The Moscow-born, London-educated media entrepreneur Evgeny Lebedev, who has been splashed by financial and political controversy (courtesy of some Saudi shareholders), this week appointed magazine publisher Mike Soutar as CEO of the loss-making London Evening Standard. He must now find ways to restore the 192-year-old free newspaper to profitability.
In 2018, the 900k-circulation, Brexit-opposing newspaper (editor-in-chief: ex UK Finance Minister George Osborne) made EBITDA losses of £9.5m. The newspaper went free (after years of paid-for losses) when it was acquired by Lebedev in 2009. That was just two years after Soutar himself had launched the pioneering ShortList free weekly men’s magazine. In what can now be seen as halcyon days for free UK media, the Daily Mail Group’s Metro daily achieved its best profit of £15m on revenue of £66m and Soutar’s fledgling company achieved revenues of £25m in 2016. That was the year he and his co-founders also completed their sale to DC Thomson for an estimated £17m. It was also the last year that the Evening Standard made a profit – of £2.2m.
Rising newsprint prices (exacerbated by a weak currency) have made life extra-difficult for UK newspapers during a period of continuing pressure on print advertising yields and readership. But the Evening Standard has a few problems all of its own. In the past two years, staffing costs have risen some 20% due to headcount that has increased from 285 to 357, and office accomodation costs have almost doubled. Some of that is due to the pressures elsewhere in the Lebedev group where costs previously shared with The Independent newspaper (now digital-only – and soundly profitable) and the loss-making London Live TV have fallen back on to the Evening Standard. Just to complete the bed-time reading for the newly-appointed CEO, the newspaper has total borrowings of £24.3m, mostly from the Lebedev family.
Soutar started his career at DC Thomson in Dundee, Scotland. The long-time publisher, among much else, of legendary children’s comics the Dandy and Beano is the place where countless stars of UK journalism have cut their teeth and where budding executives have learned how success can come from small budgets and shabby offices. That’s how it was for Mike Soutar who started, aged 17, on Secrets magazine, writing old-fashioned fiction for old-fashioned women. He quickly found himself promoted successively to beauty editor, fiction editor, and then assistant pop editor on Patches, a teenage girls magazine. Next, he became pop editor of Jackie, which had become the UK’s best-selling teenage magazine soon after launch back in the 1960s.
Working in a typically small, low-cost editorial team producing a bestselling, UK-leading magazine from remotest Scotland was the perfect grounding for Soutar who next made the jump to London, first as a disillusioned press officer for Virgin and, then, as a junior on the pioneering magazine Smash Hits. The fortnightly had been launched in 1978 and swept established music papers aside on its way to becoming the country’s fastest-growing magazine and cornerstone of the vibrant EMAP group which dominated UK media for most of the next 30 years – until it crashed and burned.
Soutar moved quickly through the ranks as Smash Hits and EMAP broke down the barriers of established media. By 1990, he had become editor, although the magazine which had peaked at 880,000 at the end of 1988 had fallen to under 500,000. It was another big learning period in a go-go company that was then having to rejuvenate the magazines that had been the hottest things on the planet just a few years before.
His next big break was to take over as the editor of FHM which EMAP bought in 1994, a few months after IPC Media’s James Brown had single-handedly opened up the market for young men’s magazines with his sensational launch of Loaded. Soutar’s challenger also took the market by storm: “In the first two-and-a-half years, we took the magazine from a circulation of about 50,000 to market leadership of 365,000, and three out of my last four issues sold in excess of a half a million.”
It was heady stuff but Soutar was soon getting restless again. In 1997, he landed the job as managing director of EMAP’s dance music radio station Kiss FM. Two years later, he was off again, flying to New York by Concorde to launch Felix Dennis’s Maxim in the US. That same year saw him involved in an abortive bid with UK broadcaster Chris Evans and PR whizz Matthew Freud to acquire the racey tabloid Daily Star – before it was snapped up by Richard Desmond as part of the then Daily Express group (now Reach Plc).
In 2000, the 34-year-old Soutar joined the longtime UK magazines leader IPC Media, then owned by Cinven private equity, having been acquired from Reed Elsevier, and chaired by his former EMAP boss David Arculus. He was successively managing director of the company’s Music & Sports division and editorial director, mainly responsible for new magazines. He successfully launched Nuts into the then booming market for men’s weeklies, followed by Pick Me Up to compete with Bauer in the quietly super-profitable puzzles and real life market. Along the way, Time Warner acquired IPC Media (now TI Media) for a £1.2bn price tag only the sellers want to remember.
Soutar was a man in a hurry but is credited by former colleagues with a careful approach to planning. “He’s very methodical, very considered, but then implements his plans with real follow-through, power and passion. He has absolute belief in his own abilities, but he plans really carefully. He is confident, endlessly enthusiastic and totally driven. If he wants to make something happen, he will. He loves breaking new ground. His enthusiasm is infectious.”
Another says: “He gave IPC a real sense of its own potential. He brought confidence and the conviction that things could be great.” It didn’t last. In 2006, his departure from IPC was marked with a terse announcement and not a single word of thanks from CEO Sylvia Auton: “After six years with the company, group editorial director Mike Soutar has decided it is time to leave. In accordance with the terms of his contract, Mike is stepping down from the board and taking six months’ gardening leave with immediate effect.” Ouch. It was as if the mighty IPC Media could sense the impact on the magazine market of his (as yet undecided) next move.
Soutar and colleagues Tim Ewington, Phil Hilton, Karl Marsden and Matt Phare (who had variously worked together at IPC and/or EMAP) “were interested in the power of ‘free’. We wanted to see how the ‘Metro’ (newspaper) business model would work with consumer magazines.” In 2006, backers, including Soutar’s Alma Mater DC Thomson, rushed to invest £4m in Soutar’s plans to publish new-style free weekly magazines across the UK.
ShortList was an almost immediate hit with readers and, crucially, advertising agencies which backed it all the way to a 30% market share in under three years. It struck gold because it captured the essence of free publishing success: free content that is ‘good enough to buy’ can guarantee an audience for advertisers. But the real prize came with Stylist, the free weekly launched two years later for affluent 20-40-year-old female commuters. Then came the profitable-from-the-start Emerald Street fashion and beauty daily email – named after their London address. The company (then known as ShortList Media) was profitable within a few years and soon achieved 20% operating margins.
Like many truly successful start-ups, things look a little different a decade later. In 2018, the DC Thomson-owned company (now known as The Stylist Group) closed ShortList magazine and recorded operating losses of £8.6m from revenues of £23m. But Stylist magazine, the Stylist Live exhibition and the digital Emerald Street are thriving and the company’s content marketing agency now accounts for some 50% of its £23m revenue.
It’s a smart company still. But the painful adjustment (and, come to that, this week’s ‘merger’ of Vice and Refinery29) is a reminder of how transient success can be in 21st century media.
That’s the challenge for Mike Soutar who now brings to the Evening Standard a special blend of journalistic, managerial and people skills. His appointment this week struck many UK media insiders as an inspired choice.
The easy bit will be the paper’s weekly magazine-supplements Homes & Property, and ES. They are both said to be profitable and we might expect additional print and digital products including, perhaps, an amplified “what’s on tonight” TV/entertainment guide for the commuter readership. Soutar will also be keen to grasp the challenge of live events. Perhaps he will have admired the one-day FT Weekend Festival which recently notched up some £800k revenue from a mere 4,000 attendance on a corner of Hampstead Heath in North London.
Just imagine a much larger Evening Standard Summer Festival of arts, music and sport in London’s Hyde Park. Other routes to profit might include B2B media/content for the professions (eg tourism, financial services and the creative industries) which dominate London business. Painfully aware of the way that young ear-phoned commuters are increasingly ignoring even free newspapers, Soutar will surely want to launch podcasts and, perhaps, even an online news radio station. That would make a lot more sense than Lebedev’s loss-making London Live TV.
There are also real problems (perhaps beyond the new CEO’s reach) of a newspaper whose business and other news coverage regularly betrays its long print edition deadlines. How can an evening paper compete on the news?
The real point, though, is that the long-term profitability of the London Evening Standard cannot be in print. Like daily newspapers everywhere, it has to be the runway for the launch of other media, entertainment and information ‘channels’. The Evening Standard is a powerful brand in London. But, to succeed longterm, it must minimise the cost and maximise the revenue of its print editions – in order to reinvest for the future. For the party-giving proprietor of a newspaper edited by one former high-flying politician and courted by so many others, that may be a bit of a challenge. Evgeny Lebedev will need to listen to Mike Soutar.