Don't believe everything you read in the press
Jeremy Warner on how David Montgomery may be about to vanquish his critics
Saturday 06 June 1998
While this offers insights that you don't get about other businesses, it doesn't necessarily make for a fair, impartial or useful view of what's happening in the world. Often these accounts are coloured by a mixture of the overtly commercial and the cynically personal.
The commercial interest takes the form either of total denial - as often happens in the Murdoch press when writing about the affairs of its proprietor - or of knocking copy about a rival organisation, which is happening with growing levels of vitriol throughout the press.
Then there is the personal. Senior and even quite junior positions in the media are traded with an abandon matched only by the City. There seems to be a perpetual game of musical chairs in progress. Sacked or otherwise disaffected employees find it easy to gain an alternative platform to vent their spleen. In my experience, employees in nearly all companies, up to an alarmingly high level of management, have a poor view of the abilities and strategies of their senior executives. But in no other industry is it possible for the employee, in this case the journalist, to gain such a powerful public medium to air their grievances, as well as their opinions.
The most successful companies, not just in the media but in all industries, are those that manage to bridge this divide between management and workforce. Lamentably they are few and far between. In any event, I suspect you would find all industries written about with the same critical eye and venom as media companies, given the same platform and writing skills. There is already a growing body of this sort of material on the Internet and certainly it makes for great entertainment.
So what's my point? I don't want to apologise for anyone, but I do want to examine a particular case of this kind of treatment. It's hard to recall a businessman receiving a worse press in recent times than that dished out to David Montgomery, chief executive of Mirror Group. He's been demonised in a way normally reserved for international fraudsters or spectacular bankrupts. As far as media moguls go, only Rupert Murdoch gets it more in the neck, and with him there's usually a grudging respect behind the strictures. Mr Montgomery has had it so badly that it's not just public opinion that is affected, but City perceptions too, and it has plainly damaged his share price.
Bits of it may or may not be fair, but quite a lot of it is not. Personally Mr Montgomery is not what he's often made out to be. He's determined and ambitious, undoubtedly ruthless and certainly a little awkward, but he also has a quiet charm and is a consummate professional. As an Ulsterman, he's played a vital role in the Northern Ireland peace process, which is acknowledged by the Prime Minister himself, often spending long hours haranguing and persuading his unionist countrymen of the need to cede ground and give up the old conflict.
His record as a businessman - which is actually pretty good - is also quite unrecognisable in what is generally written about him. When he took over at Mirror Group in the wake of Maxwell's death, there were serious doubts about the survival of the company, if not its titles. Yet Mirror Group was put back on an even keel financially, the old corrupt practices and excesses of the Maxwell years were exorcised, and the papers were moved to new, low-cost premises in Canary Wharf. Today Mirror Group achieves some of the highest operating margins in the industry.
In achieving these, Mr Montgomery may have cut too deeply into the editorial resource of his products. Certainly we have felt that on The Independent, which Mirror Group half owned until recently. There has also been a lack of any clear editorial strategy, which has been reflected in the declining circulations of all his main titles.
It is chiefly these two factors which have worried the City, led to the underperformance of Mirror Group's share price in recent years, and prompted the great outpouring of hostile copy. Furthermore, Mirror Group's diversifications have proved costly and not particularly inspired. In this department, however, Mr Montgomery has found himself largely a victim of fortune.
Mirror Group's comparatively small size and the one-product nature of the company - which is essentially the Mirror and its satellites - has made it hard to compete with the greater fire power of larger, diversified media groups such as News Corporation. At the same time, the arbitrary nature of the cross-media ownership rules have blocked Mirror Group from profitable diversification into TV. Ironically, Mirror Group recently fell below the 20 per cent of national newspaper circulation which acts as a threshold for ownership of a TV franchise. Unfortunately, everything decent has long since been snapped up.
None of this may be much of an excuse, but it does at least explain why Mr Montgomery has adopted the approach he has at Mirror Group. Most businessmen and financiers would readily understand the balance that needs to be achieved between costs and revenue if an acceptable rate of return is to be earned, even if many journalists do not. As a relatively small player in a mature and highly competitive market, this is never achieved without a degree of pain, and it requires tough decisions.
Furthermore it is now apparent beyond doubt that Mirror Group is not the busted flush many of these accounts claim. With its titles beginning so show unmistakable signs of life under the guiding hand of Mirror Group's new deputy chief executive, Kelvin MacKenzie, the company has become the object of a number of bid approaches. We already know about Axel Springer and Trinity. Not generally known about is the possibility of a venture capital bid for the company in conjunction with some or all of the top management. Royal Bank of Scotland is being lined up to provide finance. There's also the possibility of a bid from the Barclays' fledgling media empire.
Mr Montgomery's supposed asking price of 300p a share begins to look not as impossible as it might have seemed. And if he achieves that, none of the sniping he has received from the press will matter a jot. Certainly there will be not a murmur of discontent in the City.
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