While hacking may have put Rupert Murdoch into an unpleasant spotlight last month, the analysis of the direction of his business empire offers some uncomfortable truths for independent retailers who sell newspapers – which is most local shop owners in the grocery market.
Mr Murdoch has been very successful and retailers need to acknowledge that over the past 40 years he has made them a lot of money, particularly in the UK, through his investment in and vision for national newspapers. A chart in the FT provided an interesting commentary on the development of Mr Murdoch’s company. In 1980, newspapers and magazines accounted for 90 per cent of his revenues. In 1990, they accounted for 71 per cent. In 2000, they accounted for 45 per cent. In 2010, 11 per cent.
In part, the decline is explained by the expansion of his companies into broadcast TV, cable networks and films. In 1990 they were worth 1 per cent, 0 per cent and 8 per cent of his business respectively. By 2010 they were worth 5 per cent, 48 per cent and 29 per cent.
Print is the bedrock upon which the business was developed but the skills he learned in publishing newspapers were applied to audience development on TV and movie screens around the world. The newspapers funded the growth of the business and are still contributing to the group, even if the outlook is less rosy.
The news-based local shop has been the most successful across the same period of time. In the 1980s, just selling newspapers and magazines was the bedrock of a successful retail operation. In the 1990s, snacks and soft drinks and alcohol needed to be added. By the 2000s, if was full scale convenience.
Unlike News Corporation, most local shops are not scalable businesses. However, collectively independent retailers have had to change their mix to attract the audience of local shoppers. But this does not mean that you need to throw away the business model you started with.
I visited one shop in the Midlands recently and observed the fantastic fruit and vegetable display at the back. This looks fantastic, I said. Yes, said the owner, it is where my dad started out and he loves making it look good. It still contributes to the bottom line too!
It is easy to get carried away with fashion statements. Sometimes you need to ditch yesterday’s lines. Sometimes you need to retain them – as long as there is sufficient shopper demand. To use the language of the City, newspapers are still a hold.
Steve
15/08/2011
Interesting as alway, NI have increased the price of the Sun to 30p in our region today.
Tom Searle
19/08/2011
A hold but not for widows and orphans. Murdoch has removed one of the two reasons why the press barons own newspapers … that of social influence. They (the barons) are now left with profit from advertising which is geared to copies read. There is now a grave danger that more newspapers will close and that others will move to “free”.
Nick Shanagher
22/08/2011
A good point about widows and orphans. I spoke to one leading independent news retailer last year who was still prepared to work his socks off but he wanted more from the publishers about their five year outlook for the trade. He wanted to hand his shop over to his manager and wanted to keep his manager involved in the business – but he was worried that all his energy might be better spent in the coffee shop market, for example.
Chander Hingorani
23/08/2011
It is a old story. Many businesses have successfully diversified with change in markets, fashions, habits, exploring new products etc. A good example is British oxygen who used to supply oxygen cylinders to hospitals. It is no longer their core business. Tesco started as a grocery shop but now supplies financial services, banking, white goods, school uniforms and you name it. They are thinking of entering social housing. Associted British Foods owns Primark. And the list goes on.
Independents have done the same. Not long ago the News & Mags constituted may be 80% of their business, the percentage now is more likely to be 20%. What will happen in the next 5 to 10 years with increasing popularity of Internet, mobile phones and who knows what!!
The business is evolving. Nick is right. Few years ago you could hardly find a place to have coffee but the high street is now full of coffee shops.
What next !!!