Media: All about ... The Independent

Can The Indy's new chief executive retain hold of the title?

Rupert Murdoch's News Corporation has not been the only media group to experience management upheaval in recent times. Last week, Tony O'Reilly, the chief executive of Independent News & Media, announced that he is to retire from the role on his 73rd birthday in May.

Like the Murdochs, the O'Reilly family seem to be building a media dynasty, with O'Reilly's son, Gavin O'Reilly, set to succeed him. Gavin, 42, a former ad man (he worked at DDB Needham in the 80s), has been the chief operating officer of INM for the past eight years.

While his father's are big shoes to fill (Tony O'Reilly is a former Ireland rugby union international and was chairman of Heinz - the first non-family member to lead the food company), observers suggest Gavin is more than up to the task.

The announcement of O'Reilly senior's retirement created a flurry of speculation: would it lead to the sale of INM's flagship UK title, The Independent, and was it a sop to pacify renegade INM shareholder Denis O'Brien (with whom the O'Reillys have held a war of words in recent years)?

In the immediate future, little looks set to change in terms of INM's immediate strategy, with Gavin O'Reilly making reassuring noises about retaining ownership of The Independent, despite the title losing an estimated £10 million a year.

He says that O'Brien has now bought into a programme of job cuts and other cost-cutting at the title and INM also plans to push on with a sale of its outdoor business in South Africa as it faces up to the effects of the advertising recession.

1. While most commentators focus on The Independent, INM is a broad-based media group with interests in newspapers, outdoor and radio. In the year to 31 March 2008, INM made pre-tax profits of £264 million. However, the group has indicated that the downturn will affect its performance for this current financial year and estimates that revenues will be down by around 3 per cent to EUR1.4 billion.

INM publishes more than 200 newspaper and magazine titles, operates 130 radio stations, and has outdoor advertising businesses in Hong Kong, Malaysia, India, Indonesia and across Africa. Despite criticism in some quarters over a lack of digital strategy, INM has launched more than 100 websites across its operations.

2. The Independent may be a small part of the INM empire in terms of its revenue but its high profile makes it the figurehead of the group (especially to UK commentators). Gavin O'Reilly has expressed frustration at the intense focus on the future of the title, calling this "depressing", and argues that it is an important part of the group because it provides copy to the group's 200 other titles and lends the group access to world leaders and other people of influence.

However, the title has caused division at INM, with O'Brien, the second-largest investor (behind O'Reilly) with a 22 per cent stake, calling for it to be sold. Gavin O'Reilly says that these divisions have now been settled and that O'Brien is supportive of plans to back The Independent.

3. Last year, INM supported The Independent with editorial investment under the new editor, Roger Alton, and a subsequent redesign. However, the wisdom of raising its coverprice to £1 has been questioned by some in the advertising industry. The title also introduced a new strategy in ad sales with the hiring of the Ogilvy director Daryl Fielding as commercial director. Initiatives since have included distributing a Red Bull-branded magazine, The Red Bulletin, with The Independent.

4However, the biting ad recession and dramatic circulation decline (it was down 18.4 per cent to 205,964 during February according to ABC figures) has piled pressure on The Independent. The managing director, Simon Kelner, recently announced, alongside a redundancy programme that will lead to 90 job losses, a deal with Associated Newspapers that will involve it moving out of its Docklands offices into Associated's premises.

This, in turn, has led to speculation that the title may be acquired by Alexander Lebedev, who is also engaged in a partnership with Associated following his recent acquisition of a majority stake in London's Evening Standard. Other reports have suggested that Associated itself and News International could emerge as potential bidders for The Independent.

WHAT IT MEANS FOR ...

THE INDEPENDENT

- The announcement of Tony O'Reilly's retirement has led to speculation that INM, which has appointed a number of new executives to its board, may look to sell off its UK national title. Gavin O'Reilly has denied that talks have already taken place with Alexander Lebedev, the owner of the Evening Standard, or other newspaper groups such as Associated Newspapers and News International. However, analysts say that the downturn and the likely fall in INM revenues when it announces its end-of-year results in April will put pressure on it to dispose of any loss-making businesses.

- Gavin O'Reilly and the INM board will weigh this against the perceived strategic importance of retaining ownership of a national UK newspaper and the access it affords to the UK establishment.

ADVERTISERS

- Gavin O'Reilly's appointment as chief executive ensures some level of continuity in the leadership at INM. He is seen as a driven, capable leader with an understanding of the ad market, qualities that will be vital in maintaining standards.

- O'Reilly has also expressed a desire to grow and invest in digital content, something that will please advertisers. However, his main concern is to find a successful revenue model in this area. He said recently: "I don't accept you have to lose money online. Publishers are looking at what they give away free and if people want to access it, they'll have to pay, just as in print." Advertisers will be interested in the effect a pay model will have on the size of online audiences.

- While O'Reilly seems committed to The Independent, his willingness to push through a cost-cutting programme and agree to the deal with Associated shows that he is not over-sentimental toward the title. Advertisers will be concerned cost-cutting does not lead to an obvious decline in editorial quality.

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