The communications revolution is “dealing harshly with organisations long on tradition and short on vision,” Bob Phillis, chief executive of Guardian Media Group, said in his annual review of operations published yesterday. This side-swipe at other media businesses reflects a business model totally different to that of the Guardian.
Amid the gloom of predictions of the end of newspapers, Phillis was confident, saying:
The extraordinary pace of change in the media industry, with emerging digital businesses disrupting the activities and revenues of traditional content businesses, has required a particular focus on out digital strategy, alongside print. GNL’s [Guardian Newspapers Limited’s] ambition is to be the leading independent liberal voice in the world, providing relevant, personalised content and connectivity to audiences both in the UK and globally.
If the Guardian had shareholders in the way other newspapers have shareholders, the directors would be under severe pressure. They might well be considering the sale of the loss-makers — the Guardian and the Observer. Trader Media with its operating profit of Â£119.5 on a turnover of Â£303.9 million (39%) for the year ended April 2, 2006 would be a much better on its own for investors looking at share values and dividends.
With cost cutting, editorial redundancies and reduced investment plans the Guardian and the Observer, whose losses increased slightly to Â£19.3 million, could probably turn in a profit, possibly a substantial one.
That is the path that many newspaper owners are taking. There are substantial profits to be made from running lean businesses. We see this in the British regional press with very profitable companies like Johnston Press and Northcliffe Newspapers cutting costs to “increase shareholder value”. That approach also seems to be behind David Montgomery’s plans to create Mecom as a (highly geared) pan-European newspaper empire.
None of this matters very much if you believe newspapers are just another consumer product. If you believe, like me, that they are part of the cement that glues communities and countries together, it matters a hell of a lot. They are, in short, an essential part of democratic societies.
I do not really mind very much if the newspapers appear in their traditional print form or electronically. I happen to like print and believe it is going to be with us for quite a long time.
Amidst all the talk of “shareholder value” the Guardian is able to invest both in better print and the digital future. That is because it has only one shareholder, the Scott Trust.
Back at the start of the World Wide Web in 1992, the Scott Trust put on record its central objective:
To secure the financial and editorial independence of The Guardian in perpetuity: as a quality national newspaper without party affiliation; remaining faithful to liberal tradition; as a profit-seeking enterprise managed in an efficient and cost-effective manner.
Since then this has widened to include the Observer and, as Bob Phillis review makes clear, the Guardian now sees itself as being a world voice.
The success of Trader Media (largely motor advertising) underpins the newspapers. And like the newspapers it has invested heavily in the web becoming one of the top five UK websites with 6.57 million unique users a month. A profitable site too.
In the coming year Trader Media is to be partially floated, making more cash available for investment. It will be very interesting to see where that goes.
In conventional business groups Trader Media, with the biggest turnover and profits, would rule the roost. At Guardian Media Group is has enabled the newspapers to invest heavily during a time of uncertainty and change.
The question which should concern not only journalists but politicians as well as the general public is: Are newspapers safe in the hands of investment funds and private equity investors?