If US Newspapers Think They Have It Bad Then The They Should Look Across The Atlantic -- In the UK Trinity-Mirror Reports Advertising Down 16% At Its Three National Tabloids While Losses At Murdoch’s Times and Sunday Times Treble In The Past Three Years And Associated’s Daily Mail Cuts Some Editorial Budgets By 20%

The results and actions being taken by the UK newspaper industry are pretty much the same as in the US – invest as much as possible as fast as possible in the Internet while at the same time savagely controlling costs in print, trying to keep those print losses to a minimum as the Internet business builds. Long-term it will probably work, but short-term it’s savage out there, and in the case of Trinity-Mirror it has the additional headache of how much patience their large American shareholders have.

Trinity-Mirror’s management must have some fear that about 23% of the company is owned by three American investment firms that bought their shares at prices higher than Friday’s 526.50 pence close. The Harris Group – the same Harris Group that helped force the Knight-Ridder sale – has 8.11% of the company – and started building its holdings around the 554 pence level and higher. Also in there is the Capital Group with a 10.08% holding and Tweedy Browne with some 5%.

And American investment firms have shown with the forced Knight-Ridder sale, a recent verbal onslaught on the New York Times Company, and even the Tribune Company admitting it could be in play if its share price sinks much lower, that there is not nearly as much patience out there for things to get better as there once might have been, mainly because there just doesn’t seem to be any good news for newspapers on the horizon.

ftm background

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When the major US publishing companies give their various reports to the 33rd annual UBS Media Week Conference and to the Credit Suisse First Boston media meeting this week the shadow of who is not there will be overwhelming. Knight-Ridder’s prognosis is already known – its three main shareholders want it sold to gain shareholder value, and many of those other newspaper companies – especially those without family protection on their shareholdings – fear they could soon be in the same boat.

About the only thing these days that forces up a newspaper’s share is if there are suspicions of an imminent sale The pressure on Trinity Mirror is not to dump the whole company, but rather just its three national tabloids – the Daily Mirror, The Sunday Mirror, and The People -- and focus instead on its regional newspaper business, something that management has resisted but which the Americans have been advocating. Trinity-Mirror has a new chairman as of this week – and that means new eyes that will probably look at everything.

If one wanted to examine what is wrong with the UK national newspapers then one need look no further than at the Trinity-Mirror national newspaper figures.

For the first four months of the year advertising was down 16%. Better to concentrate on the regional newspapers where advertising was down “just” 10%.

Those numbers are worse than the company had previously told investors they would be and so the savage cost cutting already going in the company including redundancies, will likely continue.

Circulation for its nationals has dropped dramatically over the past 12 months according to the latest ABCs – The People down 10.92%, The Daily Mirror down 5.01% and The Sunday Mirror down 4.1%.

Most of the advertising losses have come in the classifieds. A company statement last week said, “The difficult advertising market conditions experienced in 2005 have continued into 2006. Whilst comparatives will ease as the year progresses, management continues to run the business on the assumption that the advertising environment will remain very challenging.”

In other words, it doesn’t look like it is going to get much better any time soon.

If there is any sign of light at the end of the tunnel it is that the year-on-year advertising drop stabilized at 10.2% for each of March and April, whereas in January it was 13.9% and in February it was 13%. The nationals raised their cover prices this year -- The Daily Mirror, for instance, went from 35p to 38p, and the increased circulation revenue apparently offset volume declines.

Of course, it’s one thing to advocate the selling of newspapers and quite another getting the price you want. The Daily Mail and General Trust (DMGT) found that out last year when it put its Northcliffe regional group on the bloc, looking for around £1.5 billion. As it was the bids came in less and Northcliffe came off the market, but since then the cuts through Northcliffe and Associated newspapers has been brutal.

Northcliffe announced it wanted to boost annual costs savings by £45 million annually and that has already meant editorial redundancies and job cuts at the company’s London headquarters as part of a drive to cut overall some 900 jobs. Some local printing presses were closed and plans for a new regional printing plant that was to have provided some £50 million in savings over four years were scrapped.

Most of the UK’s regional press is PM, and Northcliffe is quite blunt that while it wants to maintain quality some things are going to have to change. Peter Williams, DMGT finance director, said recently that closing local printing presses would not harm quality.

“If people want the latest local news they can get that from a website, or on their mobile. So evening newspapers don’t need to be printed so nearby. They don’t need to be so timely,” he said. That’s a strange definition of maintaining quality!

He said deadlines will be earlier, “But we don’t think it affects the product. That’s the changing nature of evening papers. They have more local information, entertainment and what’s on, as well as local news.”

Northcliffe sold the Aberdeen Press & Journal and the Aberdeen Evening Express for £132 million – about 16 times earnings before interest -- and then merged the rest of the group with Associated. An offer of 16 times earnings for the entire Northcliffe group would have been at about £1.6 billion, above the price management had set, but the highest bid was said to be around £1.3 billion from Gannett’s Newsquest regional group.

Meanwhile at Associated’s Mail on Sunday and The Daily Mail the axe has already struck. About 15 staffers went from the Sunday newspaper and at the daily newspaper about £500,000 was slashed from the editorial budget with some departments losing 20% of their budgets. At least 13 editorial staff were let go.

Newsquest has taken a different tack with its cost cutting. In addition to cutting around 100 jobs it is also reducing the number of editions some of its newspapers print. Some of those that used to print through the day – basically an AM and PM version – are converting to just one AM edition, and that also means cutting back on zoned editions, too.

And the Johnston Press, that bought The Scotsman and Scotland on Sunday newspapers late last year for £160 million has cut some 45 staff.

As for Murdoch’s Times and Sunday Times losses increased by 17% last year to £46.9 million. Management has imposed a three-year budget freeze – partially to help pay for the £600 million investment in new printing presses – but journalists are having to undergo that most miserable of exercises – the newspapers are determined to cut at least 10% off staff expense accounts.

But for all of that, managements at all of these groups believe the good times will roll again sometime in the future. Perhaps it was best summed up by Sly Bailey, chief executive of Trinity-Mirror, who told shareholders last week, “We have no plans to roll over and die – quite the opposite!”