Feeling the strain in the old media sector

Despite a rise in ad spend, ‘old’ media is wielding a cost-cutting axe to keep up with new trends.

A recent wave of job cuts across the media industry culminated last week in veteran media reporter Ray Snoddy being jettisoned by The Times and Teletext announcing the loss of 45 posts as it closes its general information website.

Just as advertising expenditure appears to be picking up and optimism in the media world is on the rise, the cost-cutting axe is swinging as wildly as ever.

The cutbacks come as the brands reposition their products and prepare for a future in which they may have a declining role. The redundancies signal the crisis providers of general information and news are facing, as competition from free sources on the Web and 24-hour digital television bite into their market.

This year has been billed as the tentative start of an advertising upturn that should have a knock-on effect across the media world. UK ad spend increased by almost five per cent in the first quarter of this year to &£3.6bn, the strongest growth since the end of 2002, according to figures from the Advertising Association. Ad spend through national newspapers increased by 3.2 per cent to &£511m. But still, the bad news rolls in.

The cull at The Times is said to threaten up to 40 journalists’ jobs, while the Evening Standard recently announced 14 editorial staff were being made redundant. On top of this, there have been job cuts at the Daily Express and Financial Times in the past year. Overall, newspaper circulation continues to decline and the newspapers are looking for ways to survive in a future where people glean general information from other sources.

Teletext faces a similar problem. The analogue television text service, which is owned by the Daily Mail & General Trust, holding company of Associated Newspapers, says it is axing its general information website because it has decided to “invest in its core activities and discontinue those that show little potential for commercial success. This will mean that the company can maximise its ability to continue to invest for future growth and will result in stopping a small number of its services,” says a spokeswoman.

She adds that the general Teletext.co.uk website, which will close this summer, attracts several hundred thousand users each month, but that the company has found it difficult to make revenue from them and “does not see a realistic prospect of it delivering an acceptable return”.

This is a blow to Teletext’s strategy, as its core television text service could be left high and dry as interactive TV and the internet continue to grow. It was the original interactive service, long before the arrival of the Web, with its provision of general information and a market for holidays via text on commercial TV channels. The launch of its own website in 1996 was part of an attempt to expand the brand across other forms of new media.

However, the launch came at a bad time – it coincided with the decision to switch off the analogue television signal in 2010. This would make way for all-digital television and would end Teletext’s main route to market at the flick of a switch.

But now the switch-off has been pushed back further, the service has a little more time to consider how it will function in a digital world, where viewers can access information through interactive television and will be able to view websites on TV.

The analogue television text service and holiday website are still successful and account for one in ten holidays booked in the UK, and 40 per cent of “last-minute” bookings – those made within six weeks – through the summer months.

Teletext is also developing its offer on digital platforms in preparation for the switch-off and has launched its own TV station selling holidays on Sky.

Even so, it announced last week that it will withdraw from the digital “walled-garden” service offered by Telewest Broadband and NTL. It says there is a “general lack of growth and investment in the platform”.

One insider says that the old axiom that television is a general medium and internet a specialist one still holds true, and that in reality there is little point in Teletext having a general news and entertainment website.

“The analogue world is still proving productive for them, and that is where the numbers are. As a general information brand, you thrive on TV. But I don’t think anyone is able to monetise general information on the Web because you can’t get anyone to pay for it.”

It is an area that is dominated by the BBC and The Guardian, two non-profit making organisations. The source sees the Teletext Holidays website as a powerful property.

A change of formats in the ever-declining newspaper market is another example of the importance of reinventing media brands in a shifting landscape.

Last week’s announcement by The Times that media correspondent Snoddy was leaving after seven years follows news that long-serving senior reporter Christopher Walker has also been told to go. Some sources suggest there exists a programme of job cuts, put in place by editor Robert Thompson, and that the paper needs to reduce costs after investing heavily in promotion and producing the tabloid version of the paper, which is thought to have alienated some of its readers.

“The job cuts are unsurprising as I don’t think they are having a brilliant time with the compact edition,” says Mark Gallagher, press director at Manning Gottlieb OMD. “They have had no circulation increase and have lost out on advertising revenue with the compact, because they don’t have the front-page solus ads and have the added costs of producing two editions. I can see why they have reduced the cost base,” he adds.

He believes The Independent has benefited from going tabloid, as it has drawn in lapsed buyers who like the fact that the compact version is different from the broadsheet. But he believes the broadsheet format is more important for Times readers, many of whom would not want to be seen reading a tabloid. “The Times has a more traditional readership that won’t want to be associated with a tabloid,” he says.

The internet and digital television have made it harder to make money from providing general information, whether on the Web or in the form of newspapers. The continuing cutbacks in these areas show how some of the old, established media brands are being forced into radical, and risky, revisions of their strategies.

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