Media Fortune Fame & Folly

Is this the future for Reach?

The Daily Mirror, the best-known brand of UK news group Reach Plc, is itself never far from the headlines. The 118-year-old tabloid dominated the country’s newsstands long before the late Robert Maxwell acquired it and plundered the pension fund. It is almost 30 years since Maxwell’s mystery death overboard in the Mediterranean, and anniversary books, podcasts and movies are underway. He still casts a long shadow over his erstwhile company.

Reach (formerly known as Trinity Mirror) publishes nine national dailies and 110 regional newspapers, including: the Daily Express, Daily Star, Scottish Daily Record, Manchester Evening News, Liverpool Echo, Birmingham Mail, and Bristol Post. More than 20% of the UK population read at least one of its newspapers or magazines each month.

But the flagship Mirror and Express together now sell fewer than 600k copies, by contrast with the heyday of almost 10m. Reach has been paying down debt, paying dividends, and growing digital revenue (+25% in the last quarter of 2020). Last year, it reduced its workforce by 10%. It has survived against all the odds and is looking for ways to grow.

Newish CEO Jim Mullen is pushing to get his millions of digital readers to register on (free) sites to create a single-customer-view database – and increase advertising yields. Reach is also creating hyper-local digital brands, especially in areas where it doesn’t have newspapers.

The trouble is that the £700m-revenue, listed group still makes most of its profit from paid-for newspapers. Digital is only 15% of revenue and the papers continue their double-digit decline. For long-suffering shareholders, though, it’s a welcome relief from the previous strategy of ‘consolidating’ print by buying up more and more newspapers. They’ve had enough of catching falling knives.

The company sprang from the Daily Mirror, which was founded in 1903 (like the Daily Mail before it) by British tabloid pioneer Lord Northcliffe. It soared to a circulation of more than 4.5m and, for decades, managed to combine its role as a racy red-top with serious, left-leaning political coverage and some of Fleet Street’s best-known columnists. Its role as a powerhouse tabloid was disrupted by the 1970s growth of television news – and by Rupert Murdoch who persuaded the Mirror’s own proprietor, Reed International, to sell him a struggling newspaper called The Sun.

Within 10 years, Murdoch and a succession of shock-horror editors had turned UK journalism upside down. The Sun became the country’s best-selling daily with a raucous mix of football, sex and celebrity. Even today, its sales are double those of the Daily Mirror which had been the 1950s model for Axel Springer’s Bild which, ironically, supplanted it as Europe’s best-selling newspaper.

The Daily Mirror and its stable-mates The Sunday People and Scottish Daily Record were in crisis after Maxwell’s 1991 death, before merging with the Trinity regional newspaper group in 1999. It acquired the Daily Express, Daily Star, and OK! magazine from Richard Desmond’s Northern & Shell Plc in 2018.

After decades of stop-start, the Reach share price has gained 50% in the past 12 months and is at a five-year high. It’s under-pinned by a few simple facts:

  • The shares have a price/earnings multiple of just 6
  • It has been paying a dividend – and building up cash
  • Its £300m pension deficit has been falling

Reach, arguably, gets the benefit of results that exceed relatively low expectations. Copy sales have continued to fall – and at a faster rate than the rival Daily Mail whose 1m circulation is now about double that of the Daily Mirror and Daily Express combined.

The strategy of aggregating its disparate online news audience into a single database is a good idea but the hard-fought 5m registered readership underlines just how far there is to go in an ad sales competition (of course) with Google and Facebook.

The UK’s largest newspaper group does have a total monthly audience of 46.7m – some two-thirds of the population. But the strategy of switching from readership to advertising revenue is troubling.

It must, surely, instead seek to generate substantial revenues beyond the competition with Google for low-yielding ads. Perhaps through e-commerce or price comparison sites?

Future, the UK’s largest and most digital magazine publisher, this week completed its £594m acquisition of GoCompare. The move had initially shocked investors, partly because the company’s biggest deal followed so closely after its £140m acquisition of the former Time Inc UK. But investors had also forgotten just how close to media companies these “savings sites” have often been. Uswitch had been owned successively by E.W.Scripps, in the US, and the UK’s Daily Mail (through its former Zoopla property site). Even before the Future deal, GoCompare’s marketing director was a longtime media executive, as are both MoneySupermarket’s chairman and its chief operating officer. And the Bauer radio and magazines group has been acquiring price comparison sites all around Europe for the past few years.

On the day Future took control of GoCompare, the £1.5bn MoneySupermarket unveiled its financial results for 2020, with revenue of £345m (-11%) and EBITDA (-24%). The 28-year-old site has 12m active customers who rely on the site to help them make savings on their domestic bills. The company emphasises its drive for: trusted brands; data-driven aggregation; smartphone buzz; and relationships with the providers of insurance, banking and energy services which pay commission for each customer it brings in.

MoneySupermarket spends a cool £150m (equivalent to 57% of its total revenue) on advertising, including £31m on broadcasting and £83m online. It’s using media, including its own newsletters, to persuade people to entrust it with their bills. In an ideal world, it would turn all its customers into subscribers.

Enter Reach Plc, with almost four times the audience of MoneySupermarket but a shared need to build reader-user relationships. They have a common focus on:

  • Brands. Building strong ‘channels’
  • Habit. Creating online loyalty
  • Appetite. Building great UX
  • Value. Making every visit worthwhile

It’s a good case for another media company merger with price comparison.

Reach + MoneySupermarket could be a formidable £400m-revenue combination, valued at some £2.5bn. It could produce obvious marketing, database and corporate cost savings, but also the opportunity to develop:

  • Content and brands to grow ‘price comparison’ loyalty
  • A unified database of customers
  • Subscriptions and membership
  • Streaming TV channels
  • Online retailing

You can imagine diverting just a slice of the MoneySupermarket marketing budget to launch news, sport and entertainment streaming platforms, generating revenue for both sides of the business.

Suddenly, Reach’s challenge of searching both for life after print and ways to monetise digital media doesn’t look so formidable. Just wait.

Additional reporting and analysis by Alex DeGroote

Reach Plc