The Global Media Weekly for executives and entrepreneurs

UK ‘quality’ dailies find their feet

In the week when the UK’s largest newspaper publisher Reach Plc was rocked by adverse trading conditions (which knocked 18% off its share price), it becomes clear that the fortunes of the news brands once collectively known as “Fleet Street” (after their historic location) are diverging. Perhaps unsurprisingly, the once money-spinning “red top” popular tabloids – News Corp’s The Sun and Reach’s Daily Mirror – continue to feel the pain of lost copy sales and advertising, while the quality dailies (once broadsheets) are learning to live with much less advertising but more subscriptions.

The most recent financials for The Guardian have been hailed as its best results in “many years”, including the first cash surplus in a generation and its highest revenues for over a decade. A dig through the financials shows, unsurprisingly, that the numbers are flattered by its large and growing £1.1bn investment fund. But – in line with the not-for-profit owner’s strategy of using the annual investment profits to balance any losses by the news group – The Guardian has clearly come a long way over the past 10 years or so, reaching the long dreamed point of “sustainable losses”.

Its journey, in many ways, reflects the one the broader UK quality news market has taken through a decade of disruption and transformation. 

Back in 2011, The Guardian was hemorrhaging money. Total revenues for the business for the year ending April 2012 (not including the stakes it then held in Trader Media Group and Top Right Group which morphed into the current investment fund) were roughly the same as now at £254m, and it made a pretty staggering EBITDA loss of almost £48m. Operating losses were at more than £64m. 

It was in a fair bit worse shape than its two most comparable UK competitors, News Corp’s The Times of London and the privately-owned Telegraph. The Times, which had only recently taken the then unusual step of launching a paywall, was then also making a loss but a far smaller one, hovering around £10m on both an operating and EBITDA basis. Revenues were at £402m, well ahead of The Guardian, but so were costs, at £412m.

The Telegraph, meanwhile, remained, back in 2011, extremely profitable, throwing off a healthy pre-tax profit of £54.5m on revenue of £331m. As the daily with the oldest audience, it managed to keep a run of similar profitability going for another few years, helped in no small part by its comparatively high subscription-to-newsstand ratio and ruthless cost-cutting. But that run started to slip in the latter half of the decade, down to £27m in 2016, £14m in 2017 and just £1.6m. Declines in print ads and circulation were catching up.

Fast forward to 2021, and one of the most striking things about the three papers’ financials is how much more similar they look. While The Guardian’s revenues are similar to a decade ago at £256m, there have been big falls at both The Telegraph, (now lower than the Guardian’s at £245m) and The Times (£327m).

Costs too have evened out. The Guardian’s have fallen from almost £320m to £245m. Meanwhile, The Telegraph has shaved £60m off its operating costs to just over £214m  and The Times has cut more than a third to £282m. Where once there was a difference of more than £135m between the costs of The Times and the Telegraph, with The Guardian in the middle, now the difference is just under £70m between the two, with The Guardian still coming in somewhere in between. 

Perhaps surprisingly, total wage bills – while not rising in line with inflation as you might expect – have stayed pretty static across all three companies. Editorial headcount at the Guardian has 100 from more than the 1,000 of a year ago, and more than halved the numbers working in other roles. But it still employs far more journalists than either The Telegraph (687) or The Times (532), both not greatly changed on the total numbers employed since 2011. Operating costs have fallen elsewhere for a variety of reasons, inevitably some of which will be associated with printing fewer newspapers. 

All three newspapers are spending less money, and all but The Guardian – which started from the lower base – are making less money. They are smaller businesses, but look to be on the way to being fundamentally more profitable ones. The results are pretty clear in the bottom line: The Times was the most profitable of the lot in 2021, with pre-tax earnings of more than £52m, while The Telegraph, after its late 2010s dip, is bringing in almost £30m. The Guardian, of course is, again depending on which way you slice things, now recording a “sustainable” loss. 

This looks to be a reflection of an unfinished, but increasingly successful transition to digital reader revenue. Early mover The Times has built a digital subscription business that accounts for almost two thirds of its 586,000 total. The Telegraph has boosted total subscriptions to  720,000, with digital subscription revenue jumping from under £13m in 2020 to more than £44m in 2021. The Guardian, meanwhile, claims more than 1m people are now paying for its journalism, either as regular supporters or digital subscribers, generating almost £70m. 

There are, of course, difficulties ahead. Print circulation and advertising will keep falling off, even as the cost of newsprint increases, while a global economic downturn will likely hit both advertising and the propensity of readers to pay for digital subscriptions or memberships. Each business will face unique difficulties as well: The Telegraph’s continued weighting towards older print readers (although digital is fast helping grow a younger audience), and The Guardian’s investments are likely to be hit by a global downturn. 

But, on the basis of the 2021 financials, the UK’s quality newspapers seem to have found the path towards a more stable, and profitable, future than seemed possible just a decade ago.