Steven Walker Scotsman Publications: Are we all doomed?

Scottish Newspaper

“Anybody who comes into this office with its 250 or so editorial and production staff, or sees our new £60m printing press at EuroCentral, cannot disagree with the argument that this is now very much part of the Scottish newspaper scene.

“Take The Sun for example. It is very much a Scottish newspaper that represents the market. It not only has great coverage of Scottish news and sport, but has great coverage of the English Premiership in which there is massive interest north of the border.

“But the editor David Dinsmore, if he so chooses, can change every single page in the paper. He has the full confidence of the team in London to run the paper North of the Border – and the sales speak for themselves.

“Everybody says the increase was down to us cutting the price. But we have been 30p for 6-8 weeks now and we are still well ahead of The Record.

“Price is a perfectly legitimate way to establish a brand in a market. Soap powders do it, fizzy drinks do it, bags of crisps do it – so why shouldn’t newspapers. But the key thing to remember is that we have not only relied on price.

“We have a full scale team here providing great content. In fact, we have a larger team than many of the so called indigenous press. And this is now a sizeable business that turns over in excess of £125m a year.”

But his experience at The Scotsman, and before that the likes of Aberdeen Journals and the Daily Record, have also given Walker another perspective. It is one where he believes the local Scottish publishers were so busy competing with each other they completely missed the real threat; the UK nationals.

“The Scottish market has also been too concerned about kicking lumps out of each other,” said Walker. “The Sunday Herald and Scotland on Sunday are the perfect example.

“When Scotland on Sunday launched it became the best-selling quality on the Scottish market. But what happened? The Herald then launched the Sunday Herald to compete. What you have ended up with is two titles selling around 60,000 and The Sunday Times has sailed straight through the middle to become the number one selling product almost by default.

“But I also think Scottish publishers under-estimated how the market has changed, particularly in terms of demographics. We all talk about the amount of non-Scottish people living here in terms of those from Eastern Europe.

“But in fact the big shift has been the number of English people moving here. And when, of course, they arrive they want to continue reading products like The Daily Mail, The Telegraph or The Times. So that has helped the UK national too.”

But in saying that Walker points out that the sales of UK national newspapers have not risen as dramatically as one might think, north of the border.

Circulation

“National newspapers are not the reason for the fall in circulation of Scottish titles,” he said. “If you take a 20 year period, the overall sales of national newspapers has only gone up 50k if you count a seven day week.

“By contrast, the Scottish sale has fallen by one million copies. However, even that is not as bad as it first seems. Because The Sunday Post, which has lost around 500,000 copies and the Daily Record which is down around 400,000 copies is included in these figures.

“So if you take these two big chunks out of the equation you could argue that the newspaper business continues to thrive and overall readership is actually static.”

But what of the future? The overall trend is still downward. Is there a place for the printed word? Is the American Academic, Philip Myers, who predicted The Scotsman and The Herald would be out of business by 2018, and the last American newspaper delivered in 2043, right? Walker thinks not.

“With the right set of numbers you can prove a bumblebee can carry an elephant. What these figures assume is that any drop in circulation will continue at exactly the same level year after year.

“It won’t. Something will happen. Ownership might change, investment will happen, new products will be introduced. It is inconceivable to me that in my lifetime there will be no newspapers in Scotland.

“However, it is conceivable we might see some big changes. For example those in niche markets are prepared to part with money to get information which is particularly relevant, so why not the £2 daily newspaper?”

But some of these big changes might happen relatively soon. Walker, certainly hopes so, because he is holding his breath in anticipation.

Inevitable

“I am waiting with baited breath to see who is the first publisher in Scotland that turns their newspaper from a paid-for to a free.

“It is inevitable that this will happen – but whether it is an evening or a morning title that is first to go, I don’t know,

“It is all about the tipping point. At what stage does your circulation fall so low that you are not going to attract advertising unless you give the title away on a daily basis.

“I can’t believe no one is considering it. I certainly had a file on it when I was with The Scotsman.”

There are models, like Metro, which are already free. Walker, is rumoured to be no fan of the Associated title, which is published under a franchise agreement by Trinity Mirror. Former colleagues say he has claimed that there is a direct correlation between the Metro launch and the fall in circulation of some leading Scottish paid-fors; but he will not be drawn on that here.

But what he will be drawn on is a theory that the changing market will inevitably lead to a change of ownership of some major players in the market. The tumbling share price of the likes of TrinityMirror and Johnston Group suggest that the long term nature of the business makes it an unahappy fit with City slickers looking for reliable year on year growth.

“There is no denying that the way you run a PLC is very different to that of a privately owned or proprietor controlled newspaper.

“In a public company there is a great deal of pressure to deliver to a great number of shareholders. But that share price does not always reflect the true value of the business, it can simply reflect the confidence investors have in a certain market.

“But anybody investing in this business at the moment hoping for a two-year turn round can forget it.

“I have never come across a company with such faith in newsprint as this one. You see it here in this new office, in our new printing plant, in the journalists and even the fact that I am increasing the size of my commercial team.

“And if you look at either Scotland, or the UK, then surprise, surprise, you will see that it is News International’s sales that are holding their own. There must be a connection there. There must be.”

Failed to Acquire

All this talk of ownership does lead naturally to the future of Walker’s former company. If Johnston does choose to sell The Scotsman, would it make a good fit with The Herald.

“We obviously looked at this when I was at The Scotsman. At the time we failed to acquire The Herald many put it down to a conspiracy theory that we would not have been allowed to in any case.

“In actual fact I suspect the reason we did not get the business was simply because we did not offer enough money. That is what it really came down to. And with the benefit of hindsight I think such a merger would probably been a very good idea. I suspect in the future it still might happen.”

Some would argue that The Scotsman was actually better off under Barclay control, than the tough fiscal regime operated by Johnston. That groups prides itself on making a profit margin of over 30 percent.

On one level this looks excellent. But is it really the root of their current problems? Although Walker would not comment specifically on Johnston he said: “Margin is the key driver for any business. If you’re margin is not good enough you clearly do not have a healthy business. But the big question is what is good enough?

“Some newspaper groups think 35 percent is a healthy margin. But if that margin restricts you from investing in the company on a regular basis over a long period of time then it is not right.

“Rupert Murdoch has said that newspaper groups in the future should start thinking of between 10 and 15 percent as a healthy margin if they want to have the funds to invest.”

Of course, the other thing newspaper groups of the future will be doing is investing in online. After a slow start News International is now investing significantly online in terms of the UK – and Walker says he is now looking at how to make many of these services more relevant north of the border.

He also adds that he is keen not to make the mistakes of the past.

“I think one of the regrets is how timid we were in newspapers about getting into the internet. How, for example, did eBay come to exist when British newspapers owned the classified market?

“The problem was we were concerned that by investing in the internet we would push our readers into another market that we did not own. And when we finally did get it, there were younger faster people out there who had nicked the whole thing.

“Now we are having to invest heavily in areas – that if we had had our heads screwed on better – we could have gotten into earlier at a fraction of the cost.”

But what else would Walker do differently if he could turn the clock back?

“I wouldn’t call thescotsman.com thescotsman.com. It might be a fantastic brand worldwide, but it is hard to make money out of North American readers.

“But when we first launched, and offered recruitment advertising for example, we still had people in Glasgow saying no to us because they considered it an east coast website.

“We made a mistake of sticking with the brand – particularly when you consider what S1 has achieved; although in fairness I believe that was through one of those fortunate errors.”

But the world of online is posing new threats, particularly for those involved in the recruitment advertising sector. The Scottish Governement has now launched its Scottish Recruitment Portal which many believe poses a major threat to newspapers.

Deluding

“Whoever thinks this will not have a long term effect on the financial structure of some major Scottish newspapers is deluding themselves,” said Walker.

“Its going to have a big impact. I would estimate the jobs market is worth around £65m with public sector jobs accounting for about half of that.

“Now, of course, this revenue will not disappear overnight. It will take a while for this website to become known and vacancies will have to be filled in the meantime. But it will have an impact.”

Despite this Walker still sees recruitment as an attractive opportunity. For example, he has appointed Moria Reid to spearhead the development of recruitment across his titles, as a part of a general effort to develop the company’s classified platforms in Scotland.

However, one major development plan – which was mooted several months ago – seems to have gone quiet. The development of a full blown Scottish edition of The Times.

“Of the newspapers published here it is the one which has changed least on a daily basis. Although we have put a bit more Scottish content in it, we haven’t done the kind of things we have done to The Sunday Times or the News of the World.

“But with very little effort, and very little promotion The Times is now only 20,000 copies behind The Scotsman. That’s already a strong platform. You can’t do everything at once. But over the next 18 months or so we might decide to invest more because that title could do very well in Scotland.”

These are fascinating times for the media business – made even more so by this great sense that nobody is quite sure what the future holds.

So as a parting shot Walker is asked where he believes he might be in 25 years time.

“I’ll be in a bath chair,” he says. “In fact my idea of torture would be sitting in a bath chair drooling, while some well meaning person reads me the Metro.”