Everyone has dreams, but they can prove expensive. Rupert Murdoch's ambition to have the number-one quality daily in the UK is proving particularly pricey. The latest results for Times Newspapers Limited (TNL), which includes The Sunday Times, show that in the year to 30 June 2003, it cost him 拢28.65m. That is nearly double the losses of the previous year (拢16.3m) and the prospects for 2004 look even more bleak.
A marketing push last autumn for The Sunday Times' The Month, plus extensive advertising for the compact edition of The Times, have added to TNL's already hefty marketing budget.
Figures from Nielsen Media Research show that spend on The Times in non-News International media was up more than 140% in the year to 31 March 2004, rising to 拢13.1m from 拢5.4m. Total marketing spend for TNL, which includes The Times' educational supplements, was up nearly 80% at 拢23.7m.
Publishing compact and broadsheet editions also brings added costs, boosting the paper's already high returns, as well as paper and distribution expenses.
'The 35,000 to 40,000 extra sales The Times has added with the tabloid edition have just mopped up what the paper lost in 2003,' says Hugo Drayton, managing director at The Telegraph Group.
Influencing factors
At a time when The Telegraph Group is said to be on course for a profit of 拢45m-拢50m a year, the poor financial performance of TNL's titles raises one question: can TNL blame the state of the advertising market for its problems, or should it be looking closer to home?
Although no one at TNL was willing to comment, a former insider believes it has only itself to blame. 'It's a careful and conservative place these days,' he says. 'The risk-taking and the dynamism is gone.' Others rubbish this, pointing to TNL's bold move in launching the tabloid edition of The Times in contrast to the more cautious approach of the Telegraph and Guardian.
Industry experts believe that while The Sunday Times is making some money, The Times is a big drain. 'The Times has never made any money. It has always been a difficult newspaper,' points out Mike Anderson, managing director of the Evening Standard. 'The transformation to compact is expensive and difficult to monetise.'
The most likely argument is that TNL's figures look bad because they coincide with a weak advertising market. Pearson announced that losses at the FT last year were 拢32m - a jump on 拢9m the previous year - as the title was hit by a 拢23m loss in ad revenue.
Industry estimates suggest that all the broadsheets lost share of display column inches to the tabloids year on year in the three months to 4 April 2004. Even The Independent, which has done so well with its compact, has lost share. 'It's just another indication that the ad recession has been savage,' says one source. 'TNL has been badly hurt on the appointments section, which normally delivers.'
Nielsen Media Research figures indicate the ad revenue decline is continuing.
In the year to 31 March 2004, The Times and Sunday Times took 拢181.6m, down 3.8% year on year, with The Times down 6.6% for the same period.
In addition, media agencies are reportedly unhappy about the discount they are being offered to take pages in the compact Times, while recruitment revenue, traditionally a big item for The Sunday Times, has suffered in the past few years.
The danger, warns Anderson, is that when the recruitment market recovers, it will not return to the nationals. 'Advertisers will have the choice of four places,' he says, citing the internet, improved regional newspaper sections, the business press, as well as the nationals.
So is The Times, kept for its prestige and political influence, a fancy that can be paid for out of the profits from The Sun and The News of the World? 'There are people for whom (owning a newspaper) is about more than just running it as a business,' says Drayton.
Price increase
There is one easy way for TNL to improve its financial performance - raise the daily's cover price. 'The Times is 10p cheaper than the rest of the market,' says Paul Thomas, managing partner at MindShare. 'You could take it from loss-making to profit-making by putting that 10p on the price.'
Observers believe such a move is unlikely. They say Murdoch is playing a long-term game and is prepared to tolerate short-term losses, especially when they include investment in marketing, and when TNL's parent, NewsCorp, is performing so well.
Earlier this month it announced quarterly profits up 69% to $465m (拢260m) for the quarter ending March 31. One thing is clear: Murdoch's desire to own the number one quality daily may cost him a lot more, but it is likely to remain undiminished.
DATA FILE
TNL financial results (year ended June 2003)
2003 2002
(拢000) (拢000)
Turnover 377,910 364,085
Operating costs 288,131 281,623
Other operating expenses 115,766 96,119
Operating loss 25,987 13,657
Finance charges (net) 2,663 2,661
Loss for financial year 28,650 16,318
Source: Times Newspapers Limited