Expert Analysis from Colm O'Reilly, CEO, Business Post. This article has been written exclusively for IoD Ireland members.
As the coronavirus story started to unfold through late January and early February, I think those who recalled the SARS epidemic in Asia and, to a lesser extent, Foot and Mouth in Ireland, understood that a virus outbreak in Asia could result in some economic disruption in Ireland. The development of globalisation means nothing is truly local anymore, after all.However, I don’t think anyone in Irish business, even with the benefit of an early view of this epidemic, could have forecast the profound impact this health crisis would have on our world and how we live life. How many times have you heard the word ‘unprecedented’ being used to describe this crisis? For C-suite leaders and business owners in Ireland, that really is the perfect adjective to describe the situation...
COVID-19 is Different to Other Economic Downturns
COVID-19 is first and foremost a health emergency. It is a health emergency that has resulted in a shutdown of many sectors of the economy and is unlike any financial crisis in living memory. This is a critical point to understand because I think there is an inherent risk in owners, managers and public policy makers believing that the solutions developed and deployed to deal with previous downturns (i.e. Banking - Property crisis of 2008) will be sufficient this time. Part of the problem is the apparent ‘temporary’ nature of the emergency and the other is its all-encompassing nature - in terms of how many economic sectors have been impacted and its truly global nature. Subsequent solutions to successfully get business moving again and reboot the economy will need to be creative and different to what has gone before.
The Media Landscape
As a media company and publisher, the Business Post already operated in an ultra-competitive market prior to COVID-19 and one that was already going through significant transformation. The advent of the smartphone changed forever how the public consumes news and the emergence of global social media platforms has seen 50%+ of all advertising spend now being allocated through these channels. These two conditions have had a profound impact on the publishing business model and Irish publishers, the Business Post included, have had to adapt to this new world.
The Impact of COVID-19
The impact of the Coronavirus crisis on the Business Post has been unusual. On the one hand, there has been strong public demand for high quality and fact-checked journalism and, with people being confined to home, there is more time available for people to follow the news. This has resulted in an upside for both the sales of our newspaper and in paid subscriptions to our digital service. This type of audience growth has been great for our brand and has generated extra revenue.
On the other hand, advertising revenues in the industry have been badly impacted by COVID-19 and are down by between -35% and -50%. As the lockdown took hold, advertisers chose to cut back expenditure, postpone campaigns or in some cases were forced to simply shut down temporarily. The rather sizeable problem for publishers is that advertising revenues make up a large proportion of total sales - up to 50% in some cases. A revenue fall-off to this degree has a serious impact on the bottom line for anyone but this is especially true for publishers who have a high fixed cost base and already operate on thin single digit margins.
So, against this backdrop we have implemented a series of initiatives to cut costs, avoid unnecessary spending and conserve cash. We have asked our staff to take on board temporary pay cuts and have availed of Government support programmes where appropriate. We remembered the ‘playbook’ to surviving the banking crisis, dusted it down and implemented quickly. In the prevailing environment there is a temptation to park the strategic projects, stop investing in Change Management and wait for the economy to reboot. But is battening down the hatches, focusing on the financial indicators and riding out the storm going to be enough? Who can honestly say when business will return to normal? I strongly believe that success, perhaps even survival, will depend on thinking more holistically than just focusing on the financials dashboard.
The Evolution of the Business Post
Since Kilcullen Kapital acquired the Business Post back in October 2018, I have been overseeing a transformation project to move the business from exclusively being a traditional print product to a modern multi-media offering that has a news offering seven days a week. The management team in the Business Post continues to focus on delivering the key strategic goals we set for the business for 2020. The plan is the right plan, irrespective of market conditions. COVID-19 has meant we have had to re-cut timelines, juggle resources and, in some cases, re-engineer how we do things. But we continue to invest in marketing spend, continue to develop new inventory (such as podcasts, videos and newsletters) for our readers and clients and we have religiously stuck to our high editorial quality standards week in, week out.
Role of the Government
So, what role should government play in the recovery? Clearly, there is a need for the Government to oversee an historic stimulus package given the breadth of sectors impacted by COVID-19 and the depth of its harm. But we need to learn from the mistakes of the banking crisis. A successful solution will need to be a private-public partnership that is properly integrated. At its core must be a resolve to stimulate consumer demand backed by the resources of the ECB. The Financial Times had an interesting piece recently which looked at retailers in Berlin as they reopened from shutdown. The collective experience of those interviewed was that there was no initial V-shaped recovery. Consumer spending was between 25-40% of normal trading. Shoppers stayed away for fear of catching the virus or from a lack of appetite to spend on non-necessities – tourism income was zero, naturally.
Recovery will not be quick or easy but, if we are truly in this together, I fully believe we’ll get there.