The leading commercial news entity in the UK, Reach, has reported a nearly 50% fall in its pretax earnings last year, attributable to decreased advertising revenues and a significant dip in digital newspaper readership. Pretax gains plummeted by 45% to an equivalent of €43 million (£36.7 million) accompanied by a drop of 24% in digital readership as a result of Facebook, one of its key traffic sources, discontinuing news support and recent disruptive changes made by Google to its news ranking algorithms.
Reach anticipates its first-quarter performance to be impacted by declining referral traffic, even though it anticipates increased trends across its digital operations. Revenues declined over 5% to £568.6 million, but an over 10% surge in its shares as a result of successful resolution of two significant financial matters aided the company.
The group has allocated approximately £18 million to handle phone-hacking litigation from victims, with an expectation that a high court announcement in December will largely conclude these disputes. Furthermore, an agreement reached with its pension trustees could potentially lower pension payment obligations by around £40 million starting in 2028, a move which Numis analysts consider as a significant positive implication noting that it’s expected that historic legal disputes will be resolved at a much reduced cost than previously projected.
The withdrawal of Meta, Facebook’s parent company, from supporting news content in multiple global regions has sent a shock wave among news entities causing widespread declines in traffic. Against this backdrop, the UK government has been pressed by Reach CEO Jim Mullen, to set up discussions between US tech corporations like Google and British news organisations, to decide on the “fair share” of profits generated by news provided by UK media.
Though the increased switch in social media traffic is putting a strain on the prevailing free digital news model, Mullen is committed to offering free access to content from their local newspapers dispelling any suggested introductions of paywalls. Meanwhile, other organisations, such as the Daily Mail and the Guardian, have started trialling subscription-driven content models.
While there’s criticism of Reach’s intrusive advertising strategies, Mullen justifies it as a requisite compromise given readers are availed news free of charge.
Amid the overall downturn in the advertising sector, a notable decrease in digital eyeballs has further intensified the issue. This problem, in turn, compelled Reach to curtail approximately 450 jobs in the previous year. The company announced on Tuesday that these redundancies are expected to curtail expenditure by around 5 to 6 percent in the current year, mirroring last year’s figures.
Additionally, Reach has begun implementing artificial intelligence technologies to complement its journalistic efforts, with over a dozen newsrooms utilising AI support for content creation by the end of last year. However, Mullen reassured that this technological shift would not lead to any role redundancies. – All rights reserved © The Financial Times Limited 2024
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