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News International has announced that it is to massively increase the cost of buying the Sunday Times and Sun newspapers. This is seen by some as good news for Trinity Mirror (LSE:TNI) and by others as a prelude to a spinoff of Murdoch’s newspaper interests. I view it another sign of an industry failing to adapt and so in precipitous decline.
The Sunday Times will now cost £2.50. Okay it may have 27 sections and you may need a shopping trolley to get it back home from the newsagents but that seems pretty steep to me. The problem all newspapers face today is that 99% of their content adds very little value to the reader. Home and foreign news, financial news, sport, gardening, cooking, property, lifestyle articles are all available all over the internet. For free. The value added by one particular paper is minimal. The real value add is columnists whose opinions you really wish to read and the odd exclusive. But in order to get that I, as a reader, have to pay the costs of gathering, assembling, printing and distributing all the other stuff which I can get for free online (and most of which is junk anyway). So when the Times went behind a pay wall I made a conscious decision: yes I would like to read Matthew Parris but I am not going to pay for access just to read that column given that almost all of the rest of the newspaper added very little for me in terms of knowledge or entertainment.
And it appears that I am not alone. Putting his papers behind a pay wall has cost Murdoch dearly in terms of online readership (something I am sure that advertisers have noticed). Meanwhile as older readers head off to a better place a younger generation who either read only online or do not/can not read at all replace them and thus sales of offline newspapers are, across the board in inexorable decline. If sales are down Murdoch has no choice but to jack up prices in order to maintain margins. But you cannot keep repeating that trick forever.
As it happens I do not expect vast numbers of Sun readers to switch to the Mirror. Surveys suggest that up to a third of Sun readers vote Labour and so, in theory, they could be persuaded to switch to a cheaper Labour loving red top. But these are tribal Labour voters. Poll their attitudes on immigration, welfare scroungers, taxpayer cash being wasted on state non-jobs for the chattering classes, travellers, crime and punishment, etc and they are attitudes of the right. Will they really enjoy reading a paper that owes its loyalty to the Trades Unions and New Labour? I somehow doubt it. One day the Telegraph might charge me to read its few columnists of note (Dan Hannan, Christopher Booker, etc). Would that encourage me to switch to a non-charging Guardian? Hell’s Teeth! You would have to pay me to read Polly Toynbee, Hamas Jew-haters and the other assorted creatures who right for that paper. In the short term Mirror sales may increase. It will not last. And as its ageing readership dies off the Mirror too will continue to see its sales fall and fall again.
And so what is the answer for this industry? I am not sure that there is one. Its fixed costs are just too high. Simply going online will cut costs but it will also lose readers as not everyone (especially among the Sun & Mirror reading classes) is web enabled. Most of Britain’s newspapers survive because they are not PLCs and so have no angry shareholders to deal with. The Independent and Telegraph are owned by rich men who regard them as trophy baubles in the same way other rich men regard football clubs. They are thus subsidized but in the end the cache of owning a paper read by fewer and fewer folk will force change. The Guardian is subsidized by you, the grateful taxpayer, through its pages and pages of adverts for State non –jobs. Eventually even this hopeless Government will put that operation online and in-house and we can then all celebrate the delightful collision of the grim reality of market forces and Polly Toynbee’s salary.
Poor Rupert Murdoch and debt laden Trinity Mirror have shareholders who demand an economic return. But the world has changed and if they are looking for such a return I would suggest that they invest elsewhere. Whatever Murdoch/Trinity does the outlook will become increasingly grim
