Why this CEO bought a newspaper when print is terminal

I newspaper
Friday’s edition of the i newspaper. kiosko.net

The i newspaper changes the guard on Monday.

The British daily national newspaper launched in 2010 as a stablemate to The Independent. But with The Independent ceasing its print publication last month after nearly 30 years, the i was sold to Johnston Press, home to hundreds of local news brands like The Scotsman and The Yorkshire Post and a number of specialist titles.

Johnston Press paid £24 million ($34.9 million) for the bite-size paper, famous for its cheap 40p cover price, tabloid size, and “matrix” design, giving readers an overview of the news and opinion content they need to know that day.

Despite moving to a new home, Johnston Press CEO Ashley Highfield told Business Insider at the company’s head office on Cavendish Square, London, that he hopes i readers don’t notice the difference when they pick up the paper on Monday — the company isn’t even running an advertising campaign to mark the relaunch.

“That’s going to be the number one objective: to a reader, all those names you know and love, and the design, and the layout — everything should be the same,” Highfield says. “If there’s anything that’s not the same, I want it to be better.”

The i’s 50-strong editorial team is a mix of old and new faces, headed up by current editor Oliver Duff.

The immediate improvement Johnston Press will make is distribution, thanks to its regional network. The i will finally be available in Northern Ireland, for example.

The i most snugly fits into the space left behind by The Independent, which had a circulation of 54,000, according to its latest ABC.

The i’s latest print ABC, meanwhile, was 269,000 — down 3% year-on-year. Highfield “will be very disappointed if we don’t put on a few copies when the ABCs at the end of the year happen.” It’s likely many of those will be — and already are — former Independent readers.

“What Buzzfeed are doing is not what we do”

Meanwhile, the newspaper launch will be accompanied with a new website — inews.co.uk — which will feature the matrix-style from the print edition. Highfield promises “no clickbait” and a revenue model that will focus mostly on sponsorship and native advertising.

Ashley Highfield
Johnston Press CEO Ashley Highfield. Johnston Press

He says: “There will be no going after traffic for the sake of traffic. I think we will be very true to the paper and therefore create a clear proposition that we think does not exist in the UK: there is not a politically independent, concise, quality read online and I think that will find a market.”

Highfield adds: “We’re not trying to be The Guardian, or BBC Online, or be an Independent.co.uk — I think that would be foolish.

“What we are going to try to do is stick very closely to the brand values of the i: a quality, concise daily digest, updated continually but at any one moment, when you go to the site, the idea is the matrix will give you everything you need to know to be informed on the day. I think that possibly flows better to the zeitgeist than the acres of never-ending content.”

That said, readers are not necessarily brand loyal online — often receiving their news from social networks, then bouncing away from that site once they finish reading the article. And inews.co.uk will need to compete with the influx of American news brands — like Buzzfeed, Business Insider, and Huffington Post — that have recently entered the UK market.

“What Buzzfeed are doing is not what we do. They are not doing what we do on a local basis,” asserts Highfield.

Buzzfeed news
Highfield doesn’t want inews.co.uk replicating Buzzfeed. Buzzfeed

But Buzzfeed recently expanded its UK editorial team to include regional reporters, we challenge.

Highfield responds: “Yeah and you will end up with something that looks like a regional BBC bulletin. You either take it seriously or you don’t. We have 900 journalists [across the Johnston Press group] who in turn have a network of thousands of bloggers and contributors… in terms of our reach, we already have a network of thousands of people who write for us in a professional capacity, and that’s bloody hard to undermine.”

And unlike Buzzfeed, Highfield wants the i to focus on an older and more affluent audience.

“It appears they are more loyal in print, but also because they tend not to ad block and they’re the people with the money,” Highfield says. “I think the obsession with millennials is starting to pale as they haven’t got any money because they have all got student loans and because they all ad block.”

Is another UK news brand a wise investment in a crowded market?

Still, the overarching question remains: why buy a newspaper brand at a time when print is in terminal decline? And on a more micro level, why make a £24 million purchase at a time when the company had a net debt burden of £179.4 million for 2015?

Every national newspaper reported a year-on-year circulation decline in the latest ABC report — the only exceptions were free titles The Metro and the London Evening Standard and The Daily Star and The Daily Star Sunday, which dramatically cut their cover prices.

The independent
The final edition of The Independent newspaper was published on March 26, 2016. Justin Setterfield/Getty Images.

Highfield says the national newspaper market in the UK is “probably the most competitive in the world” and while some newspapers are struggling to maintain print sales — not least The Independent, which was forced to close — the quality papers have managed to persevere.

He points to The Times — which reported a 0.4% month-on-month dip and a 3.5% year-on-year rise in circulation to 403,000 in its latest ABC — and The Daily Telegraph — which was up 0.2% month-on-month and down 1.46% year-on-year to 473,000.

“I’m not expecting any miracles in terms of attracting back lapsed readers a la The New Day [the new national newspaper launch from Trinity Mirror, which has failed to meet sales expectations] and I’m not expecting to take share away from the hardy perennials,” Highfield says.

“But I do think that not having to live under the wing of the Independent — haha, we just dropped the eagle [logo] from the front page — i can establish itself with its own brand values more clearly in the marketplace. Over time, therefore, with it being so competitively-priced, it might pick up a few readers from elsewhere.”

As for Johnston Press, Highfield says the acquisition of the i — which was reportedly profitable when it was sold by ESI Media — is “immediately earnings accretive.”

Last month credit ratings agency Standard & Poors said Johnston Press was facing a problematic debt burden, predicting its revenues would continue to drop this year — having fallen 8.8% to £245.1 million in 2015 — making its debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio if between five to five-and-a-half-times “unsustainable in the light of the group’s vulnerable operations.”

Johnston press
Johnston Press owns dozens of local newspapers. Johnston Press

S&P added that Johnston Press was unlikely to grow its digital operations fast enough to offset print declines, The Daily Telegraph reported.

Highfield says: “I think that by acquiring stuff like the i and disposing of some assets, we will, over time, both be able to pay down more debt and get the debt-to-EBITDA to a level of around 2.25, which is our magic number where we can start paying a dividend again… they run their algorithms but they don’t really understand the market or what we’re trying to do either, so actually we’re not really losing much sleep over that.”

The i gives Johnston Press a national footprint and scale, which should give the company more clout with media agencies and the opportunity to sell in a “premium” package across its network of print and digital assets. That — alongside the divestment of a cluster of non-strategic assets — should immediately play well to the company’s cash position, Highfield said.

He adds: “Nobody is saying the market isn’t tough, but we have always cut our cloth accordingly and I think we have a very clear plan.”

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