The Great Paper Chase
reports, Mathew Horsman, The Independent (London, England)
The sharply escalating cost of newsprint - Fleet Street's lifeblood - has done far more damage to the fortunes of Britain's publishers than Rupert Murdoch's debilitating price war. And there is more pain to come in 1996. Most analysts are predicting a further 10 per cent increase on top of last year's 40 per cent hike.
It might seem surprising, in an industry that boasts hi-tech computer technology, sophisticated printing sites and digital photo libraries, that the raw commodity of newsprint, and not cutting-edge production techniques, makes all the difference in the contemporary newspaper business.
A simple calculation of the share newsprint represents of production costs at national titles tells the story. Securing adequate supplies eats up between 20 and 30 per cent of operating costs for most publishers. Mr Murdoch's worldwide newspaper holdings provide a graphic illustration: a mere 10 per cent increase in newsprint prices adds A$350m to costs at News Corporation, Mr Murdoch's global parent company.
The newsprint crisis has lasted for the better part of 18 months and has already caused much pain at the publicly quoted newspaper companies. The Telegraph's profits fell by 65 per cent to just pounds 6m in the first nine months of 1995 (the most recent figures available). The company blamed a 30 per cent rise in newsprint costs.
Profits were also down by pounds 2.5m to pounds 40m at Daily Mail & General Trust, publishers of the Daily Mail, the Mail on Sunday and the Evening Standard, in the first half of 1995.
So desperate have publishers become that the price war launched by Mr Murdoch in 1993 has all but been called off. Even Mr Murdoch, it seems, cannot accept the effects of a newsprint price rise from about $469 a tonne in 1994 to nearly $900 tonne. As a result, the prices of the Sun and the Times have been increased in stages since last autumn, allowing the Telegraph, the Independent, the Mail and others to follow suit.
But how did the spiralling increases come about? And when can publishers expect some respite from relentless price inflation?
The rise was unsurprising. Newsprint prices move in clear cycles, usually over a seven-year period. At the last high point, in 1989, newspapers were scrambling to line up supplies at affordable prices. But as demand faltered and mills continued to produce, the price dropped sharply. By the 1991-92 recession, prices were at a new low. Publishers found themselves able to negotiate low-term, low-price …
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Publication information: Article title: The Great Paper Chase. Contributors: reports, Mathew Horsman - Author. Newspaper title: The Independent (London, England). Publication date: January 9, 1996. Page number: 17. © 2009 The Independent - London. Provided by ProQuest LLC. All Rights Reserved.