How do you solve a problem like The Scotsman?

The Scotsman

So what does the future hold for the birthday boy Scotsman?

In its 200th year, the future for the grand old dame of Scottish journalism has never looked so troubling.  Owner Johnston Press is juggling problematic debt payments after reporting a £300m loss in their recent results.

Meanwhile circulations at the Scotsman, Scotland on Sunday and Edinburgh Evening News continue to drop, with the Scotsman down below the 20,000 mark according to the most recent ABCs.

For years, the expectation was that an eventual merger between the Herald and the Scotsman would take place.  There had been an aborted attempt around the turn of the millennium, followed by the Barclay Brothers – then owners of the Scotsman titles – being rebuffed in a ‘predatory’ bid to buy the Herald and Times papers from Scottish Media Group in 2003.

Hostility towards a merger from Holyrood and Westminster appeared to put paid to any real chance of it happening, despite constant background murmurings about how it would protect quality journalism in Scotland for the long term – leaving us now in the situation where both groups, but increasingly the Edinburgh-based title, faces an uncertain future.

One thing is certain, though. Johnston Press is now in the business of disposing of newspapers, as it looks to reduce a troubling £126million company debt.

Last year it sold off a group of papers in the Isle of Man for £4m, and a cluster of titles from across East Anglia and the Midlands for a further £17m.

None of those sales involved what Johnston Press had identified as their ‘uber’ group of papers – the eight key titles classed as most important the publishing company, a group that includes the Scotsman and the Edinburgh Evening News.

However, it did titles from the next group down – the so-called primary titles – including the Bury Free Press, Grantham Journal and the Stamford Mercury, papers JP had originally said would “benefit from having a more consistently executed audience and commercial strategy”

JP’s operation in Scotland takes in a huge sweep of newspapers – this is how they break down into the four categories defined by Johnston Press last year:

UBER The Scotsman, Edinburgh Evening News
PRIMARY Falkirk Herald
CORE Carluke and Lanark Gazette, Cumbernauld News, Fife Free Press, Fife Herald, Kirkintilloch Herald, Milngavie and Bearsden Herald, Motherwell Times
SUB-CORE East Fife Mail, Galloway Gazette, Glasgow South and Eastwood Extra, Midlothian Advertiser, Arbroath Herald, Buchan Observer, Carrick Gazette, Deeside Piper, Ellon Times, Fraserburgh Herald, Glenrothes Gazette, Hawick News, Linlithgow Gazette, Mearns Leader, Selkirk Weekend Advertiser, The Buteman, Scotland on Sunday, Forfar Dispatch/Kirriemuir Herald, Arborath Herald, Montrose Review, Kinkardineshire Observer, Brechin Advertiser

The SOS is the obvious standout in that sub-core group, which otherwise consists of small circulation weeklies scattered across the breadth of the country.

Insiders reckon that JP would be interested in doing business over the Scotsman and the Evening News, but would insist that the SOS be included in the deal – freeing it up from the associated publishing and pension costs.

However, that requirement is understood to be one of the key stumbling blocks towards a deal.

So who would be the most likely to acquire the Scotsman titles?  Assuming no move from a new entrant, a management buyout or a minor player stepping up, the main publishers in Scotland would be Trinity Mirror’s Scottish arm, Media Scotland, alongside News Group, Newsquest and DC Thomson.

It’s pretty safe to discount the first two.  A Scotsman acquisition wouldn’t seem to fit Media Scotland’s current national strategy, although acquiring some of the non-Uber titles might fit in with Trinity’s recent takeover of Local World and the smaller regional titles included within that group.

News Group sits in a similar position – other than potentially acquiring the Scotsman to merge it with the Scottish edition of the Times, a paper which is starting to tighten its grip on the quality end of the Scottish national market, there’s little in JP’s Scottish portfolio which fits in with their publishing model.

This leaves us with two – Newsquest (publishers of the Herald, Sunday Herald, Evening Times and the National) and DC Thomson.

Newsquest’s current financials are somewhat mysterious, following a controversial change in accounting practices last year.  However, assuming their profits haven’t been quite so dramatically wiped out as is claimed, they’d likely have the financial resources to take on the Scotsman titles – and with a host of regional and local newspapers in Scotland already, their portfolios match up well with Johnston Press.

But there’s the question of whether JP would want to deal with their arch rivals in Scotland, and the ongoing issue of whether regulators would be comfortable with one company owning both the Herald and the Scotsman, the Sunday Herald and the Scotland on Sunday… either as going concerns, or as singular, merged titles.

Former Scotsman executive editor Bill Jamieson believes it could be done, telling Press Gazette:

The two titles could remain editorially separate with their own editors, geographic, cultural and political biases. But they would shelter under a common umbrella of shared services – marketing, distribution, advertising, HR, wages, library and IT services.

But that opposition, even with the current circulation wobbles, is unlikely to go away. The idea of a merger between the titles, in the current IndyRef2-touched political sphere, would likely be a stumbling block towards any deal, while the two co-existing as separate entities would make for unlikely editorial and political bedfellows.

This leaves DC Thomson.

There’s no denying that DC’s tight-run ship philosophy has kept the P&J and the Evening Express in decent shape, even allowing for the oil industry downturn in Aberdeen.

Circulation declines across the titles have been managed, and Aberdeen Journals posted a £8.5million pound profit in its most recent set of accounts.  Would a similar approach have an impact when scaled up – or down, depending on your point of view – to Edinburgh?

From DC Thomson’s point of view, a deal for the Scotsman titles would appear to make sense – not least as it would give them a virtual stranglehold across daily newspaper publishing on the east coast, taking in a sweep from Inverness to the capital, although they’d be unlikely to have any interest in the smaller primary or core titles.

DC Thomson already accommodates the P&J and Evening Express within its new printing facility, distributing the papers from Dundee following the closure and dismantling of the Lang Stracht press hall four years ago. Dundee lies pretty much equidistant between Aberdeen and Edinburgh, making it an obvious, ideal hub to accommodate the Scotsman and Evening News within its printing presses – if the existing contract to publish at Cardonald could be exited from early (or not renewed when it expires).  The Scotsman shut its own presses at Newhaven in 2009.

Likewise, it’s hard to imagine the presses would struggle to accommodate a run of the Scotland on Sunday, if necessary, while dealing with the Sunday Post on a Saturday evening – should it acquire the title as part of the deal.

Scotsman Publications’ most recent filings with Companies House showed it had 107 editorial and photography staff, 50 sales and distribution staff and three further employees working in administration – 40 less than the company had employed the year before.

Being brought under the auspices of another company to JP, such as DC Thomson, would likely lead to a further rationalisation of that – most likely in the sales and distribution field, but also on editorial.

Would it also lead to a shared subbing ‘hub’, likely in Dundee?  It was always rumoured, even before my year at Lang Stracht, that the company would eventually merge its subbing desks.  With Trinity Mirror and Newsquest having adopted a centralised approach to subbing, adding the Scotsman and EEN to its portfolio could be the impetus the company needs to pool – and whittle down – its backbench operations.

There’s also obvious shared resources to be found editorially, particularly in the specialisms such as agriculture, politics and sport, and among the photography and multimedia/digital pools, where the Scotsman has traditionally led the way, although DC Thomson has made decent strides in that field of late.

Acquiring the Scotsman and Edinburgh Evening News fits the model DC Thomson already has with the Courier and the Evening Telegraph (quality morning quasi-national compact, city-focused evening), and the Press and Journal and Evening Express.

So there are many editorial, production and management issues why a DC Thomson acquisition of the Scotsman group seems the most likely, if such a move were allowed – but are there economic ones?  DC Thomson isn’t short of cash.  It posted a £24million profit in its last filing to Companies House, and has cash or cash equivalent resources of around £100m – enough to fund what would be a significantly cheaper purchase than the P&J, or indeed the Scotsman itself was a decade ago.

DC Thomson’s acquisition of Aberdeen Journals in 2006 came with a £132million price tag – a year after JP’s £160million purchase of the Scotsman group.  With Johnston announcing a £300million-plus writedown of its newspaper assets last month, the entire print arm of the group – excluding the recently-acquired i – is now valued at £120m.

Given that depreciation in value, even the uber titles could theoretically be acquired for tens, rather than hundreds, of millions from Johnston Press, in the same vein as the East Anglian titles acquisition by Iliffe Media – something that would make them an attractive prospect.  Indeed, last year former Scotsman editor John McGurk claimed the Scotsman was on the market for a mere £10m – a 94% drop in value in the space of a decade.

That doesn’t take account of the pension liabilities any purchaser might face – with Johnston Press reporting a near £41million increase in its pension deficit in the last set of results – and that, even more than the Scotland on Sunday obligation, is likely to be the biggest handicap towards anyone acquiring the titles.

Ultimately, with the papers mostly marked as a vital part of Johnston Press’ portfolio, a sale for the Scotsman titles may not be on the immediate horizon but with JP’s ongoing travails it seems a not unreasonable to presume that it will happen sooner rather than later, and the rumours about it being up for sale for the right price will not go away.

But if and when the day comes when the Scotsman moves to a new home, the smart money would suggest that offer will come from the north, rather than the west.