quarta-feira, 26 de outubro de 2016
Guardian cuts costs but numbers ‘don’t add up’
Guardian cuts costs but numbers ‘don’t add up’
Britain’s leading left-wing publisher burned through another £48m in cash in the last six months. How long can it go on?
By ALEX SPENCE 10/27/16, 5:30 AM CET
LONDON — After a summer of steep job losses, staff in the Guardian newsroom are anxious about their future, but there may be worse to come.
The loss-making paper is burning through cash at an alarming rate — £48 million in negative cashflow in the first half of the latest financial year, according to internal figures seen by POLITICO — and insiders say they’re gravely concerned despite management’s assurances that costs are being brought under control.
Executives at the left-wing U.K. publisher have told staff they’re on track to reach an ambitious target to break even by 2019, after losing £80 million from day-to-day operations last year. However, one former senior executive said they’ll have to go much further if the Guardian is to survive the vicious headwinds buffeting the newspaper business.
Although the Guardian has reduced its costs and losses this year, a seismic shift in the publishing industry — where historic declines in print income are accelerating while digital advertising revenues flatline because readers are moving to mobile and Facebook and Google are taking the lion’s share — means the day of reckoning is closer.
“The maths just don’t add up,” the former executive said.
Ultimately, the executive said, the Guardian will have to slash costs by more than 60 percent to survive on the revenues it can generate from digital publishing. That would involve the sort of radical restructuring the Independent undertook in March: shutting off the printing presses, laying off many staff and drastically reconfiguring itself as a digital publication.
At the current rate, the Guardian’s investment reserves could be gone within a decade.
At the very least, another round of job cuts seems highly likely, said another media insider who reviewed the latest internal figures.
Even in an optimistic scenario, the newsroom faces a long period of budgetary restrictions, pay and recruitment freezes, and other forms of “salami slicing” that could undermine its journalism, insiders said.
That wasn’t the message when chief executive David Pemsel updated London staff last week. Revenues (£105 million) and costs (£128 million) in the first half of the financial year from April to September were broadly in line with targets and better than the previous year, according to a copy of the slide obtained by POLITICO. And the bottom line was improving.
Stripping out interest, taxes, depreciation and amortization, losses in the first half were £26 million, an improvement from £32 million in the same period a year earlier, the slide showed. The gist of Pemsel’s presentation: We’re on the right track.
However, more than a dozen former and current Guardian executives, editors and senior journalists who spoke to POLITICO were not convinced by the management plan. Those sources, whose views were backed up by independent media analysts and executives at rival publishers, asked to remain anonymous because they would lose their jobs, violate non-disparagement clauses in severance agreements, or jeopardize professional relationships.
A spokesman for the Guardian insisted the company is on track to break even, but declined to discuss specific financial details. POLITICO made repeated requests to interview editor-in-chief Katharine Viner about the newspaper’s future over several months, but the Guardian refused.
Two-and-a-half years after the Guardian won a Pulitzer Prize for its groundbreaking reporting on the Edward Snowden leaks — a moment that appears to have been the paper’s high-water mark — it is racing against time to find a viable commercial model before its substantial, but rapidly diminishing, investment fund dries up.
The new leadership team, headed by Pemsel and Viner, distanced themselves from former editor Alan Rusbridger earlier this year in a messy power struggle. Rusbridger, who retired in 2015, had been due to chair the non-profit Scott Trust that oversees the Guardian, but his return was blocked by the new regime.
Rusbridger presided over the Guardian unchallenged for two decades, in which he amassed journalistic accolades and built an audience of hundreds of millions by embracing the internet more enthusiastically than virtually anyone else in the British news business. However, when it was revealed that the Guardian’s financial losses had ballooned, Rusbridger was blamed — unfairly, some believe.
With Rusbridger out of the picture, the onus is on Viner and Pemsel, who are being squeezed from all angles. A long-term decline in print revenue has accelerated as big advertisers pulled out of the market. The Guardian’s digital business has gone into reverse as Google and Facebook swallow online advertising. At the same time, ambitious expansion, particularly in the U.S., caused costs to mushroom.
Suddenly, the Guardian’s investment reserves, flush after selling its stake in the Auto Trader classified advertising business, didn’t seem so plentiful.
That cushion, which stood at £838 million in 2015, was meant to sustain the not-for-profit publisher for generations, assuming an annual return of 4-5 percent and more moderate operating losses. By April, the fund had fallen to £765 million. At the current rate, it could be gone within a decade.
"The Guardian did not think carefully enough about the status of the material being offered," the readers’ editor wrote
Management announced a new plan in January to reduce costs by 20 percent. Pemsel’s aim, he said at the time, was to break even by 2019. As part of the cost-cutting, 278 staff in the U.K. left in a round of voluntary redundancies over the summer. Another 40 jobs are set to go in the U.S. this month in a second, unplanned round of job cuts. As POLITICO reported in September, the American business, once considered vital to future prospects, is now a financial millstone. It lost $16 million last year.
Insiders credit management with at least trying to tackle the cost base.
“They are doing a lot of the difficult stuff,” said one former senior staffer. “They are taking those decisions and getting on with it.”
Pemsel is restructuring the advertising operation to make it more competitive and seeking commercial partnerships to generate new revenues. And a drive to wring more income from readers is showing encouraging early signs.
Attempting to draw on its readers’ strong affinity for the brand, the Guardian is asking them to voluntarily pay £49 a year to help secure its future. About 1,500 new members are signing up each week, Pemsel told staff last week. More than 250,000 people are now regularly paying the Guardian in some form, whether as members, print subscribers or customers of the premium tablet and smartphone apps.
Some believe the Guardian should stop prioritizing traffic growth and focus on a core group of readers who are willing to pay for articles.
The hope is that this will be supplemented by philanthropists and charitable foundations willing to finance public-interest journalism projects, such as the funding it has received from the Gates Foundation to pay for reporting on international development.
In the newsroom, though, staff worry that it won’t be enough.
“I don’t know a single person who thinks membership is going to solve [the commercial challenges],” said one journalist.
Question marks hang over sources of new revenue, the prospect of further job losses, the future of the U.S. operation, how long the printing presses will keep running and whether the Guardian can keep giving away journalism for free on the internet.
While Rusbridger was blamed for the commercial mess, the new team seems to be pursuing broadly the same strategy, insiders said: printing a paper seven days a week, giving away articles for free online and asking readers for contributions rather than putting up a hard payment barrier online.
“We haven’t really seen a replacement to the Rusbridger vision emerging,” a former senior executive said.
Rusbridger ruled out the subscription model used by competitors such as the Times of London, Daily Telegraph, Financial Times, Wall Street Journal and New York Times because he believed the Guardian wouldn’t be able to attract a sizeable audience in the U.S. — and thereby attract large advertisers — if readers there had to pay.
Regardless of whether it charges readers or not, the paper’s survival will depend on drastically reducing costs.
Over time, insiders said, opposition to the paywall became an article of faith. It was seen as out of line with the paper’s global, progressive ethos. But with the advertising-supported online model now in serious doubt, there are those who believe the Guardian should stop prioritizing traffic growth and focus on a core group of readers who are willing to pay for articles. Privately, even Rusbridger now believes in the need for a paywall, according to one person close to him. Rusbridger declined to comment.
“What’s the point of throwing Alan off the top of the building if you’re not going to put up a paywall?” asked one senior Guardian journalist.
So far, management doesn’t appear to be thinking about a paywall, but regardless of whether it charges readers or not, the paper’s survival will depend on drastically reducing costs. The previous management drew up plans to scrap the print edition, according to another former executive, but backed off for fear of internal resistance. Likewise, the newsroom has never seen compulsory redundancies and the union still has considerable clout.
Time is running out. “We know that the trajectory is you just eventually run out of money,” said one senior journalist.