Local World Are Not Stupid

Firstly, apologies for the neglect of this blog. I’ve been busy with proper work and had nothing interesting to say.

Local World is a profoundly disliked and distrusted organisation. It is no secret that its reason for being is to cut costs within local newspapers until they increase profits regardless of the impact on the quality of output. 

There is a danger in assuming that the company is run by greedy idiots. David Montgomery is a fiercely intelligent man and there are people in Local World who have a profound understanding of the likely future direction of the local news industry.

Their recent trumpeting of digital traffic figures represents a very significant shift in strategy and hints at a fundamental change about to take place in local news.

Local World claim 14 million unique visitors across their network in December – a doubling over the last year. A lot of people have suggested that these numbers are exaggerated, and they are probably right, but that misses the point. The visitor numbers for local newspaper web sites have been impressive for some time but they have usually been ignored or downplayed by the publisher. Ad sales teams hate to see strong web traffic numbers being published because clients look at declining print sales and rising digital readership and start to consider the latter option for which the unit price is generally a lot lower.

That Local World are making a big deal of their web traffic suggests a change in thinking. All local newspaper groups have been talking about the shift to digital for a long time but the way they have run their businesses suggests that their main concern was to protect the legacy print operations for as long as possible. Local World have recognised that this isn’t sustainable. A high profile expensive hire as head of digital announced today by Johnson Press indicates they are thinking along the same lines.

Most people would accept that in ten, if not five, years time local news will be predominantly digital. Whilst some quality titles will endure, a large number of ‘zombie’ newspapers surviving only through public notice business will disappear. Local World probably have some insight into how this change will take place. Last year the Newspaper Society fought off an attempt by local authorities to end the requirement to publish Traffic Management Orders (TMO) in a newspaper. The lobbying power of the newspapers remains significant but the Government are unlikely to be willing to continue the massive effective subsidy for ever.

Councils want to publish public notices themselves arguing that this would be a more effective and cheaper way of reaching the public than the current system and they are not wrong however the retention of the TMO requirement shows that the Government recognised this would be apocalyptic for newspapers. The ruling has prevented Councils publishing public notices solely on their web sites but it does not mean that they can’t fulfil their statutory duty by publishing them on the newspapers’ web sites. The reason this has not happened so far is that the media groups have not promoted it because the prices they can charge for doing this online will probably be lower. Cash strapped Councils are going to recognise this and start suggesting that notices are run on web sites only.

Local World must be aware of this danger and seem to be embracing it by boasting of their digital readership. They will have calculated that if they can switch a guaranteed revenue stream from print to digital then can increase profits even if that revenue stream is much reduced because the costs of digital are much lower. In 2014 you will probably see them negotiating with local authorities to switch publication to digital in advance of the closure of more print titles.

The absence of new competitive threats in the provision of local digital news will probably have given them the confidence to make this switch. 2013 was hardly a banner year for independent hyperlocal. There was a lot of fanfare about the NESTA funding for this sector but the harsh reality seems to be that they decided early that the existing hyperlocal publishers were not worth backing and the money is going to mobile-based location services which really aren’t much to do with local news. As far as I can see, outside a few isolated patches of London, independent hyperlocal offers no credible competitive threat to the established media firms. If local authorities did start to switch their public notices to digital news sites in most places firms like Local News would still have an effective monopoly, and although prices would be lower than print, they would retain some pricing power once the switch has been made.

Recent history has also shown that entry into this market is very difficult reducing the chances that new digital only publishers will be cropping up across the country. Building an audience online gets harder every year and the entrenched market position of operations like Local World provides them with a high degree of protection.

The big losers from all this are not going to be journalists in my view. Paper manufacturers can start worrying and with most marginal newspapers currently free, distribution companies will get less business but if the cut in costs outweighs the cut in revenues the decline in content quality can be reversed. A leaner operation with more journalists is likely to be the end result. Once newspaper companies have recognised that their digital titles are the future because their costs are underwritten they will need to tackle the need for a mindset change in their sales departments and possibly a short term drop in revenues but if they continue growing their audience this will soon be reversed with increased revenues from the private sector.

The guaranteed winner in all this will be local authorities. The cost savings for them will be significant and a switch to digital will make it far more likely that public notices actually get read.

When these changes happen they won’t be gradual. Once one local authority has made the switch the pressure will be on for them all to do it and the changes in the local news scene will be very dramatic. As soon as the first public notice appears digitally half the print titles in the country may be gone within 12 months but I’d be surprised if a single journalist loses their job as a result.

 

 

 

 

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About londonhyperlocal

Musing on the change face of local news provision in London
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