After two months of public controversy, the UK’s competition and media regulators will – next Friday (26 Jan) – recommend to the government whether to undertake a comprehensive six-month+ review which might serve to block the proposed acquisition of the Telegraph Media Group (TMG). Much of the opposition to acquisition by the UAE-funded RedBird IMI has focused on the claimed threat to free reporting if the TMG is effectively owned by Abu Dhabi. It is, arguably, complicated by the fact that the UAE happens to be the UK’s 19th largest trading partner and a growing investor in the economy, including ownership of premier league football champions Manchester City.
Part of the controversy involves an inevitable debate about whether traditional news brands like the 168-year-old Daily Telegraph really “matter” in a world of multiple news sources, most subject to so little of the regulation that “protects” newspaper-centric brands. But if politicians of the UK’s Conservative government wanted any reminding that the so-called “Torygraph” was influential (at least among themselves and their voters) they had only to reflect on this week’s coverage of their own party.
The ruling Conservative Party has been reeling from exclusive Telegraph reporting of an opinion poll predicting their virtual wipeout in the next election (probably this year) and contributions from politicians trying to influence the policy on immigration. To some, the broadsheet Daily Telegraph’s right-of-centre coverage has never been so important and the perceived “risk” of it falling under UAE control has been spiced by the emergence of the polarising former Conservative finance minister (and sometime newspaper editor) George Osborne as an adviser to the would-be owners.
Given the UAE’s cordial relationship with the UK (and the sensitivities of election year), the proposed deal under which RedBird IMI’s lending will be converted into equity, giving it ownership of the TMG for an apparent price of £550mn, seems likely to be approved. Ironically, the net price is probably less than some rival bidders would have paid if the auction had not been pre-empted by the UAE funding of the debt crippling the Barclay family which had acquired the Telegraph for a crazy £665mn in 2004.
The apparent “solution” to appease critics of the deal would be some kind of independent oversight of the Telegraph’s content and opinion, which is being offered by RedBird IMI. In 1981, Rupert Murdoch (then owner of The Sun and the News of the World in the UK) made similar assurances before being permitted to acquire The Times of London.
Opposition to the deal may have been undermined by the comments of Daily Mail owner Lord Rothermere who also wants to own the Telegraph. He pointed out that the UK’s national daily newspapers are simply not the primary force they once were, but are mainly digital businesses together selling a total of 3mn print copies daily, perhaps 20% of their peak.
That may have been an inadvertently misleading assertion simply because – in the UK as elsewhere – quality/ broadsheet news brands look increasingly successful: their readers are seemingly happy to pay subscriptions for print and, increasingly, digital services. Nowhere is this clearer than the UK where the Telegraph, the Times of London, The Guardian, and the Financial Times each have more paying readers than at almost any time in their history.
The increasing digitalisation may not equate to the historic levels of total readership in the days when 4-5 people were reading each copy of a newspaper – and digital circulations include international audiences. But some of these traditional news brands – with their steady reputation for well-funded, “reliable” journalism – may actually be more influential than ever among (presumably) better educated people, industry leaders – and politicians. Just ask the New York Times.
That’s a measure of how much has changed in the legacy news business since the millennial days when they were panicked into flooding the web with free content and lamenting the loss of advertisers and paying readers.
For the likes of the UK’s Telegraph, it is beginning to look a bit like the start of a new golden age of quality news. And, whisper it softly, but the resurgence of populist politicians (notably, of course, Donald Trump) might actually turbocharge their readership. Again. In the age of fake news and speedy, no-checking digital reporting, traditional news brands (including broadcast and digital operators like CNN, the BBC and Reuters), are getting hotter.
The sheer strength of this trend may be underlined by the performance of the Telegraph Media Group which, in spite of being weighed down by the debts of its longterm owners (and now being pulled and pushed by politicians), is more profitable then ever. The numbers tell the story of a business which last year scored its highest EBITDA since 2013 and – with its highest revenue for six years – record profit margins:
| Telegraph Media Group £mn SnapShot | 2023 | 2022 | 2021 | 2020 | 2019 |
| Revenue | 268 | 254 | 245 | 235 | 266 |
| EBITDA | 60 | 47 | 40 | 39 | 26 |
| Margin | 22% | 19% | 16% | 17% | 10% |
| Headcount | 1,100 | 969 | 1,047 | 1,148 | 1,251 |
The additional highlights of what is now the UK’s most profitable daily news brand include:
- 1mn subscriptions (75% digital) – more than doubled in three years
- 73% of revenue from readers (2019: 56%)
- 30% digital (16%)
But some of those would-be bidders – doing their research before the Telegraph’s aborted auction in 2023 – fear that this might actually be the high point of the news brand’s performance because of:
- The 70% revenue dependance on print
- Aggressive pricing which has seen print subs revenue increasing by 8% during 2020-22 despite a 25% fall in volume
Those factors – combined with what may be an inevitably high churn-rate from the soaring levels of digital subscriptions generated by many news brands including the Telegraph and even the New York Times – have raised questions about TMG’s longer-term growth prospects, despite the record profits. Even the magic 1mn subscriptions total was achieved by adding in those of last year’s pricey £13mn acquisition (at least 12x EBITDA) of Chelsea Magazines. Although the magazine company made losses of £500k in its first year under Telegraph ownership, the deal had some echoes of how the NYT itself got to 10mn subs courtesy of its $550mn acquisition of The Athletic. But that is where the similarity ends for a UK magazines deal which had reportedly been opposed by some Telegraph executives.
For those (in and around the would-be owners) who have been whispering that Telegraph CEO Nick Hugh will be replaced when/if the UAE-funded sale goes through, it’s a talking point as to whether the 2023 financials reflect a “flight to quality media”, are testimony to the CEO’s achievements, or are merely the peaktime profits for a business whose performance still depends so heavily on print.
Many Telegraph insiders assert that the ex-Yahoo executive – whose background (as someone who had never managed ‘content media’ let alone news brands) made him an unlikely appointment back in 2018 – has transformed the daily news brand and its profitability.
They say he has succeeded by uniting the company (including the historically introspective denizens of the newsroom) behind his “10-1-23” plan for the Telegraph to achieve 10m registrations and 1mn subscriptions by 2023. It is clear that almost every Telegraph employee has known about the 10-1-23 strategy – and now knows it has been achieved.
Hugh is also credited with support for the 400-strong editorial team by pushing through investment in new content and people. Although the Telegraph reduced its total headcount by 23% during 2019-22, there was almost no change in the total number of editorial/ production people, which accounted for 68% of total staffing in 2022 compared with 55% in 2019. Tangible evidence of the investment in editorial skills and content included, for example, creation of the Global Health Desk in 2019 which meant the Telegraph was, perhaps, best prepared of all when the pandemic struck the following year. There’s also been expansive investment in puzzles, personal finance and eCommerce.
But, again, how many legacy media brands have chosen not to reduce their content costs?
The CEO’s commitment to focusing on the core strategy (content for subscribers) was demonstrated by his cost-saving decision to out-source advertising sales to the Daily Mail Group, something that would have been unthinkable just a few years previously. Fortuitously, perhaps, the Telegraph resisted the (inevitably, expensive) temptation to increase video content in favour of print and digital text and, increasingly, podcasts. The upshot is that, in five years during which revenue growth has been limited by the inevitable switch from relatively high-priced print to lower-priced digital, total costs have reduced by 14%, boosted by ad sales outsourcing and the pre-emptive renegotiation of its printing deal with News Corp.
The counter-argument is that these (and even the unspecified millions of pounds of “syndication” payments from Google and Meta) are levers that have helped deliver the profit growth so far, but may not be able to do so again.
Depending on your viewpoint, these issues may (or may not) indicate that the £550mn that RedBird IMI has paid for the rights to acquire the subscriptions-led Telegraph Media Group is a good price. Based on the 2023 financials, it’s 9x EBITDA, 2x revenue and even “only” 7x digital revenue.
RedBird IMI chair Jeff Zucker (former CEO of CNN) – who was in London again last week to schmooze regulators – has made clear that the proposed new ownership would be “more American” than anything else; Abu Dhabi (owner of 75% of Redbird IMI) would be “just” the banker. Editorial freedom would be guaranteed by a legally binding governance structure protecting the editor-in-chief from intereference in decisionmaking and recruitment.
Like every other UK daily seeking digital sales across the Atlantic, Zucker believes there is a yawning gap in the US market for the Telegraph’s blend of right-wing politics, sport and business, spiced by British pageantry. He is said to have detailed plans for the 2024 presidential election campaign and can’t wait to get started.
The ultimate prize is to become the coast-to-coast conservative counter-weight to the liberal New York Times and The Guardian. The other agenda might be new digital product/ services to accelerate the growth of young audiences in the UK for a brand whose average readership has traditionally been older than its rivals.
Beyond that, there remains the obvious opportunity to grow ‘pick and mix’ audiences for verticals like Sport (especially the universally popular Premier League football-soccer), Business, and Politics. Bespoke editions seem so much more like the logical future of digital news brands than selling the whole “bundle” (espoused successfully by the New York Times, of course). Despite the NYT success, un-bundling could become the next, quiet revolution of daily news brands which already pitch specific content in line with the preferences of individual readers”.
But the UK printed newspaper remains at the heart of the Telegraph story.
The CEO told Flashes & Flames last year that the print also added credibility to the brand: “The narrative of print being a ‘legacy issue’ is fundamentally flawed for two key reasons – firstly, there is a significant proportion of the population who enjoy reading media in print and, secondly, having a physical product on display in stores throughout the country helps drive trust in the authority of the brand which is essential for selling digital subscriptions.”
But, for now, it’s all eyes on the UK government whose decision next week may either waive through the RedBird IMI bid or prompt a renewed auction for one of the world’s oldest – and the UK’s most profitable – daily news brands.
Whether or not Nick Hugh’s record profit (more than doubled in five years) is the Telegraph’s high water-mark, he remains confident about the future. He’s also said to be sanguine about the prospect of being replaced under a new ownership, having noticed Zucker’s nudges and winks about a possible new CEO. A big week is coming.
In January 2014, Nick Hugh was replaced as CEO by former Hearst UK CEO Anna Jones. Three months later, RedBird IMI responded to UK government opposition to its £600mn acquisition of Telegraph Media Group and The Spectator magazine by announcing it would be selling the businesses again.
