Regional press: Making the anti-consolidation argument

Posted by Peter Kirwan on 26 March 2009 at 01:22
Tags: Johnston Press, Media, Trinity Mirror

So far, arguments about further consolidation among the regional press have been conducted at a fairly rarified level.

There’s been an argument about business models. Some analysts are concerned that consolidation will mean more brutish one-off job cuts. Sly Bailey is trying to reassure them that “working smarter” with a new “editorial model” is part of the plan.

Then there’s the anti-trust angle. Will boiling down the Big Four into a Big Two result in a bad deal for advertisers? We’ll get to see what the Office For Fair Trading thinks about that soon enough.

I happen to think that the government will approve further consolidation. It’s a pain-free, subsidy-free way for a weakened government to assist an industry that hasn’t been particularly adroit in lobbying on its own behalf.

But for the would-be consolidators, there’s a risk that the anti-consolidation argument starts to gain momentum. The broader the debate becomes, the less attractive consolidation will appear. This could happen quite rapidly.

Back in February, the first glimmers of momentum became visible when Peter Lazenby, a Leeds-based NUJ official, called Johnston Press the “newspaper equivalent of HBOS and Northern Rock”.

This struck me at the time as a smart piece of positioning. As Lazenby said:

“This company is a financial mess not of our making – it’s the newspaper equivalent of HBOS and Northern Rock.

“The debt now amounts to 10 times its share value and the people responsible for this mess have received fat bonuses and the chief executive is retiring with a pension most working people would die for.

“They are telling us we have to pay the price for this mismanagement by sacrificing our jobs.”

Sensibly, the NUJ is extending Lazenby’s parallel.

Yesterday, the NUJ’s James Doherty told MPs that “light-touch regulation” had “failed in the banking sector. . . and failed in the media, too.”

He added: “The Newspaper Society are asking for an even lighter touch, which will result in even fewer jobs, and more news factories producing titles 80 or 100 miles away.”

Differences between lobbyists who theoretically share the aim of saving their industry? Parallels with bust banks? This is where things get interesting politically.

I feel a Select Committee hearing coming on, with Sly Bailey and John Fry lined up to reprise the roles of those bankers who so memorably hung their heads in regret before the Treasury Committee back in February. Michael Pelosi of Northcliffe Media could sit alongside them fielding awkward questions about Viscount Rothermere’s commitment to the regional press.

And if MPs really felt the need to hear the magic s-word spoken again, they could request the presence of two men who personify the debt-fuelled decade: Tim Bowdler and Roger Parry, the former chief executive and chairman of Johnston Press.

What a swell party it would be. . .

Collapsing ad markets mean that only redundancies will keep the bankers happy

Posted by Peter Kirwan on 26 March 2009 at 00:08
Tags: Johnston Press, Northcliffe Media, Trinity Mirror

I see that the media buying agencies are starting to catch up with the real world.

Well, sort of. Carat has just issued a forecast suggesting that UK ad markets will decline in value by 7.1% YOY during 2009. Only four months ago, they were predicting a decline of 2.2%.

With ad revenues at ITV down by 20%+, Associated Press predicting a Q1 YOY decline of 24%, regional ad revenues collapsing by up to 40%, and digital media reduced to single-digit growth, I can only guess that marketers are going to buy shedloads of radio, cinema, magazine and outdoor space between Q2 and Q4.

Or maybe not.

By the way, you can ignore Nielsen’s bizarre suggestion (available at the previous link) that ad spend in the regional press fell by 2.1% during January.

For a taste of reality, take a look a handy guide to what happened to regional ad revenues during 2008 recently published by Johnston Press. It goes like this:
 

Q1 2008
– YOY percentage revenue decline: 7.3%
– YOY revenue decline: £8.4m

Q2 2008
– YOY percentage revenue decline: 11.9%
– YOY revenue decline: £13.6m

Q3 2008
– YOY percentage revenue decline: 22.9%
– YOY revenue decline: £25.3m

Q4 2008
– YOY percentage revenue decline: 28.1%
– YOY revenue decline: £28m

2008 Full year:
– YOY percentage revenue decline: 17.1%
– YOY revenue decline for 2008: £75.3m
 

These are astonishing numbers. Still more remarkable are the implications of the 36% decline in ad revenues for the first nine weeks of 2009 reported by Johnston Press a fortnight ago. 

Here’s how this nine-week performance would play out across the current quarter, with historical comparisons to the same quarters in 2007 and 2008.
 

Q1 2007:
– Ad revenues: £115.8m

Q1 2008:
– Ad revenues: £107.4m
– Percentage decline: 7.3%

Q1 2009
– Ad revenues: £68.7m
– Percentage decline: 36%
 

Today, Dominic Ponsford, editor of Press Gazette, reprised what has become a frequently-voiced thought: that there’s a mismatch between the current bloodbath of redundancies and what look like healthy profits at places like Johnston Press, Trinity Mirror and Northcliffe.

In recent weeks, these three companies have reported operating margins of 24%, 17% and 16% within their respective regional press operations for the year to December 2008.

But remember: this downturn only really turned into a rout last October. By comparison, the first three quarters of 2008 were a cakewalk. What’s happening now is unprecedented.

Ponsford is correct when he says that many titles have “slipped into the red in recent months and that has yet to be reflected in reported profits”.

My calculations suggest that if ad revenues keep falling at the current rate, Johnston Press will be lucky to break even in 2009.

Forget about fat-cat dividends; they’re long gone. If Johnston Press can’t sell its Irish papers soon, you can forget about profits, too. The company will have to fire employees simply to make its interest payments to the banks.

Indeed, by 2010, the regionals’ primary revenue stream will almost certainly have halved in value from peak to trough.

A sobering thought.

Hard cases make bad law: Polly Toynbee on state aid for the regional press

Posted by Peter Kirwan on 25 March 2009 at 13:19
Tags: Media

I reckon that if you added all of Polly Toynbee’s cries for further investment together with existing public sector expenditure, the result would equate to something like 120% of GDP.

But the poor are always with us, and the list of deserving causes is long. So it was that yesterday morning, Toynbee waded into the crisis laying waste to the regional press.

The Guardian columnist went further, suggesting that the government set up a framework for “local trust ownership” of local newspapers.

What is “local trust ownership”? Does it involve charitable status? Tax breaks? Private sector or public sector participation? And how would entrepreneurial investors get involved? Would there be specific assistance for web-based start-ups?

The answers to these questions are fairly important. Without them, the idea of “local trust ownership” could include your local council’s Pravda-style freesheet becoming the de facto newspaper for your community.

Presumably, it could also include outright nationalisation if the likes of Johnston Press find it hard to achieve going concern status later this year.

Swatting aside fine detail of this kind, Toynbee argued that she would like to see local newspapers receive some of the public money that would otherwise go to fund local news bulletins produced by ITV (“awful”) and the BBC (“shamingly bad”).

She’d also like to see trust-based local newspapers receive “a small subvention from council tax”. In return, the local trusts envisaged by Toynbee would have obligations to “good reporting, fair rules and open access”.

Most of these ideas aren’t new. The more relevant point here is that Toynbee reveals herself as a member of the raise-it-to-the-ground constituency. She believes — as Jeff Jarvis does and Maximilien Robespierre did -– that the current structure of ownership must be (largely) destroyed before something new can take its place.

Toynbee has three reasons for thinking this. The first is deterministic: further consolidation, Toynbee reckons, won’t solve the industry’s long-term revenue problem.

Her second reason is judgemental. Some local papers, Toynbee writes, are “dross” and therefore deserve to go to the wall. (The echoes of various banking rescues are strong here.)

Finally, there’s the political rationale. Toynbee believes that a catastrophic collapse is required in order to get rid of the managers who “cry press freedom” whenever public subsidy is mentioned.

In the end, I’m left with two problems with Toynbee’s proposal. The first should be obvious.

Hanging around in order to get rid of the bosses who currently resist public subsidy will inflict one hell of a cost on journalists and other employees.

The carnage would make the cuts we’re witnessing today look ridiculously modest. There’s a vast amount that can government and regulators can achieve without waiting for Armageddon.

The second is the likely public reaction to the idea of subsidised local newspapers.

Late yesterday evening, Toynbee’s article had attracted 210 comments. I counted 17 that were supportive of her proposal (and most of these came from a group of three or four readers, the majority of whom were journalists).

Admittedly, examining user-generated content at Comment Is Free probably isn’t the best way to assess public opinion. But I think that the negative intensity of so many of the replies tells its own story.

In amongst the random Toynbee-bashing and squawks of outrage about “highly-paid journalists”, I detected at least three main reasons for opposition:
  

• We’re in a recession. We can’t afford to eradicate child poverty –- and you want to give public money to newspapers? No way.
   
• In commercial terms, the internet is killing newspapers. . . but that’s how business works. Why waste scarce money attempting to keep a doomed industry on life support? The market will provide. . .
   
• Local newspapers have already declined to an alarming extent in editorial terms. Cost-cutting managers compromised reader loyalty years ago. What remains is not worth saving.
   

Whether your position on society’s attitude towards journalists resembles this or this, it’s obvious that advocating the state-aided rescue of local newspapers is going be a one hell of a tricky proposition.

It remains to be seen whether this government has the guts to propose it.

Ofcom wakes up to local news crisis. . . but will probably doze off again soon enough

Posted by Peter Kirwan on 24 March 2009 at 14:22
Tags: Johnston Press, Media, Newsquest, Northcliffe Media, Trinity Mirror

Now, finally, we know what it takes to get Ofcom out of bed.

Cindy Crawford used to demand $10,000 a day. In the case of Stewart Purvis, the absurdly-named partner for content and standards at Ofcom, it’s a 37% YOY decline in ad revenues at Northcliffe Media.

Oh, and 1,000 job losses.

Wiping the sleep from his eyes, Purvis — whose CV includes stints at Channel 4, ITN and the BBC — was all over the news bulletins last night.

What we got was yet more bleating about the role of local newspapers in a democracy. (In case you were wondering, their role is to tell voters what goes on in government “between elections”).

The abiding impression created by Purvis’s soundbite was that of a man flapping his arms in the air and repeating: “Something must be done.”

This is fine so far as it goes. But Purvis has got competition. For months now, culture minister Andy Burnham has been performing this role.

Regrettably, when it comes to taking real action — or any action at all — the minister has proved as useful as a one-legged man in an arse-kicking contest.

But still: let’s not be too harsh. Let’s ask instead what has woken Purvis from his slumber. What, in other words, was so special about yesterday’s announcement from DMGT?

On 18^th March, Gannett announced that Newsquest’s ad revenues declined by 32% (in constant currency) during January and February.

On 11^th March, Johnston Press announced a 36% decline in ad revenues during the first nine weeks of the year. On 26^th February, Trinity Mirror forecast a 37% decline in regional ad revenues during January and February.

The idea of freefall declines in regional ad revenues isn’t new. It’s been staring the industry in the face since last autumn.

Did anyone genuinely think that the 25%-30% YOY declines in regional ad revenues recorded during Q408 were going to be the end of the story?

For the past six months, this government’s response to signs of distress among local media has been consistent: let Lord Carter deal with it.

Carter largely ignored the gathering crisis in local newspapers in his interim report which was published in late January. But he provided a glimpse of his thinking last week.

On Tuesday 17^th March, Sly Bailey –- whose willingness to make waves is becoming admirable — told the FT that regional newspapers face “immediate peril”.

Two days later, a reporter asked Carter about Bailey’s repeated criticisms of him.

The noble technocrat had this to say: “Internet advertising is repricing traditional media inventory. I’m not entirely sure there’s an awful lot you can do about that.”

Carter’s quote got me wondering. What if the bleating of bureaucrats like Burnham and Purvis is actually misleading?

What if the secretary of state for culture, media and sport and the partner for content and standards actually turn out to be minimum-waged employees of the Department of Folding Deckchairs?

Furthermore: what if masterly inaction actually lies at the core of government policy?

Lord Carter may yet emerge as a Shirky/Jarvis-style technocrat who believes that the entire edifice of regional print ownership needs to collapse before a new digital order can be born. (It’s certainly a view. But until a few months ago it was controversial enough to be unmentionable in polite conversation with Big Media types.)

If Carter does hold such views, the Treasury will love him for it. HM Treasury has fought an aggressive rearguard action against any government minister who has dared to suggest that bail-outs should be offered to anyone other than bankers. You’d have to guess that Lord Carter is in agreement.

And then there’s that renowned friend of local democracy, Gordon Brown. I wonder how much priority he places upon the need for voters to stay informed “between elections”?

Of course, it was nice to see Stewart Purvis waking up to what’s been occurring beneath his nose for the past six months.

Sadly, I wouldn’t describe his new-found wakefulness as particularly encouraging. It’s entirely possible that Mr Purvis has just misread government policy in a fundamental way.

It’s the price of bread, stupid

Posted by Peter Kirwan on 18 March 2009 at 15:00
Tags: Johnston Press

“The king must die so that the country may live.”
– Robespierre, 1792 

“I don’t like using the words ‘print is dead’, but it’s not very well.”
– Nik Hewitt, former multimedia manager at Northcliffe Digital, 2009

We might as well be in Paris in 1792. Only the great debate animating society isn’t the future of Louis XVI. It’s the question of what will happen to King Print.

Jeff Jarvis and Clay Shirky, latter-day equivalents of Danton and Robespierre, have called for the monarch’s removal from power. Increasingly, both suspect that King Print must die, so that journalism may live.

Jarvis and Shirky want us to take a leap of faith. They hope to establish a technologically-enabled Republic Of Virtue in which “all despicable and cruel passions are unknown”.

As Jarvis suggests, we must focus on what we do well — and link to the rest. A bit of reverse syndication wouldn’t go amiss, either.

There’s much talk of alternative ways of organising things — ways that don’t rely on the top-down fiat of King Print. Among revolutionaries, open APIs are discussed with much fervour late into the night.

Shirky himself urges that we must allow a thousand technological flowers to bloom — in the hope of finding a route to the “democratization” of journalism.

These ambitious thoughts worry those with mortgages to pay. But they’re made plausible by the accompanying whiff of Romantic thinking that led Shelley, a generation after Robespierre, to write Ozymandias.

Both Jarvis and Shirky believe that King Print — like Ozymandias with his “sneer of cold command” — will eventually become a “colossal wreck”, abandoned to his fate in the desert.

In the future, travellers equipped with mobile broadband will be perplexed by an inscription on the ruins that could have been uttered by Beaverbrook or Murdoch: “Look on my Works, ye Mighty, and despair!”

But enough about the revolutionaries. Let’s look at the other side of this yawning political chasm, where we encounter the constitutional monarchists –- figures who resemble Mirabeau and Lafayette.

The constitutional monarchists want a bloodless revolution. Deep down, they can’t envisage life without big corporate structures.

There’s simply too much invested in the current system, including huge recent expenditure on new print capacity and billions of pounds-worth of bank debt and shareholder equity. The edifice is too big to fail.

Temperamentally, the monarchists believe –- like all conservatives -– that the new world cannot be very different from the old.

At the moment, King Print is merely unwell, not dead. So the constitutional monarchists are consolidating their arguments. They are returning to the attack — on two fronts.

Yesterday, Sly Bailey of Trinity Mirror delivered a decent impersonation of the war hero Lafayette, inciting the crowds with a populist condemnation of those ancien regime enthusiasts at the Office of Fair Trading.

Bailey warned that the OFT risks damaging the interests of King Print. Unless it casts aside “the language of purist competition theory”, the monarch will face “immediate peril”.

And then there’s John Fry, the new chief executive of Johnston Press. Fry clearly has a plan for getting through the crisis and keeping King Print on his throne. He’s emerging as something of a Mirabeau.

At first glance, that plan looks very familiar: cut costs, negotiate with the banks and keep Johnston Press cashflow-positive until the upturn begins.

But unlike King Print’s previous favourite, Fry seems confident that he can achieve these things. There will be no collapse into administration, no Ozymandias moment on his watch.

As it turns out, Fry’s scenario is based on three notions. Last week, after running through the company’s 2008 results with analysts, he named these as follows:
 

• The notion that recession will give way to recovery during 2010.
   
• The notion that digital ad spend in the UK will “plateau” at somewhere around £4.5bn annually between 2011 and 2013.
   
• The notion that resurgent revenue growth (presumably mostly in print) will outstrip a declining tendency for advertisers to defect to digital competitors.
   

Of course, the list of counter-arguments is lengthy. It includes this, this, this kind of thing and this, too.

In the end, the course of the French Revolution was defined by something very palpable: the price of bread. It was the rising cost of a loaf that prompted Parisians to storm the Bastille and to cheer when the guillotine polished off Louis XVI.

What’s our latter-day equivalent? As Fry suggests, it will be the relative growth rates of print and digital advertising during the next couple of years.

Some forecasts exist for both. But so much remains in flux that they’re essentially worthless.

For Wordsworth, witnessing the French Revolution made it “bliss in that dawn to be alive”. Now that everyone from King Print to Robespierre is running on faith, the question is whether you can persuade yourself to feel similarly.

The indiscreet charm of Lord Bell: Boom times continue for PR industry

Posted by Peter Kirwan on 17 March 2009 at 15:55
Tags: Media

“Gizza job. I can do that. All you gotta do is walk in a straight line! I can walk straight!”

– Yosser Hughes, Boys From The Blackstuff (1983) 

There is an argument that white collar workers such as journalists should be better-equipped than their 1980s working-class counterparts to change careers when redundancy throws them out of a job.

At the moment, the PR industry looks like a good option for some.

Admittedly, PR is probably not the kind of “new experiment” that Clay Shirky suspects will “might give us the journalism we need” during the next couple of decades.

But PR is growing. With the obvious exception of the City, recession hasn’t touched it. Not seriously.

In Jon Slattery’s recent piece for the Guardian on redundancies in the regional press, the number of references to journalists looking for employment in PR is striking.

“The best jobs in the regions are now in council PR,” one ex-editor tells Slattery. “They pay well, are professional and no one’s shouting at you,”. A 24-year-old reporter who has just left his job on a “top daily in the north” tells Slattery: “All the young journalists wanted to get out and work as council PRs.”

It’s not just local government that’s hiring, either.

Last week, the marketing services group Chime Communications (which makes 55% of its revenues from PR) reported organic revenue growth of 10% during 2008.

Dig a bit deeper, and the story gets better. Operating profits from PR activities rose by 30%. Chime, it seems, has just delivered on its promise — made in 2005 — to double its revenues in three years.

Certainly, some of that growth came from acqusitions. But look at the average fee that Chime charges its clients. In 2005, it was £60,000. In 2008, having climbed steadily, it was £81,000.

Chime is run by Tim Bell, the PR guru who worked alongside the Saatchi brothers to advise Margaret Thatcher in her pomp.

Last week, Bell told the FT that Chime experienced growth during January and February. He added: “Two months out of 12 tell me that it will be a perfectly good year.”

He won’t be alone. In early March, Sir Martin Sorrell’s WPP reported like-for-like growth of 4% in PR and lobbying revenues during 2008.

All of this may come as a surprise to Jeff Jarvis, who questions whether PR agencies can maintain their revenue streams while being “open and transparent” (as conversational marketing requires).

Jarvis argues that the web and social media will “cut out” all of the middlemen — not just journalists, but PROs and advertising executives, too.

There’s no sign of this happening.  On the demand side, PR agencies appear to be benefiting as corporate marketers cut back their advertising budgets. PR is a highly effective, and relatively cheap, alternative.

Meanwhile, the PR industry’s leading edge is embroiled in an effort to turn social media to its advantage. Happily, this connects parts of the industry to the growth engines of the digital economy.

The supply side economics of PR are similarly benign. As newsdesks shrink, their reliance on PR output necessarily increases. Yes, PR activity is growing as a proportion of overall marketing budgets. But no: increasing levels of competitive noise and a shrinking pool of publications don’t seem to be a problem — yet.

The opportunities for the PR industry are expanding as Big Media slashes jobs. Real money is moving away from the media and into the space occupied by these opportunities.

The former regional journalists who cross over on the The Dark Side will benefit. Good luck to them: we should be grateful for small mercies.

The moment of capitulation: “There’s nothing out there”

Posted by Peter Kirwan on 17 March 2009 at 15:15
Tags: Media

Round and round this goes, with the people committed to saving newspapers demanding to know “If the old model is broken, what will work in its place?” To which the answer is: Nothing. Nothing will work. There is no general model for newspapers to replace the one the internet just broke.

– Clay Shirky, Newspapers and thinking the unthinkable (2009)

Jon Slattery’s excellent “Where the hell do we go from here?” makes some telling points. One of the most poignant is subliminal, delivered in this quote from an anonymous former regional newspaper editor: 

“There’s simply nothing out there. Six weeks ago they were an editor, a man of significant substance in their community; today they’re signing on.”

These are the words you hear when impersonal economic forces strip human beings of their raison d’etre. They could have been spoken in Corby or South Yorkshire during the 1980s.

The same goes for Slattery’s piece as a whole, with its gallows humour, hints of collateral domestic turmoil, and complaints about clueless executives and “international conglomerates”.

Oh, and there’s the internalised personal cost of what’s currently happening in the regional press. Don’t underestimate it. One of Slattery’s sources talks of editors “being forced to destroy everything they’ve worked for”:

“They’re forced to sit in meetings telling lowly paid senior reporters with families and mortgages that they’re going to be made redundant when they know that handsome profits are still being made, but they have to do it in the hope of hanging on to their own jobs. The hypocrisy and guilt is eating them up.”

During the 1980s, the first stirrings of globalization nudged coal miners and steel workers toward the scrapheap. Today, regional journalists have become the new miners, the new steel workers.

For me, Slattery’s piece captures the precise moment when defiance collapses into what the financial markets precisely define as “capitulation”.

At times like these, the grandees running for the exit have a tendancy to throw comforting suggestions over their shoulder. Roger Parry, the outgoing chairman of Johnston Press, offered up a gem-like example a fortnight ago.

Parry suggested that “we” (it wasn’t quite obvious to whom he was referring) should “retrain our local journalists to be fully competent on video and audio”.

That way, Parry said, local newspaper hacks could apply for jobs at the new public sector broadcast outfit that Lord Carter is constructing from the mangled remains of Channel 4.

Beneath the Press Gazette blog post announcing Parry’s bright idea, a reader called “Happy Wednesdays” posted a corrective single-line comment: “[Channel] Five announces plans to make 25% of staff redundant.”

No mess, no fuss: this is the tone of voice in which capitulation speaks.

Necessarily, by extension, somewhere in Soho, right at this very moment, a latter-day Alan Bleasdale is pitching a contemporary version of Boys From The Blackstuff to a Channel 4 executive who may or may not have recently accepted a 25% reduction in “earnings potential” for 2009.

The show will be set in a Job Centre in the midlands and feature a cast of shiftless unemployed subs, some of whom are considering emigration to Bangalore.

One of the least important questions facing the director is who will play the role of Roger Parry. . .

As Gavin O’Reilly tries to manage crisis, O’Brien camp says only “weeks” remain to save INM

Posted by Peter Kirwan on 17 March 2009 at 00:12
Tags: Independent News & Media, Media

In the red corner, here’s the Irish Times: 

The end of the dispute between the [O’Reilly and O’Brien] camps follows pressure from Independent’s banks — AIB and Bank of Ireland among them — to cast aside their differences ahead of a looming deadline for repayment of a €200 million bond in May.

Independent [News & Media] is now considered unlikely to have the proceeds from asset sales in place before the bond falls due, leading to a likely requirement for bridging finance from banks. 

And in the blue corner, here’s Gavin O’Reilly, speaking to James Robinson of the Guardian during the weekend:

“It’s the greatest conspiracy theory since Kennedy got shot. . . I don’t know where half this stuff comes from. There was no deal. . . We haven’t discussed any of this with the banks.

“We decided the major shareholders needed to be on the same page. We started talking in the autumn and it was clear we had far more in common than most people would have thought. The old man and Denis - who’d never met before - struck up a friendly relationship.”

The way Gavin O’Reilly describes it, the outbreak of peace between the O’Reilly and O’Brien factions was entirely self-generated. 

Really? If all it took to end this bitter dispute was a friendly chat between two tycoons last November, external shareholders are entitled to ask why the hell it didn’t happen sooner.

If this were North America, shareholders would be reaching for their favourite contingency fee lawyers. They’d be instructing them to sue the living daylights out of Sir Anthony O’Reilly for unnecessarily prolonging a confrontation with Denis O’Brien that began in 2006.

But this isn’t North America. And it wasn’t just O’Reilly Snr’s pride that was at stake in this struggle.

Genuine differences in strategy were visible. These are differences that will have a bearing on INM’s ability to pay dividends and interest on its loans in the future.

Bankers and shareholders have a legitimate interest in such things. It stretches credibility for Gavin O’Reilly to suggest that neither constituency made known its views.

But let’s not be too harsh. O’Reilly Jnr.’s cry of “no conspiracy” is entirely understandable. Apart from an understandable desire to help his father depart with dignity, Gavin O’Reilly is engaged in an effort to damp down growing concerns about INM.

On Friday, it looked as if this PR offensive was proceeding fairly well. Then, on Saturday, the FT spoke to Denis O’Brien’s people.

Interviewed by the FT’s Ben Fenton, a source in the O’Brien camp suggested that INM is enduring “force majeure times”. Remarkable as it may seem, the same source claimed that INM could face ruin within weeks.

Bravado generated by a corporate victory? Perhaps.

But the FT’s Lex column — hardly a haven of hyperbole – joined the chorus on Saturday, too. Specifically, Lex voiced concern that INM has postponed announcement of its 2008 results by three weeks, to 24th April.

The unveiling of these financials, Lex suggested, will “be the toughest audit yet” for the company created by Sir Anthony O’Reilly.

Footnote: In the FT over the weekend, Ben Fenton also squeezed the following quote out of a source close to Denis O’Brien: ”If it [the Independent] can be saved, we will save it.”

At the Guardian, James Robinson received a simple “yes” from Gavin O’Reilly after asking him whether the Independent will remain part of IN&M in the “medium term”.

O’Reilly’s quotes would add up to good news for journalists working at the Independent – If only it wasn’t for the gloomy noises emanating from the O’Brien camp about INM as a whole.

TMS Syndrome & Open Platform: Never mind the contradiction, feel the width

Posted by Peter Kirwan on 13 March 2009 at 18:49
Tags: Media

Emily Bell, director of digital content at the Guardian, has had an interesting week. On Monday, Bell kicked things off by heralding the end of what she calls TMS Syndrome.

TMS stands for Too Much Stuff. This is the compulsion to “create more in all formats” that has haunted publishers for the past decade. 

TMS Syndrome has been fuelled, in Bell’s words, by a “seemingly ever-expanding pool of advertising opportunities”, most of them digital.

But now ad revenues are collapsing. Accordingly, Bell reckons we need some “quantative tightening”. Specifically, we must stop force-feeding content to an audience that “can’t digest it”. We must also enforce “a narrowing at one end of the distribution pipe – the creation end”.

Of course, as Bell suggests, this will prove to be “incredibly painful” and “extremely expensive”.

Hard to argue against that. But less than 24 hours after her column appeared in print, Bell was partaking in the Guardian’s launch of Open Platform.

This raised a few eyebrows.

Why? Because Open Platform isn’t about narrowing the pipe. It’s about doing the opposite.

Open Platform is all about harnessing the expertise of third party developers to develop new ways of using, displaying and combining the Guardian’s content.

Open Platform is genuinely innovative. It has the potential to become hugely significant. But can you spot the presence of TMS Syndrome?

Of course: it’s right there in the Guardian’s stated ambition to “weave [its content] into the fabric of the internet”.

Myself, I’m not bothered one bit by the apparent contradiction between column and launch.

If the Guardian gets it right, the problem confronted by everyone else won’t be Too Much Stuff. It’ll be Too Little Innovation.

Bundled out of the tradesman’s entrance: O’Reilly’s sad goodbye to Independent News & Media

Posted by Peter Kirwan on 13 March 2009 at 16:09
Tags: Independent News & Media

It resembled Night Of The Long Knives, interpreted by Darcey Bussell.

This morning’s blood-letting at Independent News & Media was certainly choreographed impressively.

With the former Sunday Times business journalists Rory Godson and Paul Durman orchestrating the PR for Independent News & Media, you’d expect nothing less.

Sir Anthony O’Reilly will retire as chief executive in May. Ivan Fallon, chief executive of INM UK, has been “removed” (as the Guardian puts it) from the company’s main board. And dissident invest Denis O’Brien has been given three seats at the top table.

In return, O’Brien has effectively allowed Gavin O’Reilly to succeed his father as chief executive of INM.

This settlement is nicely symmetrical. But it follows the worst kind of Punch & Judy antics. Don’t for a minute believe the honeyed words that were poured over a Dow Jones Newswire correspondent by Gavin O’Reilly this morning.

Discussing a recent meeting between his father, himself and Denis O’Brien, this is what Gavin O’Reilly had to say:

“What changed was that we all got together and sat in a room last November. There was far more that united us than divided us. Tony and Denis had never met before. They struck up a very friendly relationship … He and Denis gave their clear support for me as CEO-designate.”

Oddly, this makes O’Reilly Snr. and Denis O’Brien sound like long-lost brothers reunited over tea and scones amid much family rejoicing.

The realities of this soap opera have been far harsher. This morning, the headline at Bloomberg pointed us in a more reliable direction: “Independent News CEO O’Reilly to retire; shares soar.”

Typically, the world gets more than seven weeks’ notice of a chief executive’s impending retirement. In the case of a figure like Sir Anthony O’Reilly, you’d expect a year; perhaps six months as a minimum. Naturally, those months would be filled with retrospective speeches and glowing profiles in the press.

So why isn’t O’Reilly getting the full treatment? Assuming that ill-health isn’t a factor (it would surely have been mentioned), the answer probably has a lot to do with INM’s need to repay a €200m bond in May.

INM doesn’t have the money to repay its debt. Confronted with narrowing options, the company has reportedly approached its banks to negotiate a further loan. This should allow it to repay the bond.

Apart from enforcing penal interest rates, the bankers will have insisted on a settlement between O’Reilly and O’Brien.

Further lending to an debt-laden business troubled by infighting between executives and shareholders was simply not going to happen. Not even in Ireland, where bankers really do qualify as flexible friends to the Golden Circle that runs the show.

On this basis, O’Reilly’s departure suggests that his differences with O’Brien were irreconcilable.

Accordingly, Sir Anthony O’Reilly will effectively end his 36 years at INM by leaving through the equivalent of the tradesman’s entrance. In his hands, he’ll be clutching a letter of appointment to the sinecure of president emeritus at INM. 

It will be a sad farewell for a man who defended the Independents when many thought they had breathed their last.

Of course, the conventional wisdom suggests that O’Reilly’s departure will weaken the bonds between INM and its London papers.

But an interesting irony may yet unfold. It seems to me that O’Brien’s repeated criticism of INM’s ownership of the Independents was partly intended to prick O’Reilly Snr.’s apparently grandiose pretensions.

Now that peace has been restored, a different reality may come into focus.

On Today this morning, Gavin O’Reilly pointed out that O’Brien’s demand for the Independents to be sold was made “at a time when Denis and ourselves weren’t talking to each other. We’ve spent the last five months working with Denis.”

The Indys are “not [for sale] at this stage,” added O’Reilly.

This may be no more than a recognition that selling the Indys for £1 (or something similar) will do nothing to reduce INM’s debts.

Accordingly, the key question becomes whether INM’s other businesses can continue to compensate for the losses being incurred by the Independents. During the next year, much will depend on whether these shortfalls start to drag INM toward a breach of its banking covenants.

To understand whether this is the case, we need to know how far and how fast INM’s profits collapsed in Australia, Ireland and South Africa during 2H08.

In 1H08, operating margins at these businesses were healthy enough: 22.7%, 23.6% and 25.4% respectively. At 3.6 (and rising), the overall ratio of net debt to EBITDA at INM was uncomfortable, but not necessarily terminal.

All of these numbers will have deteriorated during 2H08. The important question for the Independent is by how much.

We’ll find out when the company reveals its full year results for 2008 on 24^th April.