The Press Market in the UK

The UK’s press market is in the middle of a ferocious turf war. Stalwart newspapers like The Times and The Observer, with more than 200 years of publishing experience behind them, are battling against an unprecedented number of rivals. Some are old but many are new. Publishers are having to contend with podcasts, blogs and 24 hour online news services, in addition to a burgeoning number of freesheets and an ongoing threat to their national distribution system. A glance at the sales figures released by the Audit Bureau of Circulation (ABC) for 2006 confirms an industry fighting to maintain its position. Year-on-year newspaper sales were down 4%, with the Sunday market dropping 4.8%, the weekday sector down 3.1%, and the collective circulation of the red top tabloids falling 4.8%. Of all 20 major national titles, only four managed to increase circulations in 2006: The Financial Times (up 1.07% to 430.469), The Observer (up 3.83% to 455.272), The Independent on Sunday(up 2.45% to 213.797), and The Mail on Sunday(up 1.16% to 2.319.309). It’s a similar story for the 1.300 or so titles that make up the UK’s local and regional press too. Sliding circulations have led publishers to invest heavily in new technology and develop brand extensions, including: 400 stand-alone magazines, more than 500 websites, and at least 21 radio stations (source: Newspaper Society). This year began with an announcement of plans by the Express & Star, the UK’s biggest evening regional newspaper, to axe a further 40 jobs, following a drop in display ads and a 4.4% fall in annual circulation. Elsewhere, Trinity Mirror, the group which includes the Daily Mirror, The Peopleand 240 regional newspapers, concluded a four month strategic review in December by announcing plans to sell more than 130 titles, including its daily sports paper The Racing Post. The group’s ad revenue has fallen 8.4% year-on-year, mainly attributed to the migration of recruitment ads to online.

Industry innovations
Challenging times indeed, but publishers in the UK are nothing if not innovative. It is worth remembering that despite increased competition and media fragmentation, national papers still command 13.3% of the 12.2 billion pound national ad spend and the regional press remains a 3 billion pound ad medium, responsible for 20 % of advertising. Some 14 million newspapers are delivered to 54.000 retail outlets every day. Publishers are adjusting to the changing media climate and finding new ways to stay relevant. Greater emphasis is being placed upon analysis, commentary and reviews, playing to the strengths of the print deadlines and its authoritative status over the web. There have been physical changes too. The compact revolution, started by The Independentin September 2003, and followed by The Times and The Guardian’s Berliner, have had a significant impact on the upmarket titles. In October 2003, the combined circulation of Britain’s four quality daily newspapers totalled 2.173.248. In October 2006, this was actually up 2.198.449. Elsewhere, the website for Britain’s biggest-selling tabloid, The Sun, attracted 56 million international readers in 2006, almost the size of the entire UK population. Murdoch’s paper – ranked number seven in the world’s top paid-for dailies (World Press Trends 2006) – has also made a bold foray into Web 2.0 with the launch of its social networking site MySun. Other initiatives have required less foresight. There have been hikes in cover prices – notably the Sunday Times which at 2 pounds is now the most expensive paper. The reliance on covermounts to produce short-term sales lifts is prevalent and cut-price and free bulk distribution deals are al- so on the rise. Only 88% of sales in November were actually bought at full retail price, compared to 91% in Nov 2005. At the Sunday Express, Richard Desmond has taken even more controversial steps and is attempting to run his middle market paper with just 16 full-time journalists, compared to more than 70 in the nineties.

The threat of the net
The reason behind such promotions and cost cutting practices is clear. Internet ad spend in the UK grew 40.3% year-on-year in the first half of 2006 to Euro 1.3bn (Internet Advertising Bureau). It represented a 10.5% share of the total ad market last year, up from 7.3% in 2005. At this rate of growth, it is expected to overtake the national press as an advertising medium in 2007. But Trinity Mirror’schief executive, Sly Bailey, has downplayed the internet's effect on newspaper advertising, believing it has been overstated. She views the current downturn as largely cyclical in nature and not a permanent structural change.

The march of the freesheets
The one segment where publishers have seen growth across the board is in the urban free papers. Last year the Manchester Evening News, owned by the Guardian Media Group, became a freesheet in the centre of Manchester, competing against fellow free title North West Enquirer. Trinity Mirror's Liverpool Postfollowed suit in central Liverpool and Johnston Press has launched the free weekly City Lite, in Leeds. Steve Auckland, managing director of Associated's UK Metro, predicted the move would be seen as «one of the great turning points in the history of the regional press,» and said it ensures the industry’s long-term future. The success of Metro (550.000) and afternoon sister paper London Lite (400.000), together with News International’s thelondonpaper (411.000), have attributed to a sharp decline in sales of London’s venerable Evening Standard, down 14.5% year-on-year to 263.095. The freesheets use of street vendors has proved so successful that Transport for London had to can its pitch for distribution at the tube stations last month due to lack of interest.

The magazine age
Magazines, in comparison, are having an easier ride. Since 2000, there has been continuous year-on-year sales growth, fuelled by an expanding weekly market. The total number of magazines has increased by 24% in the last 10 years to 8.474 (B2B 5.108; consumer 3.366). Combined, they commanded 13.7% of national ad spend in 2005, only slightly down from 14.4% the year before (PPA). At a time when people are watching less terrestrial TV and buying fewer newspapers, they are reading more magazines. One explanation, offered by UK publisher and broadcaster, Andrew Neil, is because in the age of the internet the printed word is better suited to the rhythm of the weekly or monthly. This would ex- plain why magazine supplements continue to be one of the most popular and successful additions to newspaper groups under fire. Indeed, last year News International created an entire new company Magazines International dedicated to just this. More magazines are launched in the UK than anywhere else in Europe: 586 in 2005, compared to 470 in France and just 250 in Germany (FIPP). However, there are similarly more casualties – 560 closures, compared to Germany’s 90. The result is a dynamic but highly competitive industry the Periodical Publishers Association (PPA) values at 6.9 billion pounds.

Crowded retail
As the number of titles grow, pressure on shelf space at retail increases. This is a growing concern for consumer and specialist publishers, who live and die by their single copy sales. In a country with more than 60m inhabitants yet smaller than 242.000 sq km, newsstands are easy to find and bursting with choice. In direct contrast to North America, 87% of consumer titles are sold through retailers. This reliance on retailers is significantly higher than most European markets: France 61%, Germany 53%, Italy 75%, and beyond USA 14%, Brazil 57%, and Japan 79%. The situation is reversed for the professional and business titles, where retail sales only account for 10%. Most have controlled circulations and are delivered by postal operators.

Improving postal service
In general, the postal delivery of magazines by the national carrier Royal Mail has improved after a poor performance in the magazine service «Press Stream» three years ago. Last year, the operator introduced a new pricing structure, based on the size and format of an item rather than its weight. Its impact across the industry has been mixed, but it has been particularly hard on cash-strapped business titles printed in larger formats. The UK’s postal market became fully liberalised last year and alternative mail providers are starting to emerge, although coverage is still limited. PPA fears potential postal hikes of up to 10% might be looming in the Royal Mail’s annual tariff increases in April. A preliminary announcement by the operator has left the doors open for such increases, and publishers holding their breath.

Author: Arif Durrani