It was like the meeting of the five families in The Godfather when the heads of rival clans sat down to negotiate.
Just getting DMGT, Guardian Media Group, News UK, Telegraph Media Group and Trinity Mirror to start discussing pooling ad sales six months ago was an achievement in an industry notorious for its egos.
But after two rounds of research and legal work – estimated to have cost more than £1m – into the practicalities of setting up a joint sales house, the owner of the Daily Mail has pulled out.
As Campaign reported last week, DMGT felt the plan had not advanced enough and required a lot more work and costs before the participants would be ready to submit a proposal to the Competition & Markets Authority.
Even then, a CMA investigation would likely take a year or longer, leaving the publishers locked in limbo.
National newspapers’ annual ad revenues have halved from £1.6bn in 2008 to £800m, with conditions worsening in the past 18 months as big supermarkets shifted money to Google and Facebook (see box, below). Yet it is far from certain that the CMA would approve a single ad sales house.
So DMGT has decided to "step back" and pursue its "own broader commercial priorities".
The remaining publishers insist the initiative, originally dubbed Project Juno (after the Juno space probe) but renamed Project Rio (inspired by the Olympics), is far from dead. A spokesman says: "The companies remain committed to finding greater scale for advertisers through our digital and print channels."
The idea was simple. A single sales point for news brands would give publishers greater leverage, cut costs and make it easier for agencies and advertisers to buy across titles.
The newspaper industry is incapable of working together to save itself
Importantly, it would have scale to be a genuine alternative to Google and Facebook, and could be a technology leader in areas such as header bidding – a form of premium programmatic.
However, the publishers struggled to decide on the sales house’s structure. Print only, print and digital, or print, digital and data were among the options discussed. How to split the revenue has also been contentious.
The publishers must agree before making a submission to the CMA because they cannot amend it during the regulatory investigation. "The challenge is nailing down what the proposition is," one participant says. "It’s not immediately obvious what the answer is or else people would rush towards it."
Rio’s supporters claim media buyers would welcome the move but the message from agency land is mixed.
"It was and is an awful idea and made rearranging chairs on the Titanic look inspired," Colin Gottlieb, EMEA chief executive of Omnicom Media Group, says in a personal capacity. "The creation of a joint ad sales house would have done nothing to prevent the demise of an independent press."
DMGT’s withdrawal "is precisely the problem", he claims: "The news-paper industry is incapable of working together to save itself." Gottlieb argues newspapers should "look to the music business and learn its lessons fast" from streaming, which gives customers a user-friendly, on-demand platform.
Anthony Mann, print trading director at Publicis Media, takes a more balanced view of the project: "Its rich data play presents an exciting opportunity and the prospect of standardised formatting allows for a more cost- effective and simplistic transaction."
But some aspects of joint ad sales "don’t sit well with the majority of agency groups", he warns: "It is the
diverse offering of the national press that allows for fair trade."
Time for a rethink
The publishers received legal advice that if they invited all the main players, including Express Newspapers, which showed little interest, then no-one could accuse Rio of being anti-competitive during the planning stage.
Now its supporters need a rethink. Steve Booth, who was hired by the publishers to knock heads together six months ago, has stepped back but remains an advisor. "We’re a long way from reaching agreement," one newspaper boss says, admitting "the level of complexity" is even greater than when they began last summer.
The publishers face three choices: press ahead with Rio, split into several "mini-Rios" or remain separate.
Going it alone is tempting because growth areas such as native ads are creative ways to drive revenue. Sales directors know outsourcing ad sales could put them out of a job. As Hamish Nicklin, chief revenue officer at GMG, said in October last year: "Turkeys don’t vote for Christmas."
Setting up "mini-Rios" is logical. This would be similar to TV, which has three sales houses. A media owner would have the option of changing sales house and that would pose fewer competition issues.
Trinity Mirror and TMG discussed pooling ad sales before Rio was on the agenda. The publisher of the Daily Mirror also talked to Express Newspapers about a takeover in 2015 and they are talking again about a joint venture as Rio has come off the boil.
Supporters of the project think pan-industry collaboration might need to go deeper than ad sales. There are a number of possibilities:
• Pooling first-party data. News brands reach 46 million Britons a month – more than Facebook in the UK.
• Building a digital distribution platform for news brands. News UK is said to be looking at how its subsidiary Unruly Media could help.
• Consolidating back-office functions, including printing. That is said to be one reason why Trinity Mirror has been talking to Express Newspapers, which has invested in modern presses.
• Sharing editorial content between newspapers – even though journalists might baulk at the prospect.
• Improving the marketing of the medium because critics say Newsworks has a low profile (see box, above).
Optimists draw comfort that Rio has got this far. "I’ve never seen the industry so united – the Mail excepted," one newspaper boss says, noting there has also been unanimous opposition to Section 40, the legislation that could mean onerous legal costs if publishers don’t sign up to a state-approved
regulator. "People [in newspapers] are getting to this realisation that they can’t tear each other apart any more."
However, newspaper publishers have failed repeatedly to face up to problems in both the UK and in other markets. Gottlieb cautions: "The point of capitulation is only a few years away for some major newspaper titles."
Paywalls still look the best way to stave off financial meltdown. But that has worrying implications for those who still believe passionately in an ad-supported news media with mass reach.
Newsworks in spotlight
Newsworks is under scrutiny from some of its members, who think the trade body should be fighting harder for the beleaguered newspaper industry.
One newspaper chief compares Newsworks unfavourably to how Thinkbox noisily champions TV and slaps down anyone who dares to question the power of the medium.
A sales director at another publisher complains that Newsworks is "too worthy" and focused on "trying to please everyone".
The organisation should "forget about trying to compete with Google and Facebook and concentrate on challenging the media that is chipping away at us, like radio and out-of-home" and think about "instigating a joined-up data play", he adds.
Newsworks has been conspicuously silent in the debate on joint ad sales but the publishers don’t appear to keep their own trade body in the loop.
It is thought that Newsworks only learned about DMGT pulling out of Rio from media reports.
Newsworks’ new chief executive, Vanessa Clifford, who stepped up in November, wants to take a punchier approach.
While Newsworks has won gold at the Media Week Awards for trade body research for the past two years, Clifford wants to use that work to sell the medium harder.
Supermarkets shun press spend
by Simon Gwynn
Supermarket press adspend fell by a third from 2014 to £155m in 2016, Nielsen data shows – that’s a £77m hole in newspapers’ income. The decline is not uniform: Lidl, Waitrose, Co-op and Iceland actually increased spend over the period, though the latter three each account for less than 5% of the sector’s total. But figures for Tesco and Asda, the top two spenders in 2014, are stark.
Asda more than halved its press budget from £49.4m to £21m. Tesco cut spend by more than 75% from £38.5m to just £9m. Tesco’s press spend began plummeting in late 2015 and for most of 2016 remained low. But it picked up strongly in November and December – so are the good times back? Chris Binns, joint chief strategy officer at MediaCom, said the figures showed that Tesco had not forsaken press ads but was being more methodical.
The festive campaign used Dunnhumby data to identify spikes in individual product demand in the 60 days to Christmas and placed ads featuring those items at optimal times. But much of the press spend across supermarkets has moved to digital, where ads can be targeted to relevant consumers – meaning brands can be confident that they’re not advertising pet food to animals haters.
Since print will never be able to offer that kind of fine-tuned delivery, it is likely that most of the money lost won’t be coming back.