As Richard Desmond looks to sell the Express and Daily Star to Trinity Mirror, what does this mean for the national press market?
As he prepares to exit the media after a lifetime in the business, Richard Desmond, owner of the Daily and Sunday Express, will leave a very strange legacy. Falling circulations, staff who had to endure, until recently, an eight year pay freeze, a talent for playing the drums and having an afternoon banana delivered on a silver tray by his personal butler. Along the way there have also been the adult magazines and TV channels, which may have permanently cost him a knighthood or a peerage, even though he no longer owns them. Yet there is one area where Desmond is deadly serious and where he rules supreme: when he is squeezing the maximum amount of profit from assets facing increasing competition and structural decline.
Desmond bought the Express group back in 2000 for £125m and is looking to sell it onto Trinity Mirror for a purported £120m…not bad when you consider the Daily Express circulation has dropped circa 60% between then and now. There will almost certainly be many last-minute squabbles about price before a deal is finally done, but the advantages of consolidation for Trinity Mirror (which has already expanded in local and regional press with the Local World deal) are great enough to push this deal over the line.
There are of course, two forms of consolidation. One is in a rapidly expanding sector, where the race is on to dominate the future and create a monopoly (if the competition authorities allow it to happen). The other involves the consolidation of decline, a huddling together for warmth in troublesome times. There is no doubt what this one is.
Now the economic case for the publications coming together is very strong and should dominate the sensibilities of any Competition and Markets Authority inquiry. The national newspaper market is still clearly segmented and there would remain serious competitive rivals in the sectors that would be affected by any Desmond-Trinity Mirror deal. The Daily Mail is still by far the most powerful player in the middle-market, just as The Sun is at the more popular end.
All Response Media Viewpoint
If the deal goes through, Trinity Mirror will have increased their overall market share from 12% to 22%, so whilst a healthy improvement, what does this mean for our clients? We’ve looked at this across three different areas: the effect on individual title rates, what new opportunities they can offer and how will this affect their value.
Firstly, despite Trinity now commanding a more comfortable slice of the newspaper market overall, they still are not dominant enough in the individual markets (popular or mid-market sectors) to leverage higher pricing. If we compare the daily popular titles, the Sun delivers over 1.5m sales per day, compared to ‘new’ Trinity’s 1.2m (Daily Mirror, Daily Record, Daily Star). Therefore, based on their circulations, comparative cost per thousands (CPTs) will remain roughly the same. Similarly, with the mid-market titles, the Mail/Mail on Sunday has a 19% share and the Express has 5% – as such, this doesn’t put Trinity in a position to demand any increases to rates. Furthermore, we have always dealt on the basis of campaign performance, not simple reach, in order to always deliver the best efficiency for client partners.
Secondly, both these publishers come from a very commercial background, where they are open to developing new revenue streams and opportunities, as such, we don’t see why this mind-set should change. Also, as they will have a wider combined portfolio of titles, we can expect them to be looking at ways they can improve their offerings so that we can in turn deliver new solutions with an improved return on investment (ROI).
Lastly, we suspect the Mirror’s more left-of-centre editorial style will help take some of the rough edges off of both the Star’s stance on Page 3, and the Express’s views on Europe. We have seen over the last year how strong journalism with the quality press has strengthened their circulations, so if the Express can adopt a similar approach, they too could see an improvement. This in turn will lead to performance benefits to our clients’ activity, without necessarily a change in cost.
So unlike Desmond, Trinity are clearly keen to keep up their investment in print journalism, so a potential shift in editorial stance and a desire to do more with the titles should offer advertisers some new opportunities. As such, we see this merger as a positive thing for the market and our client partners.