find a quote from any politician other than a member of the cabinet of the council. The reason for that is that that is the advice that has been given historically to political parties of both persuasions when producing these publications.[74]

65. The Department for Communities and Local Government (DCLG) does issue some guidance that applies to local authority newspapers and magazines. Their Code of recommended practice on local authority publicity[75] contains the following guidance on the content and style of local authority publications:

  • Any publicity describing the council's policies and aims should be as objective as possible, concentrating on facts or explanation or both.
  • Where publicity is used to comment on, or respond to, the policies and proposals of central government, other local authorities or other public authorities, the comment or response should be objective, balanced, informative, and accurate. It should aim to set out the reasons for the council's views, and should not be a prejudiced, unreasoning or political attack on the policies or proposals in question or on those putting them forward. Slogans alone will not be an adequate means of justifying or explaining the authority's views or their policy decisions.[76]

66. However, the DCLG guidance does not cover the format of local authority newspapers and magazines, nor does it specifically address any of the issues raised by local newspaper groups such as direct competition with local newspapers for advertising revenue.

67. The Chief Executive of Ofcom, Ed Richards, told us he thought the area of local authority publishing was "completely unregulated"[77] and that it was a "missing area".[78] John Fingleton, Chief Executive of OFT, told us he did not think there was a case for the OFT to answer with regards to local authority newspapers and magazines and competition for advertising. He believed that there: "may very well be a problem in terms of harm to the democratic process resulting from that"[79] but that that was for Government to examine, not the OFT.

68. The Government's final Digital Britain report, published in June, concluded that:

    While local authority information sheets can serve a useful purpose for local residents and businesses, they will inevitably not be as rigorous in holding local institutions to account as independent local media...the Government is therefore inviting the Audit Commission to undertake a specific inquiry into the prevalence of this practice, its impact and to make recommendations on best practice and if restraints should be placed on local authority activity in this field. [80]

69. The Audit Commission review was predominantly concerned with examining the cost effectiveness of councils' spending on publications and did not address the impact of local authority publications on independent local newspapers. The role of the Audit Commission in the examination of council newspapers was outlined by its Chief Executive, Steve Bundred, in a press notice in September 2009:

    The Commission's role and expertise do not lend themselves to examining the health of local newspapers or isolating the impacts of specific local authority practices on commercial bodies. This element of the Digital Britain invitation appears better suited to regulators with a specific competition remit.[81]

70. The findings of the Audit Commission's review of council publications were published in a letter dated 22 January 2010 to Stephen Timms MP, Minister for Digital Britain.[82] The Commission concluded that the "current accountability framework provides adequate safeguards against misuse of public money for political ends" but also recommended that "councils should review their editorial policy to ensure that it is politically neutral and publicly defensible."[83]

71. Subsequently the Newspaper Society has written to the OFT to ask if it will now be taking this matter up. As the Society's Communications Director explained:

    It would be unfortunate, given the concerns expressed by the OFT, by Digital Britain and by ministers at a senior level within the Government, if the market impact of local authority publications on the commercial local media industry was not examined at all and if no-one was able to make any recommendations to Government on whether constraints should be placed on those local authorities which may be overstepping the mark".[84]

72. We discussed this issue with the then Minister for the Creative Industries at the Department for Culture, Media and Sport, Siôn Simon, who told us that the Government or OFT could not do anything regarding council newspapers until the Audit Commission had completed its study.[85] Mr Simon also told us that he had tried to contact the Audit Commission to discuss this matter, but that they did not return his call.[86]

73. There is a real problem with local authority newspapers and magazines that needs to be addressed. While it is clear that most of these publications, such as Portsmouth City Council's Flagship, are legitimate communications from a council to its citizens, this cannot be said for all local authority publications. Publications such as Hammersmith and Fulham Borough Council's H&F News effectively pose as, and compete with, local commercial newspapers and are misleading to the public. It is unacceptable that a local authority can set up a newspaper in direct competition to the local commercial newspaper in this way. Nor should any council publication be a vehicle for political propaganda.

74. The current DCLG guidance in this area is currently being breached. The DCLG should set up a system to monitor this situation closely. However we believe these guidelines, even if adhered to, do not go far enough. There should be specific, detailed guidance for local authority newspapers and magazines which should state that it be mandatory that all publications of this type make clear, not only on the front page but throughout the publication, that they are a local authority publication.

75. The Audit Commission's review of council publications did not examine the impact that council newspapers are having on commercial local newspapers. We agree with the Audit Commission that it is not their role to do so. We recommend that the Office of Fair Trading should conduct a review specifically on the impact of council publications on commercial local newspapers.

Public service reporting and the future for local journalism

76. We have already discussed the vital role that local newspapers serve in communities, providing necessary scrutiny of local government and other public institutions such as courts, health trusts and education authorities.

77. The implications of a decline in local newspapers, in terms of quantity and quality, are far-reaching. Reporting on public institutions is a key function of all news media but at a local level it is usually solely the local newspaper that provides this service. We are concerned that there are signs that the problems in the local media industry are leading to a scrutiny gap.

78. Many local newspaper offices are no longer situated in the communities they serve. In the Manchester area the Rossendale Free Press, Accrington Observer and the Rochdale Observer, then owned by Guardian Media Group, have relocated their offices with those of the Manchester Evening News in the centre of Manchester. Others we have heard about include the Wharfe Valley Times[87] and Long Eaton Advertiser.[88] This could have an impact on the 'localness' of these newspapers as they are no longer 'on the beat' in their communities. It may also affect the identity of the titles and the relationship they have with their readership who may live dozens of miles away from the newspaper offices.

79. In evidence to us, the NUJ expressed its concern at the downsizing of local newspaper offices, citing many examples of local newspapers cutting down on staff and resources:

    Five day a week titles such as the Reading (Evening) Post are now to be published twice-weekly. Fewer editions mean late or breaking news will be lost or localised content is cut. Hundreds of pages of editorial coverage have been lost every week. Job cuts among specialists mean there will be a loss of expertise. For example the papers in Newcastle lost their rugby correspondent, in Gloucester they lost their health correspondent, in Liverpool their Parliamentary correspondent. The story is the same across large parts of the newspaper industry.

    At many centres, news desks, sub-editors and journalists are being moved to centralised locations, often dozens of miles away from the communities served by the titles. It means key decisions about what to cover and how to report it are being taken by people who may have very limited knowledge of the local area.[89]

80. The NUJ believed that these cuts would have a negative impact on the quality of print journalism. It suggested that if there was not enough resources in newsrooms to gather original stories and produce original content, staff on news desk would end up re-writing content they received from news wires and from the internet. This practice was described as "churnalism" in the book Flat Earth News, by Nick Davies, and is a subject that we examined in our recent inquiry on press standards, privacy and libel.[90]

81. The NUJ believed that "it is not just newspapers but public service journalism which is under threat."[91] This sentiment is shared by the Press Association and others. Paul Bradshaw, Professor of online journalism at Birmingham City University, considers that it is journalism that needs preserving rather than local newspapers. He described the up and coming 'hyper-local' movement as a natural reaction to what is perceived as a deficit in public reporting.[92] We examine these initiatives in more detail in paragraphs 253 to 263.

82. As already mentioned in paragraph 14, local newspapers and local journalists can be seen as the base of a 'news pyramid' underpinning the news industry in the UK. Trinity Mirror described the role that local newspapers play as employers and in the development of journalism:

    Regional newspapers are significant employers with a wide geographical spread. In 2007, the last year for which detailed figures are available, a Newspaper Society ('NS') survey showed that the industry employed over 41,000 people, nearly 12,000 of whom are journalists. The NS estimates that total employment had fallen to 35,260 (-4%) in 2008 of whom 11,200 (-7%) were journalists.

    It is not too high a claim to say that regional newspapers have long been the training ground for UK print journalism. They have invested heavily in training and it has been a tradition of longstanding that young journalists find their feet or cut their teeth on local papers. There isn't a newsroom on any national newspaper that doesn't have a very significant number of journalists who started in the regions. Indeed many high profile television and radio journalists started their careers in regional papers.[93]

83. The Press Association, who we visited at their headquarters in Howden, East Yorkshire, in July 2009, believes that a possible solution to the problems faced by local newspapers would be to develop a model of public service reporting, akin to some of the aims of public service broadcasting. Tony Watson, Managing Director of the Press Association, described the need for a re-evaluation of the way in which local journalism is funded:

    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.[94]

84. The Press Association's idea of a public service reporting model would operate by deploying Press Association journalists to report on events at public institutions such as courts, health trusts and police authorities at a local level who would then provide independent content that could be supplied free to local newspapers.

85. The Press Association argue that if a model of public service reporting were adopted in the UK it could be at least part-funded by a contestable public fund in the same way as independently funded news consortia (IFNCs), which we discuss in detail in paragraphs 115 to 139. Tony Watson told us of a pilot scheme that the Press Association would be running, in partnership with Trinity Mirror, that would test how much unreported material there was at local level, and what the uptake for this content would be.[95] The funding for this pilot is undisclosed, although Mr Watson did say that it would not come from the industry.[96]

86. The Press Association's proposal has also attracted criticism. On our visit to Yorkshire in July 2009, we visited the Yorkshire Post which is owned by Johnston Press. The Chief Executive of Johnston Press, John Fry, told us that he did not agree with the Press Association's calls for a publicly funded public service reporting model and argued that there was no place for public subsidy. Mr Fry went on to say that he also disagreed with IFNCs, as he would prefer regulation to be reduced and consolidation to occur naturally under market forces.

87. The importance of reporting on local institutions and local democracy cannot be overstated; without it there is little democratic accountability. This reporting must be independent and good quality in order to inform the public and maintain their confidence.

88. Therefore we welcome the Press Association's proposals for public service reporting and the launch of their pilot project. This model could alleviate some of the pressure on local newspapers and could well be a solution to the gap that has emerged as local papers are increasingly too under-resourced to report on the daily activities in courts and local authorities.

89. Despite the bleak reports we have heard about the future for local newspapers, we believe they will still be relevant for some time to come, not least because there is still a population of newspaper readers as well as digital 'have-nots'. However, to survive local newspapers need to innovate and invest in new technologies. Now more than ever people are turning to the internet and digital media for their news, providing an opportunity to for local newspapers to capitalise on their positions as longstanding local content providers.

90. For a long time local newspapers have made relatively little change to their business models. Now, along with the other traditional media platforms of television and radio, they face a vast array of digital and internet services, providing relatively easy market entry, all vying for advertising revenue and readerships. While some economic factors are cyclical, other changes of a structural nature are likely to be permanent. As is clear from the evidence we have heard from local newspapers themselves, local newspapers must innovate and re-evaluate the traditional model of local print media in order to survive in the new digital era.


91. The Press Association currently operates a 'digital pool' whereby Press Association journalists cover national events in text and video and make the content available to clients, at cost, on the Press Association video wire.[97] These clients are national and regional newspapers who are increasingly using video content on their websites. Although the pool covers national events this reporting does still have a regional appeal and relevance. For example an honours ceremony at Buckingham Palace will include local people commended for activities in their communities.

92. The Press Association's digital pool operates alongside the broadcast pool which is made up of the BBC, ITN and Sky, who share video broadcast content from events where only one camera is permitted. The Press Association is not part of the broadcast pool and traditionally has been denied access to its content. Recently the broadcast pool has made some of its content available to the Press Association, although at considerable cost.[98]

93. Tony Watson, Managing Director of the Press Association, told us:

    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 pass on to their online audience.[99]

94. Mr Watson went on to give the example of broadcast pool footage of a Government press conference on swine flu that the Press Association was denied access to which, he argued, was in the public interest to distribute as widely as possible. The Press Association also told us that event organisers could be confused about who had access to the broadcast pool, and might assume that by allowing the broadcast pool access they were allowing the coverage to be used by local and regional newspapers, which is not the case.[100]

95. Helen Boaden, Director of BBC News, told us that the members of the broadcast pool were "in discussions"[101] about the situation with the Press Association, and stressed that the BBC could not act unilaterally in the pool. Ms Boaden went on to say that "the Press Association does not actually bring enough in terms of people and resource to contribute to the pool."[102]

96. It is anachronistic to distinguish between broadcast and non-broadcast journalism. There is a convergence towards multi-platform news journalism and therefore access to video footage of national events, which often have a local or regional angle, should not be exclusive to broadcasters. The BBC, ITN and Sky are all able to use the broadcast pool content online as well as on television and it is against the public interest to deny local and regional newspapers this opportunity.

97. There needs to be clarity regarding who has access to footage from, what are currently, single camera assignments. If the members of the broadcast pool are not prepared to make the content available to the Press Association at a reasonable cost, then the Government should ensure the right of access for the Press Association digital pool reporters alongside the broadcast pool at national events.

11   Q 46 Back

12   Ev 174 Back

13   "Guardian Media Group sells regional business to Trinity Mirror", Guardian Media, 9 February 2010  Back

14   Press Association website, www.pressassociation.com Back

15   Q 11 Back

16   Ev 231 Back

17   "Johnston bad news", Financial Times, 12 March 2009, p 24 Back

18   Johnston Press, Interim report, August 2009, johnstonpress.co.uk Back

19   Ev 151 Back

20   Ev 243 Back

21   Ev 168 Back

22   Ev 168 Back

23   Ev 175 Back

24   Q 8 Back

25   Q 8 Back

26   Q 14 Back

27   Ev 163 Back

28   Ev 172 Back

29   Ev 231 Back

30   Q 44 Back

31   Ibid. Back

32   Q 44 Back

33   Johnston Press, Interim report, August 2009, johnstonpress.co.uk  Back

34   Q 70 Back

35   Q 19 Back

36   Ev 231 Back

37   Ev 173 Back

38   Ev 234 Back

39   Ev 171 Back

40   Ev 245 Back

41   Ev 234 Back

42   Ev 224 Back

43   Ev 233 Back

44   BBC Executive, Putting Quality First: The BBC and Public Space, March 2010 Back

45   Ibid., p36  Back

46   Ibid., p37 Back

47   Ev 150 Back

48   "Sarkozy pledges €600m to newspapers", The Guardian, 23 January 2009 Back

49   Enterprise Act 2002 Back

50   Ev 221 Back

51   Department for Culture, Media and Sport, "What we do - broadcasting", culture.gov.uk Back

52   Office of Fair Trading, Review of the local and regional media merger regime, June 2009 Back

53   Ibid. Back

54   Q 50 Back

55   Q 61 Back

56   Ev 233, 226 Back

57   Q 19 Back

58   Ev 223 Back

59   Ev 233 Back

60   Ibid. Back

61   Q 369 Back

62   Q 385 Back

63   Q 385 Back

64   Ev 155 Back

65   Ofcom, Report to the Secretary of State for Culture, Media and Sport on Media Ownership Rules, 17 November 2009 Back

66   Ofcom, Report to the Secretary of State for Culture, Media and Sport on Media Ownership Rules, 17 November 2009 Back

67   Local Government Association, Reputation Campaign, reputation.lga.gov.uk Back

68   "Council magazines not a threat to the local media", Local Government Association press release, 27 April 2009 Back

69   Q 61 Back

70   Ev 236 Back

71   Q 103 Back

72   Ev 253 Back

73   "Businesses brace for huge rates rise", H&F News, 20 October 2009, p 5 Back

74   Q 257 Back

75   Department for Communities and Local Government, Code of recommended practice on local authority publicity, April 2001 Back

76   Department for Communities and Local Government, Code of recommended practice on local authority publicity, 2 April 2001 Back

77   Q 390 Back

78   Ibid. Back

79   Q 388 Back

80   Digital Britain, final report Back

81   "Audit commission will not examine impact of council newspapers", Newspaper Society Press Release, 10 September 2009 Back

82   Letter to Rt Hon Stephen Timms MP from Steve Bundred, Chief Executive, Audit Commission, 22 January 2010 Back

83   Ibid. Back

84   "Audit commission will not examine impact of council newspapers", Newspaper Society Press Release, 10 September 2009 Back

85   Q 604 Back

86   Q 603 Back

87   Ev 200 Back

88   Ev 151 Back

89   Ev 153 Back

90   Culture, Media and Sport Committee, Second Report of Session 2009-10, Press standards, privacy and libel, HC 362-I Back

91   Ev 153 Back

92   Q 500 Back

93   Ev 231 Back

94   Q 77 Back

95   Q 95 Back

96   Ibid. Back

97   Q 78 Back

98   Ev 280 Back

99   Q 80 Back

100   Ev 280 Back

101   Q 457 Back

102   Q 461 Back

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