Journalistic Success, Economic Failure Can Free Web Content Save The Guardian?

The Guardian has been losing money for years. But whereas the New York Times has begun charging for online content, the British daily has staked its future on giving away its journalism for free. The media world is watching with bated breath.
The Guardian has a reputation for quality journalism. It was one of the newspapers that published the US diplomatic cables obtained by WikiLeaks.

The Guardian has a reputation for quality journalism. It was one of the newspapers that published the US diplomatic cables obtained by WikiLeaks.

Foto: Martin Gerten/ picture alliance / dpa

Alan Rusbridger could hardly be accused of being old-fashioned. The editor-in-chief of the Guardian loves the Internet. The website of the British daily is considered one of the industry's best. Yet Rusbridger, 57, has chosen to preserve his greatest journalistic triumph in good old aluminum: in the form of a matte gray exposed printing plate with light-blue lettering; the front page of the July 5, 2011 edition. The souvenir stands on the desk of his London office.

A large part of the page is given over to a photo of a young girl, 13-year-old Milly Dowler, who was abducted on her way home and later killed. On the July 5 in question, the Guardian revealed that a reporter at Rupert Murdoch's tabloid News of the World had tapped the cell phone of the murdered schoolgirl.

Although this was only one of many scoops by the Guardian in the wiretapping scandal surrounding the Murdoch paper, it was undoubtedly the most momentous. The story shook the Australian media tycoon's global empire, scandalized the British public, and prompted the British parliament to openly discuss curbs on the yellow press. Murdoch closed the News of the World and police opened investigations into 16 reporters and managers at the paper. And all because of Rusbridger's "guardians."

The paper has made something of a name for itself with such revelations. In fact it has become the symbol of independent journalism. But in purely economic terms, it's a complete fiasco.

Offsetting the Losses

The Guardian has been losing money every year since 2004. Last year alone, it and its sister newspaper, the Observer, lost more than €47 million. It's only thanks to the farsightedness and generosity of its former owners, the Scott family, that the paper hasn't gone bankrupt.

Since 1936, the paper has been funded by the Scott Trust. This structure has but a single aim: "To secure the editorial independence of The Guardian in perpetuity."

Many newspapers would like to be based on such a business model. The Scott Trust owns a number of lucrative companies, including the used-car magazine and portal Auto Trader. The profits generated on these are used to offset the heavy losses incurred by The Guardian.

"Our mission is to be profit seeking rather than profit finding," says Deputy Editor Ian Katz. Even CP Scott, the paper's owner in the early 20th century, believed it was more important to be influential than to turn a profit.

However, the Guardian's losses have become too big to absorb -- and in 2007 the Scott Trust was forced to sell some of its assets to refill its coffers.

Andrew Miller, a former consumer-goods industry manager and for the past year the managing director of the newspaper's parent company, the Guardian Media Group, recently warned that if the Guardian continued to make such heavy losses, the company would simply run out of money within five years.

An Attempt to Solidify Finances

Belt tightening at the paper has become a must. Current plans foresee it and the Observer slashing their budgets by £25 million (€28.8 million, $39 million) by 2016. Almost 300 employees of a total workforce of 1,800 have been let go since 2009. Earlier in September, the publishers furthermore announced that the price of the print edition would be increased by 20 percent to £1.20 an issue in an attempt to solidify finances.

"We are not a sort of charity," Rusbridger says. "We are allowed to spend a lot of money on investigative reporting although that does not pay off immediately. But our current financial situation is not sustainable."

Rusbridger has asked his readers for forgiveness over the price hike. He says the Guardian is not in business to make money. We are a "news company that is taking on some of the jungle's biggest beasts -- and winning," he wrote in his plea for support.

Even so, the publishers have now given up any hope of ever earning good money with printed paper. Although the daily circulation of the 190-year-old newspaper increased by 12,000 after the Milly Dowler story, the general trend continues to be downward.

Rusbridger has therefore bravely if desperately sought solace on the Web. Even so, he still doesn't think online readers should be charged for the privilege. The Guardian's website is one of the most popular around, yet its content is available free of charge -- in contrast to content on the New York Times website, for example.

The New York Times Philosophy

The New York Times also repeatedly dipped into the red in recent years and was forced to seek new shareholders and loans in the triple-digit millions. The "Times" also believed in an online future, and wondered how it could make money on the Internet. It, however, chose a completely different tack to that adopted by the Guardian: It asked its users to pay up.

From one day to the next, its readership figures collapsed. Yet surprisingly, some readers returned, and they now obediently pay to access the paper's online content.

The Guardian and the New York Times are two giants fighting on the same battlefield, yet with completely different strategies. On the one side there are the Americans, who dared to charge for their content, on the other the Brits, who prefer to rely on advertising revenues for fear of scaring their readers away.

Both are fighting a battle of principle on behalf of the entire press, which is awaiting the outcome with bated breath. So far, it's unclear which approach will prevail.

Thanks to the backing of the Scott Trust, the Guardian can afford to be more patient than the New York Times and most other newspapers. "To choke off digital growth now would be a very bold decision," says Rusbridger.

With his large, black, horn-rimmed spectacles and tousled, dark hair, the Guardian's editor-in-chief looks like a grown-up version of Harry Potter; like a man who likes to cause trouble. When Rusbridger and his departmental heads flop down in a sea of bright-yellow sofas for their daily 10 a.m. editorial conference, a hush falls over the room. Rusbridger then proffers a few choice words of praise about the previous day's edition, speaking so quietly you could think he was talking to himself. By contrast he takes little part in the discussion of the program for the current issue.

A Philosophical Difference

Rusbridger has held his post for the past 16 years. Just like his predecessors, his mandate from the Scott Trust is to carry on as heretofore." That may have been meant more from an ethical and moral point of view than from an economic one, but simply continuing regardless is becoming increasingly untenable.

The Guardian's circulation has been dwindling for a long time. In the last year alone, it has fallen by 10 percent despite the Murdoch scandal and the WikiLeaks revelations surrounding secret State Department dispatches that the Guardian published together with the New York Times and DER SPIEGEL.

The decline in circulation, a fate suffered similarly by other quality British newspapers, was caused to a not insignificant extent by Murdoch's tabloids, which also include the Sun. The British tabloid press is the world's toughest; it is notoriously sensationalist and absolutely unscrupulous.

In this sea of sharks, the Guardian has long been seen as a rather quaint and arrogant shrimp. It hasn't helped that the newspaper has a reputation for being short on news but all the more sure of itself, a kind of know-it-all paper for intellectuals, teachers and sandal-wearers. A paper that thinks more than it knows.

That image, of course, has been divorced from reality for several years now. Few other newspapers have been as persistent in hounding the British authorities as the Guardian under Rusbridger. It landed a prominent Conservative politician in prison and became embroiled in sensational legal battles with supermarket giant Tesco and oil company Trafigura over press freedom.

Dwindling Circulation

Even the fight against Murdoch brought it much sympathy. A pin-board covered in scraps of paper hangs on the second floor of the newspaper's modern headquarters near King's Cross Station in London. The bits of paper are all snippets of readers' mail: "Congratulations on a great job," one says. Another, "Where can I get a T-shirt which says: I am proud to be a Guardian reader?"

But with circulation of the print edition continuing to dwindle, Rusbridger has ordered a radical change of tack at the Guardian. Now every pound is to be invested into the online operations, while the print edition will become smaller.

A new, slimmed down Guardian is to be unveiled this fall, providing readers with more background analysis spread across fewer pages. The publishers have no illusions this will stop the drop in circulation, but at least it will cut costs.

By contrast, the online Guardian is becoming an ever-greater force. According to market researchers Comscore, the Guardian website ranked fifth worldwide this August among the most popular newspaper sites, attracting almost 32 million users a month. An American subsidiary has been charged with boosting user numbers in the US, where the Guardian already has a firm fan club on account of its liberal leanings.

But for all its online verve, the Guardian isn't making any money on the web either. Aside from a few allied services and a mobile subscription, the paper gives away its content wholesale, convinced this is the only way it will eventually be profitable. The hope is that the more people use the online edition, the greater the associated advertising revenues will one day become.

The 'Rusbridger Cross'

To date it has remained just that: A hope, though Rusbridger has a two-line graph he thinks proves his point. One line shows income from the print edition which is heading steadily downward. The other shows income from the web and points in the opposite direction. His reporters jokingly call the point where the two lines intersect the "Rusbridger cross", the moment when their boss' gamble would theoretically pay off even though the print Guardian continues to lose money.

The only question now is when and at what level the two lines will meet. "It is far too early to say that it won't work out," he Rusbridger says. "We have to wait and change the advertising industry's mind."

The New York Times has proved that a braver or riskier approach -- depending on your perspective -- can also bear fruit. In March, publisher Arthur Ochs Sulzberger, Jr. announced the cash-strapped newspaper would be introducing a pay wall.

Since then, it has been charging readers who access articles more than 20 times a month on between $15 and $35 depending on whether they read the newspaper on the web only or also on a smartphone or tablet like the iPad.

"The demand (for Times journalism) is enormous," then Editor-in-Chief Bill Keller assured his worried editorial staff. "And, you know, where there's a short supply and a huge demand, eventually a business model will emerge."

It was an existential step, like taking a leap in the dark without quite knowing where you're going to land. Jill Abramson, who took over from Keller in early September, champions the pay wall. After all, she helped introduce it.

Journalism Has a Price

Although it is by no means certain the strategy will pay off in the long term, the initial results are unexpectedly encouraging. Just three months after its introduction, 224,000 users were paying for access to the website. That's roughly the figure management had expected by the end of the first year. Nevertheless, the newspaper hasn't released more recent numbers, nor has it made any financial details public thus far.

The introduction of paid access may have cut the overall readership of the New York Times, but with a global audience of 47 million users a month, it's still the number one news site. A feared slump in online advertising revenues never materialized, partly because the publishers were able to raise their prices, and the slight decline in ad-related income in recent weeks seems to be due more to the weak economy than the introduction of the pay wall.

Defenders of the pay wall say good journalism has a price. But Rusbridger at the Guardian thinks that "it sounds more obvious than it is." He's interested in more than a business model: "This is a much bigger story about what journalism is," he says.

Not Enough to Live On

In Rusbridger's eyes, the idea of charging online readers money is like tying to apply outdated traditions to the new digital world. "The new, digital world of journalism is an open world that involves readers," he says.

He thinks people who demand money from him are simply pretending reporters are still the only experts. "Perhaps our best theater critic gets nine points out of 10. The aggregate wisdom of our readers may be six out of 10. So the margin for charging is not nought to nine, but this three point divide," he adds.

There is one promising sign that the Guardian's efforts will eventually pay off: Ever since it broke the News of the World scandal, people are more likely to turn to the Guardian website than that of its competitors to read about major events such as the recent riots in London and elsewhere.

"People see us as a reliable source of news," says Deputy Editor Katz. "We are taken seriously." That, though, is not enough to live on.

Translated from the German by Jan Liebelt

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