Examination of Witnesses (Questions 1620
- 1639)
WEDNESDAY 16 JANUARY 2008
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 reuters.com.
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 reuters.com 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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