Analysis: newspapers have attracted record numbers of readers seeking trusted sources in uncertain times
From the pandemic and the war in Ukraine to the Westminster partygate saga, newspapers are benefiting from a financially lucrative news boom. However, is the news industry enjoying a one-off blip in the battle for survival against big tech, or is this proof that publishers have finally forged commercial models fit for the new media age?
In a sign of the shifting fortunes amid unprecedented news events, Rupert Murdoch’s Times and Sunday Times last week reported a doubling of operating profits to their highest level since 1990 and the Sun, a one-time cash cow turned high-profile casualty of the digital age, is within £1m of returning to operating profit for the first time in a decade.
The papers’ parent company, News Corporation, where executives have seen the market value double to $13bn (£9.9bn) since 2019, is the latest to reveal the significant financial boost thanks to news-hungry readers seeking trusted media outlets during uncertain times in record numbers. Other major news organisations are also enjoying a revival in fortunes.
The New York Times hit its target of 10m subscriptions three years early, albeit in part thanks to spending $550m buying the sports news subscription service the Athletic, and its chief executive, Meredith Kopit Levien, said 2021 was its most profitable for many years.
The news rush has helped the Financial Times and the Guardian to pass 1 million digital subscribers each, while the Telegraph has reached 750,000 print and digital combined, at an average spend per subscriber of £172. And last year Reach, the publisher of the Mirror and Express titles, as well as hundreds of regional brands including the Liverpool Echo and the Manchester Evening News, managed its first like-for-like revenue growth since 2007.
“One of the knock-on effects of such an extraordinary news run is that it has given confidence back to the news industry that it has a role, a purpose and a community of people prepared to value it,” said Douglas McCabe, the chief executive of the research consultancy Enders Analysis. “Every conversation used to be about the battle with Google, but now heads are up. For the first time executives can see, imagine, and picture an online future.”
Despite this, Google and Meta, the parent company of Facebook and Instagram, remain fearsome competitors for ad spend. In 2022, the Silicon Valley giants will make more than £16bn in ad revenues in the UK, as much as 63% of the total market, according to eMarketer. Meanwhile, the UK national and newspaper digital and print ad market will be worth £1.5bn, according to WPP’s GroupM.
However, the tectonic plates of the hitherto one-sided relationship have changed significantly. Regulatory and lobbying pressure on both sides of the Atlantic has focused on creating a fairer playing field.
In countries including Australia, Canada, France and the US, collective bargaining by publishers to improve commercial negotiating terms with the online giants is either being allowed or is being considered by lawmakers.
The European Union is pushing ahead with the Digital Markets Act and the UK’s competition regulator is setting up a digital markets unit, both of which are designed to crack down on the big tech firms and ensure fairer trading.
News Corp has publicly said it reached deals worth “nine figures” annually, while Google and Facebook have pledged $1bn each over the next three years to pay publishers for news.
“On the platforms we distribute our content on, we have to have a fair exchange of value,” said Dominic Carter, the executive vice-president and publisher of the Sun at News UK. “The value we create needs to be recognised and that is now increasingly the case with the platforms we have relationships with. They are not the saviours of our businesses, but the relationship we have is much more equal than it has been.”
The inexorable decline of print has hastened during the pandemic – while also becoming significantly more costly as newsprint prices hit three-decade highs amid soaring inflation worldwide – with GroupM forecasting that across the UK newspaper and magazine market digital ad revenues will overtake print ad revenues by the end of next year.
“While there will be businesses that either exit, shrink or reduce frequency of publication – there are a lot of weak players in general – there are those in a strong position that are going to do OK,” said Brian Wieser, the global president for business intelligence at GroupM. “The real trend that’s played out is those media owners that have benefited are more global, while the majority are tied to one market. It is better to be global than national, and national than local. Generally, strong publishers are coming out the other side, while the weaker continue to go.”
During the pandemic the New York Times reported its best-ever year for digital revenues, while also notching up the milestone of digital surpassing print revenue for the first time in its 172-year history. In the final quarter last year, News Corporation said digital advertising income overtook print advertising at the Sun for the first time.
Still, some analysts say this is less about the success of digital strategy and more about the parlous state of print advertising. Revenues are currently on course to collapse from £6bn in 1999 to £1.2bn by 2026, according to GroupM.
“That digital is exceeding print is a positive not a negative for newspapers,” said Carter, who believed a platform for the future was now there for newspapers. “It is a sign of success in businesses that we know we are all transitioning. There is a rebalancing back towards quality, context and data – we have those at scale in newspapers.” But, he added: “Are we saved? I wouldn’t say any of us are completely out of the woods yet.”
