The Mail has a winning formula, and there aren’t too many national newspapers you can say that about at the moment. Mail MD Guy Zitter talks to Ray Snoddy about wine stoppers, cruises and ... profits.
Guy Zitter, one of the UK’s most colourful newspaper executives, obviously watches circulation figures like a hawk but he also keeps a very close eye on prospects for the cruising industry.
Is he already looking forward to a peaceful retirement? Or is the Daily Mail and General Trust (DMGT) thinking of diversifying into the holiday business?
The reason is rather more obvious. Cruising represents significant advertising business for the Daily Mail and the Mail on Sunday and that is unlikely to change despite the recession.
“Forty one per cent of cruises out of the UK in 2009 were taken by Mail readers,” explains Zitter, managing director of Mail Newspapers who started his newspaper career in ad sales in 1980 after running a nightclub in the Seychelles.
He has even higher hopes for cruising’s impact on the Mail’s bottom line this year.
“The good thing is there are ten large new cruise ships coming on line this year which would indicate to me that this market is still going to be fighting for as many passengers as it can get its hands on,” says Zitter who is optimistic that newspapers can hold onto such advertising, at least for the foreseeable future.
“If you look at the mass of Mail titles, travel is very noticeable and a huge proportion of that is cruising. You say, hang on is that going to head the same way as recruitment (to the web)?
I don’t think it will do that just yet,” argues Zitter.
He can be so confident partly because of the “maturity” of the cruisers but mainly because of the enormous choice of cruises on offer to consumers when they simply scan the pages.
Travel, and cruising in particular, is an example of how at least some specialist sectors of the classified advertising market continues to be strong while display remains “relatively healthy”.
Gardening is another of those specialist areas for Mail readers where the paper sells Mail-branded products, essentially by mail order in an attempt to develop “an even better understanding and connection” with the readers.
“Whenever we are publishing, you can see a wall of retail advertising at the front and a wall of travel at the back,” says Zitter who has described a Vacu Vin wine saver as his favourite piece of technology.
DMGT profits up
He is in the fortunate position that DMGT is a profitable group and that despite falling circulation revenue and stagnant advertising revenue – though increased market share - the pre-tax profits of Associated Newspapers rose by 135 per cent in the six months to April, to £42 million.
The performance has been heavily influenced by cost-cutting and closing or getting rid of loss-making ventures.
The sale of the London Evening Standard to Alexander Lebedev removed at least £25 million a year in losses and a similar sized redundancy liability, and the closure of thelondonpaper and London Lite was great news for Metro.
“Unsurprisingly, Metro is having a very good year,” notes Zitter who adds that, overall, advertising revenues are up “very significantly” this year.
Growth appears to be running in double digits.
There was a feisty public appearance from Zitter in April when Associated gave a presentation for investors to try to convince them that the gloom about the future of newspapers in general and the Daily Mail in particular was misplaced.
Zitter explained how every 100,000 new readers gained by the Daily Mail would be worth £12 million in profit while 250,000 would be worth £31 million.
In fact, the Mail had managed to attract 133,000 new readers through mailshots and £50 shopping vouchers for those who subscribed for at least three months.
Zitter noted pointedly that the gain amounted to more than the paid-for circulation of the Independent.
The Mail executive, once described in Campaign magazine as “a gnome-like bully,” went on to sound a bit like a caricature of a Daily Mail columnist by suggesting it helped that he was targeting “mid-Britons” rather than appealing to “a ghetto of Islingtonians and a few social workers”.
Zitter is realistic about the challenges facing newspapers but remains resilient.
“An awful lot of print advertising is going to go to the web, has gone to the web, and is unlikely to return,” concedes Zitter who adds that, fortunately, the Daily Mail has never been really majored on the advertising sectors most severely hit such as recruitment and property.
Despite declining circulations, national newspapers, Zitter argues, can still offer a reach to advertisers than not even commercial television can match.
“The fact of the matter is that if retailers want to get instant access to 30 million people and they don’t want to make up their minds until 6 o’clock the night before, the only place they are going to do that is in national newspapers, and within national newspapers the Mail titles have a very strong role to play,” the Mail executive argues.
As the industry changed, so Associated Newspapers has moved to protect its flanks with online recruitment initiatives such as Jobsite and “the big free newspaper” - Metro.
Business-to-business publications are also particularly useful for balancing the portfolio because you can charge online for publications such as Euromoney and even for elements of This Is Money website.
But one of Zitter’s main pre-occupations these days is how to make more money out of the Daily Mail’s millions of general online readers.
He claims that the company is now seeing “some seriously excellent results” from an increased use of behavioural targeting not just on MailOnline but also from a network of surrounding sites.
Visitors are “tagged” and followed to discover their interests. They are then shown relevant ads.
“As a result of behavioural targeting, the advertising response is climbing through the roof and month on month at the moment we are getting 80 per cent repeat bookings,” says Zitter.
Associated Newspapers is also clearly planning a significant move to try and boost online advertising revenues from the US. Zitter declines to elaborate but one obvious possibility would be for Associated to set up its own dedicated sales force in the US. At the moment, the online inventory is sold by third parties.
The financial numbers are relatively small at the moment but Zitter believes that £10 million profit could be achieved in the relatively near future and that a realistic longer-term ambition is to make £50 million from digital.
Like the Guardian, Zitter believes that the Daily Mail has enough critical mass to make money online without going down the Murdoch route of charging.
For now at least, the Mail’s digital play is “broadly free” and is likely to remain so.
“But just as Groucho Marx said: “These are my principals and if you don’t like them I’ve got others,”” says Zitter with a smile.
He is a member of the widespread industry consensus that wishes Rupert Murdoch well on his charging initiative but believes he will find it difficult to make general news pay online.
The first signs for the relaunched Times and Sunday Times websites were not good with a halving of share apparently caused by the introduction of a registration wall, but before charging had even begun.
Zitter is not alone is believing that Murdoch will have a plan “B” if straight charging is unsuccessful – the bundling of the newspaper websites with Sky subscriptions for a small additional charge.
Such possibilities might be at least a small part of Murdoch’s determination to take complete control of BSkyB.
For now at least, different newspaper groups have adopted different strategies and within a year, it should be much clearer whether there are a number of viable financial models for the future of newspapers.
But what state does Guy Zitter think the national newspaper industry will be in five years when he will be 61?
He is emphatic that consolidation is inevitable.
“We will lose one or two national titles; it’s as simple as that. There isn’t room,” predicts Zitter.
He declines to forecast precisely which titles will turn out to be casualties, partly because loss-making newspapers are still being rescued by “very unlikely sources”.
Who, for instance, would have predicted five years ago that the Independent would now be owned by a former KGB colonel?
Clearly he believes that both the Guardian and the Daily Express could come under increasing pressure unless action is taken.
Last year, the Guardian Media Group made a pre-tax loss of £171 million, mainly because of write-downs in the value of magazine and radio assets but GMG’s newspaper interests still made an operating loss of £53.9 million.
“The Guardian is certainly not in immediate danger because they have cash behind them but I don’t see how the Guardian is going to return to making a profit in its current structure,” says Zitter.
At the other end of the market, the pressures are even greater and questions abound.
If the Daily Express fails to keep its circulation above 600,000, will advertisers start to lose interest?
The Daily Mirror makes good profits but could its circulation be further squeezed by a cut-price Sun and a cut-price Star?
Will there come a time when one of the large newspaper groups, including DMGT, will take over struggling titles, if allowed to do so by the competition authorities?
Whatever happens, Zitter is confident about one thing – that in five years, there will definitely be “a recognisable paid-for national newspaper industry in the UK.”
He can be so confident because of reader loyalty, increased longevity and hope – as yet unrealised - that the young online crowd can one day be converted to reading newspapers.
“Fortunately my readers, because of modern health care, are living to at least 100 so it should be fine,” insists Guy Zitter.
And that should mean even more advertisements for cruises.