Mark Ritson: The Guardian may be profitable but its model damages journalism

The Guardian is a fine newspaper and should be proud to reverse its losses, but by giving its product away for free it is preventing the news industry profiting from quality journalism.

The Guardian tabloid formatThere are many wonderful things to celebrate about The Guardian. In a few moments, about 12 paragraphs from here, I am going to accuse it of drastically and repeatedly damaging the future of quality newspapers in this country. But before I do that I want to sing its praises.

For starters, it is a fabulous product. Its online edition is constantly updated by a team of talented, proper journalists and columnists that readers seek out on a regular basis. Rarely will I make it through the day without several trips to The Guardian on my iPhone or laptop. It is my go-to place for football reporting, political reporting about the imminent immolation of British parliament, and reporting on the state of the world in general. I simply do not think there is a better paper.

READ MORE: Mark Ritson: The story of digital media disruption has run its course

And, as we learned earlier this week, it is a paper that is finally making money again after decades of pain. Its financial performance was, until this year, enough to induce heart failure in even the most robust CFO. In the last decade The Guardian has posted annual losses of £26m, £22m, £37m, £28m, £23m, £34m, £57m, £38m, and £19m.

But those losses have come to an end with a profit of £800,000 for the current year. It’s not a huge amount when set next to the size of The Guardian and its accumulated losses over the last 20 years. And a more churlish critic might point out that without the £25m the paper received from its charitable ownership structure the Scott Trust, it would still be in the red. But with these caveats aside, The Guardian has clearly turned a massive corner in becoming profitable again.

Digital renaissance

And it gets even better when you see where those profits are being generated. Last year The Guardian derived 55% of its revenues from digital editions. As much as many might want to portray newspapers like The Guardian as exemplars of ‘traditional media’, the new reality of the news media business, at least for those that survived the deadly digital decade just passed, is that they now operate ostensibly like any other online business.

Print editions will remain of course. For a decreasing but stubborn minority they remain the preferred form of news coverage. And the print version remains the premium line extension of any newspaper business.

Just as the great fashion houses keep producing couture – despite seven figure losses – because of the beautiful halo it projects across all their other businesses, newspapers need a physical daily edition to ensure they are not confused with accursed digital-only entrants of the new century like Buzzfeed and the Huffington Post. While most of the revenues and almost all of the profits now come from digital editions, a printed newspaper remains an important symbolic link to proper journalism and authentic mastheads.

No matter how good the digital versions of The Times or Telegraph might be they cannot compete with a product that is literally being given away every day.

The focus on digital at The Guardian means something else too. The newspaper now derives only 8% of its revenue from print advertising. Where once a national newspaper might have expected up to two thirds of its revenue to come from this source, today the only tenable survival path leads away from the once abundant ancient rivers of cash that came from classified and big brand advertising.

Like other suddenly profitable global news media brands – like The New York Times, The Washington Post and The Australian – The Guardian has realised that digital subscriptions are the only way to make its business work. That has meant radical restructuring, cost cutting and an awful decade of transition but The Guardian appears to be moving in the right direction.

Last year some 655,000 people subscribed to either the digital or print edition of the paper. And an additional 300,000 made a one-time donation. As you know if you have visited The Guardian’s site, it has avoided the traditional paywall approach beloved by most other newspapers and instead still offers its content for free. But it encourages readers to appreciate that it is “doing something different”, asking them to either pay a monthly subscription or a one time donation.

And this more nuanced, honest approach appears to be working for The Guardian. But my point, and here comes the downside, is that it is taking a massive and unavoidable crap all over most other quality newspapers as a result.

Competing with a free product

Although almost a million people pay to read The Guardian these days, the paper is consumed by more than five times that number in this country. According the industry body Newsworks, The Guardian is read by 3.3 million people on mobile, 1.5 million on a PC or laptop and 740,000 in print form.

Some of that latter group is also subject to the readership multiple that newspapers have always enjoyed. Mum might be the one who buys the paper, but everyone else in the house has a look. But the giant disparity between paying readers and all of those who access the paper for free is mostly a function of The Guardian’s aversion to a paywall.

READ MORE: The Guardian on its journey to become a supporter-led organisation

And while a paywall might have worked for The Guardian, not having one has had a crucifying effect on all the other national and local newspapers in this country who did erect one, but who are struggling to make a profit. Why would anyone pay for access to a newspaper when they can download The Guardian’s app and read all its content for free, and – with the exception of the little yellow annoyance at the bottom asking for their money – essentially get an amazing product at no cost at all?

No matter how good the digital versions of The Times or Telegraph might be they cannot compete with a product that is literally being given away every day. Even Apple would struggle to make a profit if Samsung started gifting its smartphones to everyone with a grovelling request to perhaps drop off a few quid later on if, you know, they like their free phone.

Twenty years ago most national newspapers made a massively stupid mistake and gave their product away online for free. The single biggest agents of the destruction of newspaper profits were the newspapers themselves, who convinced a generation of readers that they could get, and indeed should expect, a quality newspaper for no charge every day. To this day people under 30 continually complain about ‘stupid paywalls’ with the vehemence of someone who simply does not realise that, without them, all newspapers would disappear and journalism with it.

The Guardian should feel very proud of its fantastic product and its newly earned status as a profitable enterprise. But the cost of its success comes in the massive damage it has done to the rest of the newspaper industry.

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. Richard Levy 3 May 2019

    And why should they care? Ritson himself wrote a few years ago that company x should attack their competitors with everything they have. So why now do The Guardian have a moral obligation to the wider industry?

  2. michael pettitt 3 May 2019

    Is it not worth a nod to the tabloid realm also? The SUN behind a paywall vs. the Daily Mail entirely free? It’s not only the Guardian that’s pursuing a ‘free’ method. Personally, I think that the fact they’ve driven subs/contributions without erecting a paywall demonstrates that customers will pay without being forced!

  3. Peter Burgess 3 May 2019

    I like this article. The problem of local news coverage is very real … but I would argue, it is not the lack of paywall at the Guardian that has caused this problem but other factors. One of these factors is that the marketing segment of business stopped using newspaper classified ads as soon as the Internet appeared on the scene. But it really is much more than that. Many of the things that are very important for a good life are not part of the financial economy, and in the modern context, not valued. Good parenting is one such product. It is not part of the financial economy, not paid for, and much diminished in the modern world, though incredibly important. Outsourcing parenting is a bad idea … but now the pretty much the norm. The result of poorer parenting is insidious … and the damage huge. Good journalism is immensely important as well … reliable news is vital. Go Guardian! But let us also think about how to rebuild local news, and everything else that is important for a vibrant, prospering local community.

  4. Simon Hayhurst 3 May 2019

    Interesting to compare this with Metro – the paper version that is given away at stations across much of the country. One wonders to what extent Metro’s paper giveaway, along with the Guardian (and Mail’s) paywall-free digital version are a pincer movement on the newspaper industry as a whole.

  5. Chris Scott-Gray 3 May 2019

    I enjoyed reading Mark’s piece – for the cost of my personal details. I am a Guardian reader of some 35 years and subscribe to the daily digital edition. A few thoughts:
    I don’t subscribe to the Times or the Telegraph because I disagree with their world view. Yes, there are times when I would like to read a piece in one or the other of these titles – often prompted by social media links – but don’t get through the pay wall. So I give up.
    That is their loss – not in some self-aggrandising way but because I remain convinced I disagree with the aforementioned world view. I know the Telegraph is well-written but I don’t get the opportunity to develop some kind of (grudging) respect.
    Surely it is all about the marketing? I pay my money because I believe in the brand (and in truth, would pay more). By exposing more people to the brand through not charging up-front the paper increases the likelihood of there being more brand loyal Guardian readers, who will eventually pay. It’s a long game made possible by the Scott Trust (admittedly) but they have no responsibility to the wider world of journalism.
    It is up to the Times and the Telegraph to get their houses in order. They will continue to appeal to their audience but it will narrow. That is their problem not the Guardian’s.

  6. Mathieu Manson 3 May 2019

    It’s ironic to essentially criticise the Guardian for giving away free content… in an article on a free marketing newspaper!

  7. Allen Roberts 4 May 2019

    Is the greater challenge not a strategic one… Newspapers have failed to build an advertising offer that matches those of facebookm et al, who do not edit or contribute commentary and content, just reflect it. In the absence of such an offer, advertisers put their money elsewhere.
    The cover price of a newspaper never did any more than cover some of the printing and logistics costs, the money was in the ads, and they never realised the potential power of their readership as a marketing tool that could target and deliver messages is until too late.

  8. Mark Garner 4 May 2019

    I thought newspapers made their money from selling advertising? The cover price of a paper was mainly for the newsagents and sellers.

  9. Stephen Leonard 4 May 2019

    Perhaps the paywall method needs reviewing. Good quality investigative and reliable journalism should be available without cost especially so right now. In effect us subscribers to the Guardian’s method are allowing others to see this content freely. That is important. Really important.

  10. David Macgregor 5 May 2019

    There’s a paradox in Prof Ritson’s thesis. Starting with context. Newspapers have been pole-axed by the web. There has been a theory that ‘information wants to be free’ that was embraced by both journalists and consumers alike. Sadly the ideals of The Cluetrain Manifesto’s authors have long fallen by the wayside – overwhelmed by The Clickbait Realities – like white walkers crawling over a dragon.

    So the environment has changed. Short term, ROI and data driven strategies that can be parlayed into advertising media kits – ‘proving’ the ‘value’ of a medium has degraded the inherent quality and appeal of the medium itself. By way of example – I live in New Zealand – the largest circulating publication in the country has just launched a ‘premium’ service to ostensibly produce a news product that will better serve a more ‘discerning’ audience. The problem is, based on years of dis-investment in quality journalism and the tabloidisation of a news organisation with a long and venerable history – the market has been taught to expect a poverty of quality. Their paywall will fail. It’s a trust thing – you have serve crap everyday – why would I want deluxe effluent?

    But back to The Guardian – because they took a long view – accepting loses (something to be said for not having a board that demands short term dividends), they are now reaping a benefit. They have not degraded their product or their staff by feeling the need to stand toe-to-toe with The Daily Mail (from whom the aforementioned New Zealand Herald pad their pages with more often than is palatable). Credit also goes to the Guardian’s loyal readers – without whom this conversation wouldn’t happening at all.

    Finally – it’s hard to buy the theory that The Guardian have shat on their rivals by refusing to descend to the feeble level of those titles who subscribed to the notion – if you can’t beat them, join them.

    Independent quality journalism and reporting is a public good – so I have no issue with the charitable status of the ‘paper’.

    Here’s to The Guardian, who nobly represent the idea that a principle isn’t a principle until it costs you money

  11. Andrew Tran 6 May 2019

    I like The Guardian, and share most of the views with the author of this article, until the conclusion.

    It’s not about The Guardian or the paywall model of the news industry. It’s about all – everything else – it’s all freemium thesedays. The next generations will expect free stuff at the cost of their hidden expenses. Facebook is free, Google is free – to use – but it comes at the cost of your digital profile, your preference and, well, marketers love the data that Google/Facebook or any other freemium model out there is providing.

    So don’t blame The Guardian, they changed the tide probably because they’re now joining with the rest of the world. Like David mentioned above, why would I pay to read, if I can read the same information (not neccessary the same quality) somewhere else – that’s the common sense now. Plus, if there’s a paywall, you’ll skip what’s inside, you wouldn’t understand the notion of ‘good, quality content’ so you don’t feel like missing out.

    Probably few years from now, you won’t read from TG anymore because Google AI would compose oh-so-good articles that fit your taste and, of couse, it’d be free.

    The message is “deal with it!’.

  12. daryl Fielding 6 May 2019

    As the former Commercial Director of The Independent, The Guardian was a formidable competitor. However their editorial costs are supported by The Scott Trust, so it does not compete on commercial terms. They used to smugly boast to us how profitable they were, a matter of no surprise to me if a charity pays for your biggest fixed cost.

    The issue with the newspaper industry is it engaged in a headlong rush to the bottom by competing for circulation with ludicrous promotions (remember all those free CDs?) instead of building value into the category. The food industry in Germany is another example of this value-deleting suicide run.

    Competition is good for the customer unless it is distorted and mismanaged to ultimately lead to the destruction of an industry.

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