The Guardian and The Independent suffered big sales falls in 2011. Both need to consider axing their print editions.
How long can a newspaper lose readers and post losses? We may be about to to find out. The Independent and The Guardian recorded such awful figures in the latest round of ABC data that both must consider whether it is fruitful to continue with a print edition.
The Independent recorded a sales fall of 32 per cent year-on-year.
The Guardian saw a fall of 13 per cent year-on-year.
The Financial Times and the Daily Star also performed badly, but have the merit of being profitable and have higher circulations than the two left-leaning broadsheets. Here are the nationals ranked by circulation drop:
The falls took place against a back-drop of unremitting gloom for the newspapers business. Tabloid sales fell 7 per cent year-on-year, mid-market papers by 2.39 per cent and the quality segment by 0.92 per cent. The Sunday newspapers all saw falling sales on the previous month, with Scotland on Sunday tumbling 7 per cent in December on the previous month, from 49,114 to 45,652. The Observer was down 11 per cent year-on-year.
The falls means the The Independent and The Guardian sit bottom of the circulation league table. The Sun now outsells the Indy by 21 copies to 1; The Daily Mail outsells The Guardian more than eight fold.
The Independent
The Independent is the prime candidate for termination. Russian billionaire Alexander Lebedev bought The Independent and The Independent on Sunday for £1 in March 2010. He also owns the Evening Standard which he acquired in 2009 for £1 and the Russian newspaper Novaya Gazeta. The two Indy titles lost £12.4m in 2009 and had gained reputations for being terminally unprofitable – hence the knock-down price.
Curiously Lebedev isn’t obsessed by profitability. After buying the Evening Standard he said: “I don’t think I can make money from newspapers. It’s about duty. I have lived in the Soviet Union for many years with no free press. It is still very restricted.”
The Independent seems like a paper without a readership and without a purpose.
In fact, such is his enthusiasm for running newspapers, Lebedev launched in October the i, a 20p Berliner sized newspaper billed as a cheap alternative to tabloids, composed of rehashed articles from the Independent.
The early signs are promising: the i has posted sales in December of 221,715 – already larger than The Independent – and Lebedev is currently funding a lavish TV and billboard advertising campaign suggesting he’s enthusiastic about his new venture.
Here’s the problem: with the Evening Standard enjoying a boost in circulation following its transition to a freesheet, and the iprospering, The Independent seems like a paper without a readership and without a purpose.
Lebedev may keep The Independent to promote plurality in the media – there really is no other justification.
The Guardian
The Guardian is a different beast: it too is unprofitable, but it has a trump card in its superlative online offering.
Guardian.co.uk is rivalling The New York Times as the world’s foremost source of hard news on the internet (the Daily Mail beats the Guardian online, but relies heavily on celebrity gossip).
Guardian Media Group CEO Andrew Miller’s target is to grow digital revenues to £91m by 2015/16. The company will need to hit this target to break even.
During November the Guardian website recorded 3.7 million daily average unique users, well ahead of Telegraph.co.uk’s 2.3 million. More than half the visitors to Guardian.co.uk are from outside the UK. It is a heavyweight operation, which will one day replace the print version entirely – editor Alan Rusbridger has said as much.
The problem is that the website is not generating enough cash.
In July, Guardian Media Group chief executive Andrew Miller revealed digital revenues at the Guardian and Observer would be an estimated £47m for the financial year ending 28 March 2012. Miller’s target is to grow this to £91m by 2015/16. It will need to hit this target to break even. The Guardian News and Media lost £55.3m in the last financial year (£33m excluding one-off costs, according to Miller) on a turnover of £221m, and readers are rapidly fleeing the paper.
Auto Trader is the reason the Guardian is still in existence
Can digital revenues grow fast enough? The lesson from the United States is that it will be tough.
The New York Times is engaged in an epic struggle to monetise its huge online presence. In March last year it introduced a paywall for readers viewing more than 20 articles a month. Digital revenues grew 6.2 per cent in Q3 2011 as subscriptions generated cash, but the prognosis is still poor.
Janet L Robinson, chief executive of The New York Times Company, resigned in December, saying “It is probably an understatement to say that transitioning from a traditional print journalism model to the digital world has been an enormous challenge.” The New York Times Company’s share price has fallen from $40 in 2005 to $8 today. For comparison, The New York Times has a print circulation of 770,586, more than triple the Guardian.
What makes the debate over which newspaper will be the first to exit print so hard to call is that all the papers have rich owners.
The Guardian’s owner, the Guardian Media Group, has around £200m in cash and around £800m in assets. The jewel in the crown is the 50 per cent share in Auto Trader (co-owned with private equity house Apax Partners).
Auto Trader is the reason the Guardian is still in existence. Auto Trader’s division reported an underlying profit of £63.3m in the six months to October. Revenues are growing at a double digit rate. It could fund the Guardian’s losses for a decade.
Furthermore, the ideological nature of the Guardian makes it likely to endure losses for as long as it can.
The Guardian’s ultimate owner is the Scott Trust. Don’t be fooled by the name – the Scott Trust ceased to be a trust in 2008 when it became a limited company for tax purposes. The old name was retained to avoid spooking the paper’s left-leaning readers.
Nevertheless, the 11-person board is committed to evangelising the paper’s particular brand of progressive politics as much as making a profit. Leaving the print market while its nemesis, the Daily Mail, remains, would be galling for Rusbridger and Co. Right-wing papers would dominate the news-stand.
But can the Scott Trust really absorb losses of £33m a year simply to wield political influence? There is also the possibility of exiting the loss-making print segment to invest the cash saved in digital – which is, afte
r all, the long term future of the industry.
The other UK newspapers
The Daily Mail, Daily Mirror, Daily Express, Daily Telegraph, The Star and The Sun are all profit-making and all owned by cash-rich entities. Express owner Richard Desmond is so confident about his paper’s future in print he recently invested in a new printing facility in Luton. We can be sure none of these papers is about to go online-only anytime soon.
The Financial Times makes a profit, and boasts the most upmarket readership. Its fall in print circulation is attributable to the success of its website (subscribers passed 250,000 last year).
The Times has a history of making losses – losing £45m in the year to June 2010 and £87.7m in the year before. The latest annual accounts should be filed this week. However, The Times’s owner News International is a global powerhouse, posting a net profit of £423m in the three months to 30 June. Rupert Murdoch has the cash and ego to continue to print The Times for as long as he wants.
The conclusion
Which brings us back to Alexander Lebedev and his lame duck title, The Independent. Lebedev possesses the resources to run the paper at a loss for some time: Forbes ranks him as the world’s 358th richest person with a fortune of $3.1bn.
But. If Lebedev’s motivation in keeping the Independent open is to promote pleurality in the media, he may realise that shutting the Independent will do more good than harm.
By keeping the Independent in print he’s losing money personally, and contributing to the Guardian’s financial woes. If he closed the Independent he could direct his readers towards The Guardian.
We saw with the closure of the News of the World how much the demise of a title helps its rivals. The Daily Star Sunday rose circulation 90 per cent, the Sunday Mirror by 63 per cent and the People by 60 per cent after the NoTW shut down.
Lebedev could axe The Independent and still have three papers to play with (the i, the Evening Standard and Novaya Gazeta). By keeping The Independent open he’s draining his own purse, and may force The Guardian to exit print far earlier than it planned.
The US has shown that no title is too big to fail – the Christian Science Monitor and Seattle Post-Intelligencer are now online only; many others, such as the Rocky Mountain News, Oakland Tribune and Cincinnati Post simply went bust. A report by the Annenberg School of Journalism forecasts the US will lose 1,400 daily newspapers over the next five years. Only four will survive.
The UK print market is overpopulated. Readers are not coming back. If Lebedev won’t shut down The Independent soonish he may drag The Guardian with it into oblivion.
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