The money question

Breaking News is mainly a book about journalism, but there’s also quite a bit about money. Most of the reviews so far have concentrated on what it has to say about journalism – and have mostly been very kind. But one or two reviewers can’t get beyond the money question.  “He may have been a good editor,” runs a certain line, “but he was crap business manager. Brought the Guardian to its knees, almost bankrupted itself.”  Never mind the quality, what about the bottom line? That sort of thing.*

So I thought I would blog briefly about the money question – just the once -  to save you having to read every passage of the book.

So this is the tl:dr version.

1)    Firstly, editors edit. They do not run the business. That’s entirely as it should be.  There is, for instance, almost nothing in Ben Bradlee’s memoir about business models. He didn’t have to think about such niceties: the money washed in and he could get on being a great editor. Life today is different and editors can’t escape having to think about the changing financials even as they try to concentrate on the words and pictures. But they do not – and should not – run the commercial side of the company.  Their work - especially in these times of perpetual change - is to decide where journalism is going - or even, what journalism is. And to do it. I was amused to read one commentator accusing me of being terrible at forecasting revenues. The truth is I have never forecasted revenues in my life. Not an editor’s job. There were two commercial boards full of very clever commercial and financial people who looked after predicting revenues and operations. The building swarmed with forecasters. I wasn’t one of them.

2)    The Guardian has never been run for profit – which is just as well, as it has rarely made one in recent times.  That’s not its point: it is owned by a Trust  and run in order to produce the best possible journalism. That much has been clear since CP Scott’s remarkable 1921 essay about news and how he saw the [Manchester] Guardian.  Alastair Hetherington was a great editor between 1956-1975, and, later, Chair of the Trust. His own memoir includes an appendix showing the Guardian lost - growing - sums of money every single year under his editorship from 1961 to 1975. The paper almost merged with the Times in 1966 it was so in debt.  He was still a great editor: he did the best possible job with the resources available to him.  

3)    The Guardian did have at least one serious crisis while I was editing: after the Lehman crash of 2008 the plans we had collectively drawn up were blown up by the collapse of advertising and the deepest recession in memory. It looked dangerously as though we could run out of money within a few years. We didn’t.  Great commercial colleagues and wise board members got us through.

4)    By around 2013/4 we – that’s the Guardian board and the parent GMG board  – had drawn up a strategy based on five things:

* The best possible editorial operation we could sustain.

* A commitment to digital innovation, investment and growth.

* An imperative to be truly global – including operations in (and advertising from) the US and Australia

* A membership scheme by which readers would give money to the Guardian to support its journalism and keep it openly available

* The interest from a £1bn endowment which GMG had – rather brilliantly - established as a fund to support Guardian journalism. On a 3-4 per cent draw down that could generate £30 to £40m a year to subsidise the editorial operation. With wise investment advice it should grow at up to 10 per cent a year. [All credit to (Lord) Paul Myners, ex-Gartmore investment, for this part of the jigsaw.]

5)    The boards knew this period of investment would involve short/medium term losses – perhaps considerable ones.  It would entail painful cost cutting both then – and in the future.   But the Guardian did not have shareholders: it could afford to think long term. We have seen enough of what short-term thinking can do to newsrooms.

6)    Once a strategy has been agreed an editor’s job (see above) is to get on and edit, knowing his commercial colleagues will shout if there’s trouble. That’s what I did. No-one shouted. Quite the opposite

7)    By the time I announced I would step down in December 2014 all three of the then main commercial executives and directors said that everything was pretty much on track.

8)    Neil Berkett, Chair of GMG, then and now, said: ”Alan’s successor will inherit a media organisation in very strong health and with clear prospects for future growth.”  (December 2014 – emphasis added)

9)    Andrew Miller, CEO of GMG, said: “I'm pleased that the Guardian is delivering on its promises: to increase revenues, invest for the future and maintain a disciplined financial approach. 2014 was the year we secured the financial future of the Guardian.” (March 2015). He also said: “My successor will inherit a business with very strong commercial foundations in place…[it has] a sustainable financial future, securing the unique contribution made by the Guardian to national and international debate for many years to come.” The respected Enders media analyst, Douglas McCabe, said of Miller as he stepped down in March 2015: He has unambiguously backed the digital strategy and secured The Guardian’s financial footing while not breaking its culture. “

10) David Pemsel, my colleague as commercial director, on becoming CEO of GMG in June 2015 said: “I am hugely excited at the prospect of managing the next phase of growth.” [The Guardian is] “global digitally-focused, financially secureWe are perfectly poised to …capitalize on the many commercial and digital opportunities.”

11) So, by the time I stepped down in May 2015,  the most senior commercial executives and directors all said as plainly as possible - on the record -   that they considered  everything to be fine. Of course, they had anxieties: no modern media company can ever relax. But the Guardian was, in their view, not an organisation “on its knees” or on the verge of bankruptcy. Rather, they said they considered it financially secure and well-placed to reap the rewards of the way we’d collectively decided to negotiate the howling digital disruption all around. We had spent the best part of 20 years trying to ready the Guardian for the digital age. We weren’t there yet - who, among general interest newspapers, was? - but they were pleased with the progress. I had no reason to doubt them.

12) But then came 2016. It turned out to be a sticky year for everyone. Facebook was suddenly eating everyone’s lunch. Even the Buzzfeeds of the world were way out in their financial predictions. So – by miles - was Facebook. And so, it turned out, was the Guardian.  The £100m digital revenues David and Andrew had forecast – and which Neil had signed off on – didn’t arrive. The digital income remained stuck on £80m. Still a huge sum, given where we had come from – but not enough.  From a £40m-odd loss, which the GMG considered sustainable (because the endowment was there to mitigate that), the losses spiralled to £70m-odd loss. That was not sustainable. The Guardian was not the only news organisation to have a sweaty time in 2016.  A good many start-ups and legacy companies went to the wall. There were redundancies and closures everywhere.

13) I, by then, had no connection with the Guardian and would not have been amazed if the new team had ripped up the strategy, built a pay wall and abandoned the international plan. They didn’t. They stuck with, and revised, the strategy – alongside implementing a painful and necessary programme of cost reduction. They have managed very well. I’m sure they – like everyone – would have preferred to live in a different age of more financial certainties.

14) Jump two years. The Guardian still has flourishing international operations. The Australia business – once derided by some as a vanity project – has just turned in a profit of AU$700k.  The US operation is reported to be moving into the black and is said to be “on a sound financial footing..and become more important to the Guardian in future years.”

15) There is still no paywall. The boards will, I’m sure, have carefully investigated the idea of putting one up and have – it appears, and at least for now – decided against. Instead, the membership scheme first devised in 2012/3 now has 800k Guardian readers paying for content (570k paying supporters and 320k one off contributions). In a world of fake news, readers pay for the Guardian’s journalism to be openly available as an antidote to falsity. That seems to be tremendously enlightened. The world needs as much good journalism out there in the open as it can. [UPDATE: The Guardian announced in November 2018 that the six-year old membership model now had the support of one million readers.]

16) Digital revenues  (£108m) have overtaken print revenues and have overtaken the £100m David Pemsel forecast for 2016. He was, it transpires, about right – and, in a world of crazy disruption, as accurate in his predicted timing as it is reasonable to expect anyone to be.

17)The company says it will break even in 2019

18)There is still £1bn in the bank – the endowment explicitly there to sustain the Guardian’s journalism. The idea that the Guardian has been bankrupted by any part of the digital strategy is laughable. The opposite: the Scott Trust has more money to sustain the Guardian’s journalism than at any time in its history.

19) There have, of course, been plenty of bumps along the way. We made mistakes, as well as getting many things right. (The same is true of every single media company I know. Look them up). All praise to David and Kath for managing through tough times. Every Guardian editor and manager in history has been through such lean, even scary, periods. The present team deserves all support.

20) In an age of such disruption it would be foolish to claim final “success” for any media business strategy. Doubtless the future will laugh at us all. In two years time it may all be about Blockchain. Or not. But the Guardian planned a strategy to support quality journalism in a digital age. It has stuck with it through painful and, I dare say, alarming times. It’s revised it, developed it and tweaked it. The evolving strategy is gradually, and hearteningly, bearing fruit.  And the Scott Trust still has a £1bn endowment to support its journalism into the future.

21) To be clear: I am not claiming this is a miracle model that would work for everyone, nor that it is an unrivalled triumph of business acumen. But nor has it been a disaster. The digital revolution has splintered and fractured very many bigger and more hard-nosed “commercial” news organisations. Just now the Guardian’s strategy over the past five years or so doesn’t look too bad.

 *[UPDATE, November 5, 2018, the former Mail Editor, Paul Dacre said much the same in a valedictory speech he made to crown his 27 years of editing]