Submission to Members of the Joint Oireachtas Committee on Communications. Climate Action and Environment

From Frank Mulrennan, chief executive, Celtic Media Newspapers Limited (CMNL)

Subject of the proposed media sale of CNML to Independent News & Media plc

Tuesday, February 7, 2017

Dear Clerk to the Joint Committee

I am writing to the Members of the Joint Oireachtas Committee on the subject of the proposed sale of our newspaper group Celtic Media Newspapers Limited (CMNL) to Independent News and Media Holdings (INM).

This sale has already been approved by the Competition and Consumer Protection Commission (CCPC), which ruled that the transaction would not lead to a substantial lessening of competition in the areas of business concerned.

It has now been referred to the Broadcasting Association of Ireland (BAI) by the Minister for Communications, Climate Change and Environment Denis Naughten TD.

I write as an interested party, but also to give a voice to the views of the vast majority of my 98 colleagues in CMNL on an issue that will ultimately decide our futures.

Those colleagues were hugely supportive of the management buy-out which I led in 2012 whereby their jobs and over 950 years of newspaper publishing history were secured after a receivership event involving the former Scottish investor owners and Lloyds Bank.

It is important to note that we opted in 2012 to allocate 25% of the company share capital to our editors, sales managers and production managers.

We borrowed €5.5 million to complete that buy-out but five years later we are faced with a broken business model in terms of publishing local newspapers and we are therefore asking you to approach this sale approval process with an open mind – ignoring the very considerable “noise” that has arisen around it in the national media but which has nothing to do with retaining almost 100 local jobs in local newspapers.

That broken business model applies right across the newspaper publishing sector due to the reality of a 65% fall in print advertising and a 35% fall in circulation since 2008.

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And while there is major growth in digital advertising, three-quarters of all that digital spend goes to just two companies – Google and Facebook.

The interests of my colleagues and the future of our newspapers will be best protected through being part of a larger company with the resources to invest in digital platforms and marketing – while still committed to our long and proud history of editorial independence.

It is of note that most of those colleagues are in the process of making submissions to the BAI supporting the sale of our newspapers to INM.

They are doing this of their own accord and I very much welcome this support at such a pivotal point in our company’s history.

I understand that our sales teams are making a collective submission as are our 20 pre-press graphic designers in and others have said they want to make individual submissions.

I particularly welcome that a number of our journalists – we employ 31 in total – have voiced concern that their local views are not being represented by the national NUJ stance.

Let me set out for you the company that we work in:

Celtic Media Newspapers Limited (CMNL) is a progressive and Irish-owned publisher of five paid-for and two free newspapers, in addition to offering pre- press (graphic design) services to a range of third-party clients.

We operate paid-for titles in Castlebar (Connaught Telegraph – serving south Mayo – 12 employees), (Westmeath Independent – serving west Westmeath and south Roscommon – 12 employees), Mullingar ( – serving east Westmeath – 11 employees), Navan ( – serving Meath – 15 employees), Cavan Town (Anglo Celt – serving Co Cavan – 14 employees).

The company’s free newspapers are Forum, serving the south Meath towns of Dunboyne, Dunshaughlin, Ratoath and Ashbourne and the which serves Co Offaly from a base in Tullamore.

Overall, CMNL employs 99 people, and contributes annual salaries of €4.2m across its six offices in Castlebar, Athlone, Mullingar, Tullamore, Navan and Cavan.

CMNL’s pre-press service is headquartered in Mullingar and provides outsourced graphic design, page layout and digital services to independently- owned titles such as , the Dublin People Group, Tuam Herald, Cork Independent and Galway Independent – enabling these titles to operate efficiently and, more importantly, with certainty.

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We provide shared services which are vital to the financial security and continued existence of many small independent titles around the country, working with them in an industry with a broken business model.

Our newspapers have, as mentioned above, 950 years of combined history behind them and a deep commitment to our served communities.

We bought out of liquidation in 2013, securing 12 local jobs in Castlebar as a result.

We had seen other newspapers close in our area such as Athlone Voice, Longford News and Roscommon Champion and were resolute that we would not let the same happen with a fine newspaper, led by a great team with whom we had an established pre-press relationship.

Celtic Media Newspapers Ltd – 35% circulation sales decline since 2008

41429

32149 32009

30408

28468

26955

2008 2012 2013 2014 2015 2016

Fig 1: Celtic Media Newspapers Ltd circulation sales decline since 2008

As a company, CMNL is experiencing cash flow difficulties following substantial investment in a new publishing system and the need to fund redundancies.

Other local newspapers face similar cash flow issues in the teeth of declining circulation and advertising revenues over the past ten years but my focus here is on finding a solution for our company.

If the proposed transaction takes place, our titles will become stronger separate enterprises through the financial resources and industry expertise that INM will make available to them – key to their survival.

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If it is not approved, our ongoing decline in revenues combined with our continuing need to invest in digital strategy will increase CMNL’s reliance on bank funding and leave us in a position where we will be unable to offer firm guarantees of survival for all of our titles.

While Ireland has a unique commitment to local news, and many of the 76 regional newspaper titles in the Republic are older than the State, the traditional newspaper model is no longer commercially sustainable.

Since 2008 the economic effects on the sector have been catastrophic – due to the fact that our two main revenue lines are so negative – and the migration of digital advertising is largely bypassing our platforms.

There have been significant job losses in the sector over the last 16 years, with the average newspaper now employing 50% of its staffing level applying in 2000.

Celtic Media Newspapers Ltd – 65% advertising revenue decline since 2008

2008 2012 2013 2014 2015 2016

Fig 2: Celtic Media Newspapers Ltd advertising revenue decline since 2008

Colleagues have taken pay reductions; agreed to work shorter hours; embraced the changes to how we do business, but we are effectively swimming against the tide of digital dominance.

Despite the resurgent economy, advertising revenue has not returned to regional press, which is constantly battling to stay ahead of a consistent decline in income.

It is vital that you understand that our competition does not come from other newspapers – it comes from Google and Facebook, which are swallowing up ever-increasing slices of Irish marketing budgets.

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Indeed, I want to welcome the level of support which we are getting from other newspapers – through them making positive submissions to this BAI process in favour of this necessary consolidation.

All regional newspaper groups in the State have undergone significant rationalisation processes in the past two years, with consolidation and aggregation now seen as the only route that guarantees the future of professional news gathering.

If communities are to be served local news it is with the core functions such as news gathering and advertising sales carried out on a local basis, with all other operations such as design, printing and distribution carried out through shared services.

CMNL titles have a long history of editorial independence, with each editor deciding on the look and content of their title, reporting and advertising sales taking place locally and the titles being produced in a successful centralised editorial production hub.

I very much welcome that INM have stated in their submission to Minister Naughten that CMNL’s newspapers will continue as independent publications, with editors who have full and effective independence and dedicated staff whose function it is to produce content to serve their local areas.

INM have also stated that they do not envisage any material staff changes at CMNL following the proposed transaction.

It is the quality of those commitments that has led my colleagues in the various centres to support the decision to sell to a company with necessary resources.

That submission to the Minister also states there is also no current intention by INM to make any material changes to operating policies at CMNL newspapers following the proposed transaction, including the policies in relation to staff remuneration, the frequency and size of publications or the information gathering used by CMNL staff reporters.

I need to put on record that if the proposed transaction is not approved, management at CMNL cannot offer the same guarantees on staffing levels, remuneration or the long-term continuation of all its titles in their current form.

In the absence of sale approval, we will need to restructure and there will be a repeat of redundancies that took place in the company in 2015, in addition to payroll cuts across the group.

The sale of premises has already begun with CMNL’s offices in Navan and Cavan being sold to generate funds including paying down bank debt and professional fees associated with the proposed sale. These costs continue to rise with each week that passes.

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As an example, the Westmeath Independent’s Athlone premises is being put on the market as a direct result of this sale being delayed thus far.

We have also decided to suspend publication of our free newspaper in Meath because we cannot continue with a loss-making publication.

CMNL has been forced to reduce its digital resource by 50% since January and effectively ceased all marketing operations apart from prior commitments.

These vital aspects of the group will continue to suffer unless they get the necessary resources and shared expertise that INM can provide.

As has been the case in the UK, regional groups need to share resources to survive.

We would much rather see consolidation of ownership in the sector than the alternative, the consolidation of titles – or worse, their disappearance.

The core operations of a local newspaper in the community are news reporting and advertising sales. It is a battle to keep these vital services in the community.

If the sale goes through, we have the commitment that these operations will continue in our served areas. If it is does not, we cannot offer the same guarantees, and jobs will certainly be lost.

This is the reality that we are faced with.

I want to thank you for your attention to this vital issue for our company. I welcome the focus which this matter has brought to the challenges facing our industry at local level and would ask that you be mindful that other extraneous issues which have clouded this issue be separated from the crux of the issue.

I also look forward to addressing your Committee this Tuesday and to answering any queries which you may have regarding this sale.

Yours sincerely

______FRANK MULRENNAN Chief Executive Celtic Media Newspapers Limited

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