Exploiting opportunity

By any standards, Johnston Press has established itself as the cheerleader for the UK’s regional newspapers. Now the second largest regional newspaper group in the UK, and the largest in Ireland, it wasn’t until 1994 that Johnston Press bought its first daily newspaper, the Halifax Evening Courier. It made its first major acquisitions in 1999, of the Portsmouth and Sunderland newspaper group, and in 2002 of Regional Independent Media, publishers of the Yorkshire Post, demonstrating in the process what the Observer newspaper called "textbook examples of how to bed down acquisitions."

This growth has continued. In 2005, the company spent close on £500m on acquisitions, including the Scotsman newspaper group for £160m, £155m on Score Press, (the newspaper arm of Scottish Radio Holdings) and a further £150m for two Irish groups. During this expansion, Johnston Press nevertheless managed to maintain an industry-leading operating margin of 34% on the back of ten years of uninterrupted profits growth (a feat achieved by only ten other UK quoted companies). In 2005, the company posted a pre tax profit of £151m on revenues of £520m. Gushed the Observer’s Richard Wachman, "if ever there was a class act, this is it."

Declining newspaper sales

So no problems then? Not quite. Advertisement revenues have been falling. In the second half of 2005, they fell by 6% and in the first two month of 2006 by some 10%. Newspaper sales continue to decline – particularly the dailies – where the average loss across the industry was probably about 5% in 2005. This has had an impact on the company’s share price, which has dipped in recent months.

Johnston Press has responded vigorously by broadening its media base. Last year, their 288 local and regional websites saw a 49% increase in page impressions with over 2.5m unique users a month logging on. These sites grew revenues by some 32% in 2005 to £8.2m, producing a contribution to profit of £5.8m. Its online CV matching service generated £1m in new revenue. Alex Green, previously director of strategy at News International, has been appointed director of digital publishing to "direct digital publishing strategy across the group."

But, a most interesting initiative has been the appointment of Chris Pennock as group sales and marketing director. Chris has been in newspapers all his working life, beginning at the Sheffield Star as an advertisement salesman. His career blossomed - via the famous Thomson training scheme. In 1994 he was appointed managing director of the Peterborough Evening Telegraph (then owned by Emap, before acquisition by Johnston Press), by 1996 becoming divisional managing director of the East Midlands region. In 2001, he took over the South Midlands division of Johnston Press as divisional managing director. Since 2002 he has chaired the company’s Newspaper Sales Forum which "debates the strategic and technical issues facing the sales of newspapers." Still only a youthful 47, Pennock was clearly on the fast track. Why did he decide to take a group appointment which – particularly given the company’s strong commitment to decentralisation – would surely be advisory and without formal authority?

Time of opportunity

"First of all", says Pennock, "this is a particularly exciting time for the industry with enormous opportunities. The regional press has, according to Bellwether, the most trusted brands of all media, and has a base in local communities that is unparalleled. With all their investment in websites, with some outstanding local news platforms, regionals now have a reach across their communities that they have not had before - particularly encompassing the younger audience. This opportunity to deliver a large and representative audience, in its various segments over integrated media platforms, to local business, is one that makes regional media a very exciting place to be, and I very much look forward to influencing and helping to lead this transition."

Is, therefore, Pennock’s role one of developing audience rather than newspaper sales, rather like the digital ‘audience’ appointments like AOL’s Andy Jonesco? "In a sense yes", agrees Pennock, "but this does not mean that I do not see a resurgent role for print in a role that is linked with digital media and enhanced by it. There is absolutely no rule which says that newspaper use must decline, just as there was no rule that said cinemas had to die when TV arrived, and then home video. The newspaper is a remarkably effective and convenient medium for conveying information. Our chance is to reinvigorate the medium with fresh ideas and by integrating it with the rest of the media family."

Reader participation

"So", says Pennock, "we are adapting fast. We have accepted that breaking stories will be showcased on our websites and our other ‘realtime’ media rather than reserved for our newspapers. We have opened our pages to our readers, to their texts and to their photographs, because we understand that we are now competing hard for our readers’ attention. The age of ‘top-down’ media is over and our readers are becoming used to ‘owning’ the media and to expressing themselves freely over it. Probably the best manifestation of this understanding is the acquisition of MySpace by Rupert Murdoch’s News Corporation for $650m – a website that enables its users easily to communicate and interact globally."

So, readers are moving from being observers to becoming participants. "Our Edinburgh Evening News shows this clearly", says Pennock. "Each Monday, the paper publishes four pages of reader content on football. The fact that Monday is our best performing day cannot be a coincidence."

But, what about the loss of classified advertising from regional newspapers and the general malaise in the advertising industry? "There is much misunderstanding about local classified markets", observes Pennock. "Local newspapers are still the first place that most people turn to find local jobs. In a recent survey of 8,000 local newspaper readers, only 14% of respondents used the internet to look for jobs, compared with the 52% who used local newspapers. And, in any event, the regional industry will host many of these digital classifieds on their websites."

Paid-for search

"Our task is to understand that the entire advertising marketplace is undergoing a major transition, with revenues being earned in ways quite different to conventional advertising", observes Pennock. "It is now possible, through ‘paid-for search’ for example, to place advertising right next to information being sought by a webuser - in real time. As a consumer, while looking for cheap flights to Majorca, I will be served information by an advertiser about their flights while I am conducting my search. "Currently", says Pennock, "UK advertisers are probably spending £800m on ‘paid-for search’ and the growth continues, with the UK market for search engine marketing predicted to grow to £1.41bn by the end of 2006, a sum not far shy of the £1.8bn spent on advertising in the UK’s national newspapers."

And the revolution is gathering pace. On June 22nd 2006, Google (which has over 80% of the paid-for search market) announced that they would be testing a new way of charging for search advertising, charging advertisers not just by ‘click’ (where Google receives a fee when the user clicks on to the advertisement) but by ‘cost-per-action’, where the internet user has performed a specific action, such as buying a product or registering for a service. In other words, advertisers would be able to pay Google when a product had been bought or when the webuser had left their contact details. "This has to be an attractive development for advertisers", observes Pennock, "and it is almost inevitable that media will gain more of its revenue in the future from facilitating introductions between buyers and sellers in real time."

Room for the regionals too

Do such developments erode the ability of regional media to compete in tomorrow’s world? "On the contrary", says Pennock, "this evolution offers regional media a new and potentially very remunerative possibility. Regional media has this enormous reach - Johnston Press newspaper titles alone are read by over 9m UK adults each week, and there are many exciting opportunities to gather data from people about their purchase intentions and to conduct a real time conversation with them about their spending plans. The regional media is well placed to take advantage of these changes in advertising and can be the first port of call for local businesses seeking the benefits of new integrated and realtime media. Realtime advertising need not just be conducted solely under the brand of the search engines."

And how will an organisation like Johnston Press, a company first established in 1767, change at the speed it needs to take advantage of this new media world and continue to give a lead to the UK’s regional press? Pennock’s philosophy is "positive engagement - challenging people, sponsoring and engaging in debate, fostering a constructive, positive dialogue, enthusing and sharing." And it encompasses measurement, "so we can manage the process of change. We have our conventional measures - of ‘availability’ for example, and we have our new measures - such as of ‘interaction’ which is being pioneered by a number of editors in our group. Our purpose is to bring about change - and not to monitor the status quo."

So, ultimately Pennock is an action–oriented strategist "bringing opportunities to the party, encouraging people to take risks and to test, and encouraging the organisation to accept that not all tests will succeed."

"Most newspapers in the UK have been slow to take risks. My job is to ask people how they are going to be successful in tomorrow’s world, and supporting those that accept the challenge, encouraging rather than attempting to coerce. By supporting the pioneers in our company, we will show ourselves how we can successfully embrace change rather than succumb to it. These are exciting times."