Evgeny Lebedev is the UK news proprietor that journalists love to hate. He’s the Russia-born, UK-educated son of a former KBG agent (yes). In 2009, he bought control of London’s once-celebrated but seldom profitable London Evening Standard. A year later, he acquired The Independent (also lossmaking). In 2014, he launched the local TV channel London Live. A media empire was taking shape.
The captivating stories ever since have included the seemingly miraculous way the Evening Standard rebounded from years of losses to make a profit, simply by turning into a free newspaper, alongside a raft of giveaway newspapers and magazines which once enjoyed the pre-pandemic boom for London’s commuters.
UK journalists and politicians have spent a decade feasting on the apparent sources of Lebedev’s funding, the role of his father (sanctioned after Russia’s invasion of Ukraine), investment from Saudi Arabia, a close friendship with former UK Prime Minister Boris Johnson, and an honour for – Lord Lebedev.
Meanwhile, the Evening Standard reverted to losses even before the pandemic and has had a deficit of almost £50mn in the last four years. But London Live TV has become profitable, generating more than 50% margins on revenue of less than £10mn, with a headcount of just 25. They are a reminder that Lebedev Holdings – whether or not its funding is affected by the sanctions against its co-founder in Russia – is just another media company trying to build a worthwhile business model in challenging times.
But – while few media groups will actually be seeking to emulate the performance of Lebedev’s evening newspaper and local TV in London – something altogether more exciting is happening at The Independent.
The daily news brand, which had been lossmaking for most of its 37 years, had been created as a liberal, campaigning broadsheet in 1986 by three former Daily Telegraph journalists. It once had a readership to rival the Times of London – and a paid circulation of some 420,000. But profits were elusive.
By the time the Lebedevs acquired it, circulation was down to 185,000 and still falling precipitously. But, in 2016, in a move which seemed at least as bold as taking the Evening Standard free, The Independent abandoned print and went digital-only.
It worked.
In only the second year as a digital-only news publisher, it made operating profit of £3.1mn from advertising-led revenue. In the last five years, it has almost doubled revenue – and been consistently profitable:
| The Independent £mn | 2022 | 2021 | 2020 | 2019 | 2018 |
| Revenue (growth) | 46.3(12%) | 41.2(36%) | 30.3(12%) | 27.0(9%) | 24.8(12%) |
| UK | 63% | 57% | 50% | —- | —- |
| N. America | 19% | —- | —- | ||
| RoW | 18% | —- | —- | ||
| Costs | 44.4 | 35.7 | 24.7 | 24.7 | 21.7 |
| Op profit | 1.9 | 5.5 | 2.7 | 2.3 | 3.1 |
| Margin % | 4% | 13% | 9% | 9% | 13% |
| Headcount | 304 | 244 | 214 | 196 | 169 |
The revenue growth is notable, of course. But in a worldwide news industry of cutbacks, so is the consistent growth in headcount (almost doubled in five years). Some 55% of headcount is editorial. The US team is 45 people having increased by 20 during the last year. Significantly, The Independent’s £160k revenue/ head is close to that of The Guardian which has almost five-times the revenue.
But the real story of The Independent – still only 20% of the revenue of its UK peers The Telegraph and The Guardian – is its internationalisation, success in diversifying away from traditional advertising, and growth in video. It’s a great performance:
- Strong audience growth both in the UK and US where it has 20.8mn and 29.7mn online readers respectively. It has 5mn registered users, with a 24-month target of 10mn. (Subscription reader revenue, at just £2mn, is a work in progress.)
- Advertising now accounts for just 43% of revenue (2021: 60%), with most revenue coming from readers, licensing, eCommerce and digital services. eCommerce revenues increased by 44% due to strong growth including via its IndyBest affiliate sales platform.
- Licensing and syndication grew by 17% and is almost 30% of all revenue.
- Revenue is 63% from the UK, with rapid growth in North America (19%).
- Independent TV (online video) is now almost 10% of total revenue (+52% in 2022), now with more than 100mn monthly views, including of documentaries on the war in Ukraine.
- A 29% increase in audience for the Indy100 news service for millennials.
- A more than doubled audience for “Independent en Espanol”, the latest of its foreign language editions which also include Arabic, Turkish, Farsi, and Urdu.
The way in which The Independent held back its profitability in 2022, to permit investment in systems and people, highlights both the success and the challenges. It has been able to achieve consistent profitability with a low-cost structure and strategy that has required a few million pounds of foregone profit every now and then. The company’s former peers in London’s Fleet Street would not recognise the almost-secret economics and ingenuinty that have made it so successful.
There is, of course, so much about The Independent for media rivals to learn, not least just how you can build a (more or less) global news brand with a small team and low budgets. Imagine if BuzzFeed and Vice had realised that a decade ago.
But the preoccupation of London’s chattering classes with Evgeny Lebedev (owner of 41% of the company) and Saudi investor Sultan Muhammad Abuljadayel (30%) obscures another secret of The Independent’s success. Its management team comprises: chair John Paton (one of the most experienced international news executives who has led companies in Europe and North America); CEO Zach Leonard, longtime digital publisher and sometime management consultant; and managing director Christian Broughton, a 10-year former editor-in-chief of The Independent in print and digital. This troika of restless executives provides the bandwidth to pursue the company’s lofty ambitions.
It is all very upbeat.
But you can wonder: whether The Independent has too much clickbait; whether “Independent TV” must become much more a “channel” than a YouTube-like portfolio; whether the plucky news brand is spreading itself a bit thin geographically, even before it has become a real force in the US; and whether its main priority should be to build paid subscriptions and wean itself off social media traffic.
For all the supposed security of ‘revenue diversity’, you can worry about the seeming lack of focus. Although this media vehicle is firing on all cylinders, the compromises are visible – and prompt two inevitable questions about future investment:
- Will Evgeny Lebedev – whose family may have incurred an estimated £150mn losses in pursuit of their UK media ambitions – either sell, or step back from, The Independent?
- Would a new owner or investor help to accelerate The Independent’s audacious strategy as a younger and more “popular” multi-media version of The Guardian and The New York Times across the world?
To judge by the tight budgets that have brought the digital news brand this far, the costs may not be scary.
Imagine how a “mere” £25mn investment across 2-3 years could enhance The Independent’s content, marketing and TV production – especially in North America – and help to create a real global network with JVs.
That level of investment – coupled with operating profit of, say, £6mn in 2023 – could give Independent Digital News & Media Ltd an enterprise value of some £85mn+ (£60mn equity and £25mn debt). The valuation might be easily justified by profits of some £10mn in 2025-6.
There could be a lot of upside.
