What is “sustainable” at a loss-making national newspaper?

Like many of the old guard Fleet Street commentators, Stephen Glover frequently talks nonsense when confronted by financials. This is the same man who wrote a 328pp book about launching and running a national newspaper that failed to mention revenue or profit in any substantive way.

Like the rest of us, however, Glover abhors a vacuum. So now that life has calmed down at the post-crash Guardian Media Group, he’s trying to stir things up a bit.

Writing at the Independent, Glover latches on to a £96m write-off at EMAP and another at GMG’s Trader Media Group. He announces: ‘Guardian Media Group’s investments have plainly not been going entirely swimmingly.”

Well, no. But (sigh) there’s a recession on. Media bosses are writing down the value of their businesses in line with a stock market that typically behaves in a manic-depressive fashion. As Glover knows perfectly well, write-downs are not a reliable way of interpreting the performance of a business.

EMAP has restructured its debts and remains highly profitable. I wouldn’t bet against David Gilbertson succeeding with his ambition to flog costly bundles of data and journalism to B2B subscribers.

And Trader Media Group? Again, look at the numbers. According to Hitwise, Trader Media Group owns 40%+ of the UK market for digital classified car advertising. 62% of its revenue and 75% of its profits are digital. Last year, it generated revenues of £250m and EBITDA of £116m. This isn’t a business: it’s a cash machine. Trader Media’s very big debts are being paid down rapidly.

Having puffed up a few familiar-looking clouds of anxiety, and blown them in the direction of Kings Place, Glover moves on to some familiar ‘what if’scenarios:

Though GMG is very far from the edge, it may not have sufficient resources to prop up its heavily loss-making national newspaper operation ad infinitum.

and:

Maybe GMG will be able to bankroll its national papers for ever. Personally, I wouldn’t count on it, especially if more of its investments go wrong.

Count the words that add a conditional flavour to proceedings: ‘though”, ‘very”, ‘may”, ‘ad infinitum”, ‘maybe”, ‘for ever”, ‘personally”, ‘wouldn’t”, ‘especially if”. I make that an average of three provisos per sentence.

Early on in the piece, Glover notes how Carolyn McCall, the chief excutive who left in late June/early July, declared that GMG’s ‘financial position is secure”. Now, he suggests, senior executives at GMG and the Scott Trust are in ‘a sort of denial’about The Guardian’s continuing losses.

What’s changed? Here’s the thing:

The trouble is that there seems to be no one in the Scott Trust or Guardian Media Group or on the papers themselves able or prepared to stand up and say what is blindingly obvious to everyone else in Fleet Street – that these newspapers are continuing to live dangerously beyond their means.

Mmm. We’ll have to leave the question of whether or not The Guardian is living beyond its means — and doing so “dangerously” — to another day. Regular readers will know my views on that.

Interestingly, however, Glover’s column does highlight — probably unwittingly — something important. That’s the absence of a voice like McCall’s at GMG, trying to set the agenda in public.

This, of course, is usually the job of a chief executive. Andrew Miller, GMG’s former CFO, has been doing that job at GMG for three months. A cursory search of Google suggests that so far, he hasn’t said a word to the outside world about the future of The Guardian, The Observer or GMG.

There are a few good reasons why Mr Miller might want to get out a bit more, and talk about his ideas.

Last time I checked, the official whisper from inside The Guardian was that job cuts are no longer on the agenda, and the paper’s losses are returning to a ‘sustainable’level. Not all staffers buy that, of course. Some worry whether there’s more carnage around the corner.

The problem is that no-one at the paper knows how to measure the shortfall between the current situation and job security. The Guardian, The Observer and guardian.co.uk turned in an operating loss of £38m last year. No-one believes that is sustainable. But what is? £20m? £10m? Is breakeven the target? Should The Guardian and its stablemates be subjected to a kind of golden rule — like the one that used to govern public finances — that would place a limit upon losses across the business cycle?

And yes, fretting about the appropriate size of all-digital newsrooms seems to be an increasingly popular pastime. Ben Evans of Enders Analysis recently published a provocative note report on just this subject. He predicts “10-20 years of pain” inside downsizing newsrooms. Henry Blodget has been irritating the New York Times Co in similar fashion.

Over to you, Mr Miller. Unfortunately, you’re running a business that’s structured in an idiosyncratic way. Not everyone finds it easy to understand. Equally unfortunately for you, that business is an important component of national life.

Although you’re under no obligation to communicate with the outside world, doing so will help to fend off the pot-stirrers.

In addition, of course, Amelia Fawcett, the chair of GMG, has helpfully described you as an executive who knows ‘how to drive successful digital transformation’and ‘ensure a sustainable future for our journalism”.

No pressure, then. . .