After several years of dodging acquisition bids Regional Independent Media (RIM) – publisher of local newspapers such as the Yorkshire Post – finally succumbed to the Johnston Press Group’s bid of £560m last week. Many believe that, now the scramble to acquire this last remaining “major” regional newspaper group has ended, there is little scope for consolidation.
Johnston Press, which posted a pre-tax profit for 2001 of £68.5m (up 4.6 per cent) and an £8m increase in turnover to £300m, has now moved up a notch from being the UK’s fifth-largest publisher to fourth place, with a weekly circulation of 8.8 million copies. RIM reported a 3.5 per cent increase in its 2001 revenues from £169.3m in 2000 to £175.3m. Pre-tax profits rose eight per cent to £44.1m from £40.9m.
The deal helps to close the gap on market leader Trinity Mirror, which has a 23.98 per cent share of regional newspaper sales compared with Johnston’s increased share of 12.24 per cent, according to Newspaper Society figures.
The wave of consolidation in the regional newspaper market cranked up a gear three years ago, when regional publisher Trinity took control of national and regional newspaper publisher The Mirror Group in a deal worth £1.3bn. That same year Johnston Press bought Portsmouth & Sunderland Newspapers for £266m and US publisher Gannett entered the market by buying Newsquest for £904m.
MediaVest associate director Vanessa Lenton believes there is little room for further consolidation in the market. She says: “The market has been getting tighter and tighter and that is evident from the fact that consolidation has slowed significantly. The Johnston-RIM deal was the first major consolidation in the industry in the past 18 months.”
The next step, she says, will see the larger players bidding for smaller newspaper groups.
Steve Tindall, a managing partner at MindShare, agrees that further consolidation within the regional newspaper market will be limited and that the sector’s main players may be forced to look at cross-media ownership in order to compete with companies outside their immediate arena.
Tindall says that consolidation across television, press, radio and outdoor could provide real benefits for advertisers. “The worry is whether the regional press, which is still not sophisticated enough, will be able to deliver across all these media,” he says.
RIM is already a principal shareholder in a consortium that operates 2BR FM, a radio station broadcasting in the Burnley and Pendle areas of Lancashire, and is also involved in a bid for a digital radio licence for the Yorkshire area.
But Johnston Press sees its acquisition of RIM as a complementary extension of its “focused” regional newspaper businesses.
Johnston Press chief executive Tim Bowdler says: “I believe that the regional press will see further consolidation. If you turn back the clock, only eight years ago the regional press was in the hands of the likes of EMAP, Reed International and Thomson Regional Newspapers. None of these exist in the regional market now and consolidation has left the industry in the hands of regional press specialists, which have invested heavily in the core newspaper businesses. And that is what we intend to do.” Johnston Press was part of the initial wave of consolidations, buying EMAP’s regional newspaper interests in 1996 for £211m.
Bowdler adds that consolidation in regional press reduces costs and increases the ability to provide a focused investment strategy.
But he also supports the Newspaper Society campaign for the relaxation of cross-media ownership rules relating to regional newspaper owners. Outside their core circulation areas, regional newspaper companies can participate in national and regional TV and radio services. But inside their core circulation areas, regional newspaper owners face complex restrictions on the number of radio assets they can hold.
A spokeswoman for the Newspaper Society, which last year launched a £3m campaign aimed at showcasing the benefits of regional newspapers for national advertisers, says: “The regional press remains far less concentrated than other UK media. There are nearly 100 different owners, half of them publishing just one title. The consolidation over the past few years has been mainly among the larger groups, moving them into the hands of regional press specialist publishers like Johnston Press. These publishers have re-invested in their core newspaper businesses rather than siphoning off the profits for another part of a wider media portfolio.
“But many are now delivering local news and information across a variety of platforms, while keeping the trusted local newspaper brand at the heart of their operations. They need the freedom to expand into other media, such as local radio.”
Yet, the regional press has other important concerns. Regional titles saw circulation for the six months to December 2001 dip by 2.3 per cent compared with the same period the previous year. According to the latest Audit Bureau of Circulations figures, evening titles showed a drop of 3.2 per cent, morning newspapers were down 3.9 per cent, while the Sundays were down 4.9 per cent.
Lenton believes Associated Newspapers’ free morning newspaper Metro, which has a presence in Birmingham, London, Manchester, Newcastle and central Scotland, is a threat to regional press. But Bowdler disagrees and considers the “national positioning” of Metro as very different to the regional newspaper market. And RIM has a franchise agreement with Metro in Leeds and Sheffield.
Despite the decline in circulation, regional press has not been hit by a fall in advertising revenue in the same way as other media has, and has reported an increase of four per cent in advertising ad revenue for February 2001 to January 2002.
Whether a positive advertising market will lead to the acquisition of what press buyers claim are “gems” – the Kent Messenger Group and the Midland News Association – remains to be seen. But it is worth noting that three of the top six regional groups – Trinity Mirror and Daily Mail & General Trust-owned Northcliffe Newspapers and the sixth-largest UK regional newspaper publisher Guardian Media Group – also sit at the national newspaper table. A sign of times to come, maybe.