Select Committee on Communications Minutes of Evidence


Examination of Witnesses (Questions 2446 - 2459)

WEDNESDAY 23 APRIL 2008

Mr Paul Myners

  Q2446  Chairman: Welcome. First of all let me say that unfortunately, for the second session, Sly Bailey, the Chief Executive of Trinity Mirror, is unwell today, and so we will not be, obviously, taking evidence from her, but we will have evidence from her in a week or two's time. So, Mr Myners, you are on your own this morning. Thank you very much for the written evidence, which I thought was extremely clear and extremely valuable. You are Chairman of the Guardian Media Group. Could you tell us how the Board relates to the Scott Trust?

  Mr Myners: The Board of Directors of the Guardian Media Group functions to a specification which broadly matches that of the boards of public companies and larger organisations. We are responsible for the day-to-day management and development of strategy for the group as a whole across its broad spread of interests. We report to the Scott Trust as the shareholder. The Scott Trust has specific responsibility in a limited range of areas for editorial matters relating to The Guardian newspaper. Those responsibilities do not rest with the Board of the Guardian Media Group.

  Q2447  Chairman: I think we will come to those kinds of questions in a moment. Let me ask you this to begin with. There has obviously been an economic downturn. What impact is that actually having on the health of newspapers generally and your group, I suppose, in particular?

  Mr Myners: The economic downturn is manifest in lower advertising revenues. The long-term decline in circulation seems to be a phenomenon that is in place for national and many local titles regardless of economic cycle. The impact for us will be reduced profitability than what otherwise would have been achieved but no change in our core purpose or in our resourcing, but a more competitive environment continues to raise questions about the ownership, direction and editorial resourcing of media organisations. Of course, in addition to the economic context, it is worth bearing in mind that the economic downturn is much talked about but not yet evident in every aspect of economic data reported, but behind that there are major changes taking place in communication as a result of the emergence of the digital medium which represent new and significant competitive threats for traditional business models. In my judgment, those are far more important from our perspective, and I imagine from the perspective of the board of directors of other media organisations, than the current economic cycle.

  Q2448  Chairman: As you can imagine, we have taken evidence on those kinds of factors quite substantially. You say in your paper that these concerns are most clearly illustrated by reference to local markets, where the effects have been most keenly felt. In other words, your regional newspapers are impacted most. Would that be fair?

  Mr Myners: Yes, I think regional newspapers tend to have a higher dependence on classified advertising, and the classified advertising medium is one which is particularly well-suited to digital transmission mechanisms. So local newspapers are having to remodel their business, they are having to redefine their purpose and, importantly, explore and develop new ways of linking with their readers beyond print on paper. The challenge is there for national titles as well but, because they are less dependent on classified advertising and secure a higher proportion of their revenues from circulation and display advertising, the threat is less immediate and less significant in current economic impact.

  Q2449  Chairman: You have an interesting model with the Manchester Evening News, which, as I understand it at the moment, you are giving away free in the city centre and selling on the outskirts. That does not sound to me, on first hearing, the most sustainable model I have heard.

  Mr Myners: I obviously defer to your considerable experience in being a newspaper proprietor in the past, but it is an economic model which accurately reflects the cost of distribution. Essentially, in town the reader comes to us to pick up the copy, outside of town we take the copy to the reader, be it to a newsagent in Manchester or home delivery.

  Bishop of Manchester: Am I right in saying that the final edition of the day is not given out free? That is the one I pay for.

  Q2450  Chairman: That is the Bishop of Manchester, as you know.

  Mr Myners: I do not know the answer to that question, Sir. I am sure it is not personal.

  Q2451  Chairman: Let me put it this way. Is there, do you think, an inevitable trend towards free newspapers, free evening newspapers, and particularly in the big cities free newspapers? The kind of contest that we see on the streets of London, do you foresee that taking place in Manchester and Birmingham and Newcastle and Leeds and all these cities?

  Mr Myners: The contest taking place on the streets of London is not sustainable. The losses that are being incurred by both the proprietors and by society are not sustainable, and so we will see this as a battle between two mighty titans who at some point will find a way of diffusing the tension, but there is a bigger and longer term trend towards free titles and that will continue, I think, to be the case for non-national titles. There is no reason why this should not be a perfectly valid business model, because the newspaper linked to a website, for instance, is a very effective mechanism for developing a sense of community and contact with the community and working well for advertisers and those who want to know what is going on in the streets and villages and towns in which they live.

  Q2452  Chairman: So you would not entirely, in spite of what you say on distribution costs, or would you, rule out the prospect that the Manchester Evening News might at one stage go entirely free?

  Mr Myners: I do not rule out any possibilities in any aspect of my commercial life.

  Q2453  Chairman: Because I see from the Wall Street Journal yesterday that the world press trends for 2007 show that free daily newspaper circulation in Europe has more than tripled in the last five years; so it would be unwise for any company not to be studying that area very closely.

  Mr Myners: I do not think you would build a commercial strategy now around launching new titles on a paid-for basis.

  Q2454  Lord Maxton: What is the impact of that on the local newsagent, which is something you really have not looked at but I think is quite important? If you are giving away, you either have to pay the local newsagent to take them and give them away or you hand them out on the street and the local newsagent loses out on his income as a result and eventually they close.

  Mr Myners: Quite the contrary. I think, as far as the local newsagent is concerned, the newspaper generates footfall; it brings people into the shop. I was involved in retailing, I was Chairman of Marks and Spencer, and I know that footfall is absolutely essential to success in retail because you are getting people into the shop and then you convert them from the purpose for which they arrived into buying other products. I think you are right to ask the question, Sir, but I think there is a positive aspect to it as well.

  Q2455  Lord Maxton: What about delivery? They will not deliver a free one?

  Mr Myners: I think the costs of delivery are high. The national minimum wage and its applicability to young workers has made the morning newspaper round, which I suspect many of us did before we went to school, a less effective way of distributing product than was previously the case.

  Q2456  Chairman: But there is no question, is there, that regional newspapers, particularly in the cities, I think, are under probably more pressure now than they have ever been?

  Mr Myners: I agree with that, as a consequence of a number of factors: a change in reading habits, which are in turn a consequence of a change in lifestyle, and the emergence of new media: local radio, local television, the net. This is an industry which is under a considerable amount of pressure for change. Strong groups will thrive in that environment; others will not. So in the regional sector we will, for instance, see continuing pressure for consolidation of ownership in order to secure scale of benefits.

  Q2457  Chairman: Does that also mean that it has an impact on your views on local radio, commercial radio, and that you would like to see the regulations surrounding radio rather less strict than they are at the moment?

  Mr Myners: Yes, I think the regulation has been crafted in a context of there being much clearer separation between different forms of delivery. We are now talking about media organisations offering contact with their readership and their listeners through multiple means, and, of course, we have seen the emergence in the media space of large and significant organisations like Google, Yahoo, eBay, which could never have been contemplated when Parliament drafted its current legislation that leads us to looking at local monopolies in a particular way. I think the reality of the industry and its low profitability does have significant consequences, and we have to contemplate what regulatory responses are appropriate in terms of how we define what is embraced within media regulation and, indeed, as far as national titles are concerned, what might motivate people to wish to buy a national title if it did not make economic sense in itself?

  Q2458  Lord Grocott: I am slightly backtracking, but the point about the challenges to regional newspapers. Is that significantly greater or less than the challenges to national newspapers? I am thinking from the perspective of the reader in Manchester or Birmingham or anywhere else. Are the proportions changing? I have seen loads of figures over the years showing that actually people are much more interested in their regional newspapers and read them more avidly than they do the national newspapers. Do you know anything about way that those proportions are changing?

  Mr Myners: We know that the decline in circulation of local, regional and national titles continues to decline, but readership of individual copies continues to hold stable. We also know that local communities are using other means to be aware of what is going on in their local community and we have talked about radio and digital. I do not think I could build a credible argument that the competitive intensity for regional papers was less than it is for national papers. I think that the regional newspaper area is one which is associated with very strong competition, primarily from non-newspapers.

  Q2459  Bishop of Manchester: I wonder if we could go back to the regulation issue. You did in your written evidence speak about the disincentive this is to local commercial investment. I wonder if we could move on from the point of acknowledgement about the problem which you made in response to seeing the possibility of a way forward. For example, Ofcom recently made a suggestion in November 2007 about drawing together the local and analogue DAB rules into a single set. I wonder if you feel that that might be a way forward and, if not, are there any other suggestions that you can make?

  Mr Myners: I think Ofcom's suggestion is a useful one, and I would encourage the committee to look at that seriously. I do not have other suggestions to make.


 
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