The financial table and some of the numbers and commented reported here were revised on 17 Sept to include the results for the year ended March 2024. **See also the latest news on the proposed sale of the lossmaking The Observer, the world’s oldest Sunday newspaper, at the end of this post.
The Guardian is in a spin. It made losses of £37mn in the year ended 31 March 2024 – the worst for eight years. The full financial results for Guardian Media Group (GMG) have themselves been delayed for a month by preparations for a reorganisation plan which is expected to involve cuts in staffing and operating costs. It is almost too ironic that the 2022-3 results (announced in July last year) had boasted of revenue growth, careful cost management and commitment to a three-year strategy to become “more global” with more jobs. Fast forward to 2024 and the company is braced for cuts.
It’s a surprisingly sudden setback for the gifted UK-based news brand whose £1bn endowment fund is intended to enable parent charity, The Scott Trust, to fulfill its role of “protecting the financial and editorial independence of The Guardian in perpetutity”.
The 203-year-old liberal newspaper was – until 1959 – known as the Manchester Guardian and based in the UK’s industrial north-west. The big breakthrough came after its longest-serving editor Charles (C.P.) Scott bought the paper which – over 57 years – he had built into a nationally-recognised daily. He bequeathed it to a charitable trust pledged to maintain its independence and liberal politics and to re-invest whatever profit it made. The pledge has survived the trust’s conversion into a limited company which now also publishes The Observer, the world’s oldest Sunday newspaper.
The way that this unique ownership structure emboldened the flagship paper was highlighted by the 20-year-editorship of Alan Rusbridger who took over in 1995, the year of its first, pioneering web site. Its journalists led the 2011 exposé of phone hacking and criminality by News Corp reporters in the UK, which helped to define the news brand for its growing international audience.
Four years earlier, it had launched Guardian America which sought to capitalise on an already substantial online readership in the US. The audience had spiked among Americans seeking an alternative viewpoint to the almost universal support of domestic media for the US-UK invasion of Iraq. The US growth continued in 2010, when The Guardian and others produced reports on the war in Afghanistan based on a huge cache of classified documents from WikiLeaks. In 2013, it won a Pullitzer Prize for coverage of the US National Security Agency documents leaked by Edward Snowden. The revelations made the The Guardian one of the world’s most visible news services. It was described by The Economist as “the most stylish paper in the hyper-competitive British quality pack, the wittiest and best-designed, the strongest for features, the one most likely to reflect modern life.”
The zeal with which Rusbridger attacked the US market has been compared with the way that his nemesis Rupert Murdoch launched the Fox Network in the US or Sky TV in Europe. The Brit might even have allowed himself to think he had some of Murdoch’s financial advantages. But, symbolically, The Guardian descended into perennial lossmaking immediately after a record 2011 EBITDA profit of almost £50mn. Its expansion seemed more like a mission than a business plan. It was all about a free web site, with no plan to sell subscriptions and only a vague idea of how to grow digital advertising sales in the intensely competitive US market.
Rusbridger’s later summary of his 20 years at the helm, said it all: “The big picture was it’s an amazing newspaper full of the cleverest, most delightful, moral, ethical, fun people. It was just a great community. We didn’t have a proprietor. The Guardian is owned by no one, so our only relationship was with each other. And being on that journey with them, of not only producing cracking stories and amazing investigations that ricocheted around the world, but also this business of reinventing journalism from a standing start was the best possible fun.”
But the fun came to an abrupt halt.
In 2015, Rusbridger retired after two decades punctuated by stand-out investigative journalism but also by a profligacy that saw the newspaper dramatically increase its staffing and costs throughout times when even its sleepiest competitors were doing the reverse.
GMG was soon disclosing that its “unsustainable” losses totalled some £300mn during 2014-16. It was a crisis.
Katherine Viner was elected (yes) as editor-in-chief by the paper’s staff, after establishing its operations in the US and Australia. It did not take her and then CEO David Pemsel long to start dismantling the Rusbridger legacy as part of what quickly became a plan to save The Guardian and the then £700mn endowment fund which, they admitted, could be wiped out in 6-7 years unless losses were stopped. They planned to reduce the £268mn cost base by 20%, to breakeven by 2019, and push hard for membership and subscriptions revenue. They also announced plans for reducing the global headcount that had increased by 32% since the previous redundancies in 2012.
It was easy to consider that – but for its £1bn endowment – GMG might have gone bust. The financial safety net had been built by Bob Phillis, a former CEO whose investment in digital winner AutoTrader eventually produced a profit of more than £600mn. The windfall dwarfed lesser proceeds from radio, local newspapers and B2B media. Onetime chair (and former government minister) Paul Myners later took the far-sighted decision to cash in the investment portfolio (soon worth more than £1bn) in order to provide a financial guarantee for GMG.
Alan Rusbridger had always believed that the investment gains would help fund The Guardian’s global digital development until it became profitable. But that was before newspapers got caught in the avalanche of falling print revenues and low-yielding online advertising. After almost 10 years of pretending that the promise of a bright new future was somehow guaranteed by soaring (free) web audiences, dailies everywhere started to freeze. The Guardian (whose pre-digital revenue had long been turbocharged by classified jobs advertising) was more reluctant than most to charge readers for online access. During the 2008 banking crisis, government cutbacks “cost” it some £100k of revenue every single day in jobs ads for social workers and teachers; it never came back.
But, by 2022, The Guardian made its – best for years – operating profit of £11.7mn and its first ‘net operating cashflow’ surplus for a decade, with its highest revenue for 14 years and costs reduced by 14% in the previous five years. At a time when many UK dailies were targeting the US market, a major impact on the GMG performance was international subscriptions and advertising which had come to account for 31% of total revenue, especially from all-digital editions in the US and Australia.
In the US (where last year The Guardian had a headcount of some 120), it had an average 42mn monthly uniques, almost 50% of the powering New York Times and ahead of the long-dominant Daily Mail Online. Of The Guardian’s 1mn digital subscriptions worldwide, more than 25% are now in North America. In Australia (170 headcount – doubled in the previous three years) it has some 7-8mn monthly uniques – about one-third of the adult population. That’s substantial progress in a market long dominated by News Corp and Fairfax. It illustrates the power of The Guardian as a distinctive liberal/progressive news brand – and also the ability of relatively small, all-digital news brands to compete with larger incumbents, albeit with support from ‘home’. These two ‘local’ operations accounted for 24% of all Guardian revenue (and 77% of its international revenue) in 2022 – and had doubled to £61mn in the previous four years.
But that positive cashflow in 2021-2 was reversed the following year when even the increased revenue was swallowed by a 16% increase in people costs. What seems like almost perpetual lossmaking had been justified by “targeted” deficits of up to the £25mn expected investment return from the Scott Trust endowment. Instead of acting as a fallback for GMG to withstand the occasional disappointing year, the endowment seems to have encouraged an unrealistic approach to expenditure. How else would you explain why costs during the past four years have risen by 50% more than the increase in revenue? And, if you doubt whether employees in a £250mn worldwide media business could be unworldly, you really can find current Guardian journalists who believe their employer shouldn’t take any advertising. Yes.
Given the fact that GMG is about to embark on its third wave of redundancies and cost cutting in the past 12 years, you might wonder whether the rationalisation is so against everything this charity-owned publisher believes that its executives just cannot wait for any signs of recovery that will enable them to reverse the cuts. How else would you explain the headcount leap in 2023, coinciding with increased revenue, only to run headlong into his year’s crisis? This time last year, GMG was gung-ho and – on the same day as the 2022-3 financials were published – announced the creation of 18 editorial jobs, including 11 for its new European edition.
What a difference a year makes.
This is the same high-quality news brand that, by many measures, seems to have become a substantial global winner. In the UK and across the world, it has made an undoubted success of its readership promotions and now generates some 75% of its revenue from non-advertising sources. It has more than 1mn paying digital supporters. The Guardian’s online readers everywhere now contribute more money than readers of its UK print newspapers. It is the sixth largest news website in the world with 365mn monthly visits and is in the UK top four. It can fairly claim to be “one of the top reader-supported news publishers in the world, while ensuring our journalism remains open to all” and is in head-to-head competition with the New York Times to become the leading quality news brand in the English speaking world.
One advantage of The Guardian’s all-digital editions in the US and Australia is that they don’t have to manage the decline of print; they can be the all-out insurgents with no traditional media to defend. While GMG does not publish operating costs separately for these international operations, both had (perhaps until 2023) become profitable, perhaps making an estimated £13mn EBITDA from the £61mn revenue in 2022. In the latest financials, all “territories” except the EU have lower revenue. Readership revenues. Readership (print and digital) now accounts for 60% of total revenue. The UK still accounts for 65% of revenue, despite the emphasis on GMG’s global ambitions.
But the most striking numbers in the following table are the headcount which, in 2023, increased by 10% – and a further 3% during 2023-4.
At a time when most other traditional media have continued to reduce headcount, GMG has been doing the opposite: staffing now accounts for an estimated 56% of total GMG costs, compared with 49% in 2020. It’s as if the previous wave of redundancies was some kind of aberration because – after a brief cutback – GMG went back to employing more people than ever. The one-time cashflow surplus in 2022 seemed to fill executives with euphoria – and that’s how they got to what we might view as a disastrous 2023-4:
| Guardian Media £mn Yr end March SnapShot | 2024 | 2023 | 2022 | 2021 | 2020 |
| Revenue | 258 | 264 | 256 | 226 | 224 |
| UK | 65% | 65% | 69% | 61% | 75% |
| US/Canada | 18% | 17% | 15% | 15% | 12% |
| Aus/NZ | 10% | 11% | 9% | 7% | 6% |
| EU | 6% | 6% | |||
| RoW | 1% | 1% | 7% | 7% | 7% |
| Digital reader | 88 | 82 | 76 | 69 | 43 |
| Print reader | 67 | 69 | 72 | 71 | 76 |
| Ads | 62 | 71 | 74 | 61 | 71 |
| Other | 41 | 43 | 35 | 25 | 34 |
| Costs | 295 | 285 | 249 | 242 | 252 |
| Net cashflow | (37) | (17) | 7 | (16) | (29) |
| Endowment | £1.3bn | £1.2bn | 1.3bn | 1.1bn | 0.9bn |
| Headcount | 1,684 | 1,636 | 1,489 | 1,497 | 1,495 |
But there’s more.
In the past few years, Google and Meta has negotiated a series of secret deals with publishers which began with News Corp in Australia. Google alone says it has spent $1bn on journalism deals in 22 countries. While no companies have disclosed their own revenue from these deals, the Australian government has said that its news outlets there have received more than A$130mn (£65mn) during the past 2-3 years. The issue has come alive again because Fairfax, the second largest Aussie newspaper publisher, has disclosed bleakly that its own three-year “licences” with Meta and Google have ended. It is believed that many other deals expire during 2024 and are unlikely to be renewed.
That may hit The Guardian hard.
We can’t be sure but it seems likely that GMG’s stand-out £10mn increase in “other revenue” in 2022 (in above table) may have accounted for all or some “content royalties” paid by Meta and Google. If GMG has been receiving as much as £10-15mn in these “royalties” during 2022-4, that’s an additional slice of cost saving that must be found as the company again seeks to bring its finances under control. It may be a major part of the challenge for 2025.
But the most obvious test for The Guardian is the headcount which in 2023-24 increased to 1,684 people. Of these, 907 were journalists (up from 865).
It’s always difficult to compare such statistics among peer companies but we’ll try.
Telegraph Media Group – with similar revenue to GMG – has a headcount of 1,130 (at least 30% below GMG) of which 757 are described as “editorial and production” (17% less than GMG). But Telegraph insiders say the actual number of journalists is just 522 – about 58% of GMG. That company’s total remuneration cost is £100mn (one-third less than GMG). The Daily Mail Group has virtually the same news brand headcount as GMG – but more than double the revenue. News Corp UK’s The Times of London and The Sunday Times have 50% more revenue but about half GMG’s number of journalists.
Despite what seems like over-staffing, editor-in-chief Viner said in May that The Guardian was targeting “a small number of voluntary redundancies” among its journalists because it was “in a much stronger position” than during the previous downturn and GMG was targeting 4-5% annual cost savings. But the delay in the 2023 results and the fact that a 5% (£14mn) cut in costs would scarcely improve the 2025 financial prospects sounds like GMG is shrugging off its latest crisis in a tactical refusal to recognise an underlying problem.
For all the fact of its charity ownership, GMG must find a way of operating much more as a business where a one-time spike in revenue does not immediately ‘justify’ an increase in operating costs. For the past decade and more, the management has chosen to interpret its traditional mission as the justification for becoming a global operation. But there’s more to it. While protecting The Guardian as a UK news brand might – even in post-digital times – be a viable objective for The Scott Trust, a worldwide business might just need to be, well, a business.
The current challenges of GMG as it expands internationally – while continuing to support the UK daily newspaper – resemble nothing so much as those facing the country’s publicly-owned broadcaster with whom it shares an enviable reputation for high-quality journalism. The widely-admired, taxpayer-funded BBC is periodically accused of applying its traditional mandate to quite different times with hugely increased cost, competition and risk. Like the way the Scott Trust has subtly added GMG’s global role to its original UK-only mission, the 100-year-old BBC has quietly morphed from a domestic broadcaster and online operator via exporting its programmes to being an owner of channels worldwide in competition with formidable international streamers. The new activity might seem to “fit” the traditional mandate but there is only so much that it can afford to do on a worldwide basis.
That’s how it is also for The Guardian. The publisher might need to recognise that:
- Newspapers are a diminishing market. Even if print survives longer than some might predict, it may become insignificant as a business for daily news brands in 10 years or less. Whether or not The Guardian newspaper is managed semi-separately from the global digital service, the print cost base needs to reflect its continuing decline. That is something more like than making The Guardian “digital first” as it did years before many other daily news brands because talking to many its journalists will convince you that the printed newspaper is vital to the ethos. It seems to easy to believe (whatever they say) that the reality of the soaring headcount is that the “core” has been relatively static while additional recruits are added to areas of growth.
- All-digital media should be different to print. The traditions and production of a daily newspaper dictate the broad menu that it must provide for readers. Even before you reflect on the fact that digital readers might tend to read “less” than their predecessors in print, the ability to choose should, presumably, result in a post-print ‘unbundling’ and narrowing down of the content
- It must – eventually – become almost wholly dependant on readership and philanthropic revenues. The 13% fall of advertising revenue to £61mn (just 20% of the total in 2005) is a reminder that ads are no longer a dependable source of revenue. Having lost so much of their advertising, it is illogical for news brands to assume it has bottomed out. Imagine how much sicker the GMG financials would now look if 2024 advertising had fallen 40% to, say, £40mn. It might happen.
- The only way to guarantee that The Guardian (in print and/or digital) can continue in perpetuity is for it to be self-financing, not permanently propped up by the endowment. It is unrealistic to manage GMG on some kind of “sustainable” lossmaking basis as they have been trying to do this past five years. You can see how difficult it has been to meet these “limited loss” targets, notwithstanding the difficulty anyway in ensuring that inevitably variable investment returns are sufficient to cover any shortfall. The endowment should, of course, serve as a backstop in tough times and also provide funds for major investments and acquisitions. But GMG needs to be a business, albeit one that has the benefit (lest we forget) of not having to pay dividends to shareholders. UPDATE: Although it was couched in terms that made it seem like unchanging policy, the Scott Trust chair Ole Jacob Sunde’s “letter” introducing the latest financials represents an unmistakeable shift in emphasis at a crucial time: “The Scott Trust has provided a bridge through challenging economic periods. But it is not there to fill gaps in annual operating budgets. We still require the Guardian to be a sustainable business on its own terms – and we must be honest about areas of the business that are not part of our future growth and adapt.”
As one insider said this week: “Everyone is better at running The Guardian than the people running The Guardian. The challenge of managing a newspaper-centric business is compounded by the GMG’s historic role and purpose.”
Updated on 17 Sept 2024:
The later-than-usual publication of the GMG year-end results and its upfront emphasis on the growth in readership revenue, rather than anything about the substantial increase in costs especially headcount, conveys the sense of “spin” that The Guardian’s own journalists would critique fearlessly if it were any other company. That’s the context for the impending sale of The Observer (the cause of much recent debate among GMG executives) and, with it, a expected reduction in operating losses. The weeks of planning for the release of the 2023-4 financials actually followed the advertising alarm (and the announced requirement for redundancies) raised by GMG itself in February. The interveming six months of soul-searching is scarcely disguised by the Scott Trust chair’s assertion that “renewal is a core theme in this year’s financial statements”. That is not what was anticipated when the year began.
In some ways, the activity of September 2024 is just the start of a “new” Guardian Media Group that (now) knows it needs to be “sustainable” (ie not lossmaking). It will still not be easy to create a global business model that will last “forever” but The Guardian has seriously started trying. The next test will be the results for the year ending March 2025 especially the headcount.
**LATE NEWS: 17 Sept 2024
Guardian Media Group is in exclusive talks to sell The Observer to Tortoise Media. The proposed price for the world’s oldest Sunday newspaper, which has been owned by GMG for more than 30 years, is unclear, although Tortoise is understood to have pledged a £25mn investment in the first five years of its ownership. Guardian Media Group CEO Anna Bateson said: “This is an exciting strategic opportunity for the Guardian Media Group. It provides a chance to build The Observer’s future position with a significant investment and allow The Guardian to focus on its growth strategy to be more global, more digital and more reader-funded.” If the deal is concluded The Guardian will continue to be involved on some level with The Observer, perhaps as a minority shareholder and/or in a sharing relationship on content and/or advertising. Any kind of proposed consideration is not thought to be as significant as the “saved” lossmaking by GMG.
The Observer – the world’s oldest Sunday newspaper (published since 1791) – has been owned by The Guardian since 1993. It is believed to be lossmaking. It is believed that some 70 Observer employees will transfer to Tortoise under the proposed deal. Its divestment, therefore, may help Guardian Media Group to achieve near-breakeven – again. A big improvement in prospects for 2025.
Tortoise Media plans to continue to publish The Observer and build its digital site, combining with its podcasts, newsletters and live events.
