Mr. Michael Doorly:

Good morning to the Chairman and the members of the committee. During the period which is the subject of the committee's inquiry, I was finance director of Independent Newspapers Ireland Limited, which is the Irish subsidiary of Independent News and Media plc. At the outset I would like to briefly address the subject of the role of the media from a commercial perspective. It is generally accepted that one of the lynchpins of a democratic society is a free press which operates on an independent basis. It follows that, in order to establish and maintain independence, media enterprises must be financially sustainable and capable of survival in a commercial and competitive environment. In seeking to achieve this, the print media has two core sources of income: these are revenue from the sales of its publications and revenues from advertising. Both income streams are vital and there is an interdependence between them.

The reality, of course, is that the publication is the core product which, through the quality of its content and its success in building circulation, sales and readership, creates a channel for advertisers to promote their goods and services. Advertising revenues are, therefore, a factor of the reputation and integrity of a publication, which is built through good reporting and good journalism, and content that is relevant to its readership. The requirement to maintain and build on this editorial integrity underpins Independent News and Media's policy of a strict and absolute separation of the editorial and commercial functions within the organisation.

The committee of inquiry has requested me to address a number of matters, including the company's business model and sources of revenue, including revenue from the real estate sector. They have asked me to address the importance of property-related revenues within the overall revenue mix, the group's engagement in property-related commercial activity and the relationship between the editorial and sales functions.

The committee will understand that the company, as a commercial organisation operating in a highly competitive industry, is not in a position to disclose detailed financial figures that would be of potential benefit, and certainly of interest, to our competitors. However, I will attempt to deal with the issues in a manner that provides the committee with substantive information which will meet its requirements.

Referring to the business model, Independent News and Media is the largest media operation on the island of Ireland. It is also a public limited company. The group has a strong portfolio of national, regional and local print titles, including the Irish Independent, which is the market leader among the dailies, and the Sunday Independent, Ireland’s biggest-selling Sunday newspaper. The production and distribution of newspapers is a complex operation, but in the business sense it is quite simple: we sell newspapers and we sell advertising.

Referring to sources of income, newspaper revenues are derived from two sources: circulation sales and advertising revenues. Between 2002 and 2007 Ireland was a country in the throes of a major economic boom. GDP grew strongly in each of those years and newspaper sales and advertising revenues enjoyed increases broadly in line with the economy. Over the period, the revenues of the Irish Independentand the Sunday Independentincreased by an average of 6.5% per annum. This is a total of 37.6%. I wish to correct the figure of 31.7% presented in my written submission. Advertising revenues increased by an average of 9% per annum, or 52% over the period. Circulation sales increased by an average of 3% per annum, or 17% during the period. This is not surprising in an economy in which personal consumption was growing at an average rate of almost 5% a year.

In terms of the revenue mix, in 2002, 60% of overall revenues came from advertising, with the remaining 40% coming from circulation. By 2007, 66% of overall revenues came from advertising, with 34% coming from circulation. This movement is not insignificant, but neither could it be described as a paradigm shift.

Referring to the importance of property-related advertising in the overall revenue mix, it is clear that the demand for advertising space to promote housing developments increased throughout the period under review. The increase was in line with the scale of activity in the residential property market, where house completions increased by an average of 13% per annum, from 57,695 units in 2002 to just over 93,000 units in 2006.

From a relatively low base, property-related revenues in the Irish Independentand the Sunday Independentgrew by a similar 13% per annum, or a quantum of 89% over the period. For reference purposes, it is worth noting that advertising of travel increased by 25% per annum throughout this period, or a quantum of 153%. Revenues from property-related advertising represented an average of 14% of total advertising income and accounted for just over 9% of overall income - that is, income including both circulation sales and advertising revenues.

In his submission, my former colleague Gerry O'Regan gave an insight into the role of the media during the economic boom and subsequent crash. The only comment I will add, specifically concerning the property market, is that the media, in my view, cannot create or sustain a boom. Demand for property is created by a mix of factors over which the media have no control. These include overall economic conditions, employment levels, consumer confidence, the availability of finance, demographics, the rate of home formation, and society's capacity for risk.

In relation to information sought concerning engagement in property-related commercial activity, I can advise the committee that INM did not engage in property development activities and was at no stage a participant in the property industry. I would like to add, however, that as part of our normal operations the Irish Independentdid relocate its printing business from Abbey Street in Dublin city centre to Citywest in Dublin 24 and relocated its publishing division to Talbot Street in Dublin 1 in 2004. This was in line with other publishers in moving printing facilities out of what were congested city centre areas.

With reference to the relationship between the editorial and sales functions, Mr. O'Regan and I have outlined the position concerning the complete separation of the editorial and commercial functions within our organisation. I thank the Chairman and I hope my comments are of assistance to the committee.