Journalism cannot ignore the digital futureby / April 19, 2016 / Leave a comment
Published in May 2016 issue of Prospect Magazine
This is a response to an article from Prospect’s April 2016 issue titled “Who guards the Guardian?”
In Washington, in April, I had a public conversation with Marty Baron, the tough, old-school Editor of the Washington Post, recently celebrated in the film Spotlight. The question came from the floor—how much longer can print survive? Baron shrugged and said he didn’t know—five, 10, 15 years? He grew up with print, loved print: “But we spend 99 per cent of our time thinking about digital.” So, these days, do most editors.
Stephen Glover’s piece about the Guardian in last month’s issue (“Who Guards the Guardian?” April) appears oblivious to this debate. He is, in Marty Baron’s terms, a one per center: fondly harking back to the age of print and, on the evidence of this piece, bereft of ideas about the digital future.
Glover rehearses old history: the Guardian should have stayed as a guest on Richard Desmond’s worn-out presses despite our print contract nearing its end. But we had to move to full colour—the old presses were mainly black and white. Two external consultants advised the board on costs. Moving to the “Berliner” format was not more expensive than the other options the board examined. If Glover thinks there are endless contract printing opportunities in the UK today he hasn’t been paying attention. News International alone spent some £350m on vast printing plants in 2008.
Similarly, Glover would have preferred the Guardian to move to “cheaper offices” in Lambeth. I think he means a Will Alsop building in Southwark, which was more expensive than the building the paper ended up renting in King’s Cross. These decisions—like everything else—were vetted and approved by three boards. On bigger decisions the boards would hire external consultants to double, or triple, check their thinking. Glover questions Guardian Media Group (GMG) judgements about how much to invest in digital as against print. Should newspapers try for large international audiences, or try to make a go of it in the much smaller UK pool, with or without pay walls? These are reasonable questions to ask: all newspaper managements are discussing variations of them all the time (see Marty Baron). The Daily Mail, for which Glover now works, has essentially an identical strategy to that of the Guardian: invest in a (currently) free web offering in order to build a global audience while still relying on print revenues to provide a steady cash stream.
This is not hard to understand, even if you disagree with it. Most analysts think print will decline: we can argue about the pace. It’s essential to get a digital version of your paper airborne even if you lose money initially, which you probably will. Most newspapers around the western world have had a torrid financial time of it in the past decade. They are trying to make up for declining print income by building digital revenues.
The Guardian’s £82m in digital revenues are small when compared with Google or Facebook. But, in Guardian terms, this is a significant chunk of income which didn’t exist 10 years ago. The £82m compares with the Mail’s digital revenues which were about £60m off the back of a much larger audience at around the same time.
Could any paper hope to expand into the US, where a third of Guardian readers live, while remaining behind a paywall? It’s difficult to imagine. Mail Online didn’t try it. Does all this require an upfront investment in people and cash? Of course. Mail Online is reported to have taken on an extra 410 journalists to help it break into America.
The Mail can afford to invest in the future off the back of a very large tabloid print circulation in the UK. The Guardian has always been a small player in print: it ranks about eighth or ninth in the UK daily league tables, even as it’s jostled with the New York Times for the number one ranking in the world for serious English language newspaper websites. As Glover knows from his days at the now online-only Independent, the economics of what used be called broadsheets are entirely different from tabloids.
Does the Times paywall point to the future? It’s difficult to tell. The company declared an operating profit of £1.7m in 2014—an improvement on its £24.5m loss in 2013. But the “profit-making” Times Newspapers Ltd employs just 459 people, all of them apparently journalists. The costs of printing and distributing papers; of selling advertisements, employing lawyers and preparing accounts—all these live somewhere else in the Rupert Murdoch empire and are cross-charged in a rather opaque manner.
Whatever the truth of the Times figures, they are achieved by bundling print and digital subscriptions together, a perfectly sensible tactic at the moment. The real long-term test for the Times will surely come if, as most people still predict, daily print eventually fades from the scene. Is there a solid future living to be made from a relatively small number of UK-only, digital-only subscribers (147,000 in 2015, down from 156,000 in 2014)? Isn’t the honest answer that nobody knows?
Some form of paywall may be part of the answer: the Guardian has not been alone in saying “never say never.” That’s a decision for the current or future management and editors. But timing and circumstance are crucial. The Sun has just dropped its paywall while declaring losses of more than £250m. There is no one size that fits all.
“The discussions I witnessed around the board tables were sophisticated ones”
It’s good, to my mind, that the Times is trying something different. We will all learn from each other. But any strategy is at the mercy of the external weather. The Guardian is currently shedding jobs. Show me a newspaper that hasn’t. The main external factor is digital disruption. Facebook took $18bn in revenues in 2015. In the last quarter alone of last year, Facebook’s advertising revenues shot up 57 per cent. It is gobbling up the advertising pie, leaving less for others. As Emily Bell, the former journalist, now at Columbia University, recently wrote: “Facebook is eating the world.” She described the last five years as the most dramatic revolution in the news ecosystem in 500 years.
But the three boards—the Scott Trust, GMG and Guardian News and Media (GNM)—have wanted to invest in things they believed would be required for long-term sustainability. They include video, mobile, a presence in America and sufficient numbers of developers and other digital experts to help build the future. All that costs money.
They were able to make those investments because of an endowment the Scott Trust had built thanks to commercial shrewdness at GMG. Let’s call the eventual endowment approaching £1bn in rough terms—give or take—once all other assets have been disposed of. It means the Guardian and Observer can enjoy the sort of subsidy that Rupert Murdoch has given the Times, the Lebedevs to the Independent or Amazon’s Jeff Bezos to the Washington Post.
Most endowments work on the principle that you can spend 4 to 5 per cent of the overall investment fund. Funnily enough, a Prospect writer did the maths back in 2010. Peter Morris calculated that the Guardian could be supported to the tune of £45m a year without depleting the investment fund—rather more, noted Morris, than the paper was actually spending at that time. He argued: “For an outsider, it is hard to avoid thinking that a more straightforward way to secure the future of the Guardian would be to run the inheritance less like a media conglomerate and more like a Wellcome Trust-like foundation.” Which is exactly the model to which the Scott Trust has been moving.
That investment hasn’t yet brought financial sustainability, any more than almost anybody else. Even Buzzfeed is suffering: the Financial Times has reported that it missed its 2015 budgets by $80m (£56m). But it has, through probably inevitable cycles of expansion and contraction, built foundations for a digital future. And it has helped sustain some quite exceptional journalism in recent years.
The Guardian is producing some outstanding reporting on the Panama Papers. The past five years have seen a rich crop of extraordinary work, including Wikileaks; investigations into tax avoidance; female genital mutilation and slavery; a seven-year campaign on phone-hacking; work on torture and rendition and undercover policing. It won a Pulitzer Prize and an Emmy for the Snowden revelations about the state and surveillance. In Australia, ground-breaking work on immigration; in America the unprecedented collection of data on people killed by the police. Serious long reads—in print and digital—which have been recognised with numerous awards.
Everyone has made mistakes over recent years: this is, after all, a revolution. But the discussions I witnessed around the Scott Trust, GMG and GNM board tables over the past 10 years were sophisticated ones in which experienced business leaders—including excellent non-executives—debated long and hard about where the greater risk (and opportunity) to the Guardian lay.
Was it more prudent to retrench, keep faith in print and hope the digital storms would blow away? Or was significant investment in digital today the only hope of having a sustainable business tomorrow? Unless you’re a one per center you know the answer.