In recent years, Johnston Press hasn’t often been the subject of good financial news. The company, which is the UK’s second-largest regional newspaper publisher, announced a yearly pre-tax loss of £144 million in April, cut 670 jobs – 11.3% of its staff – last year, and has seen the book value of its papers fall from $907 million in 2010 to £742.8 million in December 2011.
Yet on several occasions Johnston Press CEO Ashley Highfield has maintained that all the company’s newspapers are profitable. In January this year, he told In Publishing “every newspaper in the group has a healthy margin over 20 per cent.”
Now Patrick Smith at The Media Briefing has examined this claim and has found that profits are indeed relatively high at one “JP title, typical of many of its 175 weeklies.” Smith keeps the name and region of the paper anonymous, but he specifies that its circulation is around 10,000 per issue.
Smith writes that he was given the profit and loss sheet for a Johnston Press publication by a “reliable source,” and has found that for a “typical month” in the second half of 2011, the paper made a total of £90,600 in revenue. This broke down into £70,000 from advertising, £17,000 from circulation and £3,600 from digital revenue.
The paper’s total costs amounted to £38,750, of which £28,000 was spent on staff salaries. Altogether, writes Smith, these figures add up to a £51,000 monthly profit, “translating into about £600,000 a year.” Smith acknowledges that these figures don’t take into account costs that are shared among Johnston Press titles – for example IT, human resources and tech. Even so, he writes, regional weekly titles appear to be bringing in a fair amount of money “especially when you consider the sheer number of the UK weekly newspaper titles owned by Trinity, Newsquest, Johnston, Tindle and others.”
Smith draws two main conclusions from his findings. Firstly, he points out that Johnston Press has been “ruthless” in slashing its costs. “The entire editorial budget is barely £16,000 a month, which means not many peobalaple [sic] are doing a lot of work,” he writes.
Secondly, Smith concludes that keeping costs to a minimum is “crucial to preserving profit margins - so there is real business sense behind Highfield's decision to talk [sic] more JP titles from daily to weekly.”
Smith also suggests that, while Johnston regional papers appear to still be making money, “the current model is not futureproof” given that print advertising revenues are falling. However he says that, although the industry is in a decline, “it's a slow one.”
Johnston is currently implementing sweeping changes across its papers, involving a drive to relaunch all of its 170 paid titles as “platform neutral” publications. So far the changes have included the relaunch of five daily papers as weeklies at the end of last month, two broadsheet weeklies being relaunched as tabloids, and three free papers being relaunched as paid-for titles. Johnston Press’s long term plan, as Smith points out, is to derive 50% of its revenue from digital sources by 2020.
Roy Greenslade at the Guardian writes that Smith’s investigations into Johnston Press finances raise some important questions for the whole industry.
“Is the paper chosen by Smith an unusual case? And what about weeklies owned by the other big publishers, such as Trinity Mirror, Newsquest, Northcliffe and the Tindle group? Are their figures comparable? More importantly, is it justifiable to cut editorial jobs in order to maintain the "healthy" 20% margins that Highfield says every newspaper in his group is achieving?” Greenslade asks.