After the phone hacking scandal we know we need the Guardian – but where’s the money coming from?

Without the UK’s Guardian newspaper we would probably never have learned the full story about phone hacking at Rupert Murdoch’s News of the World (although the New York Times has also done some fine work).

In the UK anyway the rest of Fleet Street showed no inclination whatsoever to follow up the original jailing of royal correspondent Clive Goodman and private eye Glenn Mulcaire, even when it emerged that the company had paid a total of £1.7m to Max Clifford and Gordon Taylor to shut them up. Neither did the BBC, ITN or Channel 4 News.

But the Guardian and sister Sunday paper the Observer are still haemorrhaging cash (£22m in the last financial year) despite owner Guardian Media Group showing a small profit of £4m thanks to its investments in Auto Trader and magazine publisher Emap.

The company is estimated to have about £200m in its ‘investment fund’ (although this is tricky to access) which might keep it going for the next four years.

New CEO Andrew Miller (a number cruncher paid £572,000 for his troubles) has announced that his strategy is ‘digital growth’ to try to capitalise on its loss-making but popular website although he admits that this is likely to cost it even more money in the short term (it’s opening a New York office with a view to producing a US edition of its website).

The simple answer to the Guardian’s woes would be to close its papers (or publish the Guardian less often, as a weekend paper perhaps) but one of the many problems with going online-only is that its ultimate owner the Scott Trust exists for one reason only, to publish the Guardian (once the Manchester Guardian, which did make money) in perpetuity. I doubt that the charity’s articles say anything about websites.

Another problem is that online-only publishing would mean losing much of the Guardian’s current ad revenue although this is leaking away anyway, down 14 per cent over the past year. The most profitable part of this was public sector recruitment advertising but that has been slashed in the recession and is unlikely to come back any time soon, if ever.

Another possibility would be to take a leaf from Russian Alexander Lebedev’s book and turn the Guardian (most days anyway) into a version of his ‘i’, a cut-down version of the Independent that is cheap to produce and is currently selling nearly 400,000 copies at 20p. It’s been painfully clear for ever that Guardian fans (many of whom are students) aren’t prepared to cough up five times this even though they might love the paper (or what it stands for or maybe what it doesn’t stand for).

The really worrying thing for Guardian fans is that there doesn’t seem to any really radical thinking going on about ways to stop the rot.

Small cuts here and there can’t conceal the Mr Micawber strategy of hoping that something will turn up.

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advertising Alexander Lebedev auto trader guardian guardian media group Independent Max Clifford news of the world phone hacking scandal Rupert Murdoch

About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.

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