Upheaval in UK Newspaper Market: Northcliffe Newspapers Put Up for Sale, News International Announces Three-Year Editorial Spending Freeze, and Trinity-Mirror Starts Dumping 5-7% of its Work Force

Philip M. Stone December 1, 2005

The decision by the Daily Mail and General Trust (DMGT) to put its Northcliffe regional group of 112 titles up for sale is for exactly the opposite reason why Knight-Ridder in the US is looking to sell itself.
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For Northcliffe, the DMGT board believes its value of about £1.5 billion is so high that it is in investors best interest that the group to be sold with the majority of the funds given to shareholders. In the case of Knight-Ridder, its share price was so low that three of its main shareholders want the company sold to gain shareholder value.

Having said that there is one similarity in the two sales – difficulty in identifying just who would be able to buy, or want to buy. For debt and anti-trust fears it is doubtful that major UK newspaper groups would be able to bid. Gannett, the largest US publisher, is a possible suitor via its Newsquest division that with some 300 titles including 17 daily newspapers is the second largest UK regional; publisher.

But the thinking is more that private equity firms may be the major players and they, after cutting every conceivable cost from the Northcliffe operations, would then sell the newspapers on.

Northcliffe owns 20 daily newspapers, 27 paid-for weeklies, 50 free weekly newspapers and 24 local websites. The newspapers have a combined circulation of about 9 million and the web sites have had about 1.5 million unique visitors this year.

DMGT’s announcement surprised the market and its shares soared 11% to 750.50 pence. Only last month Morgan Stanley had reduced the company’s target from 740 pence to 720 pence, citing that the 2006 outlook was deteriorating.

But while DMGT was telling the good news, other UK publishers had much more bleak news.

News International announced a three-year editorial budget freeze at TheTimes, Sunday Times, News of the World and The Sun.

With advertising revenue slowing at a time when the company is investing some £600 million in new color presses plus with marketing costs soaring because of the DVD and CD giveaways NI, like other UK newspapers is trying to claw back some of the costs from editorial operations. The Scotsman, for instance, announced in November it was laying off eight editorial staff to help pay the costs of new color presses.

Les Hinton, the News International chairman, especially mentioned the cost of the DVD giveaways, Rupert Murdoch just the week before severely criticized the DVD giveaways that he believed did little to maintain a higher newspaper circulation. The Times, in particular, has been a heavy user of the DVD promotion since it switched from broadsheet to compact a year ago and its circulation has grown 7.4 %, year on year.

But with Murdoch and now Hinton specifically mentioning the cost of such promotions the question arises of just how long that type of spending will continue within News International.

And at Trinity-Mirror, the UKs largest newspaper publishing house where the company had been talking about reducing its total workforce by some 5-7% -- up to 770 jobs -- it has now told its morning, afternoon, and Sunday titles in Newcastle that about 3.5% of the workforce must go –somewhere between 15-20 redundancies. In Cardiff, where there are another three titles, another 10 jobs have been ordered gone. Liverpool expects to hear its fate this week.

The main problem for Trinity-Mirror is not its regional titles, however, but rather its national newspapers like the Daily Mirror that has seen a 4.8% drop in circulation over the past 12 months to 1.68 million, and even worse the Sunday Mirror where circulation is down 11% to 1.46 million copies.

Last year the company earned  £208.5 million, a 20.9% increase over the year before. Turnover rose by 4.5% to £1.13bn.

But the newspaper problems are not stopping the company from its online investments in mainly classified sites. It has just paid £3.5 million to buy SecsintheCity.com –set up in 2001 as a recruitment site for secretaries. Already this year Trinity-Mirror paid £50.5 million to buy the general recruitment web business, hotgroup, and £13 million for GAAPweb.com, a recruitment site for accountancy and finance.

Add to all that The Financial Times dumped its editor last month, and the editor of the Daily Telegraph resigned,  the Guardian successfully relaunched in Berliner size, while the Independent on Sunday successfully relaunched as a compact, and it is fair to say that for now there is seldom a dull moment in the UKs newspaper sector.

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News International To Fire 700 Printers Over Two Years - February 12, 2006

Now it is becoming clearer why News International has imposed a three-year editorial freeze for its UK national titles. It is going to absorb a £56 million charge for firing about 700 printing staff over the next two years as it closes its Wapping presses and moves to three new plants requiring two-thirds less headcount.

So while the new presses will provide wonderful color printing opportunities for editorial to flex its imagination, editorial’s style is going to be crimped somewhat as it has to pay its share of the £600 million pound plus investment

As they say in editorial, there’s no such thing as a free color press.