Technological threat brings about expected publishing consolidation
Raymond Snoddy evaluates this week’s news about consolidation in publishing – regional newspapers and books.
Whatever you might say about David Montgomery and some people say quite a lot, you can’t keep the Ulsterman down.
After founding Mecom, the continental European newspaper group in 2006 and then being ousted by shareholders two years ago, that looked like it.
He could have had a decently affluent retirement and easily picked up a few respectable non-executive directorships.
Anyone who knows the lover of opera, newspapers and cost-cutting – though not in that order – was certain there would be another chapter in the career of the former editor of the News of the World and the Today newspaper.
Now, Montgomery has taken on the mantle of consolidator of the regional newspaper industry, putting together Northcliffe Media and Iliffe News and Media, with Trinity Mirror interested in taking a stake in the new venture.
Montgomery, or Rommel as he is still known in some quarters because Montgomery ‘was on our side,’ has recently been privately seething over events at Mecom. Another chief executive, Tom Toumazis has gone with no plans to replace him, the group is expected to be broken up and sold.
When Montgomery had ‘planned retirement’ forced upon him the Mecom share price was around £3 and now languishes at 80p. As the largest individual, as opposed to institutional shareholder, Monty is keeping his beady eye on events at Mecom but couldn’t intervene directly. He was tied up with other things. We now know what.
Consolidation of the regional press has been long expected and although more jobs will certainly go under a Montgomery regime, the problems of the industry probably require rationalisation – to use a dreadful, cold euphemism.
For Daily Mail and General Trust executives the valuations are obviously embarrassing. In 2005, bids of more than £1 billion were rejected for the business. Now, Northcliffe is worth around £100 million.
We are where we are and action as opposed to the opposite is now overdue.
There are few economic miracles in consolidation. You save on head office costs and management layers, procurement and printing costs. You need to be very careful about the endless cutting of journalistic costs. Local newspapers are about local news and for that you need local journalists.
The danger is that Monty, who knows newspapers backwards and was running what were essentially local and regional newspapers at Mecom, might get over-enthusiastic with the axe.
The deal when it finally goes ahead will be a test for the UK’s nit-picking, dissembling competition authorities. The hope is they will see the big picture at last and understand the continuing threat posed by the internet to classified advertising – the financial lifeblood of the regional press.
On past form they will dicker on about the threat to advertiser choice in Bootle, not apparently realising that there will be no advertiser choice at all in Bootle in five years if they are not careful.
The position of Trinity Mirror is interesting. They are apparently only interested in a minority stake in the Montgomery venture, Local World.
If the stake is confirmed it sounds like a toe in the water, at this stage, just to see what sort of fist Montgomery makes of the venture. After all the Ulsterman was also ousted, once upon a time, from the chief executive’s seat at Mirror Group Newspapers. They might also want to gauge the reaction of the competition authorities.
By sheer coincidence – or is it – the Montgomery regional press play came at the same time as consolidation in the UK book publishing sector – another industry under threat from technology, in this case the dilemmas caused by electronic books and self-publishing internet authors.
The ‘merger’ of Pearson’s Penguin and Bertelsmann’s Random House is Dame Marjorie Scardino’s last hurrah before she wanders off at the end of the year. Or not? Certainly the increasingly worried staff at the Financial Times hope it is.
As for the ‘merger’, in the real world, as opposed to the imaginary world of press releases, there is no such thing as mergers. There are only takeovers and one side is always on top. So it is here. The proof is mathematical.
Pearson will have 47% of the joint venture and Random House will have a majority of directors. Markus Dohle will be chief executive with John Makinson of Penguin occupying the more symbolic role of chairman. The benefits of such a union are harder to get at, apart from muscle in buying up the output of the best or more popular authors.
Whether the union really will, as Dame Marjorie suggests, enable the publisher to be “more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers.” Really? Penguin with sales of £1 billion couldn’t be more adventurous on its own in this fast-moving world of…etc. etc?
By creating large groups the greatest danger of all is that individual creativity will be slowly squeezed out of the business. The trick is to knowing how to keep happy idiosyncratic, even weird, individual editors who spot financial potential in poorly written, wondrously filthy books such as Fifty Shades of Grey. How to keep the sort of person who doesn’t reject because it seems unusual the work of J.K. Rowling when it comes through the door, unannounced, for the first time?
The changes to the structure of Penguin is rather like removing a heat shield protecting the Financial Times. Next up the ‘Pink One’ in an era of change at Pearson.
You can be sure that the FT is safe for the rest of the year until the farewell parties are over and Dame Marjorie’s very much alive body is safely off the premises. After that, all bets are off and this week’s ban on all but the most essential travel and a freeze on staff recruitment at the newspaper will do nothing to soothe the jitters.
Pearson would be wise to keep the FT as long as the financial drain is not excessive because it represents the most elegant of calling cards in the US world of ideas and education, where Pearson’s main tents are pitched these days.
But the ‘over my dead body’ promise will have run out and sentiment and tradition play little part in today’s corporate decision-making. If even the FT could end up on the block we really would be into a new wave of takeovers, trade sales and consolidation in the media.