PA seizes control of news services

The future is looking bright for news agencies, and in particular for PA News, the dominant player in the UK field. David Benady looks at an unsung market

The hard-pressed newsdesks of many a newspaper would collapse without them. They do much of the hard work, but get little of the credit. They are essential in the regurgitation and dissemination of the news product, and one of them has just bitten the dust.

UK News, the news agency set up in 1993, has lost its battle to become a cheaper, sharper rival to PA News (MW June 5). PA has bought out the UK News name, and intends to hold it. The move brings to an end a four-year struggle between the two groups to supply news to local and national newspapers.

But it also comes at a time when the big agencies PA News, Reuters and Bloomberg are expecting to see their workload grow. Last week, David Montgomery, chief executive of Mirror Group, delivered a speech outlining the way he sees newspapers developing over the coming years. Costs will be cut by having fewer journalists, but with more professional skills. More work will be outsourced to news agencies.

This could bring about a big change in the way newspapers operate, and the way they are targeted at their readers. As brands, newspapers have traditionally been in the hands of their editors and top executives. Montgomery says that journalists are involved in monotonous, stultifying tasks. But the future lies in giving journalists greater control over the product.

He says: “My vision is to treat all titles as specialist publications from the start of the editorial process and to engage journalists in that concept. So writers, reporters, commentators and news-desk executives, will be empowered to decide what content, and how much of that content, characterises their product. That decision will no longer be left to a few powerful senior executives.”

In the future Montgomery outlines, news agencies will play a greater role. Last year, Mirror Group increased its stake in PA from five per cent to 19 per cent stake, making it the largest shareholder. Montgomery became a non-executive shareholder.

He says that PA is already supplying camera-ready sports and regional news pages to Mirror Group’s network papers, and other publishers are now taking advantage of this innovative arrangement. “PA and our racing paper The Sporting Life draw from the same statistical resources and then revise that information for the betting service on the Internet,” he says.

This will lead to closer relationships between newspapers and news agencies, as more of their work is outsourced. One example of this is the Independent on Sunday, which earlier this year announced that it was outsourcing most of its business news to Bloomberg.

The end of UK News is partly a symptom of these forces. The organisation was just too small to offer specialised services to compete with PA. The future growth of PA will come from new media services such as the Internet and computerised listings. This requires substantial investment, and cannot be done on a shoe-string.

It leaves PA with the lion’s share of the market, supplying over 95 per cent of UK media with news. There are no serious rivals, although its battle with UK News has cost it dear.

PA News is owned by 36 of the country’s newspaper and media owners, but they see it as a way of efficiently serving their news gathering, rather than as a profitable cash cow. This is just as well, since PA News’ 1996 results showed profits before tax of just 119,000, down from 2.4m the year before. The fall in profits was a reminder of the expense that PA had to go to in order to undercut UK News – it reduced its news agency tariffs by 5.4m.

UK News was set up by Northcliffe Newspapers Group and Westminster Press. The latter was later taken over by Newsquest Media. Northcliffe is a subsidiary of the Daily Mail which is a shareholder in PA News, and Westminster Press was a subsidiary of Financial Times owner Pearson, also a PA shareholder. They reasoned that by setting up a rival, they could cut the costs of supplying news to their regional papers.

One source says they were paying out 100,000 per paper each year to receive PA News, so the two regional newspaper groups decided to pool the top stories from each regional newspaper and send out the news from there. This proved highly cost effective and the decision was taken in 1995 to start offering the service to the national papers.

The nationals saw an opportunity to play one news agency off against the other. In August 1995, UK News came within a whisper of stealing PA’s contracts to supply news to the titles owned by Express Newspapers and Mirror Group. It even hired a clutch of journalists to work on the new accounts.

But PA quickly buckled under the threat of losing two large accounts, and renegotiated its contracts with the two groups, substantially dropping its tariffs. Some observers see the whole affair as a manouevre by Express Newspapers and Mirror Group to get PA to drop its tariffs. They were never really interested in hiring UK News, according to one source. The rival never grew big enough to offer a complete news service which could seriously take on PA. At least the outcome has given Montgomery a seat on the PA board.

So PA is left as a near monopoly in the supply of agency news in the UK. It also has agreements with Reuters which involve the two swapping UK news for international news.

Its future will lie in developing tailor-made services for newspapers, online services and other forms of new media. And it seems unlikely there will be much place for any new players. But there may be developing tensions between the regional newspapers, which provided the traditional backbone of PA’s clientele and the big four national newspapers, which now own nearly half of its shares.

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