The people who run Independent News & Media (INM) have a plan, dubbed INM@21, and so named because it runs out to 2021. In three years’ time, INM may be poised to come-of-age as a modern media company. Alternatively, INM may no longer be INM.
If the release of its 2018 financial results on Friday showed anything, it is that these are deeply awkward times for the company behind the Irish Independent, Sunday Independent, Sunday World and multiple other newspapers. Here are some of the reasons why.
INM's business is still mostly newspaper publishing. Companies that print newspapers like to drop the "paper" and describe themselves as news groups or news brands, reflecting the fact that they're more than just one medium. INM operates several high-traffic websites and apps – but last year its digital revenues accounted for less than 8 per cent of the total.
And because the online advertising market sucks for publishers, INM’s digital revenues are now going backwards. They’re in decline.
The low digital share of revenues matters. As chief executive Michael Doorly pointed out, INM is in the happy position of making a profit, even if that profit was down 15.4 per cent to €24.1 million. But any investor, current or future, is only interested in businesses capable of growth. Irish print advertising revenues are in a pattern of double-digit annual decline – INM's own print ad revenues fell 10.8 per cent last year – and circulation trends are also heading consistently south.
The share-of-revenues metric matters because it shows how much work media groups have to do to transition to a digital business that at least has a hope of expanding. In INM’s case, it’s a lot.
INM seems like a much smaller company. Its footprint having shrunk dramatically since the days of the bubbly O'Reilly empire, INM is sitting on a cash pile with few acquisition options – in large part because its current largest shareholder, Communicorp billionaire Denis O'Brien, will trigger every media plurality alarm going.
But INM also looks like a smaller business thanks to the application of IFRS 15. Under this accounting standard, which reduces both revenues and costs, it now only recognises a distribution fee from the third-party publications it distributes, rather than the full selling price and cost of sale. So while its 2018 revenues were down just 2.1 per cent on the 2017 figure of €195 million, that number was restated down from €293 million.
It has challenges that other media groups don't. The word "challenges" was used five times in the company's market update – four times in reference to those of the wider industry. But not all woes are common. Other news groups have substantial non-advertising sources of digital income from subscription charges or Guardian-esque donations. They may still be fighting to earn as much from digital customers as they did from print ones, but they have a digital model in place that extends beyond advertising.
INM, playing catch-up, has now put a date on when it will start collecting subscriber income – “early 2020”, says Doorly – and will increasingly ask digital users to register before then. But this is tricky and sensitive. It “can’t just slap up a paywall”.
INM has expenses that are unique to INM. The not-so-small matter of the corporate watchdog ODCE and the Data Protection Commissioner's investigations into an alleged 2014 data breach, plus the appointment of High Court inspectors, cost INM €3.5 million in legal fees in 2018. The figure won't be as high in 2019, Doorly indicated, and he doesn't believe the company is "overly exposed" to potential fines. But in the context of, say, the €5 million it is putting into digital investment in 2019, INM's outlay on this affair is not immaterial.
The company also paid €1.5 million in severance to former chief executive Robert Pitt, who blew the whistle to the ODCE, and roughly €700,000 to his recently departed chief financial officer and ally Ryan Preston.
Cost-cutting is endemic at the company. Reacting to its latest redundancy scheme, the National Union of Journalists said editorial cutbacks would have "a devastating impact on the ability of INM to undertake its core business". Doorly, on the other hand, says "if you're going to protect the core business, we're going to have to be as efficient as we can". Either way, between 2014 and 2018, INM spent €13 million on restructuring, and there's more to come.
New digital hires are on lower pay scales than departing journalists, but it would be wrong to say there’s no money to be made in media: Doorly’s remuneration last year was €632,000.
INM may have brand trouble. "Certain headlines haven't been helpful," admitted the chief executive when asked how he would assess where INM's brand sits now after several turbulent years. But staff at its individual properties, from the Kerryman to CarsIreland.ie, are "getting on with it", he noted. "Despite what is happening at corporate level, the brands continue to serve their community as they have always done."
Still, distractions don’t help at a time when media consumption is shifting further to a brand-disloyal mobile norm, and when a stream of ventures are courting younger consumers with voguish single-word names and absolutely nothing in their logos that resembles a harp.
