Guardian newspaper is losing £70m a year

[TonyGosling]

January 15, 2016 7:13 pm
Guardian braced for job cuts after burning through £70m in cash
http://www.ft.com/cms/s/0/a5ded58e-bbab-11e5-b151-8e15c9a029fb.html
The Guardian newspaper is braced for significant job losses after it burnt through more than £70m in cash last year, according to people familiar with its performance.
The left-leaning publisher, which runs one of the world’s most popular news websites, is preparing to embrace austerity as it cuts costs across the business.
It follows a year of torrid trading — marked by a sharp fall in print advertising sales, a rise in online adblocking, and a difficulty in making money from mobile devices.
Operating losses before exceptional items are expected to reach nearly £50m in the year ending March, up from £45m last year.
Rasmus Nielsen, director of research at Oxford’s Reuters Institute, said the Guardian was “taking a big bet” by investing in building an online audience.
“It’s been thinking more like a Silicon Valley start-up than a player in a sunset industry facing decline,” he said. “It needs to cut costs and increase revenues.”
The newspaper’s new editor Katharine Viner and chief executive David Pemsel will tell staff later this month that they will cut about £50m in costs over the next three years, according to people with knowledge of their plans.
Reports have said that they will abandon a plan to build an events hub near the newspaper’s King’s Cross headquarters. The Guardian declined to comment.
Other British newspaper groups — including the publishers of the Daily Mail and the Daily Mirror — have already reported a slowdown in advertising revenue last year. MailOnline, the world’s most visited English language newspaper website, missed its revenue target by £7m; it remains lossmaking despite 13m daily unique browsers.
The Guardian has been lossmaking for more than a decade, but is nonetheless among the most financially secure publishers on Fleet Street. Its parent company, Guardian Media Group, has an investment fund of more than £800m, mainly compiled through the sale of its car classifieds business Auto Trader. That fund would need to make an annual return of 9 per cent in order to sustain the Guardian’s current cash outflow indefinitely.
Chief executive Mr Pemsel — who took over last July — has told colleagues that losses must fall to a more sustainable level. A cash outflow of £30m, for example, would require the investment fund to make a rate of return of less than 4 per cent.
Online upstarts such as BuzzFeed have aggressively adopted sponsored content — also known as native advertising. That approach has been harder for the Guardian, which prides itself for its editorial independence and its critical view of corporations,
“What people expect from the Guardian is different from what people expect from BuzzFeed,” said Mr Nielsen of the Reuters Institute. “The risks if you get it wrong are much bigger.”
As they prepare to cut costs, the Guardian’s management do have one factor in their favour. Seumas Milne, until recently a fiery columnist and leader of its in-house trade union, has taken a one-year leave of absence to work as chief of communications for Labour party leader Jeremy Corbyn.