Guardian
faces cutbacks after ‘difficult’ year
An
era of lavish spending is over, says a newspaper insider. “We have
to be realistic.”
By ALEX SPENCE
10/15/15, 9:50 PM CET Updated 10/16/15, 10:54 AM CET
LONDON — The
Guardian is preparing for steep editorial cuts after a slowdown in
advertising sales. Job losses are highly likely, insiders at the
media company said.
“This is shaping
up to be one of the most difficult … periods we’ve faced in many
years,” David Pemsel, Guardian Media Group’s chief executive,
said in an internal memo obtained by POLITICO.
Spending on new
hires, salaries, travel and other expenses will be reined in as the
company tries to reduce its losses, Pemsel added. He did not mention
job cuts in the e-mail but several people at the company said there
will need to be a reduction in the workforce to stem the red ink.
Pemsel is half of a
new leadership team that took over at the newspaper company in the
summer, with Katharine Viner the editor-in-chief. The duo are
struggling with a problem vexing all newspaper bosses: generating
enough money from digital products to make up for diminishing income
from print.
This year has been
“incredibly challenging” for all the major players on Fleet
Street, Pemsel said, with print advertising falling at an alarming
rate in the first half of the year. Across the whole market, print
advertising will be down by about 20 percent, he said. Circulations
are also falling.
The Guardian, which
has expanded more ambitiously online than many of its rivals and now
generates about 40 percent of its income from digital, was less
exposed to a slump in print. But online advertising has also slowed,
as “spending migrates to the likes of Facebook and Google at a far
faster rate than previously seen,” Pemsel said.
“These are changes
which will not be reversed, and GMG is not immune to them,” the
chief executive added.
The slowdown will
result in the Guardian missing its target for revenue growth this
year, Pemsel said.
He did not give
specific figures, but another source at the company said full-year
revenues are on track to grow by about 2 percent, when they were
budgeted to be about three times that.
In the last
financial year, for the 12 months that ended in March, the Guardian
grew its online revenues by more than a fifth to £82 million. Among
U.K. news websites, only Mail Online had comparable income.
The digital sales
helped increase overall revenues by 2 percent to £210 million, and
operating losses narrowed from £30 million to £23 million.
However, with growth
slowing, costs will have to be brought under control if those
day-to-day losses are not to balloon again, people close to the
company said.
A large unionized
newsroom
Pemsel and Viner
have launched a strategic review of the business, known internally as
“Project 2021,” the chief executive said in the memo.
“We must … do
everything we can to balance the books,” Pemsel said. “By doing
so, we will create some financial room to maneuver, which will — in
turn — enable us to continue investing in areas of growth.”
Viner, the former
U.S. editor, was appointed to replace Alan Rusbridger in March after
winning a staff ballot. She is the first woman to run Britain’s
most influential left-wing publication.
She inherited a
newspaper that had, under two decades of Rusbridger’s editorship,
vastly expanded its reach by embracing the Internet — the audience
online has grown to more than 140 million worldwide — and won
international acclaim and prizes for a succession of big scoops.
But there was a cost
to Rusbridger’s global ambition: the Guardian racked up losses of
more than £550 million from its day-to-day operations on his watch,
according to company accounts.
The paper’s
financial situation is not desperate: It has an £840 million cushion
after selling its share of Auto Trader, a classified advertising
business. Those reserves are expected to swell to more than £1
billion when it offloads other non-essential assets.
That gives it more
time than many of its peers to find a business model that can sustain
a sizeable newsroom. However, it still faces tough challenges and the
Scott Trust, the non-profit body that governs the Guardian, is
determined that it won’t keep burning through money at the rate
that it did under Rusbridger. “Those days are over,” an insider
said. “We have to be realistic.”
Among executives,
there’s a sense that the company is carrying too many people given
the state of the industry.
While other
newspapers contracted through waves of job cuts, the Guardian’s
workforce increased by more than 300 in the last few years. It now
has 872 newsroom staff and 1,512 employees overall, who cost £87.1
million last year, according to the latest company accounts.
In contrast, the
Telegraph had 662 people in its newsroom and the Times and Sunday
Times employed 454 people across their editorial operations.
The strength of the
unions at the Guardian makes it difficult for management to undertake
a significant retrenchment, but there is provision for them to make
compulsory redundancies in extraordinary circumstances.
The company declined
to comment on its plans beyond Pemsel’s email.
Authors:
Alex Spence
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