Local media, local newsThe newspaper perspective

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1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 H1

National newspapers Regional newspapers

[Source: ABC]

Newspaper consumption trends

Year-on-year change in daily newspaper purchases(%)

Regional newspaper circulation declines are steeper than for national titles

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Time spent: print versus online

[Source: National Readership Survey and comScore]

Average newspaper reader spends 30 minutes per day Average online news user spends 11 minutes per month, or 24 seconds per day on news websites Online news is therefore not a natural home for display-style advertising formats However, most news publishers are also not generating material revenue from subscriptions

Minutes spent with news per month by the average (online) user and (print) reader

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Value of readers and users (local news brands) Local newspaper readers were worth about £77 in 2008 Online users were worth about £5 a year Regional site scale is naturally limited, but we also think the opportunities for substantial revenue growth

are also limited

[Source: Enders Analysis estimates based on National Readership Survey, Advertising Association and comScore data]

17 17 14

5039

34

24

21

16

0

1020

30

4050

60

70

8090

100

2003 2008 2013

Purchases Classifieds Display

0

5

?

0

1

2

3

4

5

6

7

8

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2003 2008 2013

Purchases Advertising

UK regional press revenue per reader(£)

Revenue per online unique visitor(£)

Revenue per user will depend more on publisher

strategies in terms of subscriptions and whether

their current obsession with audience scale

continues

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Local and regional newspaper advertising

2,880 2,9633,127

2,9932,782 2,748

2,314

1,6591,494 1,397

1,280 1,175

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Local and regional newspaper advertising spend(£m)

We estimate local and regional newspaper advertising will decline by £1.4 billion over five years

In Q1 2009, local and regional newspaper advertising has declined by 35%, including 50% declines in two critical categories, recruitment and property advertising

[Source: Advertising Association and Enders Analysis estimates]

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UK local marketplace The marketplace / expenditure for local media will be lower overall in the future The £5 billion local advertising market is rapidly moving online Google, online YP directories and regional start-ups are all taking market share from regional newspapers By 2014, a technology platform that provides a ‘scaleable’ network solution for regional advertising feels highly likely

2001 2007 2014

Newspapers 2,570 2,486 1,166

Radio 143 159 118

Directories 902 960 330

Internet 123 1,166 1,962

Cinema 33 41 50

Outdoor 135 195 174

Total 3,906 5,007 3,800

[Source: Advertising Association, Rajar. Note: regional advertising covers all classifieds in regional newspapers; regional display in regional newspapers; regional advertising in radio; all advertising in directories; in online, all directory advertising, all classifieds, 20% of search advertising; 20% of cinema and outdoor advertising]

UK regional advertising revenue estimates (£m)

Migration of direct response advertising from print to online is also shifting marketing from local brands to national / global brands, and putting severe downward pressure on rates

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Government intervention

‘Plurality’ discussions tend to deal with all media neutrally at best

However, local news provision by newspaper publishers is a particularly precious commodity in our view

Printed format has particular appeal to older demographics, who are less well (and in many cases not at all) served by online media

Print news and analysis plays a uniquely influential (therefore important) role in investigative news provision

Print format and print consumption behaviour are unique balance: “an island of peace in the digital chaos”

The depth, breadth and continuity of news provision at both local and regional levels is unmatched by other media

The UK does not have a long tradition of local (rather than regional) TV, though there are some good examples (GMG in Manchester)

However, Government and public advertising and public notices have been retreating from newspapers since 2004 – the public sector as a whole spends more than £400 million on advertising

Councils have also started publishing their own print ‘newspaper’ services

Furthermore, the Post Office ‘newspaper registration service’ was withdrawn four years ago; and the 1994 ‘newspaper code of practice’ (guaranteed delivery to all newsagents) is expected to follow

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Government intervention

Late last year, the BBC Trust pulled the plug on plans by the BBC to launch a local video service, in essence because the threats to the marketplace outweighed the public interest

Our view was that, at the very least, the timing of such a proposition could hardly have been worse

In all, we believe government intervention should make the trading landscape less onerous for local news providers, and encourage journalistic depth, breadth, quality – in other words, ‘favour’ the civic duty of journalism

Therefore, targeted tax breaks aimed at alleviating investment in the most threatened parts of the news supply chain, such as training and distribution, should be looked into

This has been controversial in the film industry; careful planning should prevent abuse of the system

As importantly, Government and public services should reverse decisions to retreat from newspaper advertising and publish their own newspapers

Independently Financed News Consortia (INFCs) are designed to “help secure plurality alongside the BBC”, by ensuring Channel 3 regional / local news output (and in so doing, releasing ITV from its regional and local news obligations)

However, INFCs risk undermining the competitive position of local / regional newspaper publisher services, both in print and online

For example, multimedia services would be free-to-access, undermining publisher opportunities to create a paid-for digital service

We believe INFCs will be abandoned by an in-coming conservative government

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Government intervention

Swedish newspaper industry

Three subsidies are provided

Production subsidy: provided to ‘number two’ newspapers in an area Joint distribution subsidy: to encourage rival papers to deliver through the same home-delivery

network Preferential loans: for technology investments; more so for joint ventures in presses etc

While the production subsidy may be less relevant in the UK the other categories may be worth exploring

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