Ailing Observer must watch out

In the four years since the Guardian Media Group bought The Observer from Tiny Rowland’s Lonrho Group, the Sunday paper’s circulation has fallen 15 per cent from 536,900 to 458,000.

Internally, there is much debate about its future. “Many are asking why we bought the damn thing in the first place,” says a high level GMG source.

In two and a half years it has had three relaunches and three editors. Four ad agencies are pitching for The Observer’s 2m account to try to provide an advertising solution to its intractable problems.

There is also a more fundamental review of the paper going on. The editor of The Guardian and editor-in-chief of The Observer Alan Rusbridger has been drafted in to review all operations of the paper from marketing and advertising to editorial.

He is faced with the prospect of throwing more good money after bad with yet another costly relaunch and a new editorial team, or taking drastic action to recoup losses.

The Observer has had a rocky history by any national newspaper’s standards. Will Hutton’s appointment as editor was supposed to be the solution to an extended period of malaise at the paper. Analysts do not know exactly how much the paper is losing, but one estimates it to be 10m a year. The Preview section, which cost a staggering 2m to start up in September 1995, was dropped last year.

At the heart of the issue is The Observer’s relationship with its sister paper. Guardian marketing director Stephen Palmer needs to maintain the two papers as separate brands, promoting The Guardian’s Saturday paper – the day that keeps the paper’s average weekly sales so buoyant – while at the same time trying to encourage its readers to buy The Observer on a Sunday.

Part of the problem has been price difference. For years the Saturday Guardian was priced at 50p, which had been much better value for money than The Observer, which was priced at 1. Now with the Saturday Guardian priced at 70p the gap has narrowed, but the value difference is still clear.

Internally, some are worried that devoting too much attention to the Sunday paper’s travails will divert attention from The Guardian. Resources are being eaten up by The Observer in disproportion to its strength.

The revelation that Rusbridger is conducting an internal review is a further indication of the use of resources. One option is to bring The Guardian and Observer together as a seven-day operation. But there are still big problems with the product.

GMG believes the biggest is the news. In spite of its brave claim to be the “Paper for the new era”, Guardian journalists view The Observer’s news as soft and a pale imitation of The Sunday Times.

Rusbridger, who came from a features background on The Guardian, has been given the task of trying to improve the news coverage of The Observer.

The Media Centre head of media planning Nigel Conway says the title needs to go back to its roots of heavy-duty investigative journalism. But this costs money.

One insider on The Guardian says: “The news values are not set by Rusbridger. That is one of the main strengths of The Guardian: that it has very strong desk heads with strong news experience. Rusbridger leaves it to the experts, he is merely the human face of the paper.”

Though The Guardian management views The Observer’s Life magazine as its strongest offer, partly because it is edited by Guardian prodigy Jocelyn Targett, others in the industry see it as one of the weaker products on the Sunday market. The paper’s biggest strength is seen to be its features and analysis.

The Observer is also suffering from the problems hitting other Sunday papers. Ten years ago daily newspapers began expanding their Saturday products, increasing features and lifestyle coverage and encroaching on Sunday newspaper territory.

Since then, the biggest impact on Sunday papers is Sunday store opening. More people are doing their shopping on a Sunday and have less time to read dense newspapers. Though The Sunday Times has increased its pagination, it is highly sectionalised and articles tend to be shorter and more mid-market. The Observer, on the other hand, has remained a five-section paper with long features and less punchy news.

If Rusbridger fails to come up with viable answers, The Observer may have to be sold.

Stories began to circulate several weeks ago about a possible merger with the ailing Independent on Sunday. And there have been publicly declared bids for the title. Last year, Harrods owner Mohammed Al Fayed bid 25m for it through his media company Liberty Publishing.

In principle the Scott Trust, which owns GMG, is not against selling troubled titles. It dropped Wired magazine and is understood to be priming the Manchester Evening News for sale. But it rejected Al Fayed’s offer and chairman Hugo Young said at the time: “The Observer is not for sale.” But there are signs that Trust may not be quite so adamant now.

What The Observer really needs is a personality. GMG has sought to impose it from the outside in the guise of Hutton. He has the right public persona for the left-of-centre paper, having written a best-selling book and fronted a TV series on the same subject. However, grafting a personality on to the paper is not the solution. It gave up trying to be like The Sunday Times a long time ago; but it has not decided what to do instead.

And only when the fundamental problems associated with the product are addressed can the agencies pitching for the account hope to provide viable advertising answers.