Examination of Witnesses (Questions 2660
- 2679)
TUESDAY 20 MAY 2008
Ms Sly Bailey and Mr Paul Vickers
Q2660 Lord Corbett of Castle Vale:
I was thinking of myself!
Ms Bailey: As a result of that, what happens
is that other newspapers identify those people and, as happens
in other industries, they will then come after them and often
offer them more money as soon as they have won the award for Young
Journalist of the Year, or whatever. I had an incident just last
week where we had that, and I said: "I think we should not
lose this person at all costs. What is it that you would like
to do to retain them? Go and do it." That is about us defending
resources; not necessarily more; it is also about holding on to
the very good people that you have in a very competitive environment.
It is my job, therefore, to understand and be supportive when
my editors need to do that.
Q2661 Baroness Bonham-Carter of Yarnbury:
The competitive environment does mean that there are squeezes
on the journalistic budget.
Ms Bailey: The competitive environment means
that there are squeezes on any budget. If you think about what
has happened in terms of media fragmentation, we now have a £3
billion digital advertising market that did not exist 15 or 20
years ago. That money has had to come from somewhere; it is not
all new money, and advertisers, on an ongoing basis, move money
around between media depending on their objectives and depending
on the kind of results and response that they are getting. That
is not exclusive to online; that would apply to TV, to radio and
the way that advertisers think about deploying budgets, but our
business is more competitive than it has ever been.
Q2662 Lord King of Bridgwater:
You heard the evidence we had before with Lord Rothermere and
his colleagues about the way they are sort of "hands-off"
on the political direction and worrying just about the commercial
success of the business. They have added nearly one million readers
in the last 15 years. You have lost over four-and-a-half million
readers during that period. What interests me, and we saw it on
the other side of the House, as you might say, is when a party
becomes unpopular quite often it affects those media outlets which
support them and loses readership. Do you just stick in there?
Are you just an exceptional victim of what is affecting all newspapers
at the present time? It is a really big issue for you, is it not?
Things are tough and there is squeezing; you have got a fantastic
squeeze.
Ms Bailey: You have to look underneath the bonnet
of the numbers as well, because the headline numbers just do not
tell you the whole story. I could make the circulation of The
Daily Mirror pretty much, within reason, anything, Lord
King, that you would like it to be. Get out your calculator and
on a cost-per-copy basis I can tell you exactly how much it would
cost to achieve that number. It would be nothing to do with journalistic
resources. I can point to the number of scoops, for instance,
if we use The Mirror as an example, and you do not get
scoops if you do not have journalists on the ground doing the
job. It would mean significantly increasing our promotional budget—promotional
as opposed to advertising; promotional in terms of cover-mounting,
giving away, poly-bagging DVDs, CDs, free china dinner services
for every reader, Princess Diana memorabilia—you name it,
we could give it away—and we could make the circulation
number anything we want to. However, economically, over time that
may not be the right thing to do if we cannot see a return on
our investment through being able to, effectively, monetise that
audience through additional advertising. It would also involve
cutting the price of the newspapers. The Daily Mirror,
going to your point about circulation, is the only tabloid newspaper
that is not cutting prices somewhere. We do not do bulk sales,
and this is every copy, every day at full price. We are very clear
about that as a strategy that economically delivers the best result
for our company and our shareholders over time. So, yes, you are
right in terms of those numbers, but we are very clear about how
we run and manage our newspapers and why. I can buy circulation.
The fact is that the newspaper market has been in decline for
the last 25 years, and I suspect that that will continue. Our
job is to achieve the best performance that we can within the
context of that market. Having said that, there are opportunities
to grow our business digitally. There are also huge challenges
with that because, as you know, we cannot charge for our content
in the way that we do. You heard earlier from Lord Rothermere
and his team about the dynamics between cover price and advertising.
The Mirror is remarkably similar to The Mail. If
you take that into the online world then it is a completely different
dynamic, and if you cannot charge for content ("monetise"
is a horrible word but I have not thought of a better one) then
how do you turn that into a business and not just a piece of vanity
publishing? That is a very big challenge for all of us and something
that we are very focused on doing.
Q2663 Lord King of Bridgwater:
You are talking about The Mirror, particularly, but surely
in the past when other national papers had problems they could
turn to their regional and local newspapers as a pretty solid
and reliable source of profit. Last week we had one of your competitors
who has gone for an emergency rights issue, at the risk of otherwise
breaking their bank covenants. Are you finding the same problem?
Or would you see that one of the salvations is to expand further
into the regional and local press?
Ms Bailey: We are not about to launch a rights
issue, if that is what you mean, Lord King. The issues of media
fragmentation are certainly affecting the regional press, and
as the world becomes more competitive, as the nature of our readers'
lives changes, as the nature of the retail estate changes (if
you think about the closures of local shops, the corner shop and
newsagents that we have seen and the growth of supermarkets and,
particularly, out-of-town supermarkets) then that has affected
newspaper-buying habits. So there are many, many things that are
impacting on our market. We have chosen to grasp the opportunity
that online presents us with, and I would say we have been very
successful in developing our business online. Each of our major
regional newspaper titles has what we call a "companion"
website, and we have decided that the overall reach of our newspapers
is the most important thing—the combination of what we can
do online and in print—and if we can monetise that by serving
interesting, dynamic audiences that advertisers value then we
have a business there. We have grown that business, if you look
at our numbers in our annual report, quite significantly over
the last few years. I think there are a lot of publishers who
have done a lot of "stuff" online—believe me,
it is not difficult to do "stuff" online because the
barriers to entry are much lower: you do not need a printing press,
you do not need to buy newsprint—but making money is an
entirely different thing. We have taken a very, very thoughtful
approach to how we build our digital business as opposed to vanity
publishing and just doing a lot of stuff and then scratching our
heads and saying: "How the hell are we ever going to make
any money out of this?" We have got our business model right
and one of the advantages of being the biggest publisher of regional
newspapers is that we can develop concepts and technology centrally
that we then give as tools to our local businesses to grow and
develop their businesses. That is not determining the local content,
which is entirely down to them, but we can give them the tools
that they just would not be able to afford to have if those were
uniquely-owned businesses. We have made a lot of very rapid progress
as a result of that. I think the great opportunity for us that
digital presents is our opportunity to drill down in a very hyper-local
way of serving communities. I would urge you to have a look at
what we are doing up in Teesside where we have developed a website,
essentially, for each of the 22 postcodes in Teesside, absolutely
serving the local community with the issues that it absolutely
values in its community, and is a lot driven by user-generated
content, so it is a reflection of what the community is, what
the community wants and what the community is all about. So the
way that we talk about our market and our approach to good portfolio
management is what we would term as "layering and segmenting".
So, effectively, from having the companion website to The Liverpool
Echo, which is the big local brand online, right down to delivering
at postcode level that, online, gives us the opportunity to do
things that, economically, just would not work for us in print,
because we just could not support it. However, what also concerns
me with that is the BBC's plans in those areas for ultra-local.
Our business in those areas, as with every other publisher, is
very fragile, is very embryonic and the business models are not
necessarily clear and we are all investing heavily. Our concern
is if the BBC moves online ever more locally they, without the
same kind of commercial constraints as us, will distort those
markets making it much, much more difficult therefore for us to
enter. We are very big supporters of the BBC (I sat on a Charter
Review panel) but we must not allow the BBC to distort these embryonic
markets. If we believe in plurality of voice, despite the fact
that we want a strong BBC, I would suggest to you it is not the
only thing that we want.
Q2664 Chairman:
Can I just go back to a rather important point that Lord King
made at the beginning when he suggested that The Daily Mirror
is a Labour-supporting newspaper, and opinion polls and everything
else indicate, at the moment, that Labour is not popular. When
that happened on the Conservative side with The Sun, The
Sun backed the Conservatives in 1992 but by 1997 they were
backing Labour. In other words, they were going with the trend
of opinion. Is that something that The Mirror would do?
Ms Bailey: No.
Q2665 Chairman:
You would just stick by your party, irrespective of what the impact
is going to be?
Ms Bailey: Yes. That does not mean to say that
Richard does not see the paper as being a critical friend, as
I think he would probably put it. Will the political positioning
of The Daily Mirror change (which I think is your question)—no,
it will not.
Q2666 Lord King of Bridgwater:
The question actually was: do you see that as something that hits
your circulation?
Ms Bailey: No.
Q2667 Lord King of Bridgwater:
You do not?
Ms Bailey: No.
Q2668 Chairman:
It is a very interesting question because The Sun changed
because they thought it would affect their circulation.
Ms Bailey: I cannot speak for them and their
organisation.
Q2669 Lord Inglewood:
On this question, which goes back slightly to what I asked earlier,
is the left-of-centre's position an integral part of The Mirror
brand?
Ms Bailey: Yes.
Q2670 Lord Inglewood:
That would then differentiate yourself qualitatively as a newspaper
from The Sun, which is clearly prepared to blow in the
wind.
Ms Bailey: That is down to them, yes.
Chairman: We have established where you are
going to be at the next election, at any rate—if we have
done nothing else this morning!
Q2671 Baroness Howe of Idlicote:
I have been absolutely fascinated listening to all of this, both
previously and now. The message I have got is: profits is one
area of measuring success and yet you are prepared to jettison
profits because you are going to put those off, for the moment,
in some of your plans; you can buy circulation, you were saying,
but you are not going to be doing that either (you have decided
other things are better). So how are you currently measuring success?
All of these things that you are doing must affect profits coming
in, to some extent. Over what period of time are you measuring?
Ms Bailey: How long is a piece of string, really?
If you look at our annual report last year you could see that
we grew our profits and we grew our profits against a background
of a very challenging environment—that challenge largely
coming from weakness in the advertising market. Profits, of course,
are important to us; we are a public company and, therefore, profit,
cash and dividend are important parts of our stock for our shareholders.
However, there are a number of measures that we use across businesses.
It is not that we ignore circulation—we want to sell as
many copies of all of our newspapers as we can—but we are
very clear about the most profitable way in which we can do that
over time. We do not delude ourselves that we are being successful
by buying circulation if we are not and we do not think that is
the right thing to do. We look at circulation, we look at readership,
we look at quality of readership, in terms of where we may be
on any paper gaining or losing readers, and we look at market
share. We also look at more qualitative measures when we talk
to our readers in research—when we talk to loyal readers
about what drives their loyalty—so we can do more of that.
We talk to occasional readers; if they are occasionally coming
in why are they not coming in more and what is it that is stopping
them from doing that? What do they like about individual newspapers
and what do they not? So it is a mixture of hard numbers, if you
like. In our digital business we are looking at building a virtual
circle of growing audience engagement; it is not just about growing
numbers in terms of unique users, it is about how your audience
actually engages with your product and its content and, therefore,
how you are driving response. So the importance of audience engagement
and response are incredibly important measures, but those are
quite different measures than we would apply to our newspapers.
Q2672 Baroness Howe of Idlicote:
You are really saying that you are doing other things, including
research into your readership, which gives you pretty good profits,
but you might have had a bit more if you had done that and continued
in some of your areas. You can come back on that. Can I just move
now into your new area, because you started to tell us that it
is a multi-platform media business approach that you are going
into? I think you started to tell us a bit about this alongside
what you are doing, because you are also having a website and,
presumably, you are working out who is going to give you more
profits into the future. How are you going to measure success
there and over what length of time?
Ms Bailey: As I said earlier, we are one of
the few media organisations that are making money online because
we have thought very hard about our business model. We think we
know how to make money online. Our challenge is to grow that now
exponentially—
Q2673 Baroness Howe of Idlicote:
You will have more competitors. We heard from one of them coming
in fast behind you, apparently.
Ms Bailey: Yes, but you are either in it or
you are not in it, and we feel that it is very important that
in terms of the health of our business and, coming back to diversity
and plurality of voice, keeping our brands as successful into
the next decade and beyond, as they have been in the past, then
we will not do that if we are not very clear about how they can
thrive digitally.
Q2674 Baroness Howe of Idlicote:
Let me to take you to one other area. You were mentioning ten
years' time. If you look at the younger generation, none of them
are reading newspapers these days; they are getting their news
from all over the place. What are you going to be seeing in ten
years' time? How much attention are you paying to that group and
trying to attract the younger generation into your readership
at this stage? Incidentally, who is doing all this? This is at
a pretty high level. Paul Vickers, do you run some of this?
Ms Bailey: Paul is our Group Legal Director
and an executive director of the company, so he is not running
our digital businesses. Our editors are responsible for the online
versions of their newspapers where we have a companion website.
Again, whether that is The Liverpool Echo, The Newcastle Chronicle,
the editors are responsible for that content and for those journalists.
We have also bought some businesses that sit separately which
are advertising-driven businesses which do not have any editorial
content—Smart New Homes, for instance, which is the UK's
leading new homes website—and those are run separately.
We are investing very heavily in this area. We are adding around
100 staff, as I speak, this year in both the commercial and editorial
areas because we absolutely understand the challenge of accelerating
what we are doing digitally. We are doing that from a sense of
confidence and success because we are driving revenue, businesses
are profitable, we think we have a good model, we have got something
that readers and advertisers value and we need to do more of it.
Q2675 Baroness Howe of Idlicote:
No newspapers in ten years?
Ms Bailey: In Scotland, for instance, we launched
Business Seven last year, which is a new, free weekly business
title aimed at, let us call them, aspiring young professionals,
also with a companion website. That has been incredibly well-received
by the market and is hitting its financial goals, and it shows
that there absolutely is a market for well-targeted, new print
products. So I do not think that we should write print off at
all in terms of us seeing new launches.
Q2676 Lord King of Bridgwater:
You said "free", did you?
Ms Bailey: Free. Yes. We publish five Metros,
for instance. We published hundreds of free newspapers, so we
love the free model as much—
Q2677 Chairman:
Do you think that some of your paid-for regional titles might
become free in the course of time?
Ms Bailey: I can absolutely see that there could
be a combination of either a hybrid model or becoming free over
time, and if that was the right thing to do and ensured the longevity
of those titles, then absolutely fine.
Q2678 Chairman:
The hybrid model is this idea, is it, of the Manchester, in the
city centre—
Ms Bailey: Which is interesting. Indeed, we
have done exactly the same thing in a small way in Liverpool with
The Post. I am more concerned (and we heard a little bit
at the end of the last session) about the current competition
regime and some of the things that that precludes us from doing.
Q2679 Chairman:
We are coming to that, literally, in a moment. You say you are
making money online, yes?
Ms Bailey: Yes.
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