Guardian faces dismal future without radical surgery

The Financial Times reckons the Guardian newspaper “burnt through” more than £70m in cash last year, which will lead to an attempt to cut costs by £50m over the next three years. And its biggest cost is people.

Cutting headcount in meaningful terms has been almost an impossibility for the left-leaning Guardian. Its staff would doubtless say that they don’t actually have enough people to do all the things needed, run a quality weekday paper (and online) plus the Observer on Sunday.

The trouble is, they’re producing a paper fewer and fewer people want to read. Most people look at the Guardian’s output online because (a) there’s a lot of it and (b) it’s free.

The management doesn’t help. The Guardian/Observer has an absolutely barmy pricing policy: £1.60p for an increasing undernourished Monday-Friday paper and a vertiginous £2.70p on Saturday. The Observer is £2.90p. By contrast, Rupert Murdoch’s Times is £1.20 Monday-Friday (£1.50p on Saturday) and the Sunday Times (still fat although undeniably flabby) is £2.50p. Most Times readers buy it as part of a discounted package.

The logical conclusion is that the paper edition of the Guardian will disappear; maybe that’s the only way the company can make the redundancies it clearly needs.

In the meantime, despite its success in gaining online readers (it’s recently opened in the US too) it is, as the FT says, burning through cash at an almost unheard-of rate.

The Guardian is run by something called The Scott Trust, whose role in life is to keep the paper going. But is it really sensible to burn your cash pile (the Guardian has about £800m from its sale of Auto Trader and this is likely to be topped up by £100m or so when another investment, Cannes owner Ascential, floats) because of some ancient commitment to what was, then, the Manchester Guardian?

The Guardian’s strategy – it doesn’t seem to have changed much under new CEO David Pemsel and editor Katharine Viner – is to keep investing in online, hoping that the ads will eventually catch up with expenditure. They would doubtless say that the existence of the paper is a key part of the Guardian ‘brand.’ But administering an annual bonfire of millions of pound notes is a strange way to operate.

Will the online strategy ever work? Last year the Guardian increased digital revenues from £68m to £82m out of total revenues of £214m. And the company still made a loss of £19m (which would have been £41m without Ascential’s contribution). So you can see how much the paper is costing (even though it brings in most of the money). We don’t know what the costs would be if the Guardian went digital only.

This digital gleam of hope, however, occurred before the rise of dreaded ‘ad blockers,’ which are devastating revenues across the online newspaper world – the more so as more people switch to accessing such products by mobile.

Somewhere in the Guardian there’s probably an online business capable of turning over £100m or so. Without a radical change of direction – and swingeing cuts – there isn’t a newspaper business.

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