No company better embodies the precipitous decline of local news than JPI Media, one of the UK’s largest regional publishers and owner of storied titles including the Scotsman and the Yorkshire Post.
In 2005 the publisher formerly known as Johnston Press was blazing the acquisition trail, spending just under half a billion pounds on multiple deals including the £160m purchase of the Scotsman titles from the Barclay brothers. Margins were at an eye-watering 35 per cent.
But the golden years were not to last. By 2010 the company’s prospects were so bad that an executive sent a note to hundreds of overstretched editors asking them to do away with “the old practice of reading every story” in a bid to cut costs, according to a leaked memo.
A decade on and JPI has itself been sold for a mere £10m, following years of uncertainty over whether it would be broken up.
The question now is whether the group, through investment and a renewed emphasis on original reporting, can reverse years of losses in what will be regarded as a test case for whether local journalism can be revitalised.
All eyes are on newspaper veteran David Montgomery, who on New Year’s Eve announced that his acquisition vehicle National World had snapped up JPI and its nearly 200 titles.
“[£10m] looks like a very small amount compared to where JPI came from — unfortunately that’s the value it came to in the end,” said Alice Pickthall, at Enders Analysis.
Mr Montgomery, a former editor of the now defunct News of the World, declined to comment on his plans. But in a note to the group’s roughly 1,700 staff in early January he said he wanted to decentralise the business and “devolve responsibility to the talented commercial and editorial managers who live and work in the cities, towns and the regions where our products circulate”.
This signals a desire to return firepower to local newsrooms, which have been hollowed out over the past decade by cost cuts. The new owner has promised to inject £6.5m of cash to boost original reporting and replace “irrelevant or clickbait stories with exclusive content to enhance local lives”.
Reversing many years of austerity will, however, be a tough job.
JPI’s fleet of reporters and photographers available to cover towns has in the past 10 years dropped by nearly two-thirds to 750, while average pay across the group has fallen more than a third in the same period, according to corporate filings.
The company’s most recent accounts, to January 2020, lay bare the scale of the challenge. JPI reported a pre-tax loss of £48m on £146m in revenue, of which £23m came from digital advertising. JPI has warned that the pandemic has hit revenues and at the beginning of the crisis temporarily stopped printing about a dozen of its free titles, with only seven back up running again.
The woes of local news publishers such as JPI stem from their continued reliance on print advertising and newspaper sales, which have both been in decline for years.
The message to staff sparked cautious optimism. Laura Davison, organiser at the National Union of Journalists, said “local commitment is obviously really important” but added that “appropriate levels of staffing” will be needed.
Ian Stewart, a former Scotsman editor, said previous desperate attempts to cut costs had threatened the reputation of its publications.
“They paid an awful lot of money and there was a bit of concern over how they would try to recoup it,” he said, recalling Johnston Press’ acquisition of his newspaper 15 years ago.
Shortly after the financial crisis the cuts came. “The Johnston Press edict said we needed to do away with sub editing; the new ideology was that reporters were supposed to get it ‘right the first time’,” he said, adding that his newspaper continued to employ second editors, who scour articles for inaccuracies, without the knowledge of its then owner.
Johnston Press collapsed into administration in 2018 having failed to refinance £220m of debt. It was taken over by creditors including US group GoldenTree Asset Management and renamed JPI Media.
A drawn-out bidding process for the group ensued. The publisher behind the Daily Mail snapped up flagship title the i for just under £50m in 2019. However, interest in the rest of the group’s titles was scant and made complicated by strict competition rules on media ownership.
“All big regional players took a look at the portfolio and decided not to buy it,” said Ms Pickthall.
Christen Ager-Hanssen, the activist investor who in 2017 acquired 5 per cent of Johnston Press and launched a failed bid to oust its management, said the group had been marred by poor decisions at the top. “Johnston Press was too aggressive . . . more than any other group,” he told the Financial Times, adding that the Scotsman had been “totally overpriced”.
Mr Ager-Hanssen, who had believed the group’s under-investment in digital revenue streams could be fixed, saw his £4m stake wiped out when the group entered administration.
Mr Montgomery’s move to restore JPI to health has already taken a personal turn. He has convinced previous directors from Reach, the UK’s largest regional news group, including former head of finance Vijay Vaghela and chief of operations Mark Hollinshead, to join the board of National World.
One former journalist at Johnston Press pointed out that Danny Cammiade, who has been recruited to join National World’s board, served as the chief operating officer at the height of the cost-cutting era, questioning whether old ideas will linger at the group.
It is not the first time Mr Montgomery, who himself ran Reach in the 1990s, has shaken up local news. In 2012 he led a round of consolidation using a company called Local World which he sold three years later to Reach, then known as Trinity Mirror, in a £187m deal.
But other ventures were less successful. The launch of Local World followed Mr Montgomery’s exit from Mecom, a pan-European media group he set up in 2005. A string of acquisitions meant its debt ballooned to €680m before investors fled and it crashed out of the FTSE 250 alongside Johnston Press.
One advantage Mr Montgomery has is that JPI is no longer saddled with the company’s pension deficit, which had reached more than £300m, as this was jettisoned to the Pension Protection Fund following the administration. Ms Pickthall adds that National World has also not assumed JPI’s debt, which in early 2020 stood at £55m.
She is convinced that there is a future for local news although shrinking revenues and largely fixed costs left the company with a profit margin close to 4 per cent last year, according to Enders Analysis.
Industry observers can cheer the recent success of Reach, which expects annual profits to beat expectations after a surge in online revenues. Its strategy is to focus on growing the number of registered readers, with the data being valuable for advertisers.
Natasha Brilliant, analyst at Citigroup, said Reach had in the past 12 months made more advances in its digital approach than in the past five years. “I think there’s hope,” she added.
Although the paywall model has proved difficult for local newspapers to crack, JPI has also begun to experiment with different models for its biggest titles.
Ms Pickthall also suggests that donations, as successfully tried by the Guardian, or revenue derived from events could generate cash in the future.
Nor can dealmaking be ruled out. National World describes its approach as “transformation through acquisition” — the old mantra of the newspaper industry is hard to shake.