SMG Newspapers

By The Drum, Administrator

November 6, 2002 | 7 min read

Last orders is fast approaching in the bid to buy SMG’s publishing interests. Already a number of bidders have been ejected and only a handful remain.

One hopeful that has beaten the bell is the Scotsman and it is now rated by the bookies as one of the favourites to win the titles.

Even before the lofty odds showed The Scotsman Publications rated as 5/2 second favourites, it would have been a risk for any betting man to dismiss the Barclay Brothers, who lie just behind Candover in the bookies’ stakes.

However, recent reports suggest that the brothers, through their Ellerman Investment vehicle – in an attempt to avoid the Competition Commission – have put in a bid of £230m for the newspapers. A bid that SMG might find attractive as it looks to pay off its highly publicised debts.

Not so much a “Bruce Grobbelar” bet-throwing bribe, as an astute business offer to tempt SMG to wait until any referral to the Competition Commission had been completed, should their attempts at avoiding referral to the DTI fail. And with the reported £230m “bung” being thrown in as bargaining power, this offer could be too good for shareholders to refuse.

The Scotsman may be able to make the alluring bid by cutting costs in other areas, costs that an investment buyer would not be able to make. It is thought that the Scotsman could save around £15m by rationalising finance, circulation, marketing and sales departments while shutting its print plant.

Whatever the measures, the view is that the bid will be under close scrutiny by the DTI. However, the decision will be made in London, and industry sources have questioned just how much Patricia Hewitt and Melanie Johnson know about the Scottish marketplace.

So, what will the impact on the Scottish marketplace be if the Scotsman did buy the newspapers? How would media buyers be affected? And how would ad agencies feel about one company controlling Scotland’s national broadsheet press?

Phil Jones, managing director at Spirit Media, says: “If the Scotsman were to take over The Herald and Sunday Herald, it could, from a media perspective, go either way. From an advertiser’s point of view it is not healthy to have less choice in purchasing area. If there is more choice then, as an advertiser, you will perform better.

“But it would make a great deal of business sense to combine the two sales houses. The fear for media buyers is that this will lead to higher prices as options are eradicated. A standard price grade for both could be developed whereby, if both the Scotsman and the Herald are not bought as a package, the buyer could be charged more for the split. But these things happen and you just have to work with it. And, although it doesn’t mean that it is a good thing, the whole media industry is moving in this monopolistic direction.

“From a positive perspective, any polarisation could open the door to a new player. I don’t think that we will see the emergence of a new broadsheet, but it gives others the chance to take stock and see what they can offer. It is a good opportunity to look at your own product and revitalise it. But, realistically, how many will actually do this?

“For advertisers this will mean less choice, and this has been proven to be unhealthy. However, what causes more concern would be any potential cross-fertilisation of staff and editorial content because, at the end of the day, newspaper buyers buy the content not the ownership.”

Gill Eatwell, media director at Media Faulds, feels that, although the balance of power would be diminished, media buyers would not be faced with too many problems as a result of the papers being sold to The Scotsman Publications: “I would rather see the Scotsman own the titles than an investment house,” she says.

“The Scotsman buying the Herald would cause us minor concern as it wouldn’t just control the broadsheets but also dominate the evening papers across the central belt. But the Scotsman already holds a monopoly in the east end of the central belt.

“Although they would have so much more power, I would trust the management team not to abuse that power and hike up the rates.

“So, although certain elements of the business community would see the move as a bad thing, I don’t think that the majority of the readers would and, in the long-term, I don’t think that the circulation of the papers would be affected.”

However, not everyone in the industry looks upon the possibility so favourably. Alisdair Gibbons, planning director at Clayton Graham, which holds the advertising account for SMG’s publications, says: “It would be bad news. The current Scotsman management has presided over a decline in business, but second-fold, the Scotsman seems to be operating with a team of dissatisfied personnel and a sliding circulation. As an observer, one would fear that if a similar business strategy were adopted at the Herald, a similar trend would follow.

“However, if an investment group were to purchase the papers it would probably be to warehouse the group until it was again sold on. You would have to assume that very little long-term investment would be made and in any business that would be negative. So, in saying that, a trade buyer is preferable.

“But if the Scotsman were to get SMG’s publishing arm, it wouldn’t matter how they packaged it – instead of just a lame duck in the east you would get a lame duck in the east and the west. Eventually one would have to be put down.”

Rob Morrice, managing director at CitigateSMARTS, which handles advertising for Scotland on Sunday, argues: “I think that it would be a good thing. In the past, both parties have tried to establish themselves as national papers. A good example of that is the Herald dropping the ‘Glasgow’ tag. But neither has achieved it. If the Scotsman was to get the Herald, and kept the two titles, then with a strong management team and editorial content this national goal is more achievable.

“Without the rivalry they would both be able to cover the big, strong, national news reflective of what the nation wants. And if each covered its own patch fully too, then I think a lot of people would buy it.

“In the past there have been too many slanging matches. It doesn’t do the credibility of either paper any good. The man on the street just isn’t interested.

“One economy would be fantastic for advertising and sponsorship if it were approached with a sensible, two-title strategy.

“However, I believe that there should be one quality Sunday paper, but if The Scotsman Publications were to take over SMG’s newspapers, I wouldn’t necessarily think that the Sunday Herald need be the paper to close. It would have to be looked at sensibly. Neither make great economic sense at the moment but there are very, very good resources at both.

“The Barclay Brothers have not had the credit they deserve for the investment they have made. These papers are public institutions and we need them to work. Quite often both papers are wasting resources competing.”


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