What to do about the Guardian, which announced to staff the other day that it was going to burn through £90m of cash in the year to April. Last year it reported an EBITDA loss of £68.7m and a pre-tax loss of £173m.
EBITDA means earnings before interest, tax, deductibles and amortisation and the number is supposed to show the underlying health/potential of the business. But it’s really only relevant for new businesses. In any case an EBITDA loss of £68.7m ain’t great.
The Scott Trust, which is pledged to support the Guardian, has just over £700m left thanks to its sale of Auto Trader. But it can’t just sit there as money pours down the tube. So what’s to be done?
Guardian editor Katharine Viner has a plan and that’s to support the newspaper by, in effect, reader donations. It currently says it has 200,000 such, up from 15,000 a year ago who receive various membership benefits but no additional content. The plan is to have a million of these by 2019. It doesn’t sound very credible although it’s the way the likes of Wikipedia and Firefox are financed, entities in the Guardians’s spiritual orbit.
It does, though, rather tie the hands of the Guardian’s management. These people, presumably, like the Guardian the way it is and may not coninue their support if it cuts back further (it’s thinking of downsizing the paper to tabloid and outsourcing the printing – after blowing zillions on its own ‘Berliner’- sized presses) with many more to redundancies.
Online advertising isn’t the answer, there just isn’t enough of it at a sufficiently high price unless you’re a Google or Facebook – maybe a Snapchat. Introducing a paywall for the Guardian website would be massively expensive and highly risky.
If there is salvation to be had it surely means axing the newspapers, now selling only 160,000 or so copies a week, to leave an online global news business.
That could lead to Scott Trust problems – it’s only pledged to support the newspaper as it pre-dated the internet by about a century. So a cut-down version as the Independent (now defunct as a paper) did with i might be necessary and might even work in a small way. But the Guardian just doesn’t have the means/market to compete with big-format rivals The Times and Telegraph. It never really did.
Let’s hope Viner’s plan works, as far as it can. But more radical surgery is needed.
