There is only one fundamental, and very short question, to put to Ashley Highfield who recently took over as chief executive of Johnston Press.
Why?
Why did someone who worked in the cable industry, was head of technology at the BBC, launched the successful iPlayer and then took charge of Microsoft’s online and consumer operations in the UK decide to move to a regional newspaper group that has seen better days?
The Johnston Press share price, which five years ago hit the heady heights of 480p, has recently been flat-lining at a mere 5p.
If the share graph were a heart monitor, the patient would be dead.
And for that matter, why did the board of Johnston Press decide to place its few remaining chips all on the 46-yer-old Highfield, who despite a distinguished career in technology, has absolutely no experience in newspapers?
The challenge
As Highfield tells it, the move to the hot seat in Edinburgh makes a lot more strategic sense for both sides than appears to the superficial eye.
The challenge that lies behind the opportunity can be simply stated.
“Yes I have absolutely no previous newspaper experience but the board had already made the decision that the future of Johnston Press lay in moving the organisation beyond print and that was explained to me in the first sentence,” says Highfield.
“Not closing down print but moving beyond an almost entirely solus print operation,” he adds.
In fact, it is believed that the name of Ashley Highfield was raised the last time Johnston was looking for a new chief executive two years ago. The former chairman Freddy Johnston, then on the board, argued that the job should go to someone with newspaper experience. Highfield was never contacted and the job went instead to John Fry.
The new Johnston chief executive also points out that while not a newspaperman, he has run two of the largest online news portals in the UK, MSN and BBC online, where he was editor-in-chief responsible for several hundred online journalists.
Then of course there is the money, which included a welcome package of £500,000 worth of seriously deflated Johnston Press shares.
If the new chief executive can conjure up a little alchemy, find a better model for linking the print and digital world and get the share price on the move then he could become seriously rich.
Those however who expected Highfield to come in to Johnston Press and wave a magic digital wand on his first day at the beginning of November have already expressed disappointment.
Highfield insists he has a digital strategy but says it would be “premature” to say in any detail how he is going to implement it.
His approach is clear enough and it involves building on the strength of local newspapers, the provision of the sort of news and information that helps a community talk to itself. But above all else, he says it is important to be agnostic about the medium used.
“If we can get over that we are a disseminator of information whether that means print, online, iPads, phones and possibly even local television, that is the cultural shift that has to be made”, says Highfield.
The new Johnston chief executive emphasises he will also be looking at what medium is most relevant, possibly even choosing different routes to the consumer at different times of the day.
Under such a scenario, for instance, meaty planning applications could be analysed and discussed in the print editions with the latest news on who is playing at the local venue relayed on phones and iPads.
“The fundamental thing is understanding our audience needs and meeting those with the right content in the right place and the right medium at the right time”, explains Highfield.
What he will not be doing is relying on taking everything Johnston does in print and merely transfer it online. That way lies historic cannibalisation of revenues.
And what about paywalls and charging for online content?
“Watch this space”, is all Highfield will say but, clearly, increasing digital revenues is a central part of the emerging strategy.
Touring the regions
Before rushing to any premature conclusions, Highfield has been travelling round his new parish of more than 190 newspapers scattered across much of the UK and Ireland. Last month (December) there was a trip to Ireland which took him from Dublin to Limerick and back via Kilkenny and on to Belfast and Londonderry. Then after a board meeting in Edinburgh, it was off to the Highlands of Scotland.
“I am seeing from Portsmouth to Falkirk and every point in-between and you learn a great deal. And what I am learning is that different newspapers do different things extremely well and the challenge and the opportunity is to find best practice amongst them and make sure all the other newspapers are aware of it”, says Highfield.
If the pace seems a little leisurely, then it is because Highfield believes there is time to get things right and that Johnston Press is not a company about to go over the edge of a cliff.
“Because everybody just looks at the share price and therefore the declining market capitalisation, there is the assumption that the business is not viable,” Highfield concedes.
In fact, the Johnston chief executive emphasises, the company has close to £400 million a year revenues and underlying profit is more than £70 million. The problem of course is the debt left after three acquisitions, including the Scotsman, were made in the last six months of 2005 for around £400 million which turned out to be the top of the market.
“The fundamental aspect of the business is that every newspaper in the group has a healthy margin over 20 per cent and all up the business is very profitable. The challenge is, can you migrate that business into the digital realm quickly enough before profits decline,” says Highfield.
The Johnston chief executive says that profits are holdings up “extremely well”, and although both advertising and circulation revenues are still declining, they are falling at a reduced rate.
Net debt at the beginning of November totalled £357 million compared with £386.7 million at the beginning of the year and Johnston has opened talks with lenders to refinance its debts in the search for better terms.
In an interim statement in November, Johnston said it expected full year results for 2011 to be in line with market expectations.
Some Johnston titles are managing to put on circulation and a “great number are” if you aggregate print and online reach.
Highfield believes it is a huge and common mistake for observers to assume that declining profits in the regional press means there is no demand for local and regional news. There is enormous demand for local and indeed hyper-local news.
“The challenge is making sure that content is available cost-effectively in whatever form consumers want to consume it”, says Highfield. His corporate battle honours also include running Project Kangaroo, the joint plan by Britain’s main public service broadcasters to provide technology linking the internet seamlessly to the television set.
Kangaroo was blocked by the Competition Commission on the grounds it might have prevented other players entering the market – a decision ridiculed by Google chairman Eric Schmidt at last year’s Edinburgh Television Festival.
Mindful that he could be dealing with the UK’s competition regulators in future, all Highfield will say of the Kangaroo ruling is: “I thought it was a great shame for the British consumer because there is no one stop shop for getting British and international programming on the web in the UK.”
Johnston could end up before the competition authorities in the coming years because Highfield is one of the many regional newspaper executives who believe that further consolidation is one way forward for the regional industry.
“Further consolidation will occur in the regional newspaper industry and I would love Johnston Press to be a consolidator,” says Highfield although he emphasises there is nothing planned at the moment.
Help from Sir Ray
One interesting boost for Johnston Press has come from the attentions of Sir Ray Tindle, one of the canniest operators in the local press who has been buying and launching new titles in the last six months.
Sir Ray has bought around 6 per cent of Johnston Press although he has emphasised he regards it a punt in undervalued shares rather than building a platform to make a takeover bid.
There is one further aspect in which Highfield believes his previous, apparently irrelevant experience might help drag Johnston Press out of the mire.
“I have learned a great deal from the BBC and Microsoft about the importance of process. Microsoft was particularly instructive. There was a reason why it’s the world’s most profitable company because it manages itself so well and so effectively and I am certainly hoping to bring across that discipline into my current job,” says Highfield.
That presumably means more jobs will go at Johnston Press?
Too early to comment on that insists Highfield, although for 2011, like-for-like cost savings are expected to total £20 million - a process that is likely to continue.
As he starts to settle in at the beginning of his first full year in charge at Johnston Press, how great are his ambitions for the technology specialist with no experience of the newspaper industry?
“I think within three years, I would expect all our titles, our brands to have a healthy, growing audience when looked at across print and online and to be profitable”, says Ashley Highfield.
“I would also expect in three years to have confounded those who said this was a sunset industry and, along the way, thus transforming the share price”, he added.
