FEATURE 

Sir Martin Sorrell - interview

There are few people in the media with a genuinely global perspective. Rupert Murdoch is clearly one. Sir Martin Sorrell, chief executive of WPP, is another. Ray Snoddy managed to catch up with Sir Martin, an achievement in itself, to get his views on newspapers and the wider media landscape.

By Ray Snoddy

For someone who is decidedly gloomy about the future of the newspaper industry, Sir Martin Sorrell, chief executive of WPP, the world’s second largest marketing services group, is remarkably enthusiastic about newspapers.

Sir Martin’s media habits

“I read the Wall Street Journal and the Financial Times. I’d feel naked without them,” admits the man who founded, and now controls a communications empire than runs from top name advertising and media buying agencies to leading companies in public relations and market research.

In an average morning, he may also flip through the New York Times, the Times or Daily Telegraph depending on which continent he is on that day.

“I spend a fair amount of time with daily newspapers but it’s not like it used to be,” explains Sir Martin.

After the daily read, his media consumption tends to move on to concentrate on monitoring the 24-hour business satellite television channels such as Bloomberg or CNBC, plus relentless personal communication via the most heavily used BlackBerry in the business.

Although the 64-year-old WPP chief executive is hardly a typical consumer, his own media habits reflect his views on how the world is changing.

“Network television will not die. Newspapers will not die. But in future, each will account for around 25% of advertising revenue, other media 20 to 25%. The balance will be in the new media area,” insists Sir Martin.

Few would think it wise to ignore the WPP executive’s predictions about the future advertising balance between media because it is based on endless streams of data from his companies all over the globe.

To a considerable extent, he also has the power to help turn his beliefs and projections into reality.

On behalf of its advertising clients, WPP allocates no less than $50 billion to $60 billion in advertising revenue a year. And Sir Martin insists the agencies are completely “agnostic” about which medium they choose – simply looking for the best deals for their clients.

Threats to newspapers

As he looks around the world, Sir Martin sees newspapers gravely threatened.

“I think they will continue to be eroded substantially. We have had bankruptcies and we have even had astute investors trying to revive newspapers and failing. The New York Times is probably at a tipping point,” adds Sir Martin who also believes that consolidation in the UK newspaper market is now inevitable.

Even in Asia, he fears that current newspaper growth will, in time, be overtaken by new technologies such as mobile.

China Mobile, the Chinese mobile phone company, he likes to point out, has no less than 450 million subscribers and that now makes it, he believes, one of the top five brands in the world.

“Newspaper circulations in Asia are rising but there will be a point in time in Asia – I don’t know when exactly – when the traditional players are going to be under threat,” he predicts.

As he looks across all the media around the world – and few individuals are in a position to take such a global view - Sir Martin repeats his basic question for emphasis and offers his own answer.

“Is there a future for newspapers? Yes there will continue to be newspapers but I think they will have a diminishing impact,” warns Sir Martin in an interview with InPublishing.

“Magazines are more interesting because I think the data shows certain women are avid readers of magazines and there is more consumer interest,” he adds.

But why does he think that? Is he right? And if he is, most important of all, can anything be done about it.

A perfect storm

The media executive’s views are based on a number of unsurprising factors: the coming together of a deep recession, profound structural change and what he believes is the inevitable rise of new media, particularly mobile and IPTV – on-demand internet delivered television.

“If I am a media owner, I am in the perfect storm. If you are in one medium in one country, it’s really acute because you have the coincidence of the deepest recession since the 1970s plus technological change,” explains the WPP executive.

But at least Sir Martin believes that the newspaper is not alone in coming under unprecedented pressure.

“Is it realistic to believe that the television industry will remain unchanged as a result of this technological change when newspapers are literally dropping like flies and titles we would have thought five or ten years ago were impregnable are in the process of just disappearing?” he asks.

The answer, he believes, is obviously No.

As for the economy, Sir Martin is very good on the recession because he has his finger on the pulse of so many marketing expenditure decisions worldwide. In the US and Europe, this year will be very tough and when the first signs of “a recovery of sorts” appear in the second half of next year, they will, he believes, be “pretty anaemic”.

Of all the media, Sir Martin believes that newspapers now have “the toughest row to hoe”.

With the regionals, there is the now all too familiar problem of the sharp fall of classified advertising for jobs, houses and cars.

For the nationals, there is the “disintermediation” of ads at the hands of Google and the endless advertising inventory of the online sites which drives down rates.

Budget pressures

Sir Martin points out that WPP companies already buy $850 million to $900 million a year in “search” capacity from Google and that has to come from somewhere.

Everywhere you look, he emphasises, there are cost pressures with advertisers looking for yet more bargains, even though the cost of advertising in the traditional media is lower in real terms than for many years.

The WPP executive says that if an advertiser reviews a $1 billion marketing budget, at the moment anything from $50 to $100 million will be squeezed out in savings – money that will not be spent in the media.

Efficiencies required

Sir Martin also emphasises that pressures are increasing to cut the cost of media content – where he believes there is still considerable waste.

The WPP executive is primarily talking about the television industry but he also recalls his experience visiting a Sunday newspaper in London – he declines to mention which one.

“I said, doesn’t it make sense to make the Sunday and the daily one and the same newspaper. The guy on the Sunday said we couldn’t possibly do that because a daily newspaper is very different to a Sunday newspaper and you need a different editor for the Sunday and a different editor for the daily. Now that distinction is lost on me,” he says.

If WPP was going to launch a daily newspaper - and no one should hold their breath - it would be a 24-hours a day, seven days a week newspaper.

“I think you would have to make it online subscription and that means that you would have to do it on such a specialised basis that you could charge subscriptions. It would be a high-end niche product with such strong editorial and such highly prized editorial that people will pay subscriptions for it,” says Sir Martin.

The perils of free

He has long been a critic of newspapers giving away their online content for free, mainly because he fears there will never be enough advertising to pay for it all – certainly not in a recession.

“It was a mistake to distribute content for free. That has always been my view. The online start-ups went for volume and trying to generate as many page views as possible on the grounds that advertising would pay for it, but advertising can’t pay for everything,” the WPP chief executive argues.

He also believes that the traditional press underestimates the threat from user-generated content and that it is foolish for journalists to look down their noses at Citizen Journalism.

“I find that a little bit snobby and elitist,” says Sir Martin who adds that OhmyNews, the South Korean online newspaper - motto “Every Citizen Is A Journalist” – broke the country’s four major stories in the year it launched.

Of course, some newspaper proprietors pass the Sorrell survival test – owners such as Rupert Murdoch with his multi-media approach.

“Media owners with operations across a range of mediums in many countries will be the ones best placed to survive,” predicts Sorrell.

Murdoch will get even more ticks from Sir Martin for this April’s News Corp content initiative. The company said it was setting up a new unit designed to share content from all News Corp’s global outlets.

What of the future?

Apart from the wisdom of the multi-media international approach, Sir Martin sees longer term hope for newspapers from devices such as the Amazon Kindle which allows users to download books, newspapers and magazines and read them on an “electronic paper display”.

The Times, Financial Times, the International Herald Tribune and the New York Times are among the titles already available on Kindle in the US via monthly subscription. The system is expected in Europe as soon as communications problems can be sorted out.

“With Kindle, you pay a subscription for it, so that’s a new medium for newspapers which can generate some subscription revenue,” says Sir Martin enthusiastically, although he admits he has never actually used Kindle himself.

Sir Martin’s view of the future of newspapers is undoubtedly bleak, although he acknowledges there will always be philanthropists and trophy hunters in the field.

“On a strict business case, there will have to be consolidation. We will see. Time will tell,” says Sir Martin.

Time will also tell on whether Sir Martin Sorrell is being too gloomy and underestimating the resilience of the newspaper industry while at the same time over-estimating the impact of mobile media and IPTV which has developed much more slowly than expected so far.

But it would still be foolish to ignore the warnings of someone like Sir Martin - given who he is and where he comes from.

At least he still reads the daily papers and he is also enormously enthusiastic about another publication that uses dead trees – The Wire – WPP’s global staff newspaper.

“Our newspaper came top out of 403 corporate publications in the annual Inspire Awards for internal communications,” says Sir Martin Sorrell with all the pride of a newspaper proprietor.