James Ashton: Contrasting stories in the fast-changing newspaper world
Outlook: In the past, Viscount Rothermere has been a reluctant seller of titles
It is a measure of how far the world has turned that Viscount Rothermere is entertaining a deal with David Montgomery to ease his Daily Mail group out of local media. Both have printer's ink coursing through their veins, but that lifeblood sustains two very different visions for newspapers.
Viscount Rothermere is a passionate believer in the future of print, sanctioning one of the biggest budgets on Fleet Street to nurture loyal readers. If the industry must decline, the Daily Mail and Metro will decline more slowly than the competition, he reasons. By the numerous acquisitions he has attempted over the years, Mr Montgomery, the former Mirror Group boss, must love the industry too.
But his steely reputation for chopping costs means he harbours more aggressive methods to prepare newspapers for a digital future by making them leaner and meaner.
As one is a willing seller and the other a willing buyer, it is perhaps surprising this pair haven't got together before. Viscount Rothermere first tried to exit Northcliffe, whose titles include the Leicester Mercury and Bristol Evening Post, six years ago when offers from private-equity groups fell short of a toppy £1.5bn valuation. As the years have rolled by, the price has tumbled – and become less of an issue than an exit itself.
In the past, Viscount Rothermere has been a reluctant seller of titles, saying that coming to terms with the sale of the London Evening Standard – now restored to profitability under the same ownership as The Independent – was as difficult as dealing with his parents' death.
But commercial realities intervene. Instead of marvelling at the rocketing army of readers garnered by showbiz-obsessed Mail Online, investors are more likely to be distracted by the plummeting profits at Northcliffe, once one of the group's main cash cows.
Martin Morgan, the Daily Mail and General Trust (DMGT) chief executive, would far rather talk up the prospects for business assets such as RMS, which models risk and analyses world events for insurance clients, and will be kept busy this week as Hurricane Sandy whips across America.
The irony is that now it has got its debt level under control, DMGT could lead a consolidation of the regional press, but doesn't want to. Northcliffe, with its Midlands and southern England presence, is the prize that rival publishers Trinity Mirror and Johnston Press covet. Stripping out costs from a bigger business is a decent strategy while they try to fathom new digital revenue streams to replace classified advertising, but neither has the balance-sheet firepower to make it happen.
Injecting Northcliffe into Trinity to create a virtually nationwide local publisher was on the cards two years ago, but revisiting that tie-up is unlikely as Trinity's emerging phone-hacking scandal has the potential, in a worst-case scenario, to make it even more toxic than its pension deficit.
Cue Mr Montgomery. Forging a company that will pool Northcliffe with Iliffe News & Media, owner of the Cambridge News among other titles, creates a platform to buy up more regional assets. It is an industry that would benefit from being refashioned away from the glare of the public markets, just as commercial radio has been under Charles Allen and Ashley Tabor at Global Radio. And putting Mr Montgomery at the helm means the newspapers' paternalistic owners are sufficiently distanced, and can look the other way as he sharpens the axe.
However, for all his fearsome reputation, Mr Montgomery's recent record has been patchy, not least in keeping his backers sweet. He clung on to power at Mecom, his European newspaper empire, despite a boardroom walkout and investor revolt over the company's giant debt pile and share underperformance that eventually forced him to go. Another attempt at constructing a press group, begun with the Belfast News Letter and the Derry Journal, ended when his backer 3i changed its mind less than two years into the project. You can't fault the guy for his persistence.
Is Pearson's new chapter the right option?
Pearson and Bertelsmann make two far less unlikely bedfellows. After all, they've spliced assets together before. What is now RTL, Bertelsmann's biggest division, contains Pearson's old TV arm – maker of Baywatch in its day – which Dame Marjorie Scardino exited along the way to building the world's largest education company.
For clues to why Penguin and Random House are being combined now, readers need only turn to Portfolio Penguin, the publisher's business imprint. From there, you can pick up a copy of Killing Giants: 10 Strategies To Topple The Goliath In Your Industry by Stephen Denny. I wonder if there is a chapter on tackling Amazon and Apple, whose ebook devices are already shaking up what used to be a slow, steady industry?
The trouble is that Pearson has options, and by merging has chosen the one that won't yield an immediate return for investors. These are the same investors who suggested not so long ago that Dame Marjorie, who is stepping down at the end of this year, sell assets from Pearson's treasure chest to raise cash for new education and high-tech acquisitions instead of passing the bowl round for a rights issue.
The company isn't exactly short of money, but nor is it short of ambition. Earlier this month, it splashed $650m (£403m) on online firm EmbanetCompass – its largest purchase in five years. With new boss John Fallon eager to make his mark from January, and Rupert Murdoch seemingly a keen buyer of Penguin to bolster his own publishing efforts, shareholders could be forgiven for wishing that Pearson had circulated another Portfolio paperback with the board papers.
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