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Panpa Bulletin : September 2010
Expect war, hope for peace www.panpa.org.au Good managers must continue to take cost out of the business, or history will repeat itself Newspaper printers don't have to lift a finger any more. Except one. Welcome along the way to fully-automated newspaper production with One Touch, the revolutionary concept from manroland. At the press of a button, tasks are performed that previously required countless separate actions: for makereadies, production changeover, printing and maintenance. Each day we are moving a little closer to this goal. And with our autoprint newspaper presses, full automation is within your reach. WE ARE PRINT.® The revolution in the pressroom has begun. With One Touch from manroland. www.manroland.com THE existence of the economic cycle is widely debated. I believe in it but a close friend, a world class economist and mathematician, tells me it's rubbish. Looking back over OECD data over the last 40 years, and personal experience, my hunch is that not only is there a cycle but this recent downturn wasn't it. Ratings agency Moody's appears to agree with its recently headlined article: "Revenues Set to Stabilise in 2010-11, But Long-Term Outlook Is Still Negative," (See www.moodys. com.) Despite my expert friend's assertion, there appears to be a ten/ eleven-year cycle. The US economy has dipped every decade since 1971/2. This can only lead me to conclude Moody's is right and we are heading for a second, if not so serious, downturn -- the so-called "double- dip recession". The news publishing industry is highly cyclical, but our challenge isn't this per se but the fact that in the past we have failed to learn how to manage and grow from it. So faced with this potential scenario, we need, as the Chinese proverb says, "Plan for War, and Hope for Peace." And the feedback is good. One thing that the last two years has shown us is that newspaper companies can be remarkably resilient. In the US, many publishers have dragged themselves back from bankruptcy. In France, with a highly complex labour market, the unions at Le Monde have recognised they need new owners and investors and, in return, they must give up some of their traditional control of the company. But we need to keep going. The hardest challenge is to continue to get cost out of the business. This is a painful and unpopular thing to say after so much sacrifice but better to slowly anticipate a need for further flexibility and belt- tightening, as Trinity Mirror is doing in Britain, than to suffer another heart-wrenching period of deep retrenchments. As The Economist reported earlier this month: "Newspapers have escaped cataclysm by becoming leaner and more focused." But in the northern hemisphere publishers, as a rule, were slow to anticipate what was coming, and even slower to react. The next crisis could affect burgeoning markets, such as Australia, India, China and Thailand. To be blunt, publishers need better tools to forecast market trends and better accounting mechanisms to respond to their consequences. Recruitment revenue cycles lead the economic cycle. Not the other way around. These indicators need to be implemented to ensure future profits are retained and enhanced. There is much debate about the extent to which resource cut-backs have affected quality and long term performance. In the UK, a study by media regulator Ofcom shows readers' perceptions of the quality of their newspapers have not fallen. Why? Because most of the savings have been made in production areas, which have been long-overdue. Having been so critical of my friends in the industry, what would I suggest? Management needs to remove an incremental 1-2 percent from core fixed operating costs every year regardless of revenue improvements; reserving the savings to protect and grow the business. For a newspaper with a 15-point operating margin, an incremental, annual 1 percent advance saving in costs would generate over five years a 4.2 percent of turnover that could be devoted to product development. This compares with Néstle which invests 2 percent of turnover in R&D and Google which sinks in 12 percent. I would establish a business development process -- there are a range of options -- not obsessed with digital but in providing realistic solutions for media consumers and communicators. My experience is that simple, cheap research -- talking to customers -- reveals a string of opportunities. Finally I would agree with the board on a long-term financial planning model for anticipating inevitable revenue cycles, so the business can reinvest in development when times are good, and not be reliant on, or threatened, by debt when things get tough. This isn't new thinking. The trends have been around for 40 years. The lessons to learn have been there for at least 20 years. Follow my thinking. If I'm wrong about the double-dip, you'll come out flourishing. If I'm right, well at least you'll survive. Giving up traditional ownership . . . A Parisian news-stand for Le Monde, which has changed from union-owned to private ownership. Image: Palagret, Creative Commons Jim Chisholm is an independent media consultant, based in France. He can be contacted at email@example.com To be blunt, publishers need better tools to forecast market trends" " Chisholm Opinion The PANPA Bulletin | SEPTEMBER 2010 | 23