MediaRoom: Papers, paywalls and public money

After a fresh round of acquisitions, the last of New Zealand’s newspaper barons, Otago Daily Times owner Sir Julian Smith, looks ahead. David Williams reports for our MediaRoom column.

In his wood-panelled office, on the first floor of his downtown Dunedin building, Sir Julian Smith grabs that day’s Otago Daily Times, scrunches over to page two, and thrusts it forward as evidence.

That day’s What’s With That? column focuses on the weather, and reprints the front page from July 29, 1957, with the headline ‘SNOWSTORM SWEEPS PROVINCE’.

Many readers would have marvelled at the pictures, including dramatic scenes of cars being pushed in deep snow. Not Smith. He notes there’s about 10 stories on what is a very busy page and confidently states that’ll appeal to 10 times as many casual readers as a tabloid cover featuring only one story.

“I think we should be back to putting more stories on the front page, and probably a bit briefer. If you’re trying to attract the widest number of people to read the product, everybody’s got different tastes and interests.”

People have limited time, he says. “Today I think that’s more relevant than it was back in 1957.”

For an accountant, Smith’s got more than a passing interest in editorial decisions. In a wide-ranging interview with Newsroom, he shares his views on broadsheets going tabloid, the merits of paywalls and whether public money should be used to prop up newspapers.

The newspaper veteran – whose family is worth an estimated $80 million – throws some questions at the industry. As he says, his company can’t go it alone. But there are also some questions for him. The biggest, perhaps, is that given he’s now in his 70s – and “officially” retired two years ago – who’s poised to take over?

Smith joined the board of family company Allied Press Ltd in 1974, after the death of his father. But his family’s lineage in newspapers trace back to the 1860s, when his great-great-grandfather, George Bell, started writing editorials for the ODT, before breaking out on his own.

According to a Listener story from 2013, the year he was knighted, Smith was told never to expect to be part of the family business. Now, he’s the leading independent figure in newspapers in this country, and a dominant force in South Island publishing.

Allied Press will still be shaped by the industry, which is in a state of flux. The StuffMe merger is still being considered by the Court of Appeal, while another merger proposal, this time across the Tasman, would see Stuff owner Fairfax Media swallowed by Nine Entertainment Co and its New Zealand assets up for sale.

Who knows, Allied Press recent buy-up might not be its last.

Weathering the storm

Twenty years ago, Allied Press was mocked as too wedded to print; the ODT format too old-school and its language too staid. But it has been the industry’s quiet achiever, seeing off competitors and weathering the internet storm better than most.

The ODT’s paper-of-record attitude, including a dedication to covering courts and councils, has endeared itself to readers. It had 32,145 average net circulation in the year to March; a creditable 3 percent drop. Compare that to other big-name titles NZ Herald (6 percent drop), The Press (9.5 percent drop) and Wellington’s Dominion Post (10 percent drop).

Its loyal readers must pinch themselves when travelling to other centres, marvelling at the cornucopia of local stories produced by the daily paper.

But the ODT is only part of Allied Press’s story. It has a healthy stable of community papers, which has been bolstered this year by acquisitions of Christchurch’s Star Media (publisher of the Christchurch Star, its associated community papers and several magazines), from family interests and the purchase of Balclutha’s Clutha Leader from Stuff. The Greymouth Evening Star Company, in which Allied Press has a controlling stake, bought the Kaikoura Star from Stuff. Now, the only part of the South Island not touched by Allied Press is Nelson and Marlborough.

(Aside from its news websites, the company also owns 80 percent of free buy-and-sell website Post a Note, and receives hundreds of thousands of dollars from taxpayers to run online TV station The South Today.)

“The number of publications you can fit in within the same fixed overheads, the better the return’s likely to be.” – Sir Julian Smith

Smith admits it’s tough times for newspapers. So why buy more? “We need growth – the company can’t stand still,” he says.

The Clutha Leader was a gap in its regional coverage. And the purchase settles an old score – as it was “sold over our heads to Fairfax”. Star Media was owned by Smith’s brother Nick’s side of the family. Having the Christchurch company within the fold means it has a stake in the South Island’s biggest city. In Smith’s mind, the operation has the most potential.

The Kaikoura Star, meanwhile, is a similar out-of-area growth move for The Greymouth Evening Star Company, as the West Coast is “pretty confined” for ways to increase newspaper advertising.

The overall strategy is more simple, and more reliant on the finances. Allied Press has reasonably fixed, and high, running costs for its printing press, Smith says. Adding papers doesn’t significantly change those overheads.

“And therefore the number of publications you can fit in within the same fixed overheads, the better the return’s likely to be.”

Smith says community papers “have worked quite well”. He now hopes the recent expansion can settle down so the publications can be “trimmed and organised” and the company can “swap things around” to make them “viable”.

“With the community papers, we’re in a position to offer a newsprint solution for the South Island at least, because you’re covering most of the population.”

Do his ambitions extend to Nelson/Marlborough? “We don’t want to bite off too much,” Smith says. The company doesn’t want to get sidetracked by smaller acquisitions that might not add greatly to the overall picture.

Smith’s strategy seems to be: slow and steady wins the race.

‘Maybe there’s nothing to buy’

What about daily newspapers? Does Smith want the Southland Times?

He notes Stuff’s owner, Australian listed company Fairfax Media Group, last month halved the value of its New Zealand assets to $44 million. And if Fairfax’s proposed merger with Nine Entertainment goes ahead, there have been signals the Kiwi operation will be put on the block.

The Stuff papers, including the Southland Times, have been truncated, in size and in their local coverage, he says. Local voices have been cut and sports reporters laid off. “Maybe there’s nothing to buy,” he says, uncharitably.

While Allied Press won’t take on the Southland Times head on, the ODT has bolstered its Invercargill operation (restoring a reporter position vacated two years ago), centred on the Southland Express community paper.  

Smith: “Rather than us trying to move in there with a heavy hand, we’re just filling a gap and see where it goes.”

(He doesn’t give numbers but says home delivery in Invercargill has picked up.)

Sport is an obvious battleground. The ODT has pulled its award-winning Monday tabloid, World Focus, inside the paper, making room for a sport pullout, with the proud tagline “We have the south covered”. Today’s regional page lead story tracks plans for a new Invercargill arts centre.

Print first, if possible

The ODT puts breaking news on its website but saves the majority of its newspaper stories for the following day. The website’s an expensive operation, Smith notes, but “we know that we’ve got to be there”.

In March 2016, the ODT announced online – and in a letter to subscribers – that a metered paywall was on its way. (Something the Herald is also pursuing.) So where is it?

It’s still being tested, Smith says. Like everything else with IT, he says, it’s taken longer than expected. But the principle is right, because the paper’s information is valuable. “Our view was to put a paywall in. It still is.”

Smith punches two numbers into his phone, calling commercial manager Matthew Holdridge to confirm details of the paywall. “I said that’s been going for years,” Smith barks in his brusque manner. “It hasn’t been forgotten about, has it?” No, Holdridge assures him – the paywalled site is working within Allied Press’s building. “We’ve got more testing to do. But still the plan is to launch it.”

Smith says Allied Press needs to promote better its taxpayer-funded TV news channel, The South Today. But he also appears wary of pouring too much time and money into digital, something he deems a “serious threat”. There’s money flowing into digital advertising, but most of it isn’t going to newspapers.

“This is where newspapers have to look at the cost structure and try and make all the efficiencies they can.”

Does that mean a public model might be necessary, like Britain’s BBC employing regional reporters for newspapers? The problem with that, Smith thinks, is if companies rely on that funding and then governments change the rules. He’s not convinced it’s the right way to go. “[But] if it was a case of not having a paper, I’d rather see the funding to make it survive.”

Will there be an ODT printed in 10 years? “Hopefully there will be,” he says, uncertainly. It’s something he’d like to see. “I’d hope to see that The Press would be printed and I’d hope to see the Southland Times would be printed.” But, he adds, they’ve got to be good products to survive.

Media own-goals

The decline of newspapers in New Zealand hasn’t been helped by bad press – ironically even from some industry players.

Fairfax Media big boss Greg Hywood floated the idea in 2016 that the flagship papers the Sydney Morning Herald and Melbourne Age might cut its weekday editions. (Although last year, the company clarified its weekday editions would continue for “some years”.)

Already some New Zealand mastheads have down-sized – specifically, the Nelson Mail and Marlborough Express, with more expected to follow. But the herd mentality that has sent other broadsheet publishers to a tabloid size hasn’t moved Allied Press. “We’d probably change to tabloid tomorrow if you could tell me we’d double the circulation,” Smith says. “But the reality is you won’t, you’d lose it.”

Reducing the scope and scale of newspapers is a problem for advertising But it’s not all doom and gloom, Smith says. He calls on the Newspaper Publishers Association to lead the fightback and says he’d like the Newspaper Advertising Bureau, through which national advertising is sold, to be more effective. 

“We can’t do it on our own,” Smith says. “People who want to have an advertising campaign across the country, they’re not going to say just put an ad in the ODT.”

Awaiting StuffMe

Right now, the industry’s biggest paralysing force has been the StuffMe merger, still being considered by the Court of Appeal. If the proposal is approved, Allied Press and other small players would inevitably be squeezed as the giant company wields its market clout. But should the merger proposal fall over, and Nine Entertainment swallows Fairfax and can’t find a single buyer for its New Zealand assets, Smith’s company might benefit.

“There are a lot of balls up in the air,” former Herald editor-in-chief Gavin Ellis says. “You might say that Sir Julian Smith may be standing underneath to see which ones he catches.”

But will it be the knight himself standing there? Smith officially stepped down from the day-to-day running of Allied Press in June 2016. Grant McKenzie – who was ill when Newsroom visited – is chief executive now.

Smith says he’d like Allied Press to remain in family ownership. His two sons, Richard and James, work in the business, while niece Charlotte Smulders runs Christchurch’s Star Media.

“Who knows what the future will be for the ownership of this place?” Smith says. “It will depend on who’s coming through and what vision they’ve got and where they want to take it to.”

In a tone as dry as a desert, he quips: “All I know is I was supposed to be retired.”

Disclosure: The writer has previously worked for Allied Press and Fairfax.

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