Wordblog

Milking mature business that have tipped into decline for maximum profits is an age-old strategy. We have been watching it for some time in newspapers but I have seldom seen it put so clearly as by Alan Ruddock in the Observer today who describes it as, “probably the only sensible approach“.

Ruddock, who is standing in for Peter Preston, says the decline will be slow and asks why people still buy the Daily or Sunday Express. At some point the weakest will fail and even the worst of the [national] titles still have a readership measured in hundreds of thousands. He writes:

Newspaper groups that invest in their content will prosper longest. Trinity Mirror does not fit in that group. Like the Express titles, Trinity’s have long suffered from what Lord Stevens, the former Express supremo, called the management of decline. While offensive to journalists, it is probably the only sensible approach for companies with shareholders to satisfy and whose titles are so poor that cash extraction is the only realistic option.

Neither the Express nor the Mirror could ever invest enough to mount a credible challenge to their nearest rivals; any money spent would be wasted. The trick is investing just enough to smooth out the decline, so that the cash extraction can continue for as long as possible.

But I wonder whether the current state of advertising and the stock market could hasten the end for some titles. On the previous page of the Observer, James Robinson writes about the regionals and suggests that when the economy improves some of the classified advertising lost will return to online rather than print.

That is not good news for those titles that have been managing decline by providing high levels of return to shareholders. Trinity Mirror, Johnston Press and Gannett, the US parent of Newsquest have all seen huge losses in value in the past six months. DMGT, which includes the Northcliffe regionals as well as the Mail titles, has done rather better.

If they cannot regain the advertising revenue revenue they are losing at present, the share values are unlikely to recover. The end of some titles could come faster than Ruddock suggests.