Buying the Daily Express is not a wholly daft idea
The fact that Trinity Mirror has even entered preliminary talks to buy Richard Desmond’s title is a straw in the wind that print is far from dead, writes Raymond Snoddy.
Surprise, surprise, Richard Desmond is playing his selling the Daily Express game again. Every now and again Desmond, who appears to have little long-term faith in the future of newspapers, tests the market. If the price isn’t right he decides to remain a national newspaper owner for a little bit longer.
This time the game looks more serious, and as a quoted company Trinity Mirror had to put out a statement this week saying it was in “early stage” talks about certain newspaper assets owned by Desmond’s corporate vehicle, Northern & Shell.
We have little idea whether Trinity Mirror is interested solely in the Daily and Sunday Express or whether any possible deal would also involve the Daily Star or not.
And if we are talking a purchase price of anything close to the rumoured £100 million, whatever assets are included, it would be another financial coup for Richard Desmond. It would of course be less than the £125 million he paid Lord Hollick for the business in the year 2000.
But that would be missing the point entirely. From just above 1 million copies a day in 2000 the Daily Express circulation was down to 500,000 last year, and is still dropping.
The real story is the profit Desmond has made from a declining asset across the years, thanks to cost-cutting. It has amounted to many times his purchase price and in one year alone Desmond took out a dividend of around £80 million from the business for his pension.
Never was there so much truth in the usual routine corporate statement issued by Trinity Mirror that there was “no certainty that any agreement will be reached in respect of the range of outcomes currently under consideration.”
Indeed, but Desmond’s sale last year of Channel 5 is instructive.
There was talk of ridiculous valuations as high as £700 million – a classic case of talking up the value of an asset before sale – but Desmond was perfectly happy to sell the channel business for £463 million to Viacom, as well he might.
Desmond paid £99 million for Channel 5 just four years earlier and to add to his joy £69 million had been taken in the form of a dividend before the sale – pushing the cash pile of his proceeds up to £433 million.
Can anyone doubt that Richard Desmond is a master of buying cheap, reducing cost structures and then selling dear?
Of course the Trinity Mirror talks could break down but the odds are the Daily and Sunday Express will go, with Desmond holding on to the Daily Star for a second bite at the cherry later. Such a split purchase would have less competition issues anyway.
Desmond would be wise to sell now because – how shall we say this – he hasn’t exactly been running the titles for growth of anything but profit. As such, it is a wasting asset and there could eventually come a terminal tipping point.
Trinity Mirror, which would enjoy obvious synergies, might be the only one in the queue of potential purchasers.
The motives of Richard Desmond are transparent. If he thinks the price is right, in all the circumstances, he will sell.
By far the more interesting question is why Trinity Mirror would want to buy such as apparently declining asset.
Shock horror the company might actually believe in the future of newspapers, despite the obvious difficulties, and would also welcome the chance to infiltrate the middle market, albeit under the shadow of the mighty Daily Mail.
For Trinity Mirror such a purchase would only make sense if they were prepared to increase investment in editorial and expand online and mobile reach.
The fact that there are any negotiations at all, however preliminary, is a straw in the wind that print is far from dead.
It is far from the only one.
There is considerable evidence that print generates greater trust, impact and dwell time than online.
Sales figures for eBooks at Christmas pointed to a renaissance of the real thing.
At the recent Newswork Shift conference Rory Keating, chief executive of the British Library, which has a duty to preserve a copy of every newspaper in the UK, noted that despite casualties, more not fewer newspapers are being published here.
At last week’s Digital Media Strategies conference Patrick Martell, chief executive of Informa Business Intelligence, saw a revival of print with increasing demand for printed specialist books. At the same conference John Ridding, chief executive of the Financial Times said the group was committed to a print version of the FT, which was now profitable as a stand-alone operation, for the foreseeable future.
While acknowledging the importance of “newsbrands” – the spread of news on all available platforms – print remains ideal to handle complex and detailed material in big exposés such as the MPs’ expenses scandal or HSBC tax manoeuvres.
There is even scientific evidence to suggest that print, its texture, shape and folds, helps to create a landscape map in the mind that leads to more permanent memories than scrolling across screens.
The impact of print holds true in the commercial domain.
The Swedish research organisation, Research and Analysis of Media (RAB) is not well known in the UK but has recently opened an office in London run by Dianne Newman.
The company has tested the impact of no less than 10,840 print ads in 15 European countries. The numbers are compelling.
Ad recall by industry goes from a low of 43-45 per cent for sectors such as real estate, oil and banking to between 56 and 59 per cent for sports and leisure to large retail and lotteries.
Analysis of Have Bought/Will Buy, according to RAB, ranges from a low of 7 per cent for insurance and education to 26 per cent for sorts, and leisure to large retail and lotteries.
Only straws in the wind in the face of the online juggernaut, of course, but interesting nonetheless and they may suggest that Trinity Mirror would not be wholly daft to buy the Daily Express.