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Chime Communications growth dented by loss of US government PR contract November 8, 2011

Lord Bell’s marketing services group Chime Communications has been forced to cut staff and take an unplanned restructuring charge, after its biggest PR contract with the US government finished earlier than expected.

Chime, reporting a financial update for the period 1 July to 8 November, also warned investors on Tuesday not to expect 2011 to show the bumper rate of growth the company has reported over the past six years.

“Because of the weak global economy we continue to expect growth, but not at the same rate as the last few years,” said Bell. “We expect to return to higher growth rates in future years.”

Chime put a brave face on the loss of the US government contract; the company said that overall its PR businesses, which include Bell Pottinger, Harvard and Good Relations, “continue to perform well and grow”.

The company would not state the level of impact on its Bell Pottinger PR business, although Chime said it was forced to “move quickly to reduce costs, mainly people and property”.

Chime added that it will now take a one-off charge for restructuring costs this year which will hit its bottom line, and said that for trading profit to be in line with budgets and market expectations this will need to be stripped out.

The loss of the PR contract is significant enough that Lord Bell said that it expects the “balance of our four divisions” – PR, sports marketing, advertising and research – to change.

“Sports marketing [will become] a higher proportion of our business and, because of the ending of the US contract, our public relations division to be a lower proportion of our business,” said Bell.

The PR operation has traditionally been Chime’s largest division, accounting for almost 50% of total revenues.

Bell admitted that Chime needed to focus investment on the PR business in order to get it on track, including acquisitions, although he said that the division will continue to show organic growth.

“We are at that point in the cycle where we need to make some investments particularly in public relations,” he added. “Chime is a growth-orientated business and our strategy is to focus on growth in areas of marketing services that will show the strongest growth, like sports marketing and digital.”

Sports marketing, which includes businesses such as Fast Track, has been growing rapidly driven by a number of acquisitions in markets such as Brazil ahead of the football World Cup in 2014 and the 2016 Rio Olympics.

Bell said Chime’s advertising and marketing division – which includes VCCP, the ad agency behind Comparethemarket.com’s TV ads featuring meerkat Aleksandr Orlov – did well during the period.

“Our advertising and marketing services business continues to do very well, building on its strong creative reputation and client wins,” said Bell.

He added that the its research operation, Opinion Leader, “is continuing to recover”.

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Wall Street Journal circulation figures to be investigated October 13, 2011

The newspaper circulation watchdog is set to launch an investigation into Rupert Murdoch‘s flagship Wall Street Journal Europe, following the resignation of its publisher amid allegations that it artificially boosted its sales figures.

The Audit Bureau of Circulations said it had “recently” decided to take another look at the sales scheme that sold bulk copies to students at cut prices on the basis of “new evidence”, although it did not elaborate on when exactly it received the evidence.

Andrew Langhoff, one of Murdoch’s most senior European executives, resigned on Tuesday after the Journal said he had inappropriately agreed to publish two articles as part of a commercial agreement with a Dutch company. On Wednesday the Guardian reported that the Dutch company had been involved in a scheme designed to artificially boost the newspaper’s sales figures.

The scheme included a contract struck by WSJE’s circulation department and a Dutch consulting firm, called Executive Learning Partnership, which ran from May 2009 until April 2011 and involved sponsorship in the paper and an agreement to publish articles promoting the firm.

Through Executive Learning Partnership and other companies, the Journal had effectively been secretly buying thousands of copies of its own paper at low prices, boosting its audited circulation. In total, 41% of the Wall Street Journal Europe’s audited circulation of 75,000 came via this method.

ABC, the official body responsible for auditing the sales of newspapers in the UK, said on Thursday that it had originally reviewed the scheme when it began in 2009 and was “deemed to be compliant with the rules” that govern the category of circulation measurement called “multiple copy subscription sales”.

A second audit of the WSJE’s circulation, carried out to provide a sales figure for the six-month period to the end of December, also gave the newspaper a clean bill of health with ABC stating that it “found the scheme to be in order”.

However, in the light of the resignation of Langhoff and the further allegations, ABC has now changed its stance. “More recently we have re-examined the scheme based on some new evidence available,” said Jerry Wright, chief executive of ABC UK. “There now appears to be additional new information which may give grounds for further investigation.”

According to the official ABC definition of what constitutes a “multiple copy subscription sale”, which it has deemed that the WSJE’s scheme fell into, is as follows: “These are multiple subscriptions purchased on a contractual basis by an organisation for their employees/members, or for students at educational establishments. The final recipients of these copies do not need to be known but the publisher must be able to demonstrate that the subscription copies are delivered to the same fixed pool of individuals. Payment may be by someone other than the recipient”.

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Rupert Murdoch’s the Daily has 80,000 paying subscribers October 3, 2011

Rupert Murdoch‘s iPad-only newspaper the Daily has 80,000 paying subscribers – a sixth of the number he said the publication needs to break even – the publisher revealed on Monday.

Greg Clayman told US website AdAge that the Daily has 120,000 weekly readers on average, with 80,000 people paying either 99¢ a week or $39.99 a year to read the digital paper since its launch in February.

He said the figures showed readers “responded well” to paying for online content – with 15% of trial readers becoming a paid subscriber – and revealed that the Daily would be available on tablet computers running Google’s Android software in the near future.

“The numbers are telling us people are responding well to original content designed for the platform. Premium content seems to work well on a tablet device,” Clayman told AdAge.

The publisher revealed the number of paid subscribers after an advertising executive told Bloomberg last week that the company was averaging 120,000 readers a week, without disclosing the number of paying users.

Murdoch himself launched the Daily in February, heralding its arrival with the slogan: “New times demand new journalism”.

He said at the time that the title would need 500,000 paying subscribers to become viable.

At 80,000 paying readers the Daily is some way off that target, but Clayman told AdAge the road to profitability would take several years.

He said the majority of subscribers had opted for the $39.99 a year subscription, while churn was low at 1% to 3% a week.

The Daily made a low-key launch in international markets, including the UK, in mid-September after being US-only since its debut in February.

While the majority of the Daily’s subscribers live on the east or west coast of the US, a significant percentage reside in midwest states such as Texas and Oklahoma, Clayman said.

“We assumed they [coastal residents] would be early adopters, but people buying these devices aren’t just on the coasts, they’re all over the country,” Clayman added. “People are using these devices to get their news on the couch, in bed. It’s a natural connection to a product like ours.”

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News Corp investors urged to drop James Murdoch from board September 28, 2011

Investors in News Corporation, Rupert Murdoch’s media company, were urged on Tuesday to vote against the re-election of his son James Murdoch as a company director by an influential shareholder group.

Murdoch’s youngest son is the company’s deputy chief operating officer, the third most powerful executive at the company overseeing News Corp’s European and Asian businesses including News International and BSkyB, and has been earmarked by his father as his successor.

Pirc, which advises shareholders on corporate governance issues, said: “In light of his close association with the phone-hacking scandal we are advising shareholders to oppose James Murdoch’s election.”

Pirc said in written advice on Tuesday: “We question James Murdoch’s suitability as a senior executive and potential successor to Rupert Murdoch. As a senior executive at News International it is unclear why he did not initiate in-depth inquiries at an earlier stage and why former colleagues now directly and publicly contradict his stated position that he was unaware that hacking extended beyond [Clive] Goodman [the News of the World's former royal editor].”

Murdoch insists he was not told about an email which indicated that phone hacking at the paper was being carried out by more than one “rogue reporter”, Goodman.

The News of the World’s former editor Colin Myler and its head of legal Tom Crone have disputed this. Murdoch has been recalled to appear before MPs on the Commons culture, media and sport committee later this year to explain the discrepancy.

“Up until the closure of the News of the World, News International’s response to the unfolding events had not been decisive and featured a number of arrests and resignations rather than dismissals,” Pirc added.

Pirc has consistently opposed the re-election of News Corp directors with close links to Rupert Murdoch, the company’s chairman and chief executive, including James Murdoch.

“Pirc’s key governance concerns focus on the position of James Murdoch as a member of the News Corp board and the implications for minority investors of continuing dominance of the company by the Murdoch family,” the group added.

Family trusts controlled by the Murdoch own 12% of News Corp but control around 40% of shares with voting rights, effectively giving them the power to veto any takeover bid.

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