Would-be buyers of the UK’s Telegraph Media Group (TMG) are preparing for the result of the July 4 general election and with it, presumably, some clarity about who the government (new or old) will permit to acquire the country’s most profitable daily news brand. The handful of suitors may need to be a bit more patient, given the expectation of a Labour Government whose leaders might not be in a hurry to resolve the future of TMG, as a constant political opponent.
There is, of course, the little question of the outgoing Conservative government’s 5% restriction on foreign investment in newspapers and the impact that this might have on the price that the Abu Dhabi-backed RedBird IMI will get for the business they are being forced to divest. We may assume that shutting out foreign investors (especially if it obstructs a prime prospective buyer like the privately-owned Daily Mail) reduces RedBird’s chance of recouping the estimated £600mn it has paid for TMG. (Ironically, the RedBird price is almost exactly what the debt-laden Barclay family paid for the company 20 years ago this month.)
Whatever the election outcome, the focus may soon switch to a much smaller publication caught up in the legal battle that began when the Barclay family creditors seized its publishing assets in June 2023.
Enter The Spectator.
It’s the world’s oldest magazine which had been acquired by the Barclay family, along with the Telegraph. After acquisition, the secretive new owners quickly established the 196-year-old political and cultural weekly as a separate company, chaired by Andrew Neil the all-singing UK media executive, political journalist and commentator.
That separation silenced speculation that Neil (former chair of Sky TV, editor of News Corp’s Sunday Times and of The Economist) would be managing TMG as well as The Spectator. In the event, it led Fraser Nelson – the magazine’s now 15-year editor-in-chief – to pay a rare 2021 compliment to the owners whose “method was to apply the three most valuable commodities any publication could ask for: patience, investment and editorial independence. We will leave readers to judge whether the magazine has improved under their ownership. But our sales have almost doubled, in a market that has more than halved, and we have had the resources to embrace the digital age with relish.”
Nelson said the owning family’s opinions on the politics of the day were a mystery, even to him: “No hints were dropped, no editorial favours asked. In the history of proprietorship, this is unusual, even unique. The only remit passed down was that The Spectator, the world’s oldest magazine, was at its best when serving its readers, and no one else.”
His words of praise were part of an obituary tribute to one of the Barclay brothers who had paid so handsomely for TMG in 2004. But, two years later, RedBird IMI’s plan to acquire control of the company by paying off debt secured on it, provoked Nelson to protest that the United Arab Emirates would become “the first government in the world to buy a national newspaper in another country, so it’s a test case. …Until now, sovereign wealth funds of foreign governments have been allowed to buy airports, shopping centres and even football clubs. But to buy newspapers, even through a vehicle like RedBird IMI, raises certain sensitivities. At least, it does if you think that a free press is important.”
The editor was making a fair point that the issue wasn’t foreign ownership (familiar enough to UK newspapers and other media) but ownership by a foreign government. But, although the UK government responded to the protest, the distinction between the two was lost (or not) on the drafters of legislation effectively shutting out foreign investment in a UK daily newspaper. That (to the Daily Mail and others) was the unintended consequence of a campaign which stopped Redbird IMI in its tracks and will, eventually, lead to divestment of both the Telegraph and The Spectator.
That’s where it gets interesting.
Just as would-be investors are getting bearish about TMG and a potential valuation that has been touted as anything from £400mn to £700mn, many believe that The Spectator itself might be sold for as much as £100mn. That possibility reflects the simple reality of the “trophy premium” that may be paid by someone who values the publication for much more than its current earnings. That’s why TMG is likely to be valued at more than the 8x average EBITDA of recent years (ie £400mn). The premium for that “trophy asset” might be £100-200mn – or 25-50%.
But The Spectator premium may be much higher and you can see why.
The magazine has doubled its profit, print-digital circulation and online audience in the last six years and has hugely enhanced its reputation as a multi-platform (and increasingly international) political and arts brand. So, even though its revenue is not much more than £20mn (less than 10% of the Telegraph), it appears to carry none of the risk inherent in a daily news brand still dependant on print and may (given the low-cost expansion in the US and Australia) even have better growth prospects. That’s why buyers might be prepared to pay £100mn. Given a 15x multiplier of The Spectator’s £3k EBITDA (ie a value of £45mn), a £100mn price tag would mean a “trophy premium” of more than 100%.
Suppose, then, that the Telegraph is sold for £500mn and The Spectator for £100mn. That would be about what RedBird IMI have paid and, presumably, the least they will want to accept. But that would also mean The Spectator was being valued at about 20% (and who knows, perhaps more?) of TMG’s value. These calcs imply, of course, that the two publications are likely to be bought by different people for different reasons, which seems increasingly likely.
But the fact that serious would-be buyers can be heard discussing The Spectator’s value in these terms says something about its almost secret success during a period of inexorable decline for magazines everywhere:
| The Spectator Group £mn SnapShot | 2023* | 2022 | 2021 | 2020 | 2019 | 2018 |
| Revenue | 22.0 | 20.8 | 20.3 | 16.3 | 14.2 | 13.2 |
| EBITDA | 3.0 | 2.9 | 3.2 | 1.9 | 0.7 | 1.5 |
| Margin | 14% | 14% | 16% | 12% | 5% | 11% |
| Headcount | 86 | 74 | 65 | 65 | 61 | |
| Monthly uniques | 3.3mn | 2.9mn | 2.5mn | 2.2mn | 1.7mn | |
| Ave print/ digital copies | 130k | 130k | 102k | 88k | 62k |
The steadily increasing financials, readership and online audience are only part of the story for the world’s oldest magazine which claims 2mn monthly downloads for its 10 podcasts, 430,000 newsletter signups and 350k signups for its programmes on YouTube.
But it gets better.
The Spectator’s twice-daily political newsletters (Lunchtime Espresso and Evening Blend) are each read by an estimated 60-80k people in the UK and around the world. Its economics brand has some 30k readers while the uniquely insightful Ukraine in Focus (written by a Kyiv journalist now working in London) is regularly read by 9% of The Spectator’s subscribers. That’s in addition to the magazine’s growing editions in the US and Australia.
All this comes from a total worldwide team of 86 (about 60% in the UK). That’s really the secret sauce of a magazine which has only 4-5 staff writers in the UK but a legion of established columnists some of whom may write for The Spectator almost for the honour of it. Yes. In many ways, that has been part of the history of a magazine whose pages have been decorated by the writings of George Bernard Shaw, W.H.Auden, Kingsley Amis and C.S.Lewis.
That tradition has produced a business model based on the staff team being largely commissioners and editors. It works so well.
To say that The Spectator punches above its weight is not the half of it for a brand which – across the world – claims a credible print-audio-digital audience of more than 5mn. As if to reinforce the point about “trophy value”, its regular readership is said to include 44% of all UK members of parliament. Although its floating political viewpoint might be described as “soft right” and the weighty arts and culture coverage competes with politics for the attention of readers, previous editors have included leading UK politicians, not least the former prime minister Boris Johnson who memorably helmed The Spectator during 1999-2006.
The Spectator’s mushrooming multi-media output helps to define the future because this explosion of new products and services has been delivered by a small and largely self-taught team. YouTube TV programmes, podcasts and newsletters are all presented and produced by people whose main job is the magazine.
In a new investment scenario, you would expect at least some of the existing brands to be developed in their own right, not merely in order to boost magazine subscriptions. Despite the US and Australia editions (which include local content alongside UK material), the almost accidental internationalisation of The Spectator is underlined by how 25% of the magazine subs and one-third of the UK web audience comes from outside the UK.
That’s why the next ownership of The Spectator could be especially interesting.
For all the fact that the most successful news brands like the New York Times channel almost everything into a subscriptions “bundle”, the eventual future seems certain to be focused on giving readers the choice of which sections or brands to read – and pay for. However many cooking, sports and games digital products they launch or buy, the current “cord cutting” experience of cable TV bundling is that digital readers-users-viewers eventually “demand” their choice and only their choice. That may, indeed, be part of what the Axel Springer-owned Politico has proved in the US and, increasingly, across Europe. Arguably, The Spectator (which already competes indirectly with Politico) could compete more strongly – at a fraction of the cost.
That’s a prompt for The Spectator (and others) to develop self-standing, ‘pick-and-mix’ print-digital-audio verticals – as well as offering a well-priced bundle to those do want it all.
While the team at the world’s oldest magazine may worry about the identity of their next owner, a “trophy premium” might signal the arrival of an individual or company which can “afford” to reinvest the current profits. On the recent track record, that £3mn EBITDA per year for, say, three years could help to develop subscription revenues for de-merged products and services and accelerate the growth on both sides of the Atlantic. For the thrifty Spectator, £9mn could go a long way in transforming its profile and longterm profitability.
It’s an exciting prospect for what may already be the UK’s most valuable magazine. Coming soon.
10 Sept, 2024: Hedge fund owner Paul Marshall has acquired The Spectator for £100mn, promising to keep the conservative magazine as an independent part of his growing British media empire which includes GB TV News. Longtime chair Andrew Neil has resigned but Fraser Nelson remains as editor-in-chief.
