Associated Newspapers – the pre-eminent national newspaper group

Paper Boy – the irreverent insider

The natural hierarchy of things in the national newspaper market has changed. In most markets a hungrier number two can eventually wear down a market leader (for example, the AVIS car rental slogan ‘We’re only No.2. We try harder’). In the newspaper market this can take decades – it really is a war of attrition and in this particular case it is between two heavyweight sluggers.

In the red corner, and last month still the long reigning title holder was News international. In the blue corner the challenger, Associated Newspapers.

The title of number one national newspaper group is still worth having despite the decline in the medium as a whole and the decimation of classified revenues (see Guardian Media Group losses increase to £54.5m, for example) – the medium still commands a lot of advertising monies (£1.6 billion).

Its strength and perceived weakness is the volume of “retail detail advertising”… mainly grocery multiples and direct response advertisers. The grocers continue to compete with ferocious price wars and newspapers are praying for no more consolidation in this area. Moreover, the direct response advertisers will only spend again if the results are good and the medium remains the best way to invest their marketing budget.

The national newspaper groups that have assets in the struggling regional newspaper market must feel like Audley Harrison (once an Olympian but when the real test came couldn’t land a meaningful punch).

Just look at the catalogue of catastrophe – the continued decline of Trinity Mirror regionals, the off-loading of the Guardian Regional Group to Trinity for £44.8 million, DMGT valuing Northcliffe Newspapers at £1.5 billion and unable to find a buyer and Johnston Press, once a 35% margin business built on the massive profitability of large amounts of classified advertising that have mostly migrated online and resulted in a share price of 5p. What a job Ashley Highfield has got! (see Raymond Snoddy’s latest article for more comment on this.)

Nevertheless, the nationals still command a lot of display advertising money because they can deliver a large audience, quickly and at short notice.

So who will be the leading group? Well back in 1998 (pre-free newspapers), News International commanded a healthy 35% share (see table 1) compared to Associated’s 18%. Market share has been calculated on a weekly basis that therefore gives dailies more weight due to their frequency. This is a comparison that helps us understand the importance of dailies over Sundays as far as the advertising market is concerned. Sunday newspapers have been struggling more than dailies in circulation terms for some time (the populars the worst) but this has been exacerbated by publishers focusing marketing efforts on the Saturday editions of the dailies to pump up their six day circulation average, which are worth more to them in terms of advertising spend.

So in 1998 the top five circulating titles were The Sun, Daily Mirror, Daily Mail, Daily Express and Daily Telegraph. But in 1999 Metro was launched and has since caused the market to rethink price, value, distribution and ease of access. The Metro success story is well documented and has seen its distribution footprint nearly double. So last year Associated’s share had grown to 28% and narrowed the gap with News International to 5 percentage points (see table 2).

Last year the top 5 ranking nationals were The Sun, Daily Mail, Daily Mirror, Metro, and Daily Star. So a change, for the rising Daily Mail benefitting from the demographic shift upscale and older, the demise of titles who forgot to invest (Mirror and Express) and The Sun still top of the pile. Moreover, News International gave the Daily Mail smoother waters to navigate when they closed Today. Despite Today being loss-making, it kept the Daily Mail at bay and was a fire break to protect The Sun – the ultimate cash cow of the national newspaper market.

The historical financials for newspaper groups have estimates that News International operated on a contribution level of 20% of turnover, driven mainly by The Sun. Industry estimates for Daily Mail and Mail on Sundayare more at 9%, which is believable when you evaluate the consistency in which they have invested a lot of money in marketing; on TV, special promotions, CD’s and DVD’s, and top dollar book serialisations. This relentless drive from Associated has started to eat away at News International. Where do Sun readers go when they stop reading the paper? Some reduce frequency, some stop altogether but a large proportion drift in varying forms of frequency to the Daily Mail.

Now with the demise of the News of the World (even though it is a Sunday and has a smaller impact on the volumetrics of this particular analysis), Associated have taken over the number one spot. This newly gained lead could become wider as dummies of a popular Sunday are being tested by Associated and NI denies any imminent launch of a Sun on Sunday.

So we are entering a period where we have two rival publishers very close in terms of circulation market share. However, the other revenue market that needs to be top of mind is the advertising one.

As Associated get relatively more powerful in the daily market with Daily Mail and Metro they have an opportunity to control the national press advertising market. Share deals, agency deals, incentives and conditional selling all go on but increasingly Associated will be in a position to dictate terms. This will result in a larger share, better yields, more revenue, better profitability and more marketing money to increase or at least maintain their sale and audience.

So Associated are the pre-eminent national newspaper group. For many that is an alarming prospect in terms of the psyche of the UK.

Would the last person to leave Britain please turn out the lights…

(Follow me on Twitter! @MTel_PaperBoy)

National Newspaper Circulation (ranked by title)

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