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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