Focus on Digital Starts to Pay Off For U.K. Newspaper Brands

Legacy publishers who focus on digital have been offered a glimmer of hope as Rupert Murdoch's The Times and The Sunday Times recently announced a profit for the first time in 13 years. In the year to June 2014, the two newspapers made $2.7 million profit between them, up from last year's $9.2 million loss. Print circulation went up 4% for the Sunday title, and 1% for the daily version. No one is claiming that print readership will return to its old levels, but some observers believe that, just as digital starts to pay off, the downward trajectory for print is starting to flatten out. Ed Williams, CEO of Edelman U.K., said at a presentation on 2015 trends, "For traditional media, their toes are just about touching the bottom of what has been two decades of decline. But that doesn't go for everyone: it's all about quality, and it's all about the high end." The Times newspapers went behind a paywall in 2011, with owner Mr. Murdoch determined to demonstrate that consumers would pay for quality digital content. Since then, the titles have invested in sports rights to drive online traffic, but they have also made significant job cuts. The Times titles don't need a huge staff to update stories constantly, because online they are more like a digital version of the print product than a rolling news service. Rather than chasing huge audiences, The Times is trying to develop lasting relationships with a smaller number of valuable readers by offering a range of member benefits. Mr. Murdoch's U.K. newspapers do, however, face a more urgent imperative to turn a profit. In 2011, Mr. Murdoch split off the newspaper division (now called News U.K.) from his TV interests, meaning that the print titles could no longer be subsidized by healthier TV revenues. Costs have been reduced, and advertising now brings in only 44% of revenues, while 51% comes from sales. Sarah Jenkins, investment director at OMD UK, said, "It's very positive to see that people are prepared to pay for high quality journalism, and that different models can work. The MailOnline is attacking on a global scale, but it's difficult [for The Times] to take a paywall outside the U.K. They might be making a profit now but there will be a cap on it if it can't go global." The Times is not alone in seeing its fortunes improve in recent years. In 2013, the Financial Times, which operates a metered model, saw circulation grow 8% to 652,000 -- the highest paid readership in its 126-year history -- although print readership continued to fall. Digital has also boosted profits by 13% to $111 million at The Daily Mail and General Trust, whose free MailOnline is one of the most-read news sites in the world. The MailOnline's U.S. digital revenue doubled this year. At The Guardian, which is also free to view and aggressively expanding globally, revenues were up 6.8% and digital revenues up 24%. The Guardian Media Group still made losses of $30 million in 2013-14, but this was an improvement on $42 million the previous year. (The Guardian is also known for inspired advertising from BBH London about the value of newspapers and journalism, including a themed series called "Own the Weekend" and the earlier, acclaimed "Three Little Pigs" campaign about The Guardian's "Open Journalism" approach.) The Telegraph, which operates a metered paywall, made profits of $96 million in 2013, up from $92 million the previous year. This was against a background of aggressive cost-cutting and despite a 0.7% fall in revenues, and helped by continued growth in advertising and subscription income. Charlotte Tice, head of publishing at Mindshare UK, said, "The decline is stemming and we are recalibrating to find a new normal. Our clients still spend not far off £100 million ($160 million) in print a year so it can't be that bad -- if you look at the numbers, there is still genuine scale in print." Ms. Jenkins added, "Newspapers used to get 80% of their revenues from ads, but with a paywall that is halved to around 40% -- subscriptions could be a more sustainable model in a volatile market. It's interesting to see where will go and what it will all look like in 15 years."

Focus on Digital Starts to Pay Off For U.K. Newspaper Brands

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