Why greed is helping to ruin the regional newspaper industry, as Newsquest cuts staff at the Bolton News

It is devastating. I understand how all those at Newsquest’s Bolton News who face losing their jobs feel, a quarter of the editorial force in that organisation, 10 in total are to go.

They will join a long procession of journalists who have lost their jobs during a bitter decade of decline, many of them great journalists and more than a handful I’m proud to call my friends.

A quarter of the workforce are to be cut in the editorial department of the Bolton News by Newsquest.

A quarter of the workforce is to be cut in the editorial department of the Bolton News by Newsquest.

The first word that came to my mind was greed. I searched for a quote to match my mood and came up with this: “One of the weaknesses of our age is our apparent inability to distinguish our needs from our greeds.”- Don Robinson.

The issue for newspapers is that they have always tried to squeeze the money out of the businesses. I’ve not become a socialist over night (just for the record),  I understand the need to turn a coin.

But it makes business sense not to be too greedy. Here lies the problem. I’m not sure my accountant friends will agree, but newspaper profit margins have always been too high.

Johnston Press used to boast profit margins of 35 per cent and the rest of the industry licked its lips and look with envy at what they had achieved.

When I joined the defunct Northcliffe Newspapers in the early 1990s, the company didn’t have such high profit margins, but they were still heading towards 20 per cent.

The reason is that the company didn’t have to bust a gut to reach 35 per cent was that it was making towards £100m and Lord Rothermere was more than happy, describing the regional newspaper arm as his ‘jewel in the crown’.

Then the collapse in income and the bottom fell out of the industry. Northcliffe, which had posted £96m profits saw them plunge to just £17m and panic set in.

This panic effectively saw the slash and burn team move in and clear out large chunks of the newsroom…and to be fair any other department which could be cut.

While the business started to adapt and modernise, fewer staff, no editions, online first, rather than reassess the need to make smaller profit margins to fit in line with a new business model, companies decided they needed bigger profit margins.

Certainly, where I was last based, they were targeting 27 per cent, certainly higher than in the glory days of larger profits. So with revenues down in news print, online failing to make up the shortfall, targets were set higher.

The point about profit margins is that most companies would be happy to make between 10 and 15 per cent (this is being generous), so you can see how newspapers have been pushing the boundaries…or being greedy.

Gracia Martore, chief financial officer at the Newsquest’s US parent, Gannett, said recently: “Let me once and for all dispel the myth that Newsquest doesn’t make money. Newsquest makes a lot of money.

“In fact, their margin, as I have said a couple of times, is consistent with the margin that our local US community publishing operations generate.

“So their margins are in the high teens to low 20s. And they have consistently made money throughout the years, even in a year like last year when revenues were under as much pressure as they were.”

So here we have it. Straight from the horse’s mouth, Newsquest is doing very well, thank you…

The issue is that the company, like other newspaper businesses are squeezing the life out of the organisations. The more staff you cut, the worse the product inevitably becomes.

Without doubt the newspaper business needed an overhaul. In some areas there were too many people doing the work. However, there is a time when staff cuts are so deep that the product suffers. This can be seen everywhere now.

If these firms were serious about keeping going, they would perhaps decide to reduce the profit margins slightly and maintain the existing workforce to protect the product.

However, by cutting staff the decline of the business becomes a self-fulfilling prophecy. Fewer staff, a poorer product, sales decline further, less income, then cut staff again, the circle of despair is complete.

I know the shareholders would moan desperately about their dividends being reduced if profit margins fell, but they will not get a penny if the business folds.

Surely, it’s worth a gamble to cut the margins, protect the staff and even look to invest in new products such as apps to ensure the longevity of the business? Unfortunately, the words horses and bolted come to mind.

Advertisements