Media Fortune Fame & Folly

How will Reach play the game?

The death 30 years ago of Robert Maxwell casts a long shadow over Reach Plc, the Daily Mirror publisher he almost destroyed. The tragic chaos of 1991 is never far away from the UK’s largest news group which is still paying more than £50m a year to the trustees of the pension fund he plundered. The £2.9bn pension fund and the current deficit of £250m (and rising) constantly seems to threaten the viability of Reach Plc. But low interest rates and relatively positive trading have pushed the company’s market cap to £636m (40% up in the past 12 months), so the pension trustees are feeling a bit more comfortable – even if the shares have lost almost 20% this week.

That is the bitter-sweet reaction to 2020 results that saw revenue fall to £600m but operating profit margins rise to 22%. More to the point, some 20% of that revenue was digital – four times greater than five years ago within a similar-size business. That is the result of a focus on creating first party data from the users of the company’s large newspaper-centric sites. It now has 5m registered reader-users and continues to develop all-digital news sites in towns and cities where it doesn’t have newspapers.

The company converted 76% of its EBITDA into cash and is hoping that continuing digital growth will soon wholly compensate for the decline in print revenues.

That is substantial progress by Reach and real achievement by CEO Jim Mullen. But the company continues to depend on print newspapers. Some 80% of all revenue comes from print and 67% of that revenue is from copy sales. So, the development of free digital sites, however inspired, seems to be avoiding at least part of the challenge.

For all the digital invention, the publisher may actually be ignoring its best revenue prospects.

It’s a guessing game where Reach is actually going in the longterm. We speculated recently on just how a major price comparison site could exploit the news group’s huge national audiences and still-powerful print brands. That seems like a pretty good bet. But perhaps there is something much closer to home.

You don’t get it from the financial reporting and the claim of being “no.1 sports publisher in the UK” is camouflage. But, make no mistake, Reach is a company built on the UK’s obsession with football (soccer). It has strong newspapers in virtually all the cities represented in the English Premier League and also many of the leagues further down and in Scotland and Wales. Hard-bitten football fans in Liverpool, Manchester, London, Birmingham, Newcastle, Leicester and almost everywhere else are tuned into the nerdy up-close-and-personal reporting of Reach reporters who are fans themselves. These relationships can be gold dust. The newspapers and their websites devote substantial space to football. It is their best content. You can almost guess where big city sides are playing by the spikes in regional newspaper sales, and many of these metro city football writers also have large worldwide digital audiences.

Reach could certainly challenge the top-slice readership of The Athletic which launched its English Premier League football coverage in 2019. The UK’s largest news group has the capacity to create any number of paid-for and free local and national services to exploit the unrivalled strength of its football reporting but also to tap into the biggest paymasters of The Beautiful Game – betting and pay TV.

That could be the twin-track future for Reach Plc: football reporting, information, and betting services, perhaps including sports audio and video streaming; and family and lifestyle services with price comparison sites.

Like so much of the potential for legacy news brands, maximising the opportunities will depend on partnerships and joint ventures with companies that can help to monetize them. But we know how difficult these imperious media brands can find it to share anything at all. Reach – which happens to be a company hobbled by inherited debt – has so much potential locked up in its traditional media. But the clock is ticking.

Reach Plc