Memorandum from D C Thomson & Co

 

Overview

 

DC Thomson & Co Ltd ('DCT') is a private media company formed in 1905 under the management of the Thomson family to run their Dundee based Newspapers. DCT's newspaper business has served East Central Scotland's communities since at least 1886 although the Thomson family owned 49% of the Courier business from 1866. Later at the beginning of the First World War we launched what became the Sunday Post and then acquired the Aberdeen Journals titles in April 2006. Today, DCT is a supplier of newspapers locally/regionally (The Courier, The Dundee Evening Telegraph, The Press and Journal, Aberdeen Citizen, The Aberdeen Evening Express) and regionally/nationally (The Sunday Post). (Other major revenue lines include magazines, especially the flagship "The Beano" and "The People's Friend" brands.) DCT's newspapers are published in print and some of their content is posted on the relevant websites (Table 1).

 

Table 1

DCT newspaper titles

 

Title	Description	Circulation Jul-Dec 2008	Website	Unique visitors March 2009
Courier	Morning	69,414	www.thecourier.co.uk	33,000
Press and Journal	Evening	78,121	www.pressandjournal.co.uk	65,000
Aberdeen Citizen	Weekly/free	76,530	N/A	N/A
Aberdeen Evening Express	Evening	52,029	www.eveningexpress.co.uk	24,000
Dundee Evening Telegraph	Evening	23,048	www.eveningtelegraph.co.uk	13,000
Sunday Post	Sunday	382,746	www.sundaypost.com	Not available

[Source: National Readership Survey; ComScore]

 

We supply our readers with mainly local news, and some coverage of national and international news, put together by our editorial teams. Our local news coverage is focused for example inter alia on local government and events, policing, firefighting and crime, charity, school and sports events, and the stories of our residents, local businesses, services, farmers and other organizations. We celebrate our local heroes, including soldiers sent abroad to Iraq or Afghanistan, and share in the heartbreaks of local families.

 

Circulation revenue is an important stream for most of our newspapers; one title, The Aberdeen Citizen, is free to readers and relies only on advertisement for its revenues. Circulation of paid-for titles is generally on the decline (Table 2), leading to a reliance for revenue growth on cover price increases, difficult to implement in a recessionary environment.

 

Table 2

Circulation of DCT newspaper titles

 

Title	Jul-Dec 2003	Jul-Dec 2004	Jul-Dec 2005	Jul-Dec 2006	Jul-Dec 2007	Jul-Dec 2008
Courier	83,084	81,002	78,010	75,435	73,485	69,414
Press and Journal	90,379	87,858	84,612	82,325	80,177	78,121
Aberdeen Citizen	69,463	68,408	66,462	59,658	55,175	50,204
Aberdeen Evening Express	59,053	57,893	56,868	55,031	53,384	52,029
Dundee Evening Telegraph	26,766	25,545	25,050	24,633	24,349	23,048
Sunday Post	530,168	497,800	468,414	438,914	408,977	382,746
Total	858,913	818,506	779,416	735,996	695,547	717,852

[Source: ABC]

 

Our titles also supply advertisement services to local authorities or government services (District Councils, NHS Trusts, armed forces et al), local (and national) businesses, services and farmers, and individuals. Advertisement revenues have also been on the decline in past years (and very significantly in the last year) due to a structural shift of spend on classified advertising to the Internet (especially recruitment and motors, but also property), and more recently due to the recession. Our advertisement revenues are also being affected by the organized retreat of the public sector from local print media (see below) as a result of:

 

· the rise of the publicly-funded and supported publication;

· the withdrawal of statutory publication requirements for notices of public interest; and

· the reduction or elimination of discretionary spend on recruitment in local media.

 

Our purchasers and our advertisers are DCT's two sets of primary client relationships, and only by retaining their confidence can we maintain a viable business, and best serve the interests of our shareholders. In so doing, we are forced to adapt to the well-documented forces of change in our local marketplaces due to the rise of the Internet as a source of information, entertainment and communication, and also as an increasingly sophisticated advertising medium.

 

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. (We also expect to have to shortly commit to spend significantly to upgrade our newspaper printing facilities to significantly extend their working life bearing in mind that the bulk of our revenues from physical copy sales and from advertising come from the printed medium.) As a result, we are facing an inevitable very considerable compression of our margins as revenue declines significantly while our costs rise.

 

Contribution to public policy objectives

 

In the pursuit of our normal business activities, we also serve important public policy objectives. The most important one is supplying purchasers/readers with information on their community and environs. For example, on Tuesday the 7^th of April 2009, the Fife edition of The Courier had front page headlines on:

 

· "Fife man killed in house fire tragedy";

· "Italian quake toll tops 150 as search goes on";

· "Teenager hurt in another skylight plunge" (warning youths against climbing onto roofs);

· "Plea over football fan's body in Holland".

 

Inside we reported inter alia on diamond wedding anniversaries, sports camps, the new look of the Fife Chamber of Commerce, Dunfermline's museum plans, convictions for crimes, the latest news on Scotland's champion curling and cricket teams, and tennis champion Andy Murray.

 

This news content is often repurposed for broadcast on television and radio, or is republished in local weekly newspapers. Our journalists generate leads and stories for all local media and even some national media on occasion. Although to an extent lifted from our own titles most of the other local media (mainly weeklies) benefit in one way or another from the work our journalists do. If the main voice of local journalism is weakened or damaged it is likely that other media will be also be weakened or damaged. Many of these titles have already cut back fiercely on their local journalism and in our view rely on us and other companies and titles like ours.

 

However, not all local communities are rich enough today to support a local media outlet, and many communities do not have a local media outlet, print, radio, or TV. We do not believe that every single local community must have a local media outlet, just as the Government has determined that not every community can support a post office. We also believe that commercial media is best able to judge market opportunities.

 

We also consider that plurality is a much more subtle concept than counting up the number of "voices" in local media, whether the number of media channels or the number of suppliers in each channel. Plurality also depends on the existence of access to media, literacy (a barrier with more complex media such as the Internet), engagement and desire for participation in public life.

 

There's an intriguing fallacy behind the view that a rise in local newspaper title concentration will reduce plurality (except in the obvious manner of losing one voice). Many local communities are unable to support more than a single local independently-owned newspaper title. Given current trends in revenues, there is no doubt that many more local communities are headed in this direction. But that local "voice" is irretrievably lost when the single local independently-owned commercial media title is forced to close.

 

In our view, consolidation will significantly help local communities retain and develop their local media voice and will enable them importantly to be independent. And in our view major titles such as ours for example the main daily regional or local morning paper or evening paper of an area needs to be strong so as to be able cover matters widely since if they do not, that is a loss of diversity in itself but also for the smaller weeklies which to a large extent survive off them editorially anyway, and those smaller titles will just find life even more impossible and unsustainable unless of course they were under the umbrella of the same main host or regional title which is generally not at present allowed under competition rules.

 

Plurality also depends on the editorial approach of local media. We offer the news in a generally independent manner, not least because it is important that our readers trust what they read. We do have strong editorial views and our readers section also reflects strong local views, but we do not have any consistent partisan or politically aligned or motivated approach to reporting the news. This kind of approach is not as typical for many of the national papers or their regionalised editions. And so we feel even more strongly about the importance from a democratic point of view and plurality point of view that it is important that the daily morning and or evening papers in an area should be able to be and allowed to be strong.

 

Such independence is also not typical of publicly-funded local media products and services, which are designed as propaganda to support the local electoral strategies of party politicians. This is why we believe that plurality will be reduced if publicly-funded local media products and services crowd out commercial local media, either by sapping our advertiser base, reducing prices of placements or drawing our readers to a substitute local media product.

 

To be fair, most of our readers consult many types of media on a regular basis, so they are not 100% reliant on their local newspaper. For most of our readers, a local newspaper is one among other sources of information. We view the trust of our readers as a core central objective, and believe they will reach their own opinions, based on all the sources of news they consult or are informed by, from the press, to the Internet, radio or TV, or even conversations with colleagues, friends and family.

 

However, there is one substantial group of readers whose choice of media is more restricted: Seniors. This customer group does not have the same access to the Internet as younger and more skilled people, and cannot exercise the same media choices. Their reliance on local newspapers, TV and radio is very high, despite Lord Carter's long-term vision of a Digital Britain. Although seniors may have retired from the work force, they are often very engaged in local politics and local community life, on which they and the local community rely. Many seniors contribute their time to community activities. We believe the newspaper is a core local communications channel for this group.

 

Dundee, where DCT corporate headquarters is located, is a middle-sized city (population 142,170 in 2006), and exemplifies this readership trend well. In the UK as a whole, seniors make up 20% of the population, but in Dundee, seniors consistently make up a much higher share of our readers, close to a third in July-December 2008 (Table 3). (The National Readership Survey figures shift around from period to period, but the important point is that the share is relatively high.) Looking ahead, we expect that our readership base will skew more to seniors in the next 5-10 years.

 

 

 

Table 3

Readership base of The Courier, 2003-2008

 

Title	Total readers (000)	Male	Female	Age 15-24	Age 25-34	Age 35-44	Age 45-54	Age 55-64	Age 65+
Jul - Dec 2008	178	87	91	14	12	23	35	37	57
100%	49%	51%	8%	7%	13%	20%	21%	32%
Jul - Dec 2007	164	68	96	8	4	30	25	38	58
100%	42%	58%	5%	2%	18%	15%	23%	35%
Jul - Dec 2006	200	99	101	10	9	14	39	42	86
100%	49%	51%	5%	5%	7%	20%	21%	43%
Jul - Dec 2005	182	90	92	21	15	31	13	39	63
100%	50%	50%	12%	8%	17%	7%	21%	35%
Jul - Dec 2004	221	93	128	13	23	38	31	41	76
100%	42%	58%	6%	10%	17%	14%	19%	34%
Jul - Dec 2003	199	105	94	8	32	34	33	33	58
100%	53%	47%	4%	16%	17%	17%	17%	29%

[Source: National Readership Survey]

 

Regulatory position

 

For the future, our core business objective is to continue to serve our readers and advertisers in our local communities. Our view is that we are best able to serve our clients and shareholders in the absence of government interventions in our marketplaces, of which I will name a few:

 

1) Merger regulations. We are an interested party to the OFT's review of the "Local and Regional Media Merger Regime" to report to Lord Carter's Digital Britain effort, and are a participant in the Local Media Alliance (LMA), whose submission to the OFT we support (http://www.newspapersoc.org.uk/PDF/Local-Merger-Regime_Modernising-the-Approach.pdf). Its key conclusion is: "Compared with other media sectors, the local newspaper industry remains remarkably diverse with 87 separate publishing groups. Further consolidation would enable publishers to make necessary investments in media services and content, product quality, digital platforms and training, allowing them to capture economies of scale in relation to management, distribution networks, printing and more efficient sales structures while repositioning their businesses for growth."

 

1) Unfair competition for advertisers and readers of replacement print media products or services, funded by the public purse. The Local Government Association (LGA) survey of 199 responses of local authorities (of a total of 353) indicates that at least 188 local authorities operate a newsletter, and 132 of these 188 newsletters (three of four newsletters) carry some advertisement. The Newspaper Society has an established position on the issue which we support. We are encouraged that the Secretary for Culture recognizes the unfair competition such publications imply for commercial media.

 

2) Interference of the BBC in local media markets. We believe that we are better able to compete in the absence of an expansion or strengthening of the BBC at local level, as we expressed strongly in a submission to Ofcom on "BBC - Local Video in 2008". We are encouraged that our views were taken on board to an extent and the proposal failed the Public Value test. Concerns were raised also for the potential for local media partnerships with the BBC. These may in fact be a Trojan horse undermining newspapers development from within.

 

3) The Killian Pretty Review - Planning Applications: A faster and more responsive system (Final Report), published in November 2008, recommends removing the mandatory requirement for local authorities to publish planning statutory notices in newspapers. In line with the concerns expressed by the Newspaper Society, DCT does not believe it is the right time for Government to be denying readers the right to be informed about such notices in their local newspaper. Our newspapers reach a large population and many readers do not have a choice of media to be informed on such matters.

 

Conclusions

 

DCT believes we can continue to produce quality local news under our existing business model. A policy of subsidization of local journalism would relieve us of a significant component of our costs. This might safeguard journalists' jobs in the short term, but would pose risks to our editorial integrity, and thus undermine our readers' trust in our independent voice. A policy of tying advertisement spend to editorial support at any level of government is a more subtle means of interference in editorial integrity, but just as dangerous. We believe that local communities are best served by commercial media with a full independence of voice.

 

May 2009