It’s news that the world’s struggling newspapers will not like to contemplate: on Monday of this week, we glimpsed a dramatic change in the future of The Guardian newspaper — and that future is not bright. At the present rate of cash-burn, the newspaper and its owners, Guardian Media Group (GMG), will go bust within a decade.
In July of last year, GMG had 835 million pounds in the bank (more than A$1.680 billion) and the reassurance this cash pile would protect the paper and its free website well into the future — for decades, some thought. On Monday, however, after news emerged last week of rising losses and the likelihood of job cuts, GMG revealed that cash pile had fallen by more than 100 million pounds (around A$205 million) and now stood at 735 million pounds. Without cost cuts, the cash pile will be exhausted by 2024-2025.
The grim news means the company as a whole is looking to slash costs by 20%, meaning some significant job losses. Besides the heavy spending and the fall in market values for assets such as shares and easing interest rates, The Guardian (like its competitors) has been hit by a sharp fall in print ads in UK papers in the past year; that fall has been put at 25% in the year to December. That will contribute to the actual loss of between 50 million and 52 million pounds by March 31. Some 80 million pounds of the 100-million-pound fall in the size of the cash pile has been blamed on rising costs and falling revenues. The rest was put down to the fall in the prices of market investments.
GMG and the Daily Mail and General Trust (its MailOnline is the biggest free news website in the world), along with Trinity Mirror are among the media groups to have remained on the free-news website track, while others have gone off into paywalls of varying height. The aim of these groups is to replace falling revenues from analogue ad sales and newspaper circulations with digital-derived revenues (and hopefully earnings) from advertising of various types, and now metered or fixed paywalls. Apart from the Financial Times, which now gets well over 60% of its revenues from digital sources, the performance of publishers has been mixed to poor. These companies have been trying to conserve or build cash reserves to enable them to continue paying for difficult, investigatory journalism in many cases, or just plain everyday reporting. The New York Times has a billion dollars in cash, but some debt and a global name (as does the FT). The Wall Street Journal has a high digital subscription base, but we know little of its actual performance, given the Murdochs release little coherent information on the public record.
The Guardian was seen as a special case compared to its peers around the world. It created this huge pile of cash after selling assets to help the paper maintain its reputation for solid investigatory reporting. The 2014 sale of the Auto Trader Group raised most of the cash that, it was believed, would give the company a firm future. Like all UK papers, the big slide in sales from around 2011 to 2014 slowed last year from double-digit falls in sales to low single digits. The Guardian lost 6.6% of its sales in December from a year earlier to average 166,000 a day in December, well behind other “quality” titles, such as The Telegraph and The Times, which sell more than 400,000 copies a day each. The Observer (owned by GMG) lost 5.9% of its sales in December from a year earlier to average just over 186,600 each Sunday. The free website is a big success. In December it had more than 7.8 million unique daily visitors, up 33% from the end of 2014, and second in the UK behind the MailOnline.
While GMG said it was committed to its Australian website, The Guardian reported:
“The cost of expanding into the US and Australia has also increased costs. Over the past three years, the group has also appointed 479 more people in both commercial and editorial for a total full time equivalent of 1,960. A third of the new appointments were in the US and Australia, where the Guardian has launched fast-growing websites.”
Despite these higher costs, the Australian operation is seen as part of its future, along with that in the US, according to Monday’s statement. The UK wasn’t mentioned. The slide in ad revenue has been a brutal surprise to the paper and its managers. Former Guardian editor Alan Rusbridger told the Press Gazette a year ago the paper was budgeting for digital revenue to overtake print this year. No longer. GMG has lost 300 million pounds in the past decade, and not made a profit in that time. It faces years of similar results unless it changes.
So a multi-point three-year plan was outlined by GMG on Monday night. These points include: “Cut annual costs of 268m pounds by 20%, Break-even at operating level by 2018/19″; “Align editorial and commercial operations to harness higher-growth membership and digital opportunities”; “Implement an advertising model that tracks evolving market trends, notably around branded content, video and data”; “Focus international growth on US and Australia, increasing their contribution to the overall business” and “Create a new data and insight team to support editorial and commercial innovation”.
That 268 million pound figure for costs jumped 23% in the past five years, while the paper’s revenues rose by only 10%, according to the paper. The big question out of this is the future of the The Guardian’s editorial content. Monday’s statement said it remains free to all online, but raised the possibility that some parts and content might have to be paid for in the future.