Business AM counting its options as speculation grows

IF time is running out for Business AM, its managing director John Penman is still giving nothing away.

"All the options are possibilities," he said - offering little consolation for the 100 or so nervous staff at its Edinburgh headquarters, and more grist to the mill for a Scottish press pack preparing to write the daily business paper's obituary in the new year.

The newspaper's owners, the Swedish Bonnier AB group, has now been trying to lure a financial backer to prop up the loss-making business since late October. London-based financial advisers Lazard were also appointed to sound out potential partners in the UK and internationally. None has so far emerged.

Last Friday, Penman, who also serves as BAM's editor-in-chief, claimed that Bonnier was not working to any set timetable and that all possibilities had been put before it. Among them was the potential for a management buy-out - an option which appears not to have been ruled out yet.

"Everything is still continuing as it was," said Penman. "All the options are still possible and the process is continuing. Bonnier has all the options in front of it and will make a decision at some point."

Penman has previously denied that the efforts to transform BAM into a joint venture was an indication that the paper was struggling financially or was close to being sold off, pointing to the fact that the paper was initially conceived as a venture between Bonnier and Trinity Mirror, publishers of the Daily Record.

The costs of running the daily business newspaper, which is not expected to break even until 2005, are clearly considerable.

Although Bonnier has invested around (pounds) 20 million since the paper's launch in September 2000, BAM is still believed to need extra investment of between (pounds) 5m and (pounds) 10m Attracting the financial backing for a management buy-out is also likely to be challenging given the investment levels required and the difficulty in achieving anything like worthwhile return on that investment.

Launched into what has become one of the biggest downturns in advertising sales for more than decade, Business AM - like all UK newspapers - has had to deal with a drop in vital advertising revenue. Although the paper's circulation level is around 12,000, its break-even point is thought to involve a total of nearer 25,000.

One small Scottish publisher has admitted that the ad sales environment has been even more unsettled in recent months, arguing that the sale of SMG's publishing division (which includes the Sunday Herald, The Herald and the Evening Times) was responsible along with general economic conditions.

Although BAM hired Trinity Mirror's national sales house, Amra, in August in a bid to boost its profile and increase the revenue coming out of England, around 75% of its ad revenue comes from Scotland.

A cost-cutting programme, linked to staffing levels and editorial spending, has been executed and the paper's cover price has also been pushed up to 95p. But circulation (80% of which is subscription) is believed to have remained fairly flat. On Friday, Penman refused to comment on the latest figures.

Despite the fact that there has been speculation about turning BAM into a weekly business paper, no option - including retaining the same format - is without risk.

BAM has built up a reputation as a must-read niche title among elements of the Scottish business and PR communities and has even matched sales of the Financial Times in Scotland, but continued growth will be difficult in such a competitive marketplace.

With Bonnier's newspaper publishing subsidiary, Bonnier Newspapers, posting an operating loss of (pounds) 33m for the first eight months of 2002, industry speculation is now growing that Scandinavia's largest media company could shut Business AM down in January after its two-week Christmas break.

Copyright 2002 SMG Sunday Newspapers Ltd.
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