Examination of Witnesses (Questions 2680
- 2699)
TUESDAY 20 MAY 2008
Ms Sly Bailey and Mr Paul Vickers
Q2680 Chairman:
Are you making as much money as you are losing or you have lost
from your regional newspapers in the classified advertising game?
Ms Bailey: No.
Q2681 Chairman:
No one has cracked that, have they? They have not been able to
equate the losses with the amount gained.
Ms Bailey: That is a key challenge for us in
terms of growing our digital business, as I said, and it is something
that occupies an enormous amount of my time. We should not confuse
the fact that there are two things going on: there are structural
issues (and when we say "structural" not all of those
are online; some of those are changes to consumer habits, to working
patterns, to the retail environment—these are all structural
changes); the reduction in public sector spending which has absolutely
affected regional newspapers—is that structural or is it
cyclical? It depends on whether it comes back or not. Also there
are cyclical factors, where we know that, for instance, the recruitment
and property markets are absolutely influenced by GDP and absolutely
influenced by the claimant count and unemployment. So it is important
to understand that there are different things going on here that
are driving that.
Q2682 Baroness Eccles of Moulton:
Ms Bailey, could we talk for a little bit about consolidation
at two levels—first of all, at your Group level and then
as far as the industry as a whole is concerned. You have a lot
of experience in consolidation because it has, presumably, happened
in your regional market as you have acquired more and more titles.
There are two questions about this: one is that the NUJ says that
this invariably leads to fewer journalists and increases workloads
for those remaining and, therefore, poorer journalism. That is
an NUJ argument, which I am sure you are extremely familiar with.
The other argument and the other point is that consolidation results
in an ability to protect the local nature of reporting and that
the journalism of your local papers has improved as a result of
being able to, as it were, pool resources. Could you comment on
both of those rather apposing points?
Ms Bailey: We certainly know the benefits that
we can bring through our titles where we are able to invest by
using Group resources. For instance, we have just invested around
£250 million in new presses for our titles. We would not
have done that if we did not think that there was an economic
model that made sense for us to do that as a company and for our
shareholders. Increasingly, there is a requirement to invest in
IT to become more efficient and, also, to be able to publish online,
because without the right IT systems you cannot publish online.
All of these things are very expensive and they require investment.
The more that you can take a group view on the right technology
then, obviously, your titles will benefit from that, and they
would find that very difficult to do without the group ownership,
for instance, of Trinity Mirror. It is a concerning point but
it is an academic point, but if I could make the case by saying
that we closed eight of our regional newspaper titles three weeks
ago in Derby and Peterborough, having explored all opportunities
to continue publishing.
Q2683 Chairman:
Were they evening titles or daily titles?
Ms Bailey: They were weekly, free titles but,
nonetheless, important to their communities. Unfortunately, they
were losing money, they were losing increasing amounts of money
and, having explored all options, we did not think that we could
turn them around. Johnston Press in 2001/2002 wanted to buy a
number of those titles and could bring their local infrastructure
which we do not have there and improve the performance, and they
were not allowed to buy those titles. So, unfortunately, rather
than ending up with a more diverse environment, we have ended
up with a less diverse environment.
Q2684 Chairman:
How would it be more diverse?
Ms Bailey: They would still be there.
Q2685 Chairman:
I understand that, but presumably they would be under the umbrella
of a company that was already there.
Ms Bailey: Yes, but I think we need to delineate
between who the companies are and what the impact on content is.
It is a very, very important point that to be successful you have
to be what the community, needs and expects you to be. Certainly,
our regional newspapers do not take a political stance, as I think
you know. So I am, frankly, baffled by why this is a good idea
when it does not change the nature of reporting on the ground
in terms of what our editors will do to ensure that they continue
to have successful titles whether they are owned by Johnston Press
or Trinity Mirror, or indeed anybody else.
Q2686 Lord King of Bridgwater:
I have a question about those eight titles. Was that a blanket
"Trinity Mirror should not be allowed to buy some of Johnston
Press", or was it examined on a paper-by-paper basis and
determined in each case whether this was reducing competition?
Was it that Johnston Press had some rival publications which they
would absorb yours into?
Mr Vickers: It is the latter. We tried to sell
those titles. All of the eight that we closed were part of a package
of titles that we tried to sell to Johnston Press in 2001. That
was referred to the Competition Commission and it was turned down
on advertising competition grounds. This is one of our great concerns.
There are two sides to our concerns to the way in which the newspaper
mergers are analysed. We would say, particularly in small markets,
there is far too much focus on small, local advertising issues
and concentration on—
Ms Bailey: And press advertising.
Q2687 Lord King of Bridgwater:
Is the point that those were papers for which Johnston Press had
a competitor in that area?
Mr Vickers: Yes, they did.
Q2688 Lord King of Bridgwater:
So they saw that as a reduction of competition for advertising
in that particular area?
Mr Vickers: Yes, and in a couple of the markets
I think they would have had 100%, and it went to the Competition
Commission. We would say that one of our concerns is that relatively
small newspaper mergers end up with the Competition Commission.
Because they are competition experts, they focus down on minute
competition issues.
Q2689 Lord King of Bridgwater:
You are saying because they had not been allowed to be sold they
have now gone, but is not the implication that if they had bought
them they would have closed them down as well?
Mr Vickers: No, we think they would still be
there. I do not think they would have spent the sort of money
that we were asking for to have bought them and just shut them.
I think that is a rather cynical approach, really.
Ms Bailey: The really important point here is
the narrow definition of press advertising markets. That may have
been perfectly fit for purpose 20 or 30 years ago but it is not
the way that readers now consume media across print and digital
and it is certainly not the way that advertisers buy media across
media.
Q2690 Chairman:
You were talking about 2001. In between we have had two Acts,
have we not: the Enterprise Act and the Communications Act? Has
that not changed things?
Mr Vickers: We do not see any evidence of it.
Unfortunately (perhaps fortunately) there has not been a big regional
newspaper merger that has gone to the Competition Commission.
There have been a couple of small ones that look as though they
might go but, again, the OFT considered the sale of some of our
titles to Dunfermline and they recommended that the acquisition
of one of the titles should go to the Competition Commission,
and the acquirer said: "We do not want anything to do with
that; we would rather sell it than go through the whole of the
Competition Commission process".
Q2691 Chairman:
Your complaint is, really, that we are going down into too much
local detail, if you would like to put it that way.
Mr Vickers: We are going into too much local
detail and then when they get into that detail they do not focus
on the right things. They have a silo advertising approach and
not taking into account the fact that there is the internet but,
also, there is local radio, there is local television (there is
very, very cheap television advertising if you go on to digital)
and they do not seem to take account of classified directories,
local magazines. Advertising buyers buy the market, they do not
just—
Q2692 Lord Corbett of Castle Vale:
Are you saying there should not be any legislation, or that it
should be looser?
Mr Vickers: I think it should be looser. It
is the two things coming together. When the Competition Commission
look at small mergers they are driven into the very small markets
on advertising; we think they should take a broader view on plurality,
frankly.
Q2693 Chairman:
Do you think there should be a public interest test in these kinds
of mergers?
Mr Vickers: I think there needs to be, yes.
Q2694 Chairman:
You do.
Mr Vickers: Yes. In the real world there is
always going to be—put it that way.
Q2695 Chairman:
So there needs to be some special controls above the normal competition—
Mr Vickers: I accept that they are likely to
be. In my ideal world there would not be, but in this real world
there always will be, yes.
Q2696 Chairman:
In your ideal world you do not think they are necessary?
Mr Vickers: I do not think they are necessary,
no.
Lord Inglewood: Could I ask Sly Bailey if she
agrees?
Q2697 Chairman:
We are going down an important side road, at the moment.
Ms Bailey: What am I disagreeing with?
Q2698 Lord Inglewood:
What he said, about a public interest test and competition. Do
you believe in any competition policy in this area?
Ms Bailey: I also think we have to take into
account who we are competing with in our markets now, and how
that legislation is or is not applied to them—Google, for
instance.
Q2699 Lord Inglewood:
Are they a competitor of yours or are they an enhancer of yours?
Ms Bailey: They are a competitor of ours in
terms of their dominance of the search advertising market.
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