After the cuts, what can The Guardian do to prove its viability?

After more than a decade of losses, it is clear to anyone outside of The Guardian that their financial issues started long before the “perfect storm” that began last summer. The news that the last bastion of open journalism is to cut 250 jobs over the next three years – including 100 in editorial – should have made it clear to Guardian staff members too.

In 2010, I took voluntary redundancy from The Guardian. I was initially of two minds about taking the buy out, but then we were told that, at the rate at which money was being burned, at the time the Guardian only had about three years’ cash on hand. I couldn’t help thinking: Was I working for a business with a future or a sinking ship?

This happens every couple of years. The Guardian editorial leadership blithely sails along knowing that they are taking on water but secure in the knowledge that the Scott Trust will bail them out.

Fast-forward to 2016, and The Guardian is once again making dire forecasts about the limits of its trust-funded model. In January, after months of rumours, they announced that losses had ballooned due to an unexpectedly rapid decline in print advertising and Facebook and Google winning a bigger share of digital. The announced job losses are an attempt to get ahead of future cuts, as CEO of the Guardian Media Group David Pemsel said recently, but the Guardian has a history of repeating its old mistakes…

At almost the same time, the New York Times sounded a bolder note: Profit was up, and Dean Baquet gave newsroom staff and leadership permission to catch their breath before they mount a strategic review to maintain their “journalistic dominance”.

The major difference between the newspapers

While it’s easy to make this a story of the Times’ paid content strategy versus The Guardian’s “open journalism” philosophy, that isn’t the most important difference between these two great paragons of serious, in-depth journalism and editorial innovation.

During the summer of 2009, I was one of a number of staff and managers who took part in Guardian 2020, a strategic review to achieve Alan Rusbridger’s goal of making The Guardian the world’s “leading liberal voice” by 2020. I remember during one of the sessions that a member of the commercial staff said, “We have unlimited ambitions with limited resources”.

After deep cuts during the Great Recession, The Guardian rolled out their plan for global domination. In spite of more warnings from then CEO Andrew Miller in 2013 about their burn rate, The Guardian added 479 new staff members across editorial and commercial teams, with a third of those new employees coming to support their imperial overreach in the US and Australia.

Over the same time, The New York Times has made some targeted cuts and have attempted to strategically reallocate positions and resources in areas where they saw opportunities for growth. They are pursuing a similar international strategy as The Guardian, but they are not facing retrenchment. 

I can sum up the difference between The Guardian and the Times with this statement from Times President and CEO, Mark Thompson, on his Q4 2015 results call (emphasis mine):

“In Q4 2015, we saw adjusted operating profit of $118 million, a 13% increase versus the prior year, driven by solid growth in digital advertising and consumer revenues, as well as good cost management.”

In a word, it’s discipline. 

When I worked for The Guardian, a friend from the US came to visit and said, “The Guardian seems like a great place to work when the times are good, but they don’t seem capable of making the tough decisions when the times are tough.”

The Guardian stands alone amongst media companies as having editorial leadership which has aspired to “sustainable losses” as their goal for financial stewardship.

In 2013, The New Yorker wrote that The Guardian had run up losses for nine years and that the “money was running out”. Ken Auletta wrote in the piece, “Last year (2012), Andrew Miller, the director of the trust and the C.E.O. of the Guardian Media Group, warned that the trust’s money would be exhausted in three to five years if the losses were not dramatically reduced.”

In 2016, we’re asked to believe that everything was going swimmingly from 2013 to 2015 and then fell off a cliff just as new leadership arrived. Things that make you go hmmm. 

Miller told The New Yorker in 2013 that The Guardian eventually would have to make money while in the same article Rusbridger said the goal was “sustainable losses”, a figure that he said was in the tens of millions. Madness.

It is sad that it takes a sharpening of the crisis that has plagued The Guardian for years for the leadership to finally set a break-even target rather than accept losses subsidised by the Scott Trust. Where was the sense of urgency in 2013? Or in 2010?

Five years ago, I said that The Guardian needed an intervention, and after a half a decade of losses which have left them unable to cope with a sudden negative turn in their business, it seems that little has changed except the rhetoric. 

CEO David Pemsel has said boldly that membership revenue will make a third of their take in three years without giving a sense of a clear strategy on how to achieve that.

Like so many people, I wish The Guardian would match their editorial brilliance with commercial innovation. The Guardian can stop this cycle, easily, but it has to make some fundamental changes to its strategy, its business and its culture. As I said in 2011, file this under tough love.

‘Open’ without a business model is an empty ideology

I love the open web, open standards and remix culture, but as I said then, “the ideology of open from The Guardian lacks pragmatism”. In 2011, there was mounting evidence that “open” business models based on scale and display advertising would not support newsrooms at their past levels, much less the staffing levels that The Guardian has built up over the past five years. The fact that media organisations, even international ones, cannot reach Google-scale is not a new trend; it has not magically appeared appeared in the past six months.

Open is a political statement. It is not a business model, and The Guardian desperately needs to understand the difference.

The Guardian has a golden brand. They need to capitalise on it. 

In 2011, I wrote: “The Guardian has the brand of Apple but the business focus of Twitter.” Almost any brand in the world would love to have the affection that Guardian fans have. When The Guardian announced their troubles back in 2009, I lost count of the number of times that people talked about wanting to pay for what they read.

Membership as a revenue generator seems to have been just over the horizon for the past six years, since I was at The Guardian. The lack of execution while announcing its massive membership space is part of a pattern at The Guardian. It launches ridiculously undisciplined projects with massive, indefensible over-investment up front that push the break-even point to the point of breaking the business. It is part of a culture in which internal empire building comes at the cost of a sustainable strategy.

If they have any hope of meeting their reader revenue goals, they need to prioritise the formulation of a coherent membership strategy with multiple revenue opportunities. It’s not enough to just have a banner on the website and hope for the best. 

The Guardian creates tremendous societal value, and they need to focus on how to capture value to sustain their incredible campaigning journalism. 

But in addition to my suggestions a few years ago, I’ll add a few more.

Stop trying to find ways to ignore market realities

In 2010, fellow media watcher Peter Kirwan told me over coffee that he believed that Rusbridger’s goal was to create a super-trust that would not only protect The Guardian’s editorial independent in perpetuity, but also sustain The Guardian’s losses in perpetuity, in essence insulating them from market pressures. He was right.

Both the eMap acquisition and GMG selling non-core businesses were both attempts to create such a massive fund that The Guardian could be relaxed about their multi-million pound losses. Neither strategy has worked, and The Guardian needs to stop trying to find ways to ignore business realities and start actually having a reciprocal sense of stewardship towards the Scott Trust. 

Channel some innovative spirit into sustainability

The Guardian is an incredibly creative place, and they attract amazing talent. They have some great commercial staff who I really enjoyed working with, but they need to focus some of that creativity and innovation on sustainability, or, to put it more directly, into making some money to pay for brilliant journalism. I appreciate that they have Guardian Labs, but see my previous criticism about scaling out of line with revenue.

If I sound cross, it’s because I think The Guardian’s troubles are so unnecessary. They suffer from a lot of self-inflicted chaos, and like many people, I believe our world desperately needs journalism like The Guardian’s.

I think the new leadership team finally gets it, and their approach sounds like a clean break with the past with leadership who was far too willing to find endless losses acceptable.

I hope that in the coming years, just as so many have looked to The Guardian as a beacon of innovation editorially, that they will also use their special economic model to solve the most pressing problem we have in journalism today: How to make a sustainable income to support the public service journalism provides

By |2016-03-18T00:01:00+00:00March 18th, 2016|Analysis|Comments Off on After the cuts, what can The Guardian do to prove its viability?

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