Chris Dobson, a senior executive at Microsoft's online business, commutes to his London office from Hertfordshire, where his local paper, the Welwyn & Hatfield Times, has been noticeably thinner of late. 'The property section used to be page after page. Now it's four sides. As a consumer, it really struck me.'
Like other titles, the paper has been deprived of valuable advertising as the downturn in the property market means fewer homes are being sold. Income generated from other ads, including jobs and cars, is falling too.
That is a huge headache for regional papers, for whom classified advertising is a lifeline, but there is a longer-term problem to contend with: more people are getting their news from the internet, and advertisers are following them online. Microsoft employs its own journalists and the company's search engine, like its rival Google, represents a daunting competitor for news organisations, while new recruitment and property sites are competing for advertising that would once have gone to local papers.
When the economy improves and classified advertising returns, a far larger share will go to Primelocation or Monster.com. Research in the US has shown that, while advertisers spend 42 per cent of their budget on print, consumers spend only 9 per cent of their time reading newspapers and magazines. The implications for print are obvious.
The global economic downturn, combined with this structural industry change represents one of the biggest challenges the regional press has ever faced, with profound implications for local news.
Lord Fowler, who once chaired the Birmingham Post group and now chairs the House of Lords Communications Committee, says: 'Regional newspapers face an extraordinarily difficult time. Advertising is going to the internet, circulations are going down and they are not helped at all by the serious decline in the economy. There is a prospect of rapid decline, particularly in the cities. They are more affected by the internet, despite setting up their own sites. The problem is the revenues can't match those generated by newspapers.'
Fowler's committee recently warned that could have a devastating effect on the provision of news, and recommended that restrictions on cross-media ownership be lifted at a local level to allow newspaper groups to buy radio companies in an attempt to shore up their businesses.
The economic climate is likely to worsen in the coming months. Investment bank Citigroup said last week: 'US markets are seeing classified property and recruitment down 30 per cent and in worst-hit areas 50 per cent. Recent UK trends also suggest massive deterioration.' Evidence to support that claim was supplied when Daily Mirror owner Trinity Mirror, which owns 150 regional papers, issued a surprise profit warning that prompted a share price collapse.
Just under half its profits are generated by local titles. At Johnston Press, whose papers include the Scotsman and Yorkshire Post, classified ads account for up to 70 per cent of advertising revenue and half the company's profits (£178m last year). The Citigroup note makes frightening reading for the big four regional owners, Johnston, Trinity, Northcliffe Media (part of Daily Mail owner DMGT) and US group Gannett. New car sales are forecast to fall by nearly 8 per cent over the rest of the year, driving down motor advertising by 27 per cent, recruitment is expected to fall by 20 per cent and property by 26 per cent.
'The cause of the problem is pretty clear,' says Johnston Press chairman Roger Parry. 'But a forward-looking newspaper owner recognises that when this cycle finishes things are going to be different. When [advertising] comes back it will come back online, and it will come back in special supplements and magazines.'
Johnston's shares have also fallen over the last year, but Parry insists there are reasons for optimism. 'The slump represents a fantastic opportunity to change. Profits will be poor for a couple of years but a stronger, more relevant business will emerge.'
Michael Pelosi, MD of Northcliffe Media and chairman of the Newspaper Society, agrees that the sector faces 'a tough few years', but adds: 'Our titles are read by over 80 per cent of the adult population in one week, so we still have high penetration. There's no doubt our readers are being more casual but they still relate to these very strong brands.' Like every newspaper group, Northcliffe has been busy reinventing itself for the digital age, launching online offerings and buying established classified websites.
'There is a crossover of people who read our papers and our website,' Pelosi says, 'but we are also gaining new readers at our local sites. The trick is to get them to come back more often.' That can be done by offering content that may seem mundane, including local traffic news, bus timetables or even the night chemists' opening hours, he says.
Clawing back revenue lost to new on-line competitors may prove more difficult: of the top 10 recruitment websites, only three are owned by newspaper groups. But Parry points out that new websites can gain ground quickly: 'In the online world consumers will [go] to the best technology. They don't have the "stickability" of newspapers. It will be possible to migrate our readers online.'
Like its rivals, Trinity Mirror, headed by Sly Bailey, has invested in digital journalism. 'We now have more websites than we do newspapers,' says Neil Benson, editorial director of its regional division. 'The web is now the biggest news medium. Newspapers are more about campaigning and opinion forming.' Trinity shut several titles after rejecting offers from local papers that would have fallen foul of competition laws, but Parry insists closures are not on the agenda. Local papers are becoming 'community media franchises', he says, an amalgam of websites, magazines and traditional print products, and will continue to play a vital role.
'The reason people will go to your website four or five times a day is because they'll want to find out about the battle to save the local post office or the local hospital. A typical weekly paper might reach 60 per cent of a community; a well-developed group of websites plus a paper will reach 80 per cent. The developing community media companies will play a greater role in local democracy not less.'
Guardian Unlimited
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