The Guardian needs an intervention

The Guardian and its Sunday title, The Observer have just announced a “digital-first” strategy. However, this is not a triumphant announcement. This is a burning platform admission.

Guardian News & Media, the parent company for both newspapers, lost £33m on a cash basis for the year ending 31 March, only slightly less than it’s £34.4m loss for the previous year. Guardian Media Group chief executive Andrew Miller warned that the group could run out of money in 3-5 years if things don’t change. I heard sobering burn rate figures when I was at The Guardian. I covered the boom and heard start-ups talk cash on hand, but I never expected to hear this from a major media company.

Some things leapt out at me: They reported £47m in digital revenues out of a total of £198m revenues. Digital made just shy of 24% of total revenue. That’s good going, and most newspapers would kill for that percentage of digital revenues. (Apart from the FT, which is making a killing from digital: 30% or revenue from digital now and projected to reach 50% of revenue by 2013.)

This came out from the presentation to Guardian staff:

Unaudited results for the year ending 31 March showed that revenues at Guardian News & Media, the immediate parent of the newspapers and, fell to £198m last year compared with £221m the year before, a fall in revenues that reflected a sharp fall in classified advertising. Recruitment advertising has fallen by £41m in the past four years.

The Guardian is seen as one of the most innovative newspapers in the world. It was why I enthusiastically joined them in 2006. They announced they were going web-first in June 2006, but that didn’t and doesn’t change the fact that the newspaper is burning through cash. To future of journalism folks, The Guardian is indicative of challenges facing the industry, but so far it’s not showing the way forward in solving those challenges.

Feel free to give The Guardian credit for being innovative, but everyone in the journalism community has to be more honest and realistic about its business challenges. It’s in the same sinking boat as a lot of other newspapers.

Guardian Editor Alan Rusbridger is saying that not only will they publish first to the web but that they will do less in print. The Guardian’s article says there will be no job cuts, though they have to find £25m in savings. Yet Mathew Ingram at GigaOm quotes Alan as saying there will be editorial job cuts.

Mathew also quotes Alan as saying that they have identified at least ten different revenue streams. That’s comforting. But it speaks volumes that The Guardian’s own article doesn’t mention new revenue, and Alan only mentioned existing digital revenue streams to Mathew.

The Guardian needs an intervention. Digital first will not be enough to save it. It needs to remember that although they are supported by a trust, that is not a licence to completely ignore business realities. Here is my bit of tough love:

1. Building a sustainable business is not evil

The Guardian needs to realise that making money to support journalism is no sin. There is a lot of moral space between being a sustainable journalism enterprise and being a voracious media mogul like Rupert Murdoch. I’d love to see The Guardian demonstrate how to create a financially sustainable journalism business, but it will have to challenge its own anti-commercial culture.

2. Editorial innovation alone is not enough

The Guardian is innovative, but it also shows that technical and editorial innovation are not enough on their own to guarantee a sustainable journalism business. Digital first without a business focus will still leave it in dire straits. If The Guardian is going to devote 80% of its resources to digital, as is implied by Dan Sabagh’s article, it has got to develop new revenue streams to support its digital first strategy.

3. ‘Open’ without a business model is an empty ideology

I love the open web. I think The Times hard paywall is foolish. However, the ideology of open from The Guardian lacks pragmatism. The Rupert v Rusbridger battle makes a good media ding-bong, but neither positions are proving able to solve the problems that face newspapers. (Yes, I’ve seen Guardian digital strategist Matt McAlister’s presentation on generative media networks. Hopefully, some of that strategy will be part of these 10 revenue streams. At the moment, I remain unconvinced.)

4. You’ve got a golden brand. Capitalise on it.

At the risk of sounding critical, I joke with people that The Guardian has the brand of Apple but the business focus of Twitter. Guardian readers are some of the most loyal in the world. When The Guardian recently cut short its well regarded local project, readers offered money to help it continue. Most newspapers would love to have that affection and loyalty. If The Guardian can’t capitalise on its loyal audience, incompetence will be the only explanation.

A friend of mine, who had taken a buyout from a US newspaper, said to me after visiting The Guardian a few years ago:

The Guardian seems like a great place to work when the times are good, but it doesn’t seem capable of making the tough decisions when the times are tough.

The Guardian has time to make some relatively easy decisions to ensure its future, but it needs to get serious, not just about digital but about its business. The Guardian’s often lauded as the future of journalism, but without a sound business model, it doesn’t have a future.

22 thoughts on “The Guardian needs an intervention

  1. Kevin,

    Thanks for a sober and honest (and affectionate) appraisal of the Guardian and its business. Losing 100,000 quid a day isn’t a sustainable proposition, and those of us who like the paper need to keep making that clear. Ideology will only take you so far; and pursuing a sustainable business isn’t evil.

    Maybe what we need is a Knight Challenge for the Guardian – opening up a discussion by loyal readers on ways it could build enough revenues (or cut costs, or focus more) and still maintain its broader vision and impact.


  2. Reg,

    Thanks a lot. I was hoping that this critique came out not so much critical as trying to give friends a bit of advice. I also think that folks in the future of journalism community need to be a bit more realistic about The Guardian. At conferences, people talk to me about its innovation but seem to be completely unaware that the paper is suffering the same financial issues as almost every other paper in the developed world. The business model crisis is a much more acute problem for journalism right now than innovation.

    As for a Knight News Challenge for The Guardian, it’s a nice idea, but The Guardian’s problems are shared by most newspapers in the US and the UK. The Guardian has some advantages that no other newspaper has, but sadly, those still haven’t allowed them to solve the one problem we all have to solve, the unraveling of the business model.

    Thanks again Reg. Looking forward to catching up again.

  3. The Guardian HAD a golden brand. And then they destroyed it by bacling The Liberal Democrats. This is not just political prejudice on may part.
    The Guardian had a crucial role in the structure of a free press, just as The Daily Telegraph. One regularly supported the left, one the right. It was part of the balance which makes the British press system work and made The Guardian literally indispensable.
    But they got carried away by the idea that they could become the newspaper of record and started infiltrating right-wing comment on to the opinion page. Now the news is affected too. So when The Guardian goes bust, only a few LibDems will mourn it. The rest of us have done our mourning already.

  4. Kevin – agree with a lot of your point, but most of all the editorial innovation picture. As you say, there’s no question that the G is an innovative, leading online journalism centre – but this doesn’t automatically translate into profit.

    Many times someone at GNM has shown me something that is genuinely impressive in terms of what it can do for readers, communities of readers and the online-reading public at large. The open platform API strategy is perhaps the best example of this. But in many cases I am left wondering how this translates into revenue.

    I think there’s a bit of a misconception among rivals that the Guardian is “a charity” but of course it isn’t – it’s a commercial, privately-owned, profit-seeking, business just like almost everyone else in national newspaper publishing. It sounds like, as part of this latest call to arms from GNM, this idea is being made more explicitly to staff than previously.

    I’d word it to them like this, commercial and editorial staff, and I’m sure it wouldn’t go down very well: if you don’t contribute revenue to this business, why are you here?

  5. I don’t quite see how

    “If The Guardian can’t capitalise on its loyal audience, incompetence will be the only explanation.”

    squares with

    “but The Guardian’s problems are shared by most newspapers in the US and the UK. The Guardian has some advantages that no other newspaper has, but sadly, those still haven’t allowed them to solve the one problem we all have to solve, the unraveling of the business model.”

    You and I have had some discussion about News International’s strategy on Twitter – but IMO, at least NI are showing that they understand there is a problem and are prepared to do something to address that issue. I know you don’t like paywalls – but I think NI’s one price for all channels isn’t terrible. Of course, given the worrying opaqueness of NI’s numbers, it’s hard to do anything but conclude that it’s not going so well.

    Like everyone else, I think the newspaper world is in deep deep shit, but hand-wavy strategy pieces proclaiming ‘digital first’ as the future (duh!) but presenting no viable and credible ideas will only hasten the demise of the Guardian, which would be a shame indeed.

    It is, however, a HUGE relief that the discussion finally seems to be moving away from traffic stats and audience figures to the only one that actually makes sense – profit.

  6. Excellent point about The Guardian needing to move away from an “anti-commercial culture.” It is only through PROFITS that The Guardian –and any news organization for that matter–can do good in the world. If they go belly up, they will not be able to provide the news and information so many people rely on and need to make informed decisions.

    I also agree that news organizations need to find new revenue streams. Why not offer online courses to readers on business topics, entrepreneurship, or even art? I have pitched this idea of offering e-Learning to several U.S. newspapers, and most reply: “Good idea and we believe it would make us money. But that’s not our brand.” How can offering educational courses not be part of a news brand that already offers education and information through the news stories it covers? Thankfully, I have two newspapers who have agreed to test the idea. With the one, we have identified that if only 1% of their readership signed up for an online course, after all expenses associated with course development and launch, they would make $490,000 in profit from that one source. There are myriad such passive income opportunities for news organizations, if they would only open their minds a bit more.

  7. Anu,

    The Guardian shares the problems of a declining print audience while also still getting more than 75% of its revenue from print. It’s why I made a reference to Nokia, and Elop’s burning platform memo. It’s why this has been cast so often a a print versus digital issue, when it’s really about more complicated than that. It’s not a paid versus ‘free’ (ad-supported) argument. That’s too simplistic. That’s why I’m trying to recast this as profitable/sustainable versus unprofitable/unsustainable. I’m not a fundamentalist about how an organisation achieves that sustainability. I really like Jim Brady’s line that there are no silver bullets, only shrapnel.

    My issue with NI isn’t that they are trying to capture some value from their digital audience. My issue is that there are so many elements of the Times’ strategy that are completely non-strategic. So many digital paid content launches are supported by sponsors that give people free or low cost access for a period so that people know what they are getting. The New York Times got a major sponsor to give their most loyal readers access for a year. The Times here seemed to be a curmudgeon’s strategy, not one designed for success.

    I agree with Vicki’s comment about developing new revenue streams and products, some of those products might be based on content, but others might be based on the information and intelligence, such as premium reports. Broadly, what I’m saying is that news organisations need to harness some of their creativity into reinventing their business. John Paton of the Journal Register Company in the US did just that. The Guardian has a lot of smart people. They just need to realise they have an existential problem and get serious about solving it. I didn’t see that in the digital first announcement.

  8. Love the Guardian and its online efforts. But they seem to lack balance by always wanting to be market leaders in digital. It’s cool & sexy but burns through a lot of resources. They need to adjust, use more off the shelf technology and stop being obsessed with being innovative every step of the way. Let the technology settle in once in a while and profit from your innovation. Being the digital darlings of the media world only feels good for so long. Doesn’t mean stop trying new things…just get the balance right.

  9. Great post.

    Freetard economics always ends up with the same conclusion. New managment is needed, the web has been a huge ego-trip for Rusbridger. Someone without his intellectual prejudices against revenues and profits is needed to save the ship.

  10. The first step to making a profit is to cut expenses, hence their decision to emphasize digital over print.

  11. Richard,
    I’m rarely so blunt in responding to comments, but saying that the first step to making profits is to cut costs is daft and facile. That’s especially true in the case of The Guardian. They have been cutting costs. They cut 380 positions in 3 rounds of painful cuts since 2008. Yes, their profits have dropped, but some of that is down to over-reliance on recruitment advertising especially in their verticals such as media, technology and education. You can either cut costs or become creative in finding new revenue streams. The Guardian has done too little of the latter. Your canned, unimaginative MBA response doesn’t carry much weight here.

  12. It is unclear to me what you recommend actually *doing*. Digital equivalent of page three girls? Cat videos? Huffington-like pandering to pseudoscience? More celebrities and soccer(“football”) articles? Ads, ads, ads? What?

    When you say “it will have to challenge its own anti-commercial culture.” that’s a generality – what do you think IN SPECIFIC they need to do that they they have not done?

    (disclosure – I wrote a freelance column for _The Guardian_ a little while ago ).

  13. Innovation with no commercial success is just a waste of time and money, I’m talking in business terms and not in regards to a creative process. I know little of this particular case but lots of industries are going through a tough digital transformation which will leave a lot of companies in the knackers yard unless they can at least survive these “hard times”. When the players have been reduced their will be a resurgence of some sort so G like many other companies in many other industries have got to learn to off set these hard times with solid revenue streams, but without focus that is not going to happen. The main contradiction that strikes me in all of this is that they want to be sustainable yet not commercial, personally I don’t buy it:-)

  14. It’s true there are no magic bullets out there, and no one has a good handle on what will work. But there are lessons on what doesn’t work well: Online ad revenue rarely covers expensive content creation, although it can cover the cost of cheap content.

    So unless the Guardian wants to go down the road of quick-and-dirty content, it, like all news organizations, needs multiple revenue streams – in some cases, premium editions, perhaps charging for access to databases, building wine or other special-interest clubs, etc. Part of the solution probably involves lower average cost of content creation – perhaps through crowdsourcing, aggregration, or technological fixes. As well as rethinking the shelf-life of content, amortizing it over a longer period. (Think databases and other types of persistent content.)

    It’s possible to be so commercially minded that innovation is stifled because ideas don’t seem profitable; but it’s also possible to be so enamored of innovation that no one thinks about profitability. The Guardian needs to tip the balance towards the former, but not go all the way.

  15. I was lucky enough to have Schibsted as a customer 2005-2009 and was privy to a lot of there transformation strategy.

    I always felt the Guardian was best placed of the UK papers to emulate that success but they just haven’t got moving.

    Maybe the Norwegians can lead the intervention.

  16. Ah Seth,
    As to your first line of argument, see point one. Your belief that commercial options in journalism exist on two unreconcilable poles is all too common. The choice before The Guardian is not to change its stripes and go down market. That would totally destroy the opportunity before it.
    As for concrete proposals, that’s easy. Change the pricing for mobile to a monthly subscription one. Two, commercialise their North American audience before they build up staff. They already have a sizeable audience there. Three, add to their digital transaction businesses. I’ve got others, but that’s all the free consulting they get.

  17. All *very* interesting… and I think Kevin hammers some big nails in this debate.

    Having provided one of the tiny revenue streams into GuardianLocal and gained a certain insight into the business direction GMG *could* have gone, I feel a blog post coming on…

    In the meantime, on the basis that a business model invariably demands an engagement model running ahead of it… the fact that the Guardian ‘brand’ delivered c130,000-odd digitally active uniques specific to the cities of Edinburgh, Cardiff and Leeds is something that I wouldn’t have abandoned in such a hurry in the belief that such loyalty could be replicated overnight beyond the salons of Long Island.

    There was the crossroads moment… three journalists, three desks, three lap-tops and 130,000 committed Guardianistas holding the councils of Edinburgh, Cardiff and Leeds to account.

    Now repeat into 20 UK cities. 50,000 monthly uniques apiece, that’s 1,000,000 committed readers… Habitat (Glasgow) heaven when it comes to advertising…

    In troubled economic, political times, what an audience to have at your command… one in the truest traditions of the ‘Manchester’ Guardian.

    I don’t see a ‘Salt Lake City’ Guardian riding to anyone’s rescue. They had a perfect platform in that Local proposition and decided, instead, to chase the US. Bit like The Spice Girls.

    Be interesting. But, personally, I think they have taken the wrong road. And if we are now facing the very real prospect of a major UK city not having a paper of daily record for ‘the first time since the Age Of Enlightenment’ (A Rusbridger) then it ain’t going to be GMG making the very most of that provincial market failure and the deep pools of advertising that will have to seek a new home when the Sheffield Star goes to meet its maker…

    best etc


  18. Let’s just say that the evidence regarding anything other than the two poles is very sparse. Proclaim it should exist, doesn’t make it exist. So far, nobody has found a workable, scale-able, Internet model to support high-quality content. I don’t think it’s because people involved need to be repeatedly told to find it.

  19. This is so Pessimistic! I’m sure mr rusbridger will think of something! His clever plan to make the newspaper even worse is a clear attempt to quickly drive circulation into the floor and therefore drive UP the groups relative proportion of digital revenues! Genius! They’ll soon be 100 percent digital revenues as the paper sales hit zero! Some say rusbridger is a bleedin’ ego maniac who has singlehandedly pissed cp Scotts trust fund against the wall. I think he’s a visionary.

  20. Seth,
    You’re assuming that I’m recommending an internet only model. I’m not, and The Guardian isn’t pursuing one.

    You said:

    Let’s just say that the evidence regarding anything other than the two poles is very sparse. Proclaim it should exist, doesn’t make it exist.

    The Atlantic and The Christian Science Monitor have both shown that a product focus that views print and digital as two different products can build a business for these changing times. Neither have dumbed down their content in print or online. If anything, their content is sharper and smarter, as are their businesses. We do have some examples of how this works without forcing The Guardian to have a page 3 feature of topless human rights campaigners or developing a Lol-animals site for endangered species.

  21. First, I’d like to say that I think what the Guardian is delivering via the web is great. And I have to observe that developing a compelling offering before monetising it is the current Internet model.

    I am relived that (by your calculation) the Guardian can afford a little time to get this right. Of course, I also share your concern about the implications if it gets it wrong.

    I feel somewhat embarrassed that there is not a good opportunity for me to contribute more to the costs of providing the content. I bought the iPhone app (even though I don’t use it, preferring the browser interface on the iPad, and mobile browser interface on my BackBerry). I guess I should try to find more ways to contribute (maybe even clicking on ads, if I have to, although normally I religiously avoid clicking on online ads – or reading printed ones).

    I’ve thought about buying printed copies, even though I know I will not get around to reading – but my eco-conscience makes that difficult.

    I guess I could subscribe to the Digital Edition. The problem is, it is very clever, but I prefer the Web UI and iPad over laptop for access.

    I might be tempted if the Digital Subscription came with an iPad (etc.) apps which are really well designed for those devices. But I don’t often use the laptop to access the paper, and am not sure that simulating the paper edition (even with all the clever extra capabilities) is the right way forward. After all, a newspaper is probably a prime example of the exact use case that HTML and the Web was designed for!

    I don’t know what the right financial model is – though I’d be delighted to participate in any forums or communities the Guardian might develop to let their readers help figure out the answer.

  22. Stuart,

    Thank you for the comment. You’re one of the kinds of loyal Guardian readers that I was referring to in the post. You said:

    I feel somewhat embarrassed that there is not a good opportunity for me to contribute more to the costs of providing the content.

    I don’t think you should feel embarrassed, but this is the key issue. How does The Guardian capture this loyalty and translate it into revenue to support their journalism? How does it give you easy, frictionless ways to support the journalism you care? How does it deliver content in a format that you want? These are key questions.

    Alan Rusbridger talks about mutualisation. I don’t really like the term because quite frankly 99% of what he is talking about is networked journalism, and it seems an attempt to brand a common industry practice and grant The Guardian exclusivity where none exists. Apart from the networked journalism aspect of mutualisation, Alan has always envisioned a financial component of it where Guardian readers can financially support its journalism. I am hopeful that some of the Guardian’s creativity and innovation can be directed toward exploring those financial aspects of mutualisation as well as the editorial ones. Thanks again for the comment.

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