THE Government and the industry itself will have to share the responsibility for radical change if Irish newspapers are to survive and thrive, the report of the Commission on the Newspaper Industry has concluded.
The report says that much of the responsibility for securing its future lies in the hands of the industry itself. Newspapers must introduce new work practices and substantially reduce costs, it says.
Many have already started down this road, but difficult decisions lie ahead for all the main newspaper groups in catching up with the latest technology.
But the report is clear that the Government will have to play a role by abolishing VAT on newspapers. This would cost the Exchequer around £23 million per year, not a large sum in the over all annual Budget. Removing VAT should be done without delay, it says.
The survival of an independent Irish newspaper market "depends on it having the financial strength to undertake major investment in the next few years", the commission says. It believes that in most instances the reduction in VAT would be accompanied by a similar cover price reduction.
Whether this occurs is another matter, but the recommendation will be a major fillip to newspaper owners, who have consistently argued for a zero rate of VAT. The Institute of Advertising Practitioners in Ireland has also backed the case for a zero rating.
It is highly likely that the Government would have to be given a cast iron guarantee that the price of newspapers would come down if VAT was abolished. A VAT reduction would go some way towards eradicating the price differential between UK and Irish newspapers.
However, a considerable gap will remain, posing a continuing threat to Irish papers. Economies of scale - which the commission acknowledges will always exist - mean some UK publications sell for as little as 30p.
The Government will also have to clamp down on below cost selling and on the lottery style games some UK papers are offering readers in Ireland, the commission says.
These findings will also be welcomed by Irish newspaper publishers. But identifying below cost selling is not easy. A Competition Authority report, published last year, concluded that UK newspapers were not engaging in below cost selling, or predatory pricing, a point with which several Irish newspaper owners strongly disagreed.
The commission conducted its own examination of the pricing policies of imported UK newspapers. It says there are very substantial grounds supporting the arguments of Irish newspapers that in a number of instances UK newspapers are selling at prices which are less than their marginal costs.
It backs a previous National Newspapers of Ireland (NNI) recommendation that simple legislation should be introduced to outlaw selling newspapers below cost.
The commission lays great emphasis on diversity and its importance in a democratic society. Not surprisingly, it finds that the demise of the Irish Press titles has "involved an unwelcome reduction in diversity". The newspapers' demise was one of the factors which moved the Minister for Enterprise and Employment, Mr Bruton, to establish the commission.
The commission says it would be concerned that any further reduction of titles or concentration of ownership in the indigenous industry could severely curtail the diversity required to maintain a vigorous democracy.
Last year's Competition Authority report said Independent Newspapers had abused a dominant position by taking a stake in The Irish Press. It recommended that Mr Bruton take action to force Independent Newspapers to divest the stake. Mr Bruton did not act. Events finally overtook him when Irish Press Newspapers went into liquidation.
The authority's report also criticised Independent Newspapers 29.9 per cent stake in the Sunday Tribune and said its presence could be acting as a deterrent to other investors.
The commission says that Independent Newspapers is currently financing the Tribune's operations "by substantial regular loans which are not being paid off".
The commission heard arguments that this has constituted an impediment to any persons who might otherwise have entered the Sunday newspaper market following the closure of the Sunday Press. But Independent Newspapers argued that, by giving the Tribune loans on lenient terms, it has kept alive an Irish title which might not otherwise have survived.
The commission did not make a decision on this delicate issue but says the situation confirms the desirability of maintaining "as far as possible" ease of access to the newspaper market.
However, the commission urges the Minister for Enterprise and Employment to consider amending existing merger controls in the newspaper industry to widen the powers to regulate not only the acquisition of shares but also the acquisition of control over newspapers by other means.
Such a move would have implications for Independent Newspapers, which was careful to acquire under 25 per cent of the Irish Press, so that the matter would not be referred to the Competition Authority.
However, the commission appears to have taken the view that allowing the Minister to regulate the industry through mechanisms such as mergers and acquisitions legislation could be a "negative procedure".
The commission says it is clear that Independent Newspapers occupies a powerful position in the Irish market, but mere size cannot be taken to establish unfair competition. Nor is there any sign of below cost pricing or a price war between any nationally circulated newspaper.
The commission says the Irish newspaper industry must find ways to cut its costs. It identifies what it sees as the major requirement for publishing today. These include direct editorial and advertising input, on screen page makeup and digital photographic transmission systems.
Although it acknowledges that these exist to varying degrees in the industry, it says the introduction of new technology will require changes in lab our costs, staffing levels and work practices. It says these are a matter of extreme urgency, as competition from UK papers is likely to increase sharply.
However, it firmly rules out a "Wapping style" confrontation or any changes in labour laws which would aid such confrontation. This is a reference to when Rupert Murdoch moved to sack printers and journalists and move to a new high tech plant away from the centre of London.
The move ended in violent confrontation and resulted in thousands of job losses and a hire and fire approach to the industry. It also left a legacy of bitterness between management and workers.
The commission innovatively suggests that the Government should set up a special unit within the Lab our Relations Commission to deal with the newspaper industry. It should work with unions and management in companies where its assistance is requested to identify changes necessary to make the industry more efficient.
Perhaps mindful that these matters could take forever, the commission says this "unit" should be available for a fixed period.
The commission dismisses suggestions made last year, around the time of the Irish Press problems, that a central shared printing facility could be state funded. This was mentioned at one stage by the Minister for Finance, Mr Quinn. It says state funding should not be provided. The idea has also been floated by Independent Newspapers, whose presses are a lot older than those of The Irish Times.
The commission believes that a central printing unit would clearly help newspapers who could avail of it to be more competitive. But lit adds an important caveat the capacity of newspapers to avail of the facility would depend on where it was located. The location would most likely be Dublin, so it would not benefit provincial newspapers.
On the issue of provincial papers, it says that, in general, competition between local papers is fair, but local publishers are apprehensive about whether they lean withstand competition from publishers with much greater resources.
The commission acknowledges that local radio is a major competitor to local newspapers in the advertising market and that it is perceived to have lower overheads. The commission said this competition cannot at present be categorised as unfair. However, if local radio was to receive state subsidies, this would be unfair.
The commission was drawn from a wide spectrum of people. Obviously, the various newspaper representatives pushed their viewpoints, and this can be seen in the report. However, for the first time, it sets on record what is generally acknowledged within the industry that the industry needs a radical shake up, that new technologies must be fully implemented and that there must be flexible work practices.
Such steps will require major investment. The indigenous newspaper industry is being assailed from all sides, including by UK papers and the electronic media.
Whether the challenges laid down by the report will be grasped by the newspapers is one matter - the industry has been notoriously slow to embrace new work practices. Whether the Government will play its part is another. The transition to a leaner, fitter industry will be a painful one, but a Government role will be essential.