Select Committee on Communications Minutes of Evidence

Examination of Witnesses (Questions 1620 - 1639)


Mr David Schlesinger, Mr Pierre Lesourd and Mr Tony Watson

  Q1620  Lord Inglewood: On the question of the French Government representatives, do they change the moment the political persuasion of the Government changes?

  Mr Lesourd: Yes, because one is coming from the Foreign Ministry, for example, and usually it is the spokesman of the Foreign Ministry who is on the Board, so, when this spokesman changes, it changes, but it is not always when the Government is changing. As soon as the spokesman changes, there is a new one on the Board, yes.

  Q1621  Bishop of Manchester: You represent three news agencies, there is loads of news around, there is a good appetite for news and Mr Watson referred to increased business, but can I take it, in terms of each of you, that you are in a hugely profitable business at the moment?

  Mr Watson: Just because the appetite for news has increased, it does not necessarily follow that the customers' willingness to pay has kept pace. The fact of the matter is that, whilst we are still very largely dependent on what we might call `traditional media', there is no growth in that media, and everybody will be aware of what is happening to newspaper circulations generally and to the major broadcaster audience share. In the case of the Press Association, our Board have taken the view that they are happy for us, as far as the agency is concerned, to produce a modest profit because they see that the wider interests of the industry are in the agency producing a good-quality, broad service. Where we do achieve a higher-margin business is by commercialising that content and adding to that content in other markets away from the mainstream media. For example, our sports business has grown away from what we call `agency customers' into live data which is marketed all over the world, and another example would be our weather business which sprang out of providing the media with weather panels for newspapers to now becoming a worldwide weather business which has moved way beyond our media customers.

  Q1622  Bishop of Manchester: I could find this out by looking it up, but you might just provide a shortcut now. What was your published profit for last year overall?

  Mr Watson: It would be around the £5 million mark for the Group as a whole, so, on an £80 million turnover, so not an enormous margin.

  Mr Schlesinger: Reuters of course is a public company and we are due to report results in about six weeks, so we are in a quiet period right now. What I can say in general is that in terms of revenue the media side of Reuters represents about 8% of revenue and the financial services side is about 92%. The costs of editorial, my costs, the costs of gathering the news, that is spread across all the divisions and the media division pays for everything for pictures, everything for television, everything for on-line and a portion of the rest and the other costs are spread amongst the other divisions because, as I said before, all the news actually powers all the different markets. In last year's accounts, you could see that the media division is largely profitable and I think it has a profit margin of around 10% within the media division itself and that is fully allocated with its share of editorial and its share of other parts, so it is quite complicated to really break down what is the profit of news, but I think Reuters believes very firmly that news is at the heart of what we do and what we are actually selling is news and information to power markets and the media.

  Q1623  Bishop of Manchester: Presumably, when you go in with the Thomson Corporation, you are anticipating healthier profits?

  Mr Schlesinger: One of things that is attractive about the deal as proposed is that we will be less dependent upon the financial markets. Thomson has major operations in legal information, in health information, tax information and, as the events of the last two weeks have shown, if you are significantly dependent on the financial markets for your customers and your revenue, you can have a very volatile time.

  Q1624  Bishop of Manchester: Just going back to the point Lord Corbett made at the beginning, you are absolutely confident with this coming together that there will be no danger to your independence or your Trust principles?

  Mr Schlesinger: The Trust principles had to be protected in order for the deal to go through because the way the company constitution is right now, the Reuters Founders Share Company could have blocked it because the Articles of Association say that they have the power to block anyone from taking more than a 30% stake in the business, so they had to explicitly accept that the guarantees were satisfactory to them, and they were satisfied.

  Mr Lesourd: The general news is more and more expensive to produce. Fresh coverage of Iraq, Afghanistan, things like that, are very, very expensive to do and it is one of the main differences between Reuters and AFP. Reuters is making more than 90%, I think it is 93%, of its revenues on financial and economic news, so it is only 7% to 10% on general news. The AFP is 65% general news which is an area where is difficult to earn a lot of profit on it, but we are developing the photo side. The photo is more profitable and it is an example here in this country where AFP is profitable here in the UK mostly because we are very successful on photo delivery. Also, on video, we are starting to have good profits on video production, but we are doing mostly video for internet sites, but we are not doing full video production for television like AP or Reuters are doing because it is too expensive for us anyway, so we try to do it on specific, niche angles and it is successful.

  Q1625  Bishop of Manchester: But are you able to give an overall figure for your profit margin?

  Mr Lesourd: In 2007, the net profit was €4.6 million which is about £3 million, so it is not a lot, but it is a profit.

  Q1626  Chairman: Just to go back to Reuters for a moment, arising from what the Bishop of Manchester was asking, if only 7% of your profit comes from general news—

  Mr Schlesinger: From media outlets. My friend from AFP actually characterised it wrongly because we sell financial news to media clients and we sell general news to financial clients, so 8% of revenue comes from media clients, from broadcasters and from newspapers, from internet sites.

  Q1627  Chairman: Is there any concern then on the future that the number of foreign correspondents, the number of foreign bureaux that you have is going to be put under some pressure?

  Mr Schlesinger: No, because I sincerely believe that it is the foreign news that moves the markets. To give you just one example, an earthquake in Taiwan not only affects the people who might be killed or injured, but it affects semiconductor plants in Taiwan which affects the price of mobile handsets for Nokia in Finland and the price for Vodafone here in the UK, so we need to have a bureau in Taiwan not just to report on Kuomintang politics, but what happens to the semiconductor plants. We need to report on what happens to China's toy factories not just because it is an interesting story, but because that is trade and that affects companies, it affects John Lewis, so having foreign bureaux is absolutely vital for the financial clients as much as it is for newspapers and broadcasters.

  Q1628  Bishop of Manchester: And they are all-rounders, in other words. The whole thing about the opera critic who just happened to notice that fire had broken out, but did not report it, that has gone?

  Mr Schlesinger: That kind of person would not have much of a future. We want to develop specialities, we want to develop people who understand the bond market or who understand the oil market, but we also want them to be able to write about political change and to write about social change as well.

  Q1629  Lord Corbett of Castle Vale: Mr Schlesinger, I hope you will forgive me for this, but we have all had a letter from the NUJ raising concerns, and it is not even on likely impacts, but it is what they claim is a refusal by you to talk to either the journalists, who are at the core of much of your success of course, or others working for Reuters. You have argued apparently that you cannot do this because it could prejudice the outcome of the competition authority's decision.

  Mr Schlesinger: Sorry, refuse to speak to them?

  Q1630  Lord Corbett of Castle Vale: Yes.

  Mr Schlesinger: No, I have met with the NUJ, I think, three times just with the NUJ leadership and I meet with journalists all the time. I think what they have been asking for is what I cannot give them which is a specific number of how many people will be in editorial after the merger. What our Chairman, our CEO and I have said is that Reuters' 2,400 journalists plus the 260 that we are getting from Thomson's realtime service will end up being a number larger than what we currently have in Reuters, but I do not know how much larger as that is still in the process of being worked through. I have said everything that I know, but it is just that there are some things which, because of the process of the deal, we have not been able to, for example, go bureau by bureau through exactly who is working for Thomson, what their skills are and what our skills are comparing it, so there is a limit to how much detail I have been able to do in the planning yet, but I have certainly been speaking to journalists constantly and with the NUJ as well.

  Q1631  Lord Maxton: Can I move to the on-line and actually jump to the defence of Wikipedia which I use about three or four times a week to check facts and information because it is self-correcting, so, in other words, you can correct it if you see a fault which is unlike any other news source, can I say. If you run your own websites, which you do, which presumably are kept absolutely up to date with all the latest stories, how do you protect your copyright, if you like, on that? What is to stop a newspaper saying, "We're not going to buy news from you. We don't have to. All we have to do is go on to your website and take the story from there"?

  Mr Watson: As far as PA is concerned, it is not a situation that arises because we do not have a public-facing website. We do have a Web version of our wire service, but that is a password-protected service for our clients and it is an alternative means of delivery should the wire delivery go down, but we do not have a consumer-facing site.

  Q1632  Lord Maxton: But Reuters do, do they not?

  Mr Schlesinger: Yes, what you posit is an issue. I think that the reason that it has not become a major problem with our subscribers is that our subscribers get a much fuller service than we put on the Web and they get to edit it the way they want to, whereas what we present on the Web is our selection of stories, so it is not quite as rich or as deep as the service broadcasting can get. However, we have noticed some people who are not subscribers liberally quoting from

  Q1633  Chairman: Like who?

  Mr Schlesinger: They might become subscribers again in the future, so, if you would not mind, I will reserve that, but it becomes a topic of conversation and it then becomes—

  Q1634  Chairman: But it is an important point, is it not?

  Mr Schlesinger: It is an important point.

  Q1635  Chairman: You can have organisations actually living off news agencies like you, unless you are very careful, and actually providing absolutely nothing.

  Mr Watson: There are some quite clever software programs that have now emerged to deal with this particular problem because it arises once you start providing content to on-line clients, they put it out on the Web and it can find its way to myriad other parties, but there are a number of companies now that are providing this. I know that in fact both agencies are subscribing to a service now which can track your content. I think it started life as an anti-plagiarism program within universities and basically it analyses key phrases and it will track your content around the world and even send a notice to the website, saying, "Take it down or pay us".

  Q1636  Lord Maxton: If I can reverse it then, why should I bother going and buying a newspaper if I can read everything I want to read on your websites and on others' websites? Are you in fact not having a direct impact upon exactly your own customers?

  Mr Watson: Well, our newspapers are also moving in this direction as well, our newspaper customers, because they recognise that this is where the customer is moving and I do not think you can hold back that tide. I think it is a different experience. If you read a newspaper, it is a sit-back sort of experience, it is taking in a lot of information, it is a relaxed read. You would not want to read many 2,000-word pieces on your PC, particularly when it is something that you associate with work.

  Chairman: Lord Maxton might!

  Q1637  Lord Maxton: That is now certainly, but probably within the next two years you will have a device you can read anywhere at any time and in a relaxed way and it will look like a book or whatever.

  Mr Schlesinger: Newspapers and Reuters have different functions. If what you are interested in is foreign news and financial news, then I think is perfect for you, but, if what you are interested in is much deeper local content or the political point of view that you were quizzing the previous witness about and if you are interested in getting that point of view, then a newspaper has a point of view that a wire service will never have, so it depends on what you are looking for and it depends on what you want.

  Q1638  Lord Inglewood: Surely, the existing rules of copyright, whilst they were devised in a previous era, still apply in the multimedia context and the real issue arises as to whether people like yourselves put material up for other parties to access freely? If people use material and subsequently reuse it for commercial purposes, they are as much in breach of copyright as they ever were. Is that not right?

  Mr Schlesinger: Yes.

  Q1639  Chairman: Then, if you have an organisation like Google News, and it calls itself `Google News', but, as I understand it, it does not actually have any reporters, do you supply news to Google?

  Mr Schlesinger: The relationship that we have with Google is different from what was described for AFP. We are actually very happy that Google puts up our headlines because people who click on those headlines go right back to our website, so it increases our—

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