Last week, the Scottish Affairs Committee at the House of Commons grilled five key figures in the Scottish newspaper industry, as part of an investigation into a ‘crisis’ within the nation's press.

At the meeting were Tim Blott, regional managing director, Newsquest (Herald and Times); Mark Hollinshead, managing director, nationals, Trinity Mirror; John McLellan, editor in chief of The Scotsman Publications; Jim Raeburn, director, Scottish National Daily Newspaper Society; and Michael Johnston, divisional managing director, Scotland, Johnston Press also president of the Scottish Newspaper Publishers Association.

The full, unedited transcript has now been released and makes for interesting reading.

Minutes of Evidence taken before the Scottish Affairs Committee, House of Commons: Ian Davidson (chair), Jim Devine, Jim McGovern, David Mundell, Lindsay Roy, Charles Walker, Ben Wallace, Pete Wishart.

Mr Davidson: Are there any opening statements that anyone wants to make? I presume you have seen the evidence from the previous hearing that we had. Is there anything you want to say now or do you just want to go straight into questions.

Mr Hollinshead: Straight to questions.

Mr Davidson: Okay. That is fine.

Q74 Mr Devine: I am wondering about your profit levels of your newspapers at the moment. Are they down? Were they up before the current economic crisis? Has it been reflected or are they profitable at the moment?

Mr Blott: From the perspective of the Herald & Times, we are still profitable but our profits are considerably down year on year. Part of that is down to the recession and part of that is down to structural change.

Q75 Mr Devine: When you say "Herald & Times" are you talking about the parent company or just about the Herald and the Times? There have been major recent redundancies. The Herald part of the company was very profitable.

Mr Blott: That is a good point. There are four businesses that form the Herald & Times Group. There is a printing business, there is an internet business, there is a newspapers business and there is a magazines business. The newspapers business has undoubtedly suffered considerably. When we bought the business in 2003 the newspaper business represented more than 60 per cent of our profits. It now represents, and will do this year, probably just over 30 per cent of our profits.

Q76 Mr Devine: What would that be in figures?

Mr Blott: I am sorry, we have not published our audited accounts for 2008.

Mr Hollinshead: The Daily Record and the Sunday Mail are of quite specific interest. It remains a profitable business, but the organisational/structural change we are undergoing at the moment is a critical business imperative to ensure the future viability of our business and of, in particular, two iconic Scottish newspapers. Historically, Mr Devine, the business has been profitable, but, looking forward, given the issues that Tim has highlighted in terms of increased newsprint prices and a reduction in discretionary expenditure which is affecting newspaper purchase currently and a cataclysmic downturn in advertising across the whole of the UK, not just in Scotland, that requires us to cut our cloth accordingly and look to the future in terms of how we protect the future shape of our business for all our employees.

Q77 Mr Devine: When you say "still profitable," how much do the Daily Record and Sunday Mirror make?

Mr Hollinshead: Our statutory accounts will be filed - October 31, I think, is the deadline - and we will release an interim management statement next Wednesday at our AGM, but we are looking at mid-teens as a forecast currently.

Q78 Mr Devine: Is that up or down?

Mr Hollinshead: That is significantly down.

Q79 Mr Devine: How about the Scotsman, John?

Mr McLellan: We are not making a profit this year, but on the details I will defer to my commercial colleague.

Mr Johnston: The situation for Johnston Press and, more specifically, The Scotsman Publication, Mr Devine, is that the business made a small profit last year. Revenues are significantly down. Revenues are down about 40 per cent year on year. The Scotsman Publications is currently going through a period of re-organisation, and that re-organisation is absolutely fundamental to ensuring the sustainability of the business. The re-organisation obviously aims to ensure a profitable business, a modestly profitable business at year end. Obviously we are in the hands of what happens in the current economic climate, which is extremely hard - in fact, probably the worst that anyone within the industry has seen. The situation for Johnston Press, the holding company, is that the company is trading profitably at an operating level, but it is quite well publicised that it has an issue with debt that was accumulating through a series of acquisitions. However, operating profit is significantly down year on year. The weekly papers in Scotland are trading profitably but at a much reduced level on the levels that they were trading at last year.

Q80 Mr Devine: Was that the reason for your press release on Friday?

Mr Johnston: It was not a press release. We are currently in discussions with the Treasury about the content side of our operations. We have had a number of re-organisations across this year that affected all departments. We have to scrutinise the whole of our business from top to bottom.

Mr Raeburn: My only comment is backing up that which Michael has just made. Certainly our public companies, Johnston Press, Trinity Mirror, were quoted earlier this year as saying that in the first two months of 2009 revenues were down 36/38 per cent. I suspect that is representative of what is happening in the industry. That comparative period was when we were seeing a downturn at the beginning of 2008, so that indicates how very difficult the situation is.

Q81 Mr Devine: You referred to the impact of the internet. Do you know of any newspaper in the world that has made a profit from going on to the internet?

Mr Blott: We make a profit with our internet business. Last year our internet business, which is called S1 in Scotland, accounted for about 40 per cent of the total company profit.

Q82 Mr Devine: Can I be clear that your S1 business is mostly classified advertising.

Mr Blott: It is classified advertising.

Q83 Mr Devine: It is cars, it is jobs. It is not a newspaper. It is not news or anything similar, is it?

Mr Blott: It is not from our newspaper websites, that is true.

Mr Hollinshead: I think it is worth defining the two elements of the internet to which Mr Devine is referring. You are referring to companion newspaper websites. Tim is referring to more vertical markets, where we are looking at particular classified pillars: cars, jobs, homes - which are across the board generally still profitable, albeit job sites are under equivalent pressure compared to their print brands. Companion newspaper websites is a whole new venture for us. Generally they make a small profit but we are starting to see some real changes in worldwide trends. For instance, about nine weeks ago in the USA the Seattle Post Intelligencer closed as a newspaper - a very, very famous newspaper. It was making significant losses and they were forced into the very difficult decision to close the newspaper. However, they decided simultaneously to retain their newspaper companion website, which would be manned by 20 journalists. After just three weeks of operation of the online side on its own, its traffic reduced by circa 25 per cent, if I recall the facts correctly, which indicates that to have a very good companion newspaper website you need a very good newspaper to feed it with unique content. That is a key strategic challenge for the whole industry and one with which all my colleagues are wrestling.

Q84 Mr Devine: Before we move off Mr Blott's point, where he said 40 per cent of the profits together were from the S1 site, that is only the classified advertising site.

Mr Blott: It is.

Q85 Mr Davidson: I think we are really wanting to pursue the question of news, as such, rather than simply other forms of advertising. Coming back to Mr Devine's point about the internet element of the newspaper, is that profitable?

Mr Blott: As Mark suggested, slightly profitable. It certainly would not be able to sustain the business overall.

Q86 Mr McGovern: Mr Blott, I think you said there are four factors in the Herald, one of them being magazines. The only Herald magazines I am aware of are the Saturday and Sunday supplements. Are they a completely separate entity?

Mr Blott: That is a separate division. It includes The Scottish Farmer, The Great Outdoors, and some of our niche publications.

Q87 Mr McGovern: It is not the supplement on the Saturday and Sunday.

Mr Blott: It is not the supplement on the Saturday and Sunday. It is a separate division of our business.

Q88 Mr McGovern: Which profits are more profitable and which parts are maybe making a loss or are less profitable?

Mr Blott: All parts of our business are making a profit. Our magazines, our printing, our internet and our newspapers businesses are making a profit but there has been a significant change in the balance of profit over the last five/six years. Certainly the majority of our profit was driven by newspapers five/six years ago and now it is not.

Q89 Mr McGovern: As the Chair said, news was previously the big profit maker.

Mr Blott: Yes.

Q90 Mr McGovern: In order for the four, what is it now?

Mr Blott: As I suggested before, newspapers now adds up to just over 30 per cent of our profits, our internet business generates about 40 per cent of our profits, our printing business generates about 20 per cent and about 10 per cent is our magazines business.

Q91 Mr Wishart: We had the unions here a couple of weeks ago and we were hearing of some horrific and appalling situations of stress in the workplace, of people being unable to cope because of the new conditions that were forced upon them. We heard examples of journalists missing lunch breaks or working extra shifts just to make sure this could happen. We see strikes in the newspaper industry akin to what we saw in Wapping in the early 1980s. We are seeing people being sacked and asked to re-apply for their jobs. How would you characterise morale and industrial relations in the newspaper industry in Scotland just now?

Mr Johnston: I will speak for Johnston Press. We have not had any strikes. There is a very difficult situation that both the management and the trade union side face, and for all employees. I work pretty closely with the trade union side. I did see the evidence that Paul Holleran gave. With regards to the stress and anguish of the staff, I do not disagree with him. It is an incredibly difficult time. Hard decisions are being made and people are having to leave the business, but at the same time, in my own company - and I know the same applies to the rest of the industry - we are fully committed to health and safety legislation, we meet all our requirements. My own company operates its health and safety consultative committees and ------

Q92 Mr Wishart: Do you think that industrial relations are quite good just now?

Mr Johnston: Let me finish. We have employee forums and so forth, so there is input from the trade union side and from the employees. The trade union side have spoken to us about the situation. They have apparently done an audit in parts of the industry. I have not seen that audit, although I have asked to see it. It was first raised with me about eight months ago and I am still waiting today. Certainly, as soon as I see or have anything raised to me, I would act accordingly. It is not in anyone's interest for people to work antisocial hours, to work hours that would make them sick or stressed, but it is a difficult time. To answer your question "Are industrial relations good?" I think industrial relations are pragmatic. I think everyone understands the terribly difficult problem that the industry faces, which is the hardest problem that it has faced in anyone's lifetime. To go back to the web issues that were being raised earlier ----

Q93 Mr Wishart: If we could stick with industrial relations just now. I am grateful for that.

Mr Johnston: I think we drifted off the web issue ----

Q94 Mr Wishart: Yes, but we are on to something else, if you do not mind, just to give the opportunity to the other people being here. We keep hearing from the union that this is the sharp practice of the management involved. We want you to have the opportunity to say how you would characterise industrial relations and morale in the Mirror Group just now.

Mr Hollinshead: We are referring specifically to the Scottish Daily Record and the Sunday Mail Ltd, not the Mirror titles. As Mr Holleran indicated at the last hearing, we have "consulted extensively" - I think those were his words - with the Scottish Daily Record and the Sunday Mail with not only myself but senior editorial management and our administration team. We did get a disappointing and unfortunate conclusion where industrial relations did break down, Mr Wishart, which resulted, as you are aware, in industrial action. We are now back around the table with regard to negotiating a sensible solution as to how we move forward and, as I said in my first remarks, to protect the future of our newspapers. The changes that are taking place are technology led. They look at an element of our business, the editorial production aspect of our business, because you need content. Great writing, great journalism and great photography, both in print and now online, remains very much at the heart of our future business proposition. They are difficult times. I have worked in the newspaper business for 27 years. I went through the transformational change that took place in the late 1980s, which was an enormous transformation from hot metal to single key, and we are now about to embark on an enormous paradigm shift in the way we produce our newspapers which is going to impact on our morale and we need to consult with our workforce, with our journalists, with our advertising colleagues and with our circulation colleagues to make sure that they understand how we move forward.

Q95 Mr Wishart: I think everybody around this table accepts and acknowledges the challenges in the newspaper industry, and we have all seen the figures, but it does not seem to be the right strategy almost to pick a fight with the unions. We saw the example at the Herald titles, for example, where everybody was made redundant and asked to reapply for their jobs. What sort of sense does that make, when you need the journalists to work with you in order to bring these titles back? I will ask that directly to Tim.

Mr Blott: I was interested in Paul Holleran's evidence before the Committee. I think he pointed out a slight irony and I will reinforce that irony. In a sense, D C Thomson are seen within the Scottish publishing industry as a very good employer. Their attitude towards the unions is perhaps different from some of the three companies represented here. I would say that The Herald, the Record and The Scotsman have traditionally had a very strong union environment. The other publishing company that I would quote in Scotland that probably sells more newspapers than any other is News International. As you alluded to in terms of Wapping, News International similarly does not have a strong union environment. I would say that the morale within those particular businesses and in terms of the evidence that has been supplied before and amongst the journalists may be seen as even higher than amongst the heavily unionised businesses represented at this table. That is the irony of the situation. I would say, as a former journalist myself, that morale is shifting sands: morale can move from a Monday morning to a Friday afternoon and journalists are not necessarily the most positive.

Q96 Mr Wishart: How is sacking all your journalists and then asking them to re-apply for the job going to improve morale?

Mr Blott: We have been negotiating with the unions for some considerable time to try to address some anomalies in their terms and conditions. Every year we try to address this situation in terms of voluntary redundancies. Every year the union would accept the voluntary redundancies and not address the fact of the anomalous terms and conditions. In the end, in desperation, rather than continually losing very good staff, we decided that we needed to take somewhat desperate action. All I would say, much as the newspaper company was criticised at the time for taking such drastic action, is that we did not incur any industrial action, the jobs were dealt with and we did not lose one day's work during that process.

Q97 Mr McGovern: Mr Blott has possibly pre-empted the question, but the question I want to ask is to Mr Johnston. In your position as President of the Scottish Newspapers Publishers Association and Vice-President of the Scottish Daily Newspaper Society, could you tell me if DC Thomson are members of either of these?

Mr Johnston: They are members of the SDNS.

Q98 Mr McGovern: When you mentioned to Mr Wishart about consulting with trade unions, et cetera, who exactly do D C Thomson consult with?

Mr Johnston: I do not know. You would have to ask D C Thomson.

Q99 Mr McGovern: But you are President of the Association which includes them. You mentioned in answer to an earlier question, presumably on behalf of this Association, the consultation with the unions. I am asking you, in relation to one of your members, who do they consult with.

Mr Johnston: The Scottish Daily Newspaper Society is a trade body. It is a meeting of companies in the daily sector in Scotland. It has no part to play within trade union negotiation.

Q100 Mr McGovern: So how can you quote that about trade union negotiations in an answer to my colleague?

Mr Johnston: I do. My job is Managing Director of The Scotsman Publications Ltd. I enter into discussions with employees and trade unions all the time. That is how our business works.

Q101 Mr McGovern: You either cannot or you are refusing to answer my question.

Mr Johnston: I am answering your question. I fully consult with trade unions. I pre-consult with trade unions. We have a very business like relationship with trade unions, where, on all of the organisational changes that have been looked at and any that have been implemented at Scotsman Publications or within Johnston Press companies where there is trade union participation, we fully consult. With regard to D C Thomson, D C Thomson are a member of a trade body that talks abut marketing and lobbying and does not have any input in day-to-day trade union and employee negotiations.

Q102 Mr McGovern: Mr Raeburn, you wanted to make an input into this.

Mr Raeburn: There is an important distinction between a trade association and an employers' organisation: the latter engages in industrial relations matters; a pure trade association does not. Employment relations matters are all for individual companies and not for their representative body.

Mr Davidson: We understand that, but the Sunday Post in D C Thomson was referred to by yourselves and I think it is reasonable for my colleague to pursue clarification on that matter.

Q103 Lindsay Roy: Gentlemen, I think you would accept that, as employers, when an individual indicates their perception of high levels of stress amongst the workforce there is an obligation on management to look at that and to see to what extent that is the case. How have you dealt with this perception? Have you looked at it clinically and come up with some outcomes or ways in which to alleviate stress or, indeed, is it a different perception that you have?

Mr Hollinshead: Across Trinity Mirror we take staff welfare very, very seriously indeed - not just in our nationals operations. One of my first challenges when I moved to Glasgow in 1998 was to knock down an old, antiquated, unfriendly building and move to a bright new, open-plan, ergonomically friendly environment that is now on Central Quay. As part of that process, the objective was to ensure all health and safety criteria were exceeded. I think we have achieved that with our move to our new premises. We have a staff gymnasium, which is staffed by two full-time members of staff. To cope with their part of the stress management policy, each individual has free access to a personal fitness plan. We have a staff restaurant which has healthy option opportunities - across the week and not just on a fad-by-fad basis. We have an employee counselling service; we have an occupational nurse facility which can be called on by employees; and we have an on-site Rakhi and masseuse facility which our staff have to pay for but at highly subsidised rates, for them to engage in that sort of stress management policy. We take it very, very seriously indeed. It is a critical business imperative to make sure that all our employees operate in such an environment.

Q104 Mr Davidson: You are not seriously saying to us, though, that the threat of dismissal and the drastic changes in working conditions that there have been at your newspapers are balanced by healthy options in the canteen and the use of a masseur, are you?

Mr Hollinshead: No, I am not saying that at all. I was asked the question how we relate to stress-related policy.

Q105 Lindsay Roy: I think that is a highly commendable thing to have been doing in terms of environment. I was looking more at inquiring into whether this has been a result of perceived harassment, intimidation, or just changes in work practices that people cannot cope with? I am interested to see what work you have done, as employers, to find out what are the root causes of the stress or the perception that there is a high level of stress?

Mr Johnston: At Johnston Press we have very robust policies and procedures with regards to any harassment or inappropriate behaviour or grievances. We take those all very seriously and we follow tried and tested procedures on those. You refer to the situation in which we all find ourselves in the industry, which is going through a very, very difficult time. Yes, people are feeling that it is a difficult time and, yes, there are difficult conversations being had and so forth, but I can assure you that if there was any evidence of any sort of harassment or intimidation, both the management side and the trade union would be very active in taking that up. I have not had a case referred to yet. If it was, I would robustly investigate it and follow procedure. With regard to health and safety, as I said earlier we have a strong commitment to health and safety. We fully comply with all legislation and we go further than that. We have the health and safety consultative committee, we have employee forums and so forth, and anything that is brought up or raised with us as an issue we would absolutely treat as a serious matter and investigate. If I believed there was any area of stress, I would investigate it as a serious matter. As part of our recent reorganisations, we have investigated shift patterns and so forth. We have consulted very thoroughly with the trade union side and those shift patterns have been agreed with the trade union to reflect proper working practices. We are not in the business of making people work long, anti-social hours that are going to impact adversely on their health.

Q106 Lindsay Roy: I accept what you are saying, but I was really wondering, given that Mr Holleran gave his advice in March, if any of the employers have said, "Let's have a fresh look and see if there are underpinning factors that we are not aware of?" Has there been any initiative to follow this through?

Mr Johnston: I have seen Mr Holleran three times since March and on every occasion I have picked up that issue with him. Most recently I saw him three days ago.

Q107 Mr Davidson: He is now happy, is he?

Mr Johnston: Mr Holleran is never happy, because Mr Holleran is fighting hard for the things that he represents of course.

Q108 Mr Davidson: Has the situation improved in Mr Holleran's eyes? I did not have the opportunity to be here at the last meeting, but some of the evidence he gave us was really quite worrying, from our perspective, and I am sure from the perspective of the staff. Are you saying that the situation has now been considerably improved?

Mr Johnston: My issue with it is that I do not know. Mr Holleran obviously here mentioned a health and safety stress audit that he has carried out across the Scottish press and I have not seen that health and safety press audit. I have asked to see it, because I have told him that it is absolutely our case that we would not want issues to do with stress and antisocial hours. He accepts that, but he has yet to show me the figures or show me the details. If he shows me the details, then I will act immediately.

Q109 Mr Davidson: To follow up the point that Mr Blott made about your relationship with the staff in The Herald and the other group papers, Mr Holleran did tell us about the procedure that had been followed, when people were being told that jobs were going. I do not know if you saw the evidence he gave us. Mr Wishart asked him whether or not there had been consultation and discussion, and he said, "All the staff were called into a massive room and an announcement was made. The editor-in-chief, Donald Martin, just said that they had all been made redundant and that 250 of them had to apply for 210 jobs with worse conditions." Is that true?

Mr Blott: They were different conditions.

Q110 Mr Davidson: So apart from that, the rest of it is true.

Mr Blott: They were called into a room. What Mr Holleran missed out was that Mr Holleran was also meeting with us at the same time.

Q111 Mr Davidson: They were all called into the room and they were told that they had all been made redundant. Is that true?

Mr Blott: They were told that their jobs were at risk of redundancy.

Q112 Mr Davidson: At risk of redundancy. They either were or were not told that they were redundant.

Mr Blott: They were being told that their jobs were at risk of redundancy.

Q113 Mr Davidson: So they were not actually sacked at that time.

Mr Blott: No.

Q114 Mr Davidson: But they were told the figures: 250 had to apply for 210 jobs?

Mr Blott: Yes.

Q115 Mr Davidson: Is that the best way of dealing with these situations, do you think?

Mr Blott: As I said earlier, we had tried to consult with the unions over a number of years to try to address these anomalous terms and conditions, without success. Albeit that it was drastic action, it did address the situation, and, as I have said before, we did not have a day's industrial unrest. We discussed and consulted with the unions and the matter was drawn to a close.

Q116 Mr Davidson: Would you have taken it more seriously if they had had industrial action? The suggestion seems to be that because the staff did not go out on strike, it was okay and they were happy with the situation, but that, I must tell you, is not my impression.

Mr Blott: I do not think any of us are saying that people would be happy, given the current challenges within the industry, but we have to address the challenges within the industry and each individual company is going to address that in the way in which they feel it is best.

Q117 Mr Davidson: Each individual company has to deal with it in the way they think is best. If anybody in any other industry had dealt with their staff in this way, do you not think The Herald and the Evening Times and the Sunday Herald would have been thundering about Victorian employers and it not being the way to treat staff, not modern and so on and so forth?

Mr Blott: I think you will find that within the public sector that has been done in Scotland. I think you will find that The Herald and the Evening Times ... It was a point made by the First Minister in Holyrood: "Would The Herald have not condemned this action?" The Herald did not condemn that action taken, I think, by Glasgow City Council.

Q118 Mr Davidson: You lose me slightly there. The Herald did not condemn the action taken by The Herald. Is that what you are saying?

Mr Blott: By another organisation which did exactly the same thing; that is, saying to their staff, "We wish you to apply for your jobs under different terms and conditions."

Q119 Mr McGovern: To pursue that point, you contradicted the evidence we heard previously or you said it was not quite complete and that the fact was that people were called in to a room and told that their jobs were at risk and that they should reapply under different terms and conditions. Was the rather thinly veiled, underlying threat that if they did not apply under the new terms and conditions then they were going to lose their jobs?

Mr Blott: That was a possibility, yes.

Q120 Mr McGovern: Was that a probability?

Mr Blott: It was a possibility.

Q121 Mr McGovern: Which? Not a probability?

Mr Blott: If they did not apply for the job, they would not have a job. They would not have had a job if they did not apply for one.

Q122 Mr McGovern: They would not have had a job.

Mr Blott: Not if they had not applied for it, no.

Q123 Mr Davidson: So it was not so much a risk, it was: "Accept this or you are sacked."

Mr Blott: Under employment law, you are not allowed to make somebody redundant immediately. They have to be put at risk and then there has to be consultation process. The staff were told that their jobs were at risk of redundancy.

Q124 Mr Davidson: Yes, but my understanding is that that was pointed out to Donald Martin at the meeting, that he could not make everybody redundant, and that was the stage at which it was agreed that the jobs were being put at risk. That is in Mr Holleran's evidence for the last meeting of the Committee.

Mr Blott: That is not my understanding.

Q125 Mr Davidson: Were you there?

Mr Blott: I was not at that meeting. Neither was Mr Holleran. He was with me.

Mr Davidson: Indeed.

Q126 Mr McGovern: You said in an earlier response that the new terms and conditions were not so much detrimental, they were different. You are a manager. Could you quantify that? Could you say they were better?

Mr Blott: They were the same terms and conditions that I am on.

Q127 Mr McGovern: The same salary?

Mr Blott: Not the same salary. I said the same terms and conditions. The same amount of holiday, the same amount of sickness -----

Q128 Mr McGovern: How did it compare to what they had previously? Was it better? Worse?

Mr Blott: In some cases they would have been worse.

Q129 Mr McGovern: And in some cases better?

Mr Blott: In some cases they would have been the same.

Q130 Mr McGovern: In some cases better?

Mr Blott: No.

Mr McGovern: Thank you.

Q131 Mr Wallace: I apologise for being late to the opening. I have listened to what you have said and I am under no illusion about the pressures the media industry is under. I think it is all very well having this lovely conversation about people in tears and going to gyms but I recognise that the viability of newspapers, full stop, is under pressure. We are in danger of talking about the employment issue. Is it not the case that one of the difficulties you face in trying to run an efficient newspaper is the employment law itself is now so burdensome and there are so many obstacles it makes it very hard to efficiently ensure that the paper is running at maximum. In other words, you have to do it by making everyone redundant or on notice, rather than calling people into the room and saying "I'm terribly sorry but we are going to have to cut out this and that" and there are real challenges about the day-to-day running. In fact, you spend a lot of your money going through these employment law hoops. The end result is the same: the taxpayer is not going to bail you out if you go bust. How much of a barrier is the current employment law to you running your official businesses? I do not mean maximum profit, I mean efficient as in responding to the market if people do not buy your newspapers.

Mr Blott: I would agree with everything you have said. I would say that a large proportion of management time is dealing with HR issues for those very reasons, as opposed to sometimes dealing with the normal business activities.

Q132 Mr Wallace: Could I ask for the view of other newspapers.

Mr Johnston: I am not sure I do agree with you. The environment we have is one that fosters proper consultation and communication. At Johnston Press we are believers in a thing that we call the trade union pre-consultation. We involve trade unions at a very early stage. I have found it of great benefit to be able to discuss how we take the business forward with organised labour. We take consultation extremely seriously and we follow our legal obligations right down the line. I have not found those to be unacceptable. I think they are often a fair check, to be perfectly honest.

Q133 Mr Wallace: Does that make your workers any happier? You might go through all the hoops and enjoy going through the hoops but are they happier?

Mr Johnston: I cannot judge how happy or unhappy the workers are.

Q134 Mr Wallace: My impression is that they are not any more happy there or at the Mirror Group or anywhere else.

Mr Johnston: I think we are fundamentally missing the problem here. This select committee is about the crisis in the Scottish newspaper industry which is very real. That crisis has been caused by a number of issues. The first issue is obviously an extremely serious recession. The second reason is a significant structural change within our industry. The other issues are the environment in which we currently sit with regard to regulation of the relationship to do with the merger rules. The other issues are to do with how government approaches funding for media and the suggestion that there would be public intervention in other media when the newspaper industry has no public subsidy - so a distortion of the market-place - the suggestion that there would be a change to do with public notices and the impact that has on the democratic fabric of our society and the ability of local authorities to set up as competitor publishers with their own publications selling advertising.

Mr Wallace: On that, you have done quite well out of the public sector ----

Q135 Mr Davidson: To be fair, we do have those down as questions to which we are going to come later. We thought we would flog this issue to death first and then move on.

Mr Johnston: Obviously I cannot bear not putting my pennyworth in. I cannot say anything about the Glasgow Herald because I do not -----

Q136 Mr Wallace: The question was about the burden of employment legislation and whether it was too much. You did talk about restructuring. Every editor who comes before us talks about the need to restructure to reflect the market. How much of that restructuring is facilitated by employment law or how much of it is hampered by employment law?

Mr Johnston: We have an editor here who has been involved in restructuring. Maybe would be the person to ask.

Mr McLellan: I find myself agreeing with both my colleagues here, in that I do think that some streamlining of the process for all concerned in reducing the amount of uncertainty there is amongst employees but I also agree with Michael that the consultation process is highly valuable. When it is entered into positively and with an open mind, then solutions can present themselves which were perhaps not previously considered. That the law contains a requirement for us to consult is not a bad thing. Where we get into difficulties is when we get into consultations about consultations. It is a process that can grow arms and legs, and at some point decisions have to be taken. Certainly, in our early experience, with some of the comments that have been made in the light of our announcements last week, to a great extent I agree that people are going to be unhappy because we are in a bad situation. We are not going to be able to keep people happy all the time. We have been criticised in the last week for not specifying in which areas we want to make staff reductions, in not being more specific and therefore people do not understand where the cuts may fall. If we had been specific, we would then have been accused of not consulting with them and making our minds up before we had had time to talk to staff. We are really in a no-win situation in these circumstances.

Q137 Mr Devine: You did say that morale at News International and morale in Dundee is higher than what it is in your other three papers. Are you suggesting that trade unions are lowering morale?

Mr Blott: Within the Scottish newspaper industry, but particularly within some of the indigenous press and particularly amongst the companies represented here, we have a higher proportion of union membership in our companies as opposed to those two companies that were described. As I have said about morale, and as a former journalist myself, as a former member of the NUJ, I know that morale can change. It is a very stressful job. I do not believe that the morale is any different within my particular company or Mark's company or Michael's company compared with News International, but I was contrasting the evidence that Paul Holleran gave previously to this Committee.

Q138 Lindsay Roy: I think we would all recognise that change is inevitable and you will not keep everybody happy all the time. You said consultation is not a bad thing. I would have thought it might be more positive to say consultation is a good thing.

Mr McLellan: Okay.

Q139 Lindsay Roy: Where I am coming from is a comment from Paul Holleran, and I want your view on this. He seems to feel that there is an issue here about relatively poor management. He says that people who have been good journalists or editors are promoted but are not given any management training and that this has been a big problem. Is that the case? Have you been trained, for example, in leadership and management? I know you have HR personnel. What is the background there in terms of consultation and working with unions?

Mr McLellan: Certainly in my time as a young news-desk executive I had quite intensive management training - when Thomson Regional Newspapers were still around. We had people management, we had business management - many different things which were not specifically aligned to the journalistic end of it.

Q140 Lindsay Roy: Generic?

Mr McLellan: Yes, and there were courses on which you rubbed shoulders with people from other disciplines, advertising, production and what-not, and we still have similar setups within Johnston Press. People who are starting on the management rung at news-desk level are given the opportunities to go on people management courses and gain general management skills.

Q141 Lindsay Roy: You would be saying that the perception put forward by Mr Holleran is not accurate.

Mr McLellan: All I am saying is that there are opportunities for people to gain those skills.

Q142 Lindsay Roy: How about the other businesses involved?

Mr Hollinshead: John and I came up through the Thomson training scheme many years ago and it was a very good scheme and it set the gold standard of the industry. There are two forms of management training. There is obviously generic, in terms of leadership and motivation and improvement, but there is also very specific training, in terms of human resources delivered, in terms of employment law - we have a two-year legal update in terms of changes in law, as Mr Wallace was alluding to - and very specific technology driven training courses: how to recruit people, how to manage people. This is embedded in our overall business and is critical to our success.

Q143 Mr Davidson: It has been suggested to us on a number of occasions, both formally and informally, that many of the people in senior management in newspapers might have been really good journalists but they have been promoted not necessarily beyond their abilities but out of their skill set. Do you think that is grossly unfair, Mr Blott?

Mr Blott: I think it is grossly unfair. I think there is extensive management training done within all three of our companies. I know within Newsquest that we carried out a management training programme across all our first line managers and senior managers about 18 months to two years ago to ensure that all our managers were up to scratch. Like Mark, we continually, through our HR process, identify managers who might have skills weaknesses and address those.

Mr Davidson: We are now going to move on to follow Mr Johnston's agenda of items, to newspaper strategy.

Q144 Mr Wishart: This is interesting to me. It is about what you guys are doing to address the very real crisis, as you said Mr Johnston, in the newspaper industry. It seems to me that there is only one approach that has been deployed here and that is to merge your titles, to merge your Sunday title with your main titles. Newsquest have pioneered this fantastic great innovation that has now been picked up by other titles. Is there any evidence from anywhere that this would have any success? What evidence is there to suggest that merging titles in this way will produce results?

Mr McLellan: The results we are looking for is to reset our business on a profitable level. We are not trying to kid ourselves that this is going to bring about a revolution in the quality of the papers. It is about making the business fit for the future.

Q145 Mr Wishart: What studies did you look at? Which examples did you use to come back on this particular strategy of merging titles? What research did you do to see if this would work?

Mr McLellan: As far as business strategies are concerned, that is only one arm of what we are doing. The launch of websites, which is now something which is taken as read, that required -----

Q146 Mr Wishart: So you did not do any research of any background effect?

Mr McLellan: I am not saying that at all. I am saying that you have alighted on one particular area of activity, which is ------

Q147 Mr Wishart: But it seems to be the only one. Tell us what else you are doing. There is stuff in websites, obviously.

Mr McLellan: If you give me a minute to speak, then I might be able to tell you. We have launched websites, we have launched product after product which have enhanced the publications, new magazines, and improved the papers themselves. The process of change within the paper has been ongoing as long as I can remember. We are now in a process where we are having to save money. We have to find ways of making our editorial operation more efficient. If you can find other ways of making us more efficient that does not go down this route, then I would welcome to hear it. It is purely a question of saving money from the editorial function, but to accuse us of not having any other approaches to developing our businesses just completely ignores the developments that have gone on for years, year after year after year.

Q148 Mr Wishart: This is your opportunity to tell us exactly what you are doing, because it seems to us that your only strategy and your only approach that seems to be deployed is the one of merging the titles. Obviously you are going at your websites. We can see your activity, we look at your websites and we are interested in them. You talking about new titles, but I think this is something all the newspapers have been doing for the past ten or 20 years anyway. Where are the great ideas? Where is the new thinking about trying to get the Scottish newspaper industry up and running? There must be something beyond just merging titles and sacking journalists.

Mr Johnston: I will give you one. Scotsman.com, which is our internet arm, now has 2.5 million users a month. It reaches a quarter of all Scots every month. It is growing the audience in Scotsman journalism.

Q149 Mr Davidson: You say it reaches a quarter of all Scots every month, how do you know that it is different Scots as distinct from the same ones doing it constantly?

Mr Johnston: This is the gold standard that people measure it by. It is called Unique Users. These are unique points of contact. I do agree that it could be somebody who has four different computers who is rushing from one to another, but it is how the industry terms itself. It is what everybody uses.

Q150 Mr Davidson: Fine. I just wanted to be clear whether or not it is sufficiently regulated.

Mr Johnston: These are audited. There is an organisation called ABCE - Audit Bureau Circulations Electronic - and it is very rigorous.

Q151 Mr Davidson: Fine. Thank you. Like many of my colleagues, I sometimes look at your stuff on the internet and we see the mixture of cranks and loonies who reply to your various political comments late at night or early in the morning who seem to have nothing else to do, so some of them must have 60, 80, 90, 100 or more entries a month. I just wondered whether or not there was any element of repetition.

Mr Johnston: There is a number of different measures. I have given you Unique Users, which are unique computers using the site per month. There is obviously a core audience, so we know how many repeat visitors we have, those people who visit more than once. We know how many pages they view. Pages is another measure. For the Scotsman, it is currently between 12 and 15 million, depending on time of year and the month.

Q152 Mr Wallace: On the comment that the only aim of some strategic recovery has been merging titles, I am conscious that there should perhaps be three other places on the table, such as the Sun, the Scottish Times and the Daily Mail, who undoubtedly have eaten into your circulations for all sorts of reasons. How much of your decline in market share - and I accept the market has shrunk - has been due to bad strategic decisions of proprietors? The best example I can give is the Daily Record, I have to tell you. Some whiz kid in the Mirror Group decided to introduce the Mirror into Scotland at half the price of the Daily Record. That was the same group. I do not understand. That is a strategic bungle that would have damaged its own stable.

Mr Hollinshead: That happened in early 1998. I joined in May 1998.

Q153 Mr Wallace: I am not trying to put the blame on you. That is a strategic decision. If you look on these figures which the Scotland Office gave, some of your demand has not collapsed, it has gone elsewhere. Some might be competitors to the Mirror, the Record, the Sun. How much of that has been strategic failures? The Sunday Herald launching itself.

Mr Blott: On that particular point I think we should stress that Scotland is probably one of the most competitive newspaper markets in the world: 17 daily papers. To take up Pete's point about what is the big idea, we are talking about profitable businesses. We are competing against the Scottish editions of UK titles that are losing money today. For instance, the Times and the Sunday Times, it was announced, are losing over £1 million a week. The Independent is losing money. The Guardian is losing money. We are competing against Scottish editions which are probably producing more Scottish content now than they have ever done in their history. That does increase the pressure on the indigenous press.

Q154 Mr Wallace: Are you saying that some of the Scottish editions are being more of a loss leader than their parents? For example, are you saying that the Sunday Times (Scotland) or the Daily Mail (Scotland) is making a conscious decision to unfairly compete with you by having a Scotland edition, and they do not care how much money the Scotland edition loses, it is just about taking out the regional or national titles?

Mr Blott: I am not saying that it is unfair competition.

Q155 Mr Wallace: But it would be. It would be unfair practice to loss-lead on purpose.

Mr Blott: It would but I have no evidence that that is the case. I am suggesting that for Scotland to have 17 daily papers for a population of five million is highly unusual. Within that particular market it is increasingly difficult under the current circumstances in order to make a profit. Our prime aim as businesses is to make a profit. As you have heard, the majority of us are making a profit but a number of our competitors are not. There is no doubt that 40 years ago, 30 years ago, a lot of the UK nationals pulled out of Scotland because of high labour costs, because of union militancy. They came back, post-Wapping, into the Scottish market-place with lower overheads and were able to capitalise on new technology in order to strengthen their Scottish editions. That has had an impact on our businesses.

Q156 Mr Wallace: What proportion of your reduced demand for newspapers, reduced market share, has gone to those other competitors, those UK editions and what proportion have just gone because they have stopped reading newspapers?

Mr Blott: That is a greater difficulty for each of us. I am not trying to dodge the question.

Q157 Mr Wallace: I have asked for a quantity. What do you think?

Mr Blott: In terms of market share, when you ask why does Scotland have the most number of newspapers probably in the world, it is because a lot of people were buying more than one newspaper. The reduced frequency of buying newspapers and multiple copies of newspapers has had an effect and is having an effect at the moment, so people may still be buying the Herald but not six days a week - but maybe three days a week. They may have once bought the Herald and the Daily Record and another title. Now they only buy one title.

Mr Hollinshead: That is a very, very important point, Mr Wallace. We are seeing a period of enormous political and economic and social and technological change. Those four key variables affect consumer behaviour. Twenty years ago there was no Scottish Sun. There was no internet. There was no Metro - which you see every morning down here but it is also in Scotland, in the North East, in Manchester and in the Midlands. There was no raft of free weekly newspapers which happened in the early 1980s. The Daily Record at 48 pages I am told quite often was a very, very successful newspapers, and advertisers were queuing up to get into the paper. The media landscape has changed beyond recognition and it continues to change at an enormously rapid rate. The key strategic challenge now that Mr Wishart was talking about is about our ability to adapt and our ability to innovate. We are doing that. Technology is at the heart of innovation. If you can streamline your business by using technology here in a better way, we have to embrace that change. That is one of the key levers we are pushing forward. Consumer behaviour has changed dramatically. Tim talks about reading frequency. Reading frequency is at the heart of the challenge here. How do we vet the Saturday reader of the Daily Record to buy Jim Traynor's on a Monday. How do we get Jim Traynor's column on a Monday to promote and attract Joan Burnie's two days later. Reading frequency is very, very important. That is the key strategic challenge. In the last year we have seen the bottom of the pyramid start to disappear, and the bottom of the pyramid in publishing terms is the free weekly newspapers. Ms Clark was due to be here today. Over in Arran, just last week, one of her newspapers closed. It had one revenue stream. It was a free newspaper and it closed. Across the UK over the last year 63 newspapers have closed.

Q158 Mr Wallace: The Citizen group.

Mr Hollinshead: What is the next level in the pyramid? Let us talk about Ayrshire, Mr Wishart. The Ayrshire Post is one of our titles. It is very, very important to you, Pete, in that you ----

Q159 Pete Wishart: Perthshire.

Mr Hollinshead: Perthshire Advertiser is also one of ours. It is very, very important for you to communicate to your community and to your constituents. Part of the revenue profile of the Perthshire Advertiser, of the East Kilbride News, the Hamilton Advertiser, the Wishaw Press, and the Airdrie and Coatbridge Advertiser is public sector advertising - public notices on that roundabout in Airdrie. How has it changed and how is it affecting the local democratic process? How many people know about it? Now it has migrated to the internet less people will know about it. This is the important point: yes, the Scottish Government is under the cosh to reduce costs, they have now half a billion less funding this year compared to last, so they are looking at their cost base - I am told - and advertising is on the agenda. Public sector advertising is moving away from paid-for weekly newspapers, and the likes of The Herald and The Scotsman - public notices' advertising is moving away. That has to have a significant effect on the future profitability of those newspapers. I think this is the main reason why successful publishers have come here today to talk about the future of the Scottish press. How can we work with government to demonstrate the effectiveness of press in the Scottish marketplace? This is critical for our future viability in terms of how we liaise with government. We are not looking for funding; we are looking to demonstrate the value and effectiveness of our medium, and I think that is the critical point here.

Q160 Mr Wallace: I do understand, but I want to get an idea of the quantity of market share that you suspect has gone to new arrivals on the block, as opposed to the traditional drop-away of how people use newspapers. Some of these sales of the Sun have come from somewhere.

Mr Hollinshead: Price is a very powerful marketing tool.

Q161 Mr Wallace: You do recognise that some of that crash you are facing - the double-whammy - has gone to your other ----

Mr Hollinshead: Of course.

Mr Raeburn: It has happened to different degrees and different levels of newspapers. If you take, let us say, certain quality newspapers, take the Press and Journal, The Courier, The Scotsman and The Herald, they are selling 260-270,000 copies per day between the four of them. Take the four corresponding UK titles with Scottish editions, The Times, The Guardian, The Telegraph and The Independent, they are selling of the order of 75-80,000 per day. So, in relative terms, the Scottish quality newspapers are performing well against serious competition. However, at other levels, the Daily Mail has made big inroads, selling 125,000 and others likewise, through price cuts and marketing promotions. The News of the World has just announced it is going to 50p.

Q162 Mr Wallace: The Sun has overtaken The Record.

Mr Raeburn: Yes, at different levels, what I am saying is the pattern is not always consistent. If I can come back on what Mark was saying just to try and quantify the potential losses that newspapers might have from what is happening in the public sector, we had a meeting very recently with the First Minister ----

Mr Davidson: I am sorry, you are talking about the loss in advertising from the public sector. Can I say, we are going to come on to that? Maybe we will take that in a moment. Before I ask Jim McGovern to come in, you mentioned Linda Clark. We discussed this before you came in. She is due to give birth within the week, so, on balance, we thought it was reasonable that she was not here today. I do not know whether or not you would take the same view, as employers, but we decided that it was reasonable if she was not here.

David Mundell: I hope it is not Linda Clark who is due to give birth because that would be a big story!

Mr Davidson: I am sorry, Katy Clark.

Mr McGovern: This question, either for Mr Blott or, probably, Mr Hollinshead, is in response to a question from Mr Wallace. Mr Wallace was making a point about Sundays, possibly, national papers that have got Scottish editions using the Scottish editions as a loss leader. I think Mr Blott said that would be unfair

Mr Wallace: It would be. You are not allowed to use ----

Q163 Mr McGovern: In Dundee the Evening Telegraph has had a monopoly, almost, for many, many years, but recently The Record have started putting in a paper, Record PM, free of charge in Dundee. That sounds to me like a loss leader. Are we agreed that that is fair or unfair?

Mr Hollinshead: It withdrew from the Dundee marketplace about six months ago, but we did launch a late afternoon edition which is very much slimmed down - it is not the full paper - to cater for the afternoon commuter market, in a key time segment in a specific place with a specific demographic, to sample our product to a different type of audience.

Q164 Mr McGovern: I am concentrating on the price that the reader has to pay.

Mr Hollinshead: It is free.

Q165 Mr McGovern: Is that a loss leader?

Mr Hollinshead: No, it augments our overall proposition to our advertisers, in that it broadens our readership base. We demonstrated through continuous research that the PM product has attracted - 81 per cent of its readers are under the age of 45, which is a mirror image of the Daily Record. So we are introducing a tempered-down version of paper to a new audience, to attract them.

Q166 Mr McGovern: The original question was that Mr Wallace said that if the Sundays were putting out a paper which they were selling for less than what it cost to produce it, as it were, then how could a free newspaper not be a loss leader?

Mr Hollinshead: Because it attracts advertising. If you look at the Metro, the Metro is a very successful ----

Mr McGovern: That would apply to the analogy that was made earlier on as well.

Mr Wallace: A lot of the "freebies" will not be highly resourced newspapers and they will be balanced by the advertising revenue.

Mr Davidson: I think, on balance, we will let the visitors answer the questions. Any comment on that?

Mr McGovern: I do not agree with the answer, but if that is the answer, that will be recorded.

Q167 Mr Davidson: Could I bring us back to the point that Pete was raising about the merger of The Herald, the Sunday Herald and the Evening Times, about the question of the loss of quality, because that has been one of the concerns? I think we can understand the issue of streamlining, but the issue for us in relation to a number of the points that were raised earlier on is about whether or not the resulting loss of journalistic jobs results in a loss of quality across the three of them? Can you assure us that that will not happen? How do we measure? Surely, there is inevitably bound to be a degree of overlap which reduces the differentiation between the titles with their different characteristics?

Mr Blott: I would like to quote a slightly different analogy. If you had three journalists going to the same event producing the same story, yet with the same photographer, for three separate newspapers, then that might be seen as being wasteful. It is an efficient use of your resources, which should not diminish the quality. Merging the editorial departments is not just being done in Scotland it is being done across the world; there are countless examples of where newsrooms are being merged, UK titles in London have merged, and there will be more mergers ----

Q168 Mr Davidson: I think we understand that. Our anxiety has not been so much a journalist from The Herald, the Glasgow Herald and the Evening Times all turning up at the same story; our anxiety would be that in the future none of them would turn up because the numbers have been so reduced, and none of them would be writing various things up, and you would be reduced to recycling press releases. How can we be assured that that is not the direction of travel?

Mr Johnston: I think this goes to the very heart of what we are here for today. The fact of the matter is that a lot of the things that are being done are an attempt by the industry - which is not publicly funded, it is an industry that needs to make a profit to invest back into its product, it is making difficult decisions and they are painful decisions - to ensure sustainability. So I take on board your point but what we are trying to look at is how best to use a limited resource; how best we can use that resource in an efficient way to ensure that we maintain our product. This is being driven by harsh economic reality; the newspaper industry is in a very difficult place, it is not publicly funded. Yes, it is possible, in certain places - and I hope it will never happen within my organisation - that you will have no journalists. You have seen it happen in the States, where papers are shutting. It is a harsh economic reality. We do not get hand-outs; we are not the BBC, we do not get a licence fee.

Q169 Mr Davidson: We understand there is a bit of special pleading to come later on.

Mr Johnston: I am not pleading, I am just saying that the things that are driving the industry at the moment are about sustainability and ensuring there is a Scotsman, a Daily Record and a Herald for the future. They are painful and, in some ways, they are distressing, but it is the harsh reality of the place we find ourselves.

Mr Hollinshead: We have to adapt and innovate. Just to use the American analogy again (I know there is not always a direct correlation), the Boston Globe, one of the most famous newspaper brands in the world, is on its last legs; the San Francisco Chronicle Examiner is in Chapter 11, The New York Times has recently had to mortgage its building for $250 million and take a slice of investment from a Mexican steel tycoon. We are in a position where major newspapers across the world are closing as we speak. You are looking at four publishers today who, in a very, very challenging marketplace, are looking to adapt and innovate their business model to ensure the future viability and safeguard the future of their newspapers. That is the situation we are in. We are seeing political influence on our ad revenues, we are seeing dramatic, unprecedented economic circumstances affect our advertising revenues, we are seeing social change and behavioural change, and we are seeing massive technological development. We have to be aware of all these key variables that affect our industry. To read more click here