It has been a very bad week for journalists and journalism. Never before has the media industry gone through such a period of job insecurity, with such massive and widespread loss of jobs, as in the past three weeks.
What is surprising is why we, journalists, don’t sufficiently cover lay-offs and massive firings in the media. When we leave it to corporate executives, the information is communicated in the bleached language of management textbooks — “trimming”, “retrenchment”, “right-sizing”, “doing more with less” and “newsroom re-organisation”.
While publishers may be, understandably, reluctant to share miserable details, a reader and viewer wants more when he suddenly realises that his favourite outlet has laid out hundreds of workers, cut compensation for those who have remained and that its stock is under pressure. Even as the executives soft-pedal the bad news, we, journalists, must spill the hard facts.
So, why are the local media companies where they are?
Without a doubt, Covid-19 is a major contributor to their dwindling fortunes. But we must all agree that this began long before the pandemic.
In analysing the situation, and to put the prevailing environment in context, you have to go back to the famous statement by Mr Warren Buffet: “Only when the tide goes down do you discover who’s been swimming naked.” Covid-19 has exposed most companies as having been swimming naked all along and failing to build buffers to enable them to ride out through pandemics. Companies did not build the inbuilt resistance to catastrophes.
A friend recently collated 15-year data that he had extracted from published accounts of a number of listed companies, including the three listed media companies. He has used it to develop a spreadsheet based on yardsticks for measuring corporate resilience.
The findings are revealing. You see in the numbers that, immediately after the 2007/2008 post-election violence, the corporate sector experienced steady growth in revenues. This period of healthy revenues peaked in 2010, after which the trend started behaving like a plane going to land. From June 2014, listed companies have gone through six years of plummeting revenues. This is the trend you will see in growth of media revenues.
REALITY OF LOW REVENUES
The riddle is why our highly paid executives did see the sense of re-engineering their operations to the reality of low revenues. Pick up a copy of annual accounts of any listed company in the past six years and you be surprised at the number of times the phrase “a difficult operating environment” appears in the chairman’s statement.
The truth of the matter is that, despite those exaggerated numbers you read in government statistics, the economy has been suffering from a crisis of corporate profitability — lack of it, actually. We often cite the banking sector as the exception to the problem of diminishing productivity. Yet when you look at their numbers closely, the evidence you will see is that growth in profits did not come from more lending to the private sector but to the sovereign.
We also cite telcos as the exception to the six-year era of plummeting revenues. They were lucky to ride on both technology and demographics to turn in a profit.
Which brings me back to media companies. Yes, they did not sufficiently respond to the challenge from the internet. Although every other media house launched a ‘digital first’ project, the statistics from the data I made reference to above will not give you the impression that companies deployed sufficient capital in the transition to the digital world.
RESILIENCE TO PANDEMICS
When you examine it gradually, reducing the staff cost base was in tandem with reduced revenues. The evidence is in the fact that the share of labour costs as a percentage of revenues remained unchanged.
Covid-19 has exposed our companies as entities run by directors who interpret their most important role as shipping out most of the earnings to shareholders, leaving the firms with little inbuilt resistance to pandemics like coronavirus.
According to the data I refer to, the trend you will see is that the beginning of the years of low growth also coincided with a two-year record distribution of dividends to shareholders. It is like shareholders have been taking the money companies need to keep to deal with systemic shocks such as the pandemic.
From the data, I see how some of the big banks have been regularly shipping nearly 100 per cent profits to parent companies in London, New York and Johannesburg.
My parting shot: I will remain a firm believer of the old priorities of journalistic publishing; namely, the reader or viewer first, the employees second and the owners third. Who will protect the newsroom from bean counters?