The internet era has been a turbulent one for local legacy newspapers, with a number of circumstances both recent and long-term contributing to their woes. Drawing on
secondary research, I will now provide a review of the sector, focusing specifically on three changes: the appetite for mergers and consolidation since the 1990s; the
disruptive influence of the internet on the advertising platform and the effect of the 2008 recession on revenues.
It is not the purpose of this thesis to carry out detailed analysis of statistics, but it is important to understand the position of the local newspaper landscape in terms of the degree of consolidation. In 2015 The Media Reform Coalition reported that six publishers (Johnston Press Plc, Gannett UK (Newsquest Plc), Tindle Newspapers Ltd, Local World Ltd, Trinity Mirror Plc and Archant Ltd) owned 80% of local newspaper titles. This
represented ‘more than four times the number of titles published by the remaining 56 publishers’ (2015: 8). By 2016 this had consolidated further, following the transfer of Local World Ltd titles to Trinity Mirror Plc, to five publishers (Trinity Mirror Plc, Johnston Press Plc, Newsquest Plc, Tindle Newspapers Ltd, and Archant Ltd) accounting for 80%
(Ramsay and Moore, 2016: 6).
Consolidation of the media is not a new phenomenon (Howells, 2015) but arguably the
‘profits before product’ (Williams, 2006: 83-92) scenario which has seen large-scale editorial cutbacks (Tait, 2013: 6) and distanced local legacy newspapers from their communities is a recent development. To understand how this situation has arisen it is necessary to consider the era of consolidation which started in the 1990s (Mair, 2014:
26). To put the term into perspective, Franklin observes that: ‘In 1996, ownership of one-third of all regional newspaper companies changed hands’ (2006: 8-10). Mergers continued during the new millennium, as newspaper groups organised themselves into regional monopolies to deliver economies of scale (Tait, 2013: 5-17). The era of mergers and consolidation of local newspapers was initially driven by the availability of cheap borrowing during the 1990s and the promise profits of huge profits, Richard Tait said that: ‘They enjoyed near monopolies in their markets and achieved margins most businesses could only dream about’ (ibid: 6).
When operating conditions became more difficult, after 2005, a ‘management strategy of cost cutting’ kept profits high (Williams and Franklin, 2007: 10). Strategies to boost profits involved closing district offices (Howells, 2015: 179-185), moving reporters and
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advertising staff out of the community, creating centralised sub editing units and printing facilities. Then as the situation became increasing difficult with titles closing and huge staffing cuts, what followed was a reduction in: ‘the range and quality of editorial content’
(Franklin, 2006: 10) with news gathering and reporting practices altered to favour lifestyle and entertainment led copy (Williams and Franklin, 2007: 10). This indicates some of the ‘socially cohesive elements’ that were being destroyed in the ‘parent culture’
(Cohen, 1972:23; 1980, 83).
Legacy organisations also over leveraged themselves with their unfettered borrowing, increasing pressure for high profits to service the debt. In 2014 Ashley Highfield, then Chief Executive of regional newspaper group Johnston Press Plc, stated on Radio 4’s Media Show (2014) that the group’s debt had been reduced to £300M, having been as high as £700M as a result of acquisitions and mergers. In 2004 the same company had reported profits of 35 percent (Franklin 2006), this revenue level continued in 2005-2006 representing: ‘a profit margin more appropriate to a gold rush’ according to Matthew Engel (2009: 59). Newspaper owner’s response to falling profits was to close titles and cut-staff to keep profits high, Mair observes that ‘Merger mania’ has damaged the industry more than it realised’ (2013: 26). Local newspaper closures since the 2008 recession have been the subject of much debate among both academics and media professionals, (Fowler, 2011; Siles and Boczkowski, 2012; Nielsen, 2012; Mair et al, 2013). Statistics indicate the scale of decline, research suggest that since the mid-1980s around 600 local papers have been lost, Franklin states (2006: 4) that in 1985 there were 1,687 local papers and during the remainder of the pre-internet era this dropped to 1,284 in 1995. At the beginning of the new millennium the largest companies were earning annual profits of 30% or more which is arguably why between 1995 and 2005 the number of local papers barely changed. The total remained stable during the early internet era up until 2005, with a total of 1,286. Research by the Media Reform Coalition shows that by 2015 this had dropped to ‘1,122 distinct local papers published at least once a week’ (2015: 8). The most up-to-date figures by industry publication Press Gazette reported in March 2018 (Kakar, 2018) that a further 40 papers had closed in 2017. The business models of legacy newspapers were based on the advertising revenue model (Howells, 2015: 12-14) and in addition to a historical decline in
newspaper advertising particularly since the 1990s (ibid: 23), there have been two more recent disruptive factors - the internet and recession. Those at local legacy newspaper organisations, assumed that falling income from print advertising would be replaced by
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revenue from digital advertising (Brock, 2013: 95); Richard Tait quotes Ashley Highfield (Johnston Press Plc CEO) as saying: “We will flip the model to digital first” (2013: 7-8).
Despite such optimism, Ramsay and Moore state that it has not been that simple:
‘Revenues from local print display and classified advertising, that were falling prior to the advent of the web, have fallen faster since and have not been matched by the rise in revenue from digital advertising’ (2016; 4). George Brock indicates that the: ‘deceptive stability of the four decades before 1990’ was part of the reason that news organisations:
‘failed to grasp the threat and the opportunity of the internet’ (2013: 85). Küng’s
observations on discontinuous and disruptive innovations are particularly relevant here, because as she notes it is unusual for: ‘incumbents to maintain their leadership positions across technology transitions’ (2008: 134-137). The internet represented both innovation types, being both competency destroying (discontinuous) allowing other operators to enter the field as well as disruptive to established market structures. For local
newspapers the most destructive aspect has been the disappearance of classified advertising, the reliable small ads placed by the public and paid for ‘up-front’. Classifieds have been described by Rupert Murdoch as “Rivers of gold” (Plunkett, 2005); such was their importance to the business model of local and evening newspapers (Brock, 2013:
93-94). The San Francisco based Craigslist, started in 1995 as an email list of events which then expanded to a website taking job and property listings, provided the model which: ‘was varied or imitated across the digitally connected world’ (ibid.). Key
advertising like property and cars began to migrate online in the early part of the millennium, away from local papers to new dedicated online sites such as eBay, Autotrader and Zoopla. Legacy organisations reacted too slowly to this trend, arguably because they were so profitable. Between 1995 and 2004 profits were high, with local newspapers: ‘the only medium to increase advertising expenditure year on year for more than a decade’ (Williams and Franklin, 2007: 14). It was in 2005 that local newspapers began to feel the effects of the internet on advertising revenues, a trend that has continued (Howells, 2015: 25). Research participant Paul Breeden was working on a mainstream regional daily newspaper and he remembers the impact:
Paul Breeden: People that were, by then, starting to advertise their cars online when they wanted to sell a car. Job ads were starting to go online and estate agents were finding that people were looking for houses online. And all those three areas were massively profitable advertising markets and the biggest part of those markets has all been taken away from the regional publishers.
(I:1 12/07/2016)
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Added to the pain inflicted by innovative internet start-ups, the legacy organisations also lost advertising to social media because of the precise audience segments they can offer. As predicted by Martin Moore in 2015 a lot of local advertising has been lost by local newspapers to the ‘US behemoths’, social media companies such as Facebook and YouTube who can carefully target an online audience. Brock observed that: ‘Twenty years after the internet disruption began, a few advertising-supported models are
succeeding. But they tend to be start-ups with low costs’ (2013: 95). This view is underpinned by organisational theory which suggests that in the early stages of
technological innovation the entry level is low (Küng, 2008, p. 130); providing a seedbed for digital subcultures.
In 2008, an already precarious situation worsened when revenue was significantly affected by the economic downturn, with both circulations and advertising revenues of legacy newspaper, reducing further. Ágnes Gulyás notes that in 2009 advertising revenue dropped by 14.1 percent and in 2010 a further six percent (2013: 124), but she cautions that these figures need to be viewed in relation to previous recessions. She proposes that a sudden drop in advertising revenue is customary during periods of recession citing the Office of Fair Trading figures (OFT, 2009):
Advertising revenues of local newspapers have always been cyclical, falling sharply at times of recessions. For instance, advertising expenditures in local newspapers declined by 22 per cent during the 1974-1976 recession and by about 17 percent during the 1979-1981 recession. (Gulyás 2013: 124) She indicates long-standing structural change as being at the heart of the revenue problems experienced in the second decade of the millennium, rather than solely the 2008 recession (ibid: 123-130). As previously stated there are a complex set of
challenges including technological developments as well as changes in the relationships with their audience (Gulyás and Hammer, 2013:144). Harcup and Cole state that it’s wrong to blame the rise of the internet for legacy local newspaper’s woes (2009: 9).
Writing in the 2009 Journalism Review, Matthew Engel delivers a far more brutal assessment: ‘Britain’s local newspaper groups compounded their problems by their ill-judged expansion of the past few years and decades of editorial neglect before that’
(2009: 61). Tait also blames flawed business strategies which allowed borrowed money to finance ‘take-overs’ resulting in subsequent ‘cost-cutting’ which: ‘took precedence over any strategic planning to face the challenge of online media’ (2013: 6). He observes:
The irony is that many local newspapers still make money. But in many cases they no longer make enough money both to service the interest on the significant
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debts which many groups ran up in the years of consolidation and meet the unrealistic expectations of shareholders that the exceptionally high profits of the past could continue forever. (ibid: 7)
It is therefore, incorrect to cast the local newspaper industry ‘parent culture’ purely as a victim of circumstance. The response to its declining fortunes impacted heavily on local news coverage because of the cuts which were inflicted on frontline staff, which will be discussed next.