Telegraph Media Group has weathered the economic downturn relatively well, continuing to turn a handsome profit while the rival publishers of serious national newspapers have been wading in red ink.
However, like its rivals TMG is seeking a financially viable digital publishing model. This led it earlier this year to take the gamble of charging readers for access to the Telegraph website – becoming the UK’s first general interest paper to use the metered model, which allows readers 20 stories a month free, but then requires them to pay a subscription.
When the company announced the initiative in March, its marketing director, Graham Horner, described it as “the next stage in our subscription strategy”. That sounded bullish in the face of two major concerns. Could the paywalled Telegraph website attract enough subscribers to ensure digital advertisers hang around? Could the company attract reasonable subscription revenue by offering readers packages starting at £1.99 a month, or £20 a year?
Since the paywall went up, Telegraph.co.uk has maintained its position as the UK’s third most popular national newspaper website. In June, audited figures showed it had 2.73 million unique browsers a day, up 16% on the same month in 2012, and 54 million monthly browsers.
What is unclear however, and the company isn’t saying, is how many of those browsers have opted to buy a subscription package. The overwhelming majority are apparently getting by on the 20-article limit. This implies that TMG is able to enjoy extra subscription revenue without, at present, losing out on advertising income.
According to the last accounts filed with Companies House, TMG managed to increase its operating profit in 2012, making £58.4m compared with £55.7m the year before despite a very slight fall in turnover. Though it is a private company the financial accounts are clear enough on the overall figures (if rather short on details).
This healthy balance sheet is overseen by TMG’s shrewd chief executive, Murdoch MacLennan, who is steeped in the business of newspapers. He was hired soon after Sir David and Sir Frederick Barclay acquired TMG in 2004 from Associated Newspapers, publisher of the Mail titles.
They also appointed Sir David’s son, Aidan, as chairman, but it was MacLennan’s experience that counted in the early years when the TMG ship required a substantial refit. He made a series of decisions that were anything but popular with staff. Editors of the Daily and Sunday Telegraph came and went. He instituted rounds of redundancies. Costs were consistently pruned. He oversaw a virtual merger between the two titles to create a seven-day operation.
But MacLennan tempered the cuts with astute digital investment exemplified by the path-breaking move in 2006 away from Canary Wharf to new headquarters in Victoria that boasted a “hub and spoke” newsroom layout. MacLennan and the Barclays also resisted the print format changes pioneered by rivals by maintaining the Telegraphs as broadsheets and thereby giving them a unique selling point.
Print sales, though declining steadily, have not fallen anywhere near as fast as those of the other serious titles. The Daily Telegraph, for example, sold an average of 558,817 copies in July, 3.86% fewer than in the same month the year before. By contrast, some rivals suffered double-digit falls.
The main battle for audiences nowadays is, of course, online. TMG’s print advertising revenues fell in 2012, but the company said the decline was “significantly mitigated” by a growth in digital and consumer revenues.
Media industry specialist Douglas McCabe of Enders Analysis says the upside of TMG is that it punches above its weight in print by attracting healthy advertising revenue. TMG’s problem is in rising to the digital challenge. “There are two problems,” he points out. “One is in building a subscriber base and the second is in creating a business from either advertising or e-commerce. They have struggled to do that so far.” But he argues that the metered subscription model is the right approach.
MacLennan courted further internal hostility in March by demanding yet more redundancies. Some 80 people, amounting to 14% of the total editorial staff, were required to go. This was mitigated by a commitment to hire 50 “new digitally focused jobs”.
Angry veteran journalists saw this as a cynical cost-cutting exercise. One staff member told me at the time: “Out go 80 well-paid, experienced, skilled staff. In come 50 cheap, inexperienced, unskilled replacements.”
He was only partially right, however. The younger enthusiastic imports are expected to have the digital skills necessary to carry the papers forward in an increasingly online era. As his track record at TMG suggests, MacLennan’s cost-cutting has been consistently allied to digital investment.
It is doubtful that his axe will remain sheathed for too long. There will surely be more blood on the newsroom floor at some stage as the digital revolution moves forward.
In the coming months the statistics that MacLennan and his senior executives will be monitoring most closely are the numbers of online subscriptions and the monthly browsers. TMG’s financial health depends on website visitors becoming subscribers.
Turnover 2012: £327.5m (£331m, 2011)
Operating profit: £58.4m (£55.7m, 2011)
Editorial staffing: 520 (550, March 2013)
Online browsers: June daily, 2,733,136 (+16.15% year on year); June monthly, 54,007,113 (+18.4%)
- The Guardian, Sunday 11 August