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The future of news Contents

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Chapter 3: Financial health

26.The financial outlook for news is challenging.42 The first part of this chapter provides a brief sector overview. The second part evaluates response options.43

Overall picture

27.Audiences continue to shift online and away from print, radio and traditional (linear) TV broadcast.44 Many news outlets have followed them, often funding their online services through digital advertising. But recent market changes and shifting priorities among some big tech platforms have led to major declines in such revenue streams.45 At the same time, production and distribution costs have risen as audiences increasingly expect content in different formats across multiple platforms.46 Carrying out quality investigations is also becoming less economical.47

28.The charts below illustrate these developments. Figure 1 shows the growth of online and social media as news sources. Table 1 suggests that advertising spend in 2023 was down across TV, radio, magazines, and national and regional newspapers, with further declines forecasted for all but radio and TV. Figure 2 shows that fewer people are clicking through to news websites from Facebook, which in turn impacts news websites’ ability to sell digital advertising.

Figure 1: Main platforms used for news

Source: Ofcom, News consumption in the UK: 2024 (September 2024) p 5: https://www.ofcom.org.uk/siteassets/resources/documents/research-and-data/tv-radio-and-on-demand-research/tv-research/news/news-consumption-2024/news-consumption-in-the-uk-2024-report.pdf [accessed 23 October 2024]

Table 1: UK advertising expenditure

	Q4 2023		2023		2024(f)			2025(f)
	Adspend	% change	Adspend	% change	Adspend	% change	Latest vs last	Adspend	% change
Search	3,699.7	12.9%	14,705.0	11.9%	16,015.7	8.9%	+0.2pp	17,042.9	6.4%
Online display	3,449.6	13.2%	12,925.1	11.3%	13,748.3	6.4%	-1.0pp	14,505.3	5.5%
TV	1,426.0	-9.2%	4,900.0	-8.9%	5,028.2	2.6%	+1.2pp	5,073.8	0.9%
of which broadcaster VOD	276.1	15.9%	979.6	15.9%	1,117.3	14.1%	-0.5pp	1,240.4	11.0%
Out of home	396.0	14.4%	1,295.3	9.7%	1,389.1	7.2%	-0.1pp	1,466.9	5.6%
of which digital	266.8	18.1%	841.3	12.2%	921.0	9.5%	+0.7pp	988.5	7.3%
Online classified	285.3	8.2%	1,080.8	-2.7%	1,074.7	-0.6%	+2.9pp	1,090.6	1.5%
Direct mail	276.7	-5.4%	956.7	-12.6%	909.5	-4.9%	+0.5pp	879.1	-3.3%
National newsbrands	224.9	-5.7%	773.5	-6.2%	747.8	-3.3%	-1.7pp	732.3	-2.1%
of which digital	101.0	-5.5%	352.8	-5.8%	350.0	-0.8%	-2.9pp	352.9	0.8%
Radio	202.4	0.3%	715.5	-3.3%	731.7	2.3%	+0.2pp	743.1	1.6%
of which digital	19.8	-12.3%	72.2	-7.1%	77.6	7.5%	-0.5pp	80.7	4.1%
Magazine brands	124.8	-13.5%	503.3	-9.1%	477.7	-5.1%	-4.0pp	474.0	-0.8%
of which digital	65.1	-19.7%	260.8	-13.7%	248.4	-4.8%	-7.1pp	253.2	2.0%
Regional newsbrands	115.4	-6.8%	454.2	-10.1%	439.1	-3.3%	-0.8pp	430.4	-2.0%
of which digital	61.3	-7.7%	239.4	-7.6%	235.4	-1.7%	-2.8pp	235.9	0.2%
Cinema	69.0	-16.2%	219.9	-4.2%	225.5	2.5%	-2.1pp	230.4	2.2%
TOTAL UK ADSPEND	9,746.4	7.4%	36,624.3	6.1%	38,758.5	5.8%	-0.1pp	40,505.7	4.5%

Source: AA/WARC, ‘Expenditure Report’ (April 2024), p 7: https://www.warc.com/about-media/expenditure-report [accessed 23 October 2024]

Figure 2: Facebook referrals since 2018

Source: Press Gazette, ‘Facebook’s referral traffic for publishers down 50% in 12 months’, (May 2024): https://pressgazette.co.uk/media-audience-and-business-data/media_metrics/facebooks-referral-traffic-for-publishers-down-50-in-12-months/ [accessed 23 October 2024]

29.Douglas McCabe, CEO of Enders Analysis, told us that print newspaper circulation “has gone from 8 million copies per day to well under 3 million copies per day … that rate continues apace”.48 Peter Wright, Editor Emeritus at DMG Media, said that national newspapers were adapting to survive.49 Tactics include focusing on digital subscribers, bundling supplements with news, brand-building via podcasts, international expansion, events and much more.50 National papers have added 2 million additional subscribers (print and digital) since the pandemic,51 though this does not mean that everyone benefits: the Reuters Institute for the Study of Journalism has cautioned about a “winner takes most” market, as the majority of subscribers pay only for one publication.52 In 2023 The Telegraph and The Times alone accounted for 41 per cent of all UK news subscriptions.53

30.The fate of local news is a longstanding concern.54 Advertising revenues for local publishers fell by 70 per cent between 2010 and 2020 alone.55 Local media outlets have struggled to find an appropriate response, creating a cycle of revenue losses and financial insecurity which hampers investments in the type of innovation needed to adapt.56 Local TV has also faced challenges as audiences move online.57

31.According to the Public Interest News Foundation (PINF), 4.1 million UK residents live in a “local news desert”, defined as “a local authority area that has no dedicated local news outlet, whether print, online, radio or TV”.58 Reach, a local and national news conglomerate, contested the PINF’s definition of a “news desert” as outdated and too narrow, and warned against “misleading” representations of the sector.59 Reach also told us that journalists face barriers reporting on local democracy, citing an instance where journalists were asked by the police to sign non-disclosure agreements.60

32.While some promising models have emerged, the local news market has seen mass consolidation.61 Opinion remains divided about the merits: local news conglomerates told us that they had preserved the viability of smaller titles.62 Joshi Herrmann, Founder & Editor-in-Chief of the Manchester Mill, argued in contrast that consolidation led to “zombie” newspapers with centralised hubs, little local presence and generic reporting.63 Henry Faure Walker, CEO of Newsquest, argued that local subscription-based models would only work in metropolitan areas with larger populations,64 (which also have a higher density of wealthier customers).

33.UK broadcast news is also facing financial pressures. It is not particularly profitable: ITV and Channel 4 suggested that their news is effectively subsidised by other genres.65 Sky News is reportedly loss-making,66 and its funding arrangements from the 2018 Comcast merger expire in 2028.67 David Rhodes, Executive Chairman EMEA at Sky News, told us there were “some regulatory guardrails” about the channel’s future and said there would be an “ongoing commercial and business plan to properly monetise what we do”.68 Newer entrants have also struggled. TalkTV, owned by News UK, moved to online-only distribution in March 2024 after reporting operating losses of £53.7 million.69 GB News has made successive losses since its launch in 2021.70

34.Commercial radio paints a more positive picture. Global told us that increased audiences meant advertising revenues in 2022 were “the highest ever”.71 Overall commercial radio revenues increased by two per cent between 2022 and 2023.72 Some providers are diversifying with subscriptions and targeted advertising.73

35.Both commercial radio companies and the BBC have reportedly shifted their local radio production towards regional hubs in recent years.74 Global told us they had been “reshaping our regional news teams” to “beef up our journalism right around the country”.75 We note that Ofcom will consult on changes to localness requirements for commercial radio as part of the implementation of the Media Act.76 The BBC accepted that “some aspects of the local radio network … perhaps feel more regional than they did six or 12 months ago”, describing a “balancing act” of serving audiences on radio and online.77

36.The podcast market is growing.78 Sam Shetabi, Creator Network Director of the podcast firm Acast, said podcasts were providing listeners with “an abundance of choice” and enabling news providers to “spread their wings”.79 Advertising linked to podcasts rose by 23 per cent to reach £83 million in 2023.80 But this remains a fraction of the billions spent on advertising across national news, regional news and magazines.81 While news and current affairs podcasts are popular (a fifth of monthly podcast users listen to news and current affairs podcasts daily) only a few make substantial profits.82

37.Approaches to digital-first news outlets are evolving as formats merge and consumer habits change. James Harding of Tortoise Media noted some business models were becoming less sustainable, citing Buzzfeed News and VICE as a cautionary tale.83 But others will continue to emerge. Jonathan Paterson, Managing Editor of The News Movement and John  Quinlan, CEO of JOE Media Group, said their organisations had grown by using social media and targeting younger audiences.84 Mr Herrmann cited the online newsletter platform Substack as a tool which helped him launch Mill Media with limited overheads.85

Deepening divisions?

38.The considerations above suggest that a few large outlets may have a reasonably viable financial future, benefitting from investments in quality journalism and digital innovations which attract a paying audience—reportedly wealthier and more educated groups.86 Smaller niche outlets can also support themselves at a modest size, targeting hyper-local (often metropolitan) readers or specialist interest groups who are often willing to pay for valued products. Many mass market tabloids and traditional local news outlets look increasingly squeezed.87 As their financial situation worsens, the gap between well and poorly served audiences will only grow.

39.Overall these trends indicate deepening differences of supply and demand across social, regional and economic lines.88 Douglas McCabe, CEO and Director of Publishing and Tech at Enders Analysis, warned that such dynamics pointed towards a “two tier” media environment where the decline of “popular” journalism means a growing proportion of society has limited engagement with professionally produced news—absorbing instead “whatever they can pick up online”. He thought this was a “pretty horrible outcome”.89

40.This also suggests the role of the UK’s public service broadcasters (PSBs) is, in some ways, becoming more important. In Chapter 6 we examine in more detail the need for PSBs (and the BBC in particular) to address shortcomings in service provision given their “anchor” role in the media market.90

41.Stephanie Peacock MP acknowledged the “huge challenges” facing the media sector and highlighted the Government’s intention to develop a “local media strategy” which will be “across government”.91

Response options

Tax breaks

Box 1: Previous Government support for the news industry 2019–2024

“Our support for the sector has included the delivery of a £2 million Future News Fund, designed to invest in new technological prototypes, start-ups and innovative business models to explore new ways of sustaining the industry in this changing landscape; the zero rating of VAT on e-newspapers; the extension of a 2017 business rates relief on local newspaper office space until 2025”.

Source: Written evidence from DCMS (FON009)

42.Tax breaks are one option for sector-wide financial support that would help news organisations invest in relatable news, without picking winners. (The 2024 Autumn Budget did not address in detail the issue of newspaper office reliefs which were expected to end in Spring 2025).92 Mr Nelson said that the previous Government’s cut to VAT on digital-only sales was “a big help” that had allowed his organisation to “trade its way” out of the pandemic.93 DMG Media suggested that tax exemptions for digital publications should be extended to rolling news websites.94 Some US states are introducing tax breaks related to the hiring of local journalists.95 Professor Jane Singer of City, University of London said tax breaks should “certainly” be considered.96

43.Tax reliefs are one way to reduce the costs of producing quality journalism. The Government should review the impacts of business rates relief on local newspaper offices. If found to be helpful, this scheme should be extended until 2029. The Government should also issue a consultation before the 2025 summer recess on tax breaks for hiring local journalists.

Public sector advertising

44.Another way to support local outlets involves public notice advertising in traditional newspapers, which local authorities are required to publish for information like planning applications or tenders. These adverts were worth an estimated £46.3 million in 2022. We heard online-only titles and publishers providing print editions less frequently than every 26 days are ineligible to host them, because public notices must be published in a “newspaper” whose definition predates the internet.97

45.Mill Media and the PINF advocated changing the rules, arguing that even a minor financial benefit would make a major difference to small (digital) providers.98 Newsquest and Reach (which benefit from current arrangements) countered that print organisations remain better placed to serve more audiences, especially those not digitally connected.99 The previous Government said that changing the system for local authority notices would not benefit the sector as a whole.100

46.Alternatively, both Mill Media and Newsquest suggested that a larger proportion of central government advertising (much of which is spent on social media firms) could be spent on local outlets.101 Examples of central government advertising include public health messaging or schemes encouraging EU citizens to apply for settled status.102 The PINF called for 25 per cent of central government advertising to go to “public interest news providers”.103 Creating further reliance on Government brings other considerations, however. Robert Colvile highlighted the example of the Government’s pandemic advertising partnership with newspapers, which he believed “was probably quite a good thing for democracy” but also risked compromising the perception of an independent press.104 Andrew Neil raised similar concerns.105

47.Stephanie Peacock MP said she was keen to explore effective uses of Government advertising spend but noted that it must fulfil its primary objective of informing audiences.106 The Minister cited reach and cost-effectiveness criteria but said she had had a “very positive conversation” with Cabinet Office counterparts responsible for Government advertising. Robert Specterman-Green, Director of Media and Creative Industries at the Department for Culture, Media and Sport (DCMS), suggested a need to “think more broadly about the key performance indicators” when designating advertising spend.107

48.Local authority public notice advertising is a substantial source of income for local print news providers (many of which are owned by large conglomerates). The rules generally exclude digital titles and smaller outlets that publish print editions less frequently. Questions remain about using local government advertising to support local media, as this risks becoming a market distortion. However, if this spending is happening anyway, modest changes would help to make the situation more equitable.

49.The Government should consult on changing the definition of a “newspaper” to allow local authorities greater flexibility in determining the most effective use of public notice advertising spend. We suggest local authorities should be permitted to use both online providers and a wider variety of print outlets.

50.Local authorities should ensure public notice adverts remain accessible to digitally excluded groups. In line with the findings from our 2023 report on digital exclusion, we recommend local and central government advertising teams explore creative ways to engage digitally excluded groups (for example using community centres and local hubs).

Innovation schemes

51.Joshi Herrmann of Mill Media said that innovation was the best response to the unprecedented loss of advertising revenue.108 Professor Nielsen noted that media organisations lagged on research and development investment however, typically falling behind the furniture industry in spending.109 Our previous report on the creative industries recommended trialling changes to the research and development tax credit scheme to help creative industries to innovate.110

52.In 2019 the Government set up a £2 million Future News Pilot Fund to boost innovation.111 The pilot, which was administered by an innovation charity, Nesta, ran for several months and funded 20 projects. Examples included testing Tortoise Media’s membership model for local publications; improving the way mainstream publishers acknowledge the original local source of news stories; and testing audience engagement strategies at the Manchester Meteor.112 Comparable initiatives in Europe, as well as other UK catalyst schemes focussed on small and medium sized enterprises, suggest that a more comprehensive version for news media would be worthwhile.113

53.Learning lessons about the scope and focus would be key: the limited scale and length of the pilot seems unlikely to be transformative, particularly when overheads are accounted for. As the House of Commons Culture, Media and Sport Committee noted, the project was “neither substantial nor long-term enough to make a significant difference”.114 The Cairncross Review had recommended £10 million per year over four years. It also stressed the importance of focusing on technology-driven business transformation for long term financial sustainability.115

54.Professor Nielsen cautioned that funding should only be allocated to those who demonstrate their commitment to innovation.116 Maintaining media independence remains vital too. (We suggest options for the BBC to help catalyse innovation later in this chapter).

55.The PINF highlighted that funding for journalism initiatives could be sought by adding public interest news to the list of eligible causes funded by the Government’s dormant asset scheme.117 This scheme was expected to release £350 million for eligible causes from 2024 to 2028;118  a review of the scheme is also expected by February 2025.

56.Media organisations will need to innovate and take more risks to transition to long-term sustainable business models. The UK already has good innovation initiatives for other industries which help catalyse, scale and monetise new ideas. The news sector needs one too.

57.The Government should establish a new Future News innovation catalyst scheme. The objective should be to facilitate technology-driven business transformation to help participants improve their long-term financial sustainability. While the Government should provide the funding, the scheme should be delivered independently. It should learn from the successes and shortcomings of the previous pilot. The number of recipients should be small to ensure the available funding can make a meaningful difference. Some grants should be match funded by recipients to ensure value for money and participant buy-in.

Training and recruitment

58.Increased financial pressures and the decline of local media outlets have affected recruitment and training routes. Supporting entry-level schemes to attract and train diverse talent, perhaps focusing on regional outlets, is a further way to alleviate newsroom costs without unduly distorting market dynamics. This could build on the previous Community News Project delivered at arms-length by the National Council for the Training of Journalists (NCTJ). This project trained 280 journalists between 2019 and 2023 and resulted in over 100 new community reporter roles in newsrooms.119

59.This might also address concerns about elitism. Mr Colvile of the Centre for Policy Studies worried that journalism was becoming a “prestige profession”, as those from wealthier backgrounds could better support themselves through the poorly paid lower ranks.120 The NCTJ said “72 per cent of journalists had a parent in one of the three highest occupational groups, compared to 44 per cent of all UK workers”.121 This in turn may influence the editorial outlook of newsrooms.122 However, David Dinsmore, Chief Operating Officer of News UK and Anna Bateson, CEO of The Guardian Media Group, believed that access routes were improving, notably via apprenticeships.123 The Minister agreed that routes into journalism need to be “open to everyone, wherever they grow up”, and noted that the Department for Education and DCMS would have to work together to achieve this.124

60.The financial precarity of many jobs in journalism is not conducive to attracting a diverse workforce representative of the UK’s population. We welcome schemes from industry and the National Council for the Training of Journalists to attract and train under-represented groups, particularly outside London. As part of its local media strategy the Government should seek partnership funding to support attraction and training schemes for local news, including apprenticeships.

BBC

61.Our report on the future of the BBC examined a variety of strategic challenges around growing competition, online fragmentation, and balancing investments in digital media while continuing to serve older audiences (who often prefer linear media).125 The corporation told us it is facing “significant financial challenges”.126 News programmes and jobs have been reduced or cut.127 Deborah Turness, CEO of BBC News, defended making “really tough choices” and argued the corporation was having to “to do more with less”.128

62.BBC World Service is another substantial cost.129 The Director-General has been reported as saying that Russian and Chinese state media were filling the vacuum left by an underfunded World Service,130 and called for the Government to fund it given other pressures on UK licence fee payers.131 The 2024 Autumn Budget included an increase in funding for the BBC World Service from the Foreign, Commonwealth and Development Office for 2025–26.132

63.Concerns about the BBC’s priorities and spending choices persist. Efforts to reach more audiences online have been critiqued by various groups for crowding out commercial competitors, while changes to radio services have reduced unique local programming.133 Ofcom said it would review the impacts134 and delayed the launch of an online music extension to BBC Radio 2 on competition grounds.135 The BBC’s proposal to introduce advertising on podcasts hosted outside BBC Sounds has sparked further criticism. Global said that smaller producers would lose advertising.136 James Harding of Tortoise Media said that licence fee-payers would be paying twice.137 Rhodri Talfan Davies, Director of Nations at the BBC, acknowledged that continuing to serve linear audiences while strengthening its digital offering is “one of the most delicate balancing acts we have at the moment”, adding that even older audiences are moving towards online formats.138

64.The upcoming Charter Review in 2027 offers an opportunity to re-examine the BBC’s future, including funding models and its strategic priorities.139 This could include recognising the BBC’s role in global soft power more explicitly. Dr Samir Shah, Chairman of the BBC, described the World Service as “an incredibly important instrument of soft power” and advocated for it to be “properly funded” and “not dependent on actions that we correctly take on public service”.140 We acknowledge the challenges faced by the World Service, and we note these are being explored by the House of Commons Culture, Media and Sport Committee, and the Foreign Affairs Committee.141 We look forward to seeing the conclusions of their respective inquiries.

65.At the same time, the BBC must address its shortcomings, for example around serving all audiences and concerns about due impartiality. We examine these issues in detail in Chapter 6.

66.Charter renewal discussions could also involve a bigger focus on supporting the wider UK news environment. The BBC could reinvigorate its relationship with independent local news providers, building on its Local News Partnership Scheme. The BBC invests up to £8 million in this scheme each year.142 As part of this, the Local Democracy Reporting Service (LDRS) funds the salaries of 165 journalists allocated to local news providers. Some stakeholders have called for its expansion, and to broaden the number of recipients beyond big conglomerates.143 Further expanding the initiative’s links to apprenticeship schemes could also be explored. Stephanie Peacock MP expressed support for continuing the LDRS, adding that the BBC plays a “really important role underpinning the fragile ecosystem” of local news.144

67.Technological innovation is another priority. The BBC told us that it is examining potential uses of generative AI, and “actively looking” at options to build a foundation model “in partnership or unilaterally”.145 We considered the potential for public service large language models (LLMs) in our previous report on generative AI.146 We note that a BBC-led generative AI tool could come in several forms, including an internal-facing LLM to boost productivity, an externally available open source model, a generative AI ‘news chatbot’, or wider news search application. Looking beyond internal productivity tools, we see potential value in an external-facing generative AI application which surfaces BBC content. This could be developed in partnership with Government investments in publicly accessible compute.147

68.The upcoming Charter Review is a key opportunity to refresh the BBC’s relationship with local news. The Government should give the BBC an objective to engage with local news providers as strategic partners. This should involve expanding the Local Democracy Reporting Service and increasing the proportion of journalists allocated to small (including online-only) outlets. The BBC should also explore expanding its apprenticeship scheme in ways that support local news.

69.The BBC must pursue transformational innovation as new technologies fundamentally reshape the news environment. In doing so, it should benefit the wider health of the UK media sector.

70.Developing a public interest news generative AI tool is one option the BBC could explore as it seeks to keep pace with new technologies and changing consumer habits. This might involve a service that is designed to improve public access to authoritative information—perhaps with a particular focus on partnering with local news organisations. Any major projects of this nature would need to be subject to industry consultation and relevant public value and market impact assessments.

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