Submission to the parliamentary inquiry into regional newspapers from Rural Press Pty Ltd (trading as Australian Community Media)
Thank you for the opportunity to make a submission to the committee's inquiry into the provision of newspapers (print and digital) in regional and remote Australia. We welcome the chance to outline the extreme pressures facing our industry and to address any misconceptions about decisions ACM has been forced to make about our publications.
Regional newspapers are facing an existential crisis. A combination of factors including the COVID pandemic, a shift of readers and advertising revenue to digital platforms and rising costs of production and distribution have led to closures, suspensions and frequency changes across the sector.
As Australia's largest independently owned regional publisher, our company is confronting these issues daily. A business model that was relatively healthy even five years ago is now facing serious challenges. This has meant that during the past two years we have had to make difficult decisions about the future of some of our titles.
While we have been working for some years to adapt our business to the realities of digital disruption, the pandemic has pushed many of our mastheads to breaking point.
To demonstrate the gravity of the situation, we would ask the committee to consider this:
Without the federal government's timely support through JobKeeper and the Public Interest News Gathering (PING) fund, ACM would have stopped trading.
This would have resulted in more than 1300 people in regional Australia losing their jobs, including 600 journalists. It would have created "news deserts" across the country. It would have silenced the voice of regional Australia.
This submission will address a number of topics the committee is considering. But first, regarding the mention of Australian Community Media (ACM) in the inquiry's terms of reference, we should be clear:
- In April 2020, when a once-in-a-century global pandemic hit Australia, ACM temporarily suspended the printing of a number of non-daily publications and stood down associated staff in accordance with the provisions of the Fair Work Act. We did not decide to abandon communities. We decided to save our business.
- Unlike News Corporation, we did not take a decision to simply walk away from printing the vast majority of our regional mastheads. Instead, we have been fighting to keep as many of our titles open as possible. The two situations are not comparable.
- Emergency funding awarded under the $50million PING program enabled ACM to return more than 100 mastheads to print or digital publishing - more than was originally foreshadowed in our 2020 grant application. Our obligation under PING was to return 91 mastheads. We have exceeded this requirement.
- The $10.4million received over 12 months reflects the size and scale of ACM's business and the number of journalists we employ. We have complied with the grant program's requirements.
- ACM employs 600 journalists across regional Australia. This is a commitment to regional journalism that only the taxpayer-funded ABC comes close to matching. Unlike other publishers, we have avoided wholesale journalist redundancies during the pandemic. We have launched new publications and hired new journalists.
- When the federal government's JobKeeper program came into being it helped preserve the jobs of more than 1300 ACM employees. It saved our business.
- During the past two years ACM has closed five printing presses and sold two others. This was not done lightly, but these capital-intensive manufacturing operations were simply unaffordable. Printing of papers at these press sites has been outsourced to other providers. In many cases these presses were printing other organisations' products at a loss to ACM. This was not sustainable. Rationalising how we produce and distribute our newspapers has helped protect the viability of ACM's core business: regional journalism.
- ACM has made every effort through the COVID disaster to maintain as many of our local mastheads as possible and employ as many regional journalists as possible. Of the 50 publications that have not returned to printing through the COVID pandemic, more than 20 retain a digital presence and 20 others were free titles circulated in areas already covered by another ACM newspaper. The virus has changed the face of our industry, but we have made prudent financial decisions for the future of our business.
- Finally, ACM has been criticised for leaving a limited number of markets. It is disappointing that in the face of the worst conditions ever faced by regional media companies, the fact that we have continued to provide local news for hundreds of towns, cities and regions is conveniently overlooked. Around Australia, ACM's people and publications take great pride in keeping their communities informed, connected and strong.
ACM knows how important, and how trusted, our regional newspapers are to the communities they serve around the country. We see the effects of that coverage every day as our journalists write stories that inform and connect our readers. We provide the accurate and timely news and information that binds communities together. And in many cases our journalism is what stands between regional communities and the echo chamber of social media.
But the regional newspaper sector needs help. Without it, some of Australia's oldest and most trusted mastheads are in danger of closure.
ACM operates in every state and territory of Australia. It employs 1360 people and publishes 140 mastheads, ranging from small weekly newspapers circulating hundreds of copies to specialist agricultural titles and large regional dailies with distribution in the many thousands.
We are proud to employ the largest workforce of regional journalists in Australia outside the taxpayer-funded ABC. The 600 journalists, photographers and editors of ACM produce about 7000 stories every week that are published across our print titles and websites. We publish 14 daily newspapers, including The Canberra Times, Newcastle Herald and Illawarra Mercury.
The journalism produced by the ACM network reaches 6.4 million Australians every month. We have more than 110,000 digital subscribers across more than 40 of our mastheads.
Our portfolio contains some newspapers that have been in continuous publication for more than a century. It includes two of the three oldest regional mastheads in the country: The Examiner, in Launceston, established in 1842, and The Maitland Mercury, established in 1843. The Examiner remains a daily newspaper but the Mercury is an example of how we have battled to keep mastheads in publication. During the past seven years it has dropped from publishing in print daily to tri-weekly and is now a weekly.
ACM's journalism is vital for regional communities. It is produced to the highest ethical standards and has no political agenda. Our reporting has led to legislative changes, a Senate inquiry and even prompted a royal commission. Our journalists have won multiple Walkley awards - the highest honour in Australian journalism.
Despite the scale of our organisation and the dedication and accomplishments of our journalists, recent COVID-related challenges have resulted in suspensions, closures and frequency changes within our portfolio. The feedback in response to these difficult, but unavoidable, decisions has demonstrated more clearly than ever that our journalism is the glue that helps bind communities together.
In cases where we have been forced to make changes to titles, communities have felt let down and abandoned. We understand this completely. We know that the local newspaper is about more than simply the reporting of public-interest news through credible independent journalism - it is the social and cultural hub of a regional community, with everything from sporting fixtures and results to birth and death notices to local business advertisements helping to chronicle the important rituals and events in the daily life of a town or district. According to the University of Canberra's 2021 Digital News Report, 73 per cent of people who primarily get their news from a printed newspaper are more likely to say they feel attached to their local community than those who rely on other news sources.
We want to assure the committee that we recognise the social consequences of what global studies have called the "news desert" effect created when a local newspaper ceases to be viable in a town and closes. ACM has made every effort over a number of challenging years, even before the COVID disaster hit, to maintain as many of our local mastheads as possible. We have restructured our portfolio, introduced digital subscriptions to support local news coverage, adapted the way we work and innovated through industry best practice and investment in efficient new technology. Difficult decisions during the pandemic to close printing presses and even exit under-utilised office space in some small markets demonstrate ACM's determination to reshape our business in order to preserve as much as possible our core function: journalism.
It is understandable, given the intense sense of ownership regional communities feel for their local newspapers, that they are viewed as a community service rather than as a business. But newspapers, like any business, must be profitable to survive. We cannot run them at a loss.
We estimate that of our portfolio of titles, 20-30 per cent are under threat without urgent support. Already a large proportion of our portfolio is operating unprofitably and is only sustained by the larger group.
The reason for this is rising costs and dwindling advertising revenue as businesses seek cheaper online and social media alternatives. ACM's traditional revenue mix was approximately 80 per cent from advertising (driven by once-healthy classified categories such as jobs and cars) and 20 per cent from circulation (cover prices).
Of the advertising revenue, more than 80 per cent sits within print products that are all facing some degree of challenge. Digital advertising does not attract the rates of print and is therefore not a dollar-for-dollar replacement. Declines in circulation revenue have been driven in large part by free content from Google and Facebook. This has been partially offset by growing numbers of digital subscriptions, but we do not see any near- or medium-term prospect that this will go anywhere near replacing lost print circulation revenue.
So the revenue that has traditionally funded our journalism is drying up fast.
The following insights may be useful to illustrate just how serious the situation is:
- Between FY16 and FY21 ACM's total print revenue fell by almost 45 per cent.
- During the same period total print circulation (cover price) revenue fell by more than 30 per cent. This is a drop of more than $23 million.
- Total revenue fell by 33 per cent between FY16 and FY21.
- When pandemic-related print advertising for consumer goods is excluded, print revenue was 49.8 per cent lower in FY21 compared with FY16.
- Between FY16 and FY21 revenue in the three traditional pillars of print classified advertising experienced falls greater than 50 per cent. The real estate category fell by 63 per cent; motoring fell 87 per cent and job advertising fell 55 per cent.
- In FY16 the real estate, motoring and jobs categories supplied the equivalent of 115 per cent of the total annual editorial budget. In FY21 those categories supplied the equivalent of 48 per cent of the editorial budget.
- During the same period between FY16 and FY21, the reduction in the editorial budget was contained to just 15.25 per cent, indicating that despite massive revenue drops and rising costs, we are doing everything we can to preserve our journalism.
We see no change in this trajectory in the short- or medium-term and, indeed, it has been accelerated by COVID. Without some form of at least short-term support, our only option to maintain the viability of many of our mastheads will be to further cut costs. This means fewer pages, less frequency of publication, fewer journalists and other staff, less journalism and, ultimately, fewer newspapers.
ACM employs a significant number of people in the communities it serves and injects millions of dollars every year into regional economies. These jobs are in jeopardy unless steps are taken to support the broader regional publishing sector through the worst trading conditions in its history.
It should be noted that we are not giving up without a fight. Along with a strict focus on costs, we have invested in training for our staff, new apps for our daily newspapers and a redesign of our websites. We have expanded the political bureau at The Canberra Times so that it can serve our entire network with accurate, balanced, independent reporting from federal parliament. We have expanded our video and audio capabilities and launched new titles in some areas where News Corporation has closed its newspapers. And we have hired a small team of property reporters to drive audience to our real estate portal, in the hope that this will provide a longer-term source of revenue to sustain our journalism.
Why we closed publications
Of the ACM portfolio of more than 170 titles, 140 continue to cover the news in print or online after two years of COVID.
Of the mastheads no longer publishing, 20 were small free papers circulated in the same readership area as another ACM title, such as the Newcastle Star, the Riverina Leader in Wagga Wagga, the Wollongong Advertiser and the Tamworth Times.
Others were serving communities which continue to have access to an ACM masthead providing regionally relevant and some locally relevant coverage online and in print. For example, the Goulburn Post publishes Southern Tablelands news and information of relevance 30 minutes away in Crookwell and issues in Wingham, 20 minutes from Taree on the NSW mid-north coast, are covered by the Manning River Times.
Examples of local mastheads that have unavoidably ceased operations in markets where ACM no longer retains a print or digital presence include the Nambucca Guardian on the NSW north coast and the Bombala Times on the NSW south coast, the Barossa and Light Herald and Ceduna's West Coast Sentinel in SA and the Collie Mail and Avon Valley Advocate in WA.
The closure of these small-circulation publications with tiny profit margins decimated by COVID-driven advertising revenue declines is, of course, regrettable. However, the federal government's $50million PING program enabled ACM to keep more mastheads in operation than originally foreshadowed in our 2020 grant application.
PING funding was originally granted to help ACM continue to provide public interest journalism for 91 mastheads between November 2020 and November 2021. Of these, 79 were required to deliver local news in print and online and 12 were digital-only.
Across the funding period, the grant contributed to maintaining the jobs of approximately 340 full time equivalent public interest news-gathering journalists and the resumption of printing of 83 of the newspapers.
The Armidale Express and Dungog Chronicle in NSW, the Goondiwindi Argus in Queensland and the Bunbury Mail in Western Australia were required under the PING program to maintain digital-only local news coverage but ACM returned them to print despite challenging commercial conditions.
ACM has also resumed printing other titles not covered by PING, including the Hunter Valley News (NSW), which is distributed free in towns such as Scone and Muswellbrook, complementing the continuing Upper Hunter print and digital coverage of the 148-year-old Singleton Argus.
A further 10 mastheads not covered by PING were able to maintain digital-only coverage.
Titles where advertising support failed to recover after print publishing was suspended at the outset of the pandemic include the Wingham Chronicle and the Bellingen Courier-Sun in NSW.
These titles had continued to provide local news online after the April 2020 suspension of their weekly printed newspaper, and were among ACM's original 12 digital-only PING titles.
The Wingham Chronicle's website was ultimately incorporated into the manningrivertimes.com.au. Also part of the PING program, the Manning River Times reports news and community issues on the mid-north coast region around Taree and nearby Wingham, with a journalist from the Wingham Chronicle redeployed to support this coverage.
The closure of the Bellingen Courier-Sun website followed ACM's launch of a new publication, the Northern Rivers Review.
Our push into new markets
ACM is one of the few regional media businesses in Australia to launch new publications during the COVID challenges of the past two years.
These publishing initiatives extending ACM's local news coverage into new geographies and markets are striving to grow our business and add new revenue streams that support the local journalism produced across our network.
In October 2020 ACM launched the Northern Rivers Review, a new print and digital publication telling local stories and showcasing local businesses in the Northern Rivers region of NSW.
We hired local journalists and other staff, established print and distribution networks and circulated the magazine to more than 20 communities, including Lismore, Ballina, Richmond River and Byron Bay.
Despite the embrace of readers, the impact of COVID lockdowns and government restrictions on local advertisers ultimately affected profitability, forcing an indefinite pause of production in September 2021.
Regardless of this setback, ACM responded to community feedback and pivoted in November 2021 to launching Lismore City News, a weekly newspaper to fill the gap left by News Corp's former Northern Star. The early signs for Lismore City News are encouraging, and the reader response has been enthusiastic, but again the revenue pressures remain.
Beyond its traditional regional and rural footprint, ACM also launched the news and lifestyle magazine and website Northern Beaches Review in Sydney in November 2020, filling a gap left by News Corp's changes to its Manly Daily.
Success for ACM in this new metropolitan market has the potential to open new revenue streams to support the regional journalism produced by the existing ACM portfolio.
Again, severe COVID lockdowns and restrictions affecting local business advertisers and our delivery networks have made this title's quality reading and agenda-setting local journalism a marginal proposition but ACM continues to work with our advertising partners to achieve sustainable profitability.
In February 2022 ACM launched Inner West Review in print and online, serving another NSW community crying out for reliable local news after News Corp's changes to its Inner West Courier. We are striving to establish another dynamic and engaging new product that will contribute positively to both its community and the ACM balance sheet. The launch of this title has been delayed several times through the Delta and Omicron waves of the pandemic but we are determined to give it a go in 2022.
Impact of the News Media Bargaining Code
The introduction of the federal government's News Media Bargaining Code in 2021 was a welcome and long-overdue reform to address the bargaining power imbalance between Google, Facebook and traditional media companies in Australia.
As a result, ACM has negotiated fair agreements with both platforms that compensate us for the use of our journalism on their services. Our agreement with Google also provides funding for training and the annual salaries of a group of trainee journalists.
While these negotiations were accomplished without the need to enact the provisions of the code, it is beyond doubt that our ability to do so was what brought the platforms to the table.
The compensation from the platforms is significant and a vital part of our revenue mix. It should be noted, however, that it is far short of the amount of revenue lost to our newspapers through digital disruption, the migration of key advertising categories such as cars and jobs, and the dominance of the platforms themselves.
The details of the agreements are confidential, however, the total is less than five per cent of our total annual revenue.
In summary, the News Media Bargaining Code has delivered a much-needed source of income that will help support regional newspapers. But given other cost and revenue pressures, including COVID and a massive hike in newsprint prices, it will not be enough to save regional publications that are already at the margin of profitability.
Degree of economic recovery from COVID and advertising revenue
To secure a more sustainable future for some of newspapers on the other side of the pandemic ACM has made difficult but unavoidable structural changes to its portfolio, including altering publishing frequencies, suspending the printing of some titles and adjusting the distribution of other products.
Over the past two years approximately 20 of ACM's newspapers have switched from printing twice or three times a week to publishing a weekly print edition, giving our audiences and advertising partners in these markets a stronger print offering. Essential local news, including breaking news and emergency updates, are covered online between print editions.
In western Victoria, for example, the bi-weekly Ararat Advertiser and Stawell Times-News returned from initial COVID-19 stand-down in 2020 as weekly editions to give these long-running trusted local news providers the best chance to return to sustainable profitability.
Before the start of the pandemic The Wimmera Mail-Times, serving the city of Horsham and surrounding districts, was experiencing advertising revenue declines of up to 10 per cent year on year as a result of the rise of global digital platforms targeting local business advertisers.
Forced to temporarily suspend its printed newspaper at the onset of COVID lockdowns and restrictions, the Mail-Times was able to bring more loyal readers on board as digital subscribers but by the time it resumed printing its three editions per week it faced continuing local advertising revenue declines of more than 25 per cent.
Slow economic recovery from COVID-driven revenue declines means the commercial risks remain high for ACM's smallest community titles, as evidenced by the South Australian mastheads Coastal Leader and Flinders News. While not part of the PING grant, ACM resumed printing these titles in April 2021 after careful assessment but the products were proving financially unviable by year's end when print publishing was unfortunately halted once again.
Our observations and projections around any likely recovery of the advertising market are not optimistic. Local advertising has been worst-affected, and specifically the retail and hospitality sectors which are struggling for stock and staff respectively. We are seeing some uplift from COVID-related federal government spending but not enough to give us any confidence about a future recovery.
We urge the committee to consider reforms or incentives, such as tax breaks, to encourage small and medium-sized businesses to advertise in their regional print publication. This kind of incentive would lift all boats and provide a much-needed fillip not just to regional newspapers, but also businesses that are struggling to get back on their feet.
Massive newsprint price rises
Printing and production, including newsprint, is the biggest single input to our business after labour.
A massive increase in newsprint prices will affect publishers globally this year. It is perhaps the single biggest threat to the viability of our publishing business, after COVID and its economic effects.
A British newspaper executive described the newsprint increases in this story in The Economist as "like tasering an elderly person who's already on a pacemaker".
ACM will be heavily affected by this rise because of the number of publications we produce and the high volume of newsprint we require.
Our supplier, Norske Skog, has advised that the price rise from July 2022 will be more than 30 per cent. This equates to millions of dollars of extra expense a year. When combined with price rises for specialty paper used for our magazines we are confronting extra costs for paper alone that are equivalent to the salaries of 50 journalists.
These increases will likely cause the closure of titles that are teetering on the edge of profitability and will put even our biggest publications under significant cost pressure.
We will have no choice but to increase the cover prices for all our newspapers while at the same time reducing paging. This in turn will reduce circulation and put further pressure on our ability to sell advertising.
This is a situation that requires urgent government attention and assistance.
Media regulation and ownership laws
Australia's outdated media ownership laws discriminate against regional publishers and are in urgent need of an overhaul.
If one thing has become evident in the disrupted environment of recent years, it is that publishing companies benefit from scale. We have seen it in the merger of Nine Entertainment Co and Fairfax Media to create a multi-platform company that is less reliant on traditional publishing revenue streams.
At ACM, we see a future where journalism in regional markets can be preserved and strengthened by serving journalism and advertising across multiple platforms.
But different rules apply to regional and metropolitan publishers. Under the present anachronistic laws ACM is unable to merge with a regional television broadcaster without divesting parts of our portfolio.
Until recently, ACM held a stake in Prime Television. Our hope had been to create a multi-platform media company that would sustain our regional journalism.
This plan put us in breach of the antiquated federal Broadcasting Services Act 1992, which requires each regional radio licence area to have at least four independent "media operators", or "voices". To proceed, ACM would have been forced to sell two of our respected daily newspapers, The Daily Advertiser in Wagga Wagga and The Advertiser in Bendigo.
Our concerns about the Act are two-fold:
- It describes a 20th century media environment of print, television and radio. It does not mention websites, social media, the digital platform giants, smartphones, streaming services, digital-only start-ups or international media companies with Australian operations. ACM is the only company in the country that is trying to build a 21st century media business to serve regional Australia, but we are doing it with one arm tied behind our back.
- It empowers the Australian Communications and Media Authority (ACMA) to police the number of media operators in a market, but gives ACMA no discretionary power in assessing the number and quality of those operators. This means a reputable, large-scale publisher such as ACM, which is operating with the highest ethical standards and without any political agenda, could be forced to sell quality mastheads to the highest bidder. Under the legislation, ACMA is unconcerned about whether that bidder is qualified or ethical, or simply an operator interested only in using the outlet for political or commercial advantage.
This legislation is completely at odds with our desire to build a business that does not have to rely on government handouts. Unfairly for regional media, the Act was changed in 2017 to permit consolidation in metropolitan areas, which allows Nine Entertainment Co to own newspapers, free-to-air TV, radio and streaming television and newspapers in the same markets.
We ask that regional media companies be given the same opportunity. For regional media to survive and prosper, the "voices test" in the Broadcasting Services Act 1992 must be amended.
At the very least, ACMA should be given discretionary powers to assess the number and quality of voices in a market, instead of being required to make a binary decision and force a sale.
Mandated government spending in regional newspapers
In April 2020 the NSW government amended local government regulations to allow the state's councils to bury notices about their activities and decisions on their own websites, rather than display them in their town's trusted local newspaper.
This was not a temporary measure to financially support councils through the peak of the COVID-19 outbreak while newspaper publishing and distribution was disrupted by lockdowns, but a permanent change that has done lasting damage to the financial viability of many local papers. Annual revenue from NSW local government advertising in ACM titles has dropped by more than $2.2million from 2019 to 2021.
While some councils in ACM's NSW readership areas have continued to stand up and defend their local paper and the jobs that go with it by maintaining council advertising, sadly many have been happy to withdraw support for an independent voice in the community.
The Centre for Social Impact at Swinburne has described the removal of the traditional requirement for council notices to be advertised in local newspapers as an erosion of the public's right to know that deepens civic and digital inequality, disproportionately affecting those without internet access, especially the elderly and low-income households.
ACM supports the alternative approach taken by the Victorian government in 2020. It pledged to place weekly public health advertising in more than 100 regional media outlets over six months to bolster local newspapers and keep regional Victorians informed about coronavirus.
The federal government should lead other tiers of government by example and commit to ongoing advertising support to reach the highly engaged readers of local newspapers in regional and rural areas. This mandate could be extended to include a portion of each federal Member of Parliament's individual expenditure allowance for media advertising.
Underlining the importance of credible news sources in regional and rural areas, a 2021 Australian Research Council-supported survey by RMIT and Deakin universities showed that country newspaper readers are almost 10 times more likely to go to their local news website over a council website. That said, the majority (71 per cent) of the more than 4000 readers surveyed preferred to read their local paper in print rather than online.
We also note that nearly two-thirds of survey respondents indicated that policies affecting the future of rural and regional media would influence the way they vote at the next federal election.
ACM would propose the following recommendations for the inquiry to consider. These recommendations are designed to allow regional newspaper publishers to survive and grow on their own merit. If implemented they will remove the need for "Band-aid" measures such as grants, help to secure thousands of jobs in regional Australia and keep the vital community service of local newspapers viable for many years to come.
As we have noted, the PING program provided a critical lifeline for our journalism through the revenue hit of COVID. But our business does not want to become reliant on continuing government handouts to sustain and protect regional journalism.
1. The federal government needs to change Australia's outdated media ownership laws to level the playing field for regional media. Or at the very least give ACMA discretionary authority (similar to that of the ACCC) to allow consolidation and growth. (See section on media regulation and ownership laws above.)
2. Tax benefits, such as tax rebates (as opposed to existing deductions), should be considered for regional small business operators who advertise in their local newspaper. This would be an easy way for the federal government to help small- to medium-sized regional enterprises grow their business and keep money and jobs in their local community. The added incentive of a full tax break for a business supporting their local newspaper through a minimum advertising spend would contribute to the provision of public interest journalism in that community, help the small businesses tell their local community who they are and what they do and encourage the community to in turn support the business and the newspaper.
3. Rather than further grants under a "PING 2.0", we would urge consideration of ongoing tax concessions for the procurement of newsprint to offset the imminent increases in costs facing all regional news publishers. Such industry support for the continued production of newspapers would offer a fundamental and material change to the business model of regional news publishing.
4. The federal government and its agencies should guarantee a minimum annual advertising spend across Australia's regional newspapers, ensuring equitable access to essential public information for the 36 per cent of Australians who live outside metropolitan cities. Such a commitment would not only contribute to a more sustainable future for regional media, it would also demonstrate to country newspaper readers - the most highly engaged news consumers in the country - that their government knows they exist all year round and not just every election. This same minimum annual local newspaper advertising spend should be extended to individual federal MPs and senators to ensure local news providers employing local journalists in regional areas rather than global digital giants benefit from their taxpayer-funded electorate advertising allowances.
5. The tax-deductible status of regional news media subscriptions should be extended to all Australians, not just those who can already claim the cost of subscriptions through existing income tax arrangements. This should be for subscriptions to legitimate regional news media organisations employing journalists in regional Australia and providing public interest journalism and local community information to regional audiences.