On Sunday, Johnston Press completed a deal that has puzzled many observers of the UK’s shrinking newspaper industry.
While the publisher of more than 200 regional papers has in recent years focused on expanding its online offerings, it is taking a step back into print, buying the “i”, a national newspaper with no website.
The £24m purchase — from The Independent’s Russian owners Alexander and Evgeny Lebedev — comes at a torrid time for the UK press. Last month, The Guardian unveiled plans to cut a tenth of its workforce in an attempt to stem its losses, while The Independent stopped printing its newspaper.
Since 2000, total daily sales of UK national newspapers have almost halved to less than 8m — a relentless decline that shows no signs of slowing. Print advertising revenues have fallen even more dramatically and suffered a particularly sharp reduction, of 16 per cent, in the first quarter of this year, according to Nielsen, the research group.
“Nobody should be in any doubt that the newspaper industry’s top line will continue to fall in the coming years,” says Douglas McCabe of Enders Analysis.
Yet print is by no means dead. National newspapers’ revenues from print circulation and advertising were about £2.5bn last year, according to Enders. Publishers also see that revenues from their websites and apps are growing far too slowly to compensate for print’s decline; last year they rose just 11 per cent to £360m.
On the internet, news is so competitive and barriers to entry to the market are so low that newspaper groups are finding it far harder to make money than they had anticipated several years ago at the start of their digital transformations.
As a result, publishers are being forced to find ways to make print profitable. That means cutting costs and, increasingly, consolidation.
Through its purchase of the i, which has a circulation of 270,000, Johnston Press has become the fourth-biggest newspaper group in the UK.
Scale is critical for newspaper publishing because of the large fixed costs involved in printing and distributing papers to newsagents across the country. “If you’re running printing presses, it can be incredibly cost effective to exploit those assets as best you can, and buying another newspaper is a good way to do that,” explains Mr McCabe.
Larger publishers are also more attractive to advertisers who want their ads to reach a big nationwide audience.
Ashley Highfield, chief executive of Johnston Press, says he is “not expecting any miracles on print advertising”. But he is confident the company will be able to increase sales of the i by distributing the 40p newspaper into Northern Ireland as well as increasing its availability in newsagents across the UK. The paper will also launch a website this month at inews.co.uk.
With a staff of just 50 journalists, the i will operate with much lower costs than rivals such as The Times, The Telegraph and The Guardian, which employ hundreds of writers. It will also license articles from other publications including The Independent (now online only) and The Evening Standard.
Under The Independent’s ownership, it reported profits of £5.2m last year, according to Johnston Press.
However, Colin Morrison, a media consultant and former industry executive, argues that the purchase of the i is likely to turn out be an expensive “distraction” for Johnston Press as it grapples with a £225m debt burden and struggles to turn round its core business of local newspapers.
“They are of course managing decline, and decline keeps going,” he says.
Trinity Mirror, the publisher that acquired rival Local World last year for £183m, is also trying to swim against the tide. Last month it launched The New Day, a new national paper that aims to be more upbeat and politically neutral than its peers.
The early signs are that Trinity Mirror has overestimated demand for the new 50p paper. Official sales figures for The New Day have yet to be released but its circulation has reportedly been running at about 40,000 — almost certainly lower than the number needed to cover its costs.
To put that in context, The Independent’s circulation had fallen to about 55,000 in February when its owner, Mr Lebedev, decided the newspaper was no longer sustainable and would be closed. He said at the time that other newspaper proprietors were “in denial” about the viability of their publications.
“The figures speak for themselves,” he said. “The question should not be why we are doing it, but why others in the industry are not.”