The ris­ing tide of red ink at long last washes over Fleet Street

▶ U.K. papers are get­ting pinched as print ad rev­enue weak­ens ▶ For Britain’s na­tional dailies, “the house of cards is tum­bling”

Bloomberg Businessweek (North America) - - Contents - -Eric Pfan­ner and Kris­ten Sch­weizer

Britain’s daily press—with its saucy head­lines and cov­er­age that ranges from lurid ex­posés of politi­cians’ pec­ca­dil­loes to sober analy­ses of their poli­cies—has long weath­ered the dig­i­tal on­slaught that’s dec­i­mated the busi­ness else­where. Two decades into the web era, the U.K. sup­ports at least 10 print papers with na­tional reach.

Yet Fleet Street is fi­nally feel­ing the pinch. News­pa­pers are cut­ting jobs and try­ing to shore up ad­ver­tis­ing and cir­cu­la­tion. The In­de­pen­dent in March ceased pub­lish­ing its print edition and adopted a dig­i­tal-only strat­egy. The Tele­graph is clos­ing its of­fice can­teen. The Guardian is cut­ting 250 jobs as it aims to re­duce costs by 20 per­cent. Even the Daily Mail, which has main­tained a strong print read­er­ship while build­ing the world’s big­gest English­language news web­site, is warn­ing of weak­ness in ad­ver­tis­ing. “I’ve had a dread of this hap­pen­ing,” says David Banks, a one­time ed­i­tor of the Daily Mir­ror and a for­mer man­ag­ing ed­i­tor at the New York Post. “The house of cards is tum­bling.”

The U.K. news­pa­per mar­ket gen­er­ates $8 bil­lion a year in rev­enue, mak­ing it the fifth-largest in the world, af­ter the U. S., Ja­pan, Ger­many, and China. But just 62 per­cent of Bri­tish adults read a news­pa­per at least once a week in 2015, down from 70 per­cent in 2011, ac­cord­ing to the World As­so­ci­a­tion of News­pa­pers and News Pub­lish­ers. Print ad sales at U.K. papers fell to £1.7 bil­lion ($2.5 bil­lion) last year, from £4.2 bil­lion in 2005, says me­di­a­buy­ing agency Zenithop­ti­me­dia. And web ads aren’t plug­ging the gap: Dig­i­tal ad sales to­taled £356 mil­lion in 2015, leav­ing a short­fall of more than £2 bil­lion. “Ev­ery­one was wait­ing for the mo­ment when dig­i­tal ads were go­ing to off­set the drop in print,” says Alex De­g­roote, me­dia an­a­lyst at Peel Hunt. “The tip­ping point didn’t come through, and it’s not go­ing to.”

The Guardian in­vested heav­ily in dig­i­tal op­er­a­tions un­der its for­mer

ed­i­tor, Alan Rus­bridger. While the ti­tle ranks sec­ond among English-lan­guage news sites, with 39 mil­lion unique vis­i­tors in April, vs. the Daily Mail’s 50 mil­lion, ac­cord­ing to re­searcher Coms­core, its dig­i­tal ad rev­enue hasn’t off­set print de­clines. Guardian Me­dia Group, which pub­lishes the Guardian and the Sun­day-only Ob­server, says it ex­pects an op­er­at­ing loss of £53 mil­lion for the 12 months ended in March. David Pem­sel, the group’s chief ex­ec­u­tive of­fi­cer, says he’s aim­ing to break even within three years with a re­newed fo­cus on dig­i­tal rev­enue. He’s look­ing for sources other than ad­ver­tis­ing, such as so­lic­it­ing do­na­tions from dig­i­tal read­ers; 28,000 have chipped in so far. “The last 12 months have been a gen­uine wake-up call for the in­dus­try,” he says.

Pub­lish­ers have tried all man­ner of new ideas to keep read­ers from de­fect­ing. The Tele­graph gives out free bot­tles of wa­ter with a pur­chase of the pa­per at Wh­smith con­ve­nience stores. The Mir­ror’s owner in Fe­bru­ary launched New Day, a tabloid aimed at at­tract­ing women who’ve de­serted news­pa­pers. The pa­per fea­tured an up­beat edi­to­rial line with sto­ries about fam­i­lies, chil­dren, and re­la­tion­ships and largely skirted sports and crime cov­er­age. The mar­ket­ing slo­gan, “Life is short, live it well,” turned out to be prophetic. The pa­per closed af­ter less than three months.

News Corp., which pub­lishes the staid Times of Lon­don and the Sun, a tabloid stuffed with celebrity tit­tle-tat­tle and sports news, has had mixed re­sults try­ing to get read­ers to pay for on­line con­tent. The Times started charg­ing in 2010 and to­day has more than 170,000 paid dig­i­tal sub­scribers. The Sun dropped its pay­wall in 2015 af­ter two years. To tap into Bri­tons’ love of gam­bling and sports, it plans to add an on­line bet­ting ser­vice fol­low­ing the in­tro­duc­tion of Dream Team, a fan­tasy soc­cer game. “In­stead of just think­ing about the Sun as a news­pa­per, you think about it as a brand,” says David Dins­more, chief op­er­at­ing of­fi­cer of News U.K.

The Daily Mail has bucked the in­dus­try by min­i­miz­ing print de­clines while at­tract­ing on­line read­ers with a steady diet of Kar­dashi­ans, Kate Moss, and Cris­tiano Ron­aldo, but it’s also get­ting hit. Shares of its owner, Daily Mail & Gen­eral Trust, plunged in May when the com­pany said print ad rev­enue fell 13 per­cent in the lat­est six months. “There is a per­fect storm this sum­mer,” says Tim Luckhurst, a jour­nal­ism pro­fes­sor at the Univer­sity of Kent.

The bot­tom line Britain’s dailies are fi­nally feel­ing the squeeze from the rise of dig­i­tal news out­lets, years af­ter papers else­where.

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