Guardian Media Group is considering a sale of The Observer to Tortoise Media after reporting rising losses for the last financial year.
The company reported a fall in revenue for the year to 31 March 2024 after a four-year growth streak, although digital reader revenues were up by 8%.
The publisher said the 2.5% year-on-year drop to revenue of £257.8m reflected a “market slowdown in advertising and sustained structural pressures on print”.
Advertising saw the biggest drop, down 13% since 2023 and 16% compared to 2022. Print reader revenue was down 3% in the past year.
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Cash outflow from the business stood at £36.5m, up from £21m a year earlier. However, investment performance meant the Guardian’s endowment fund actually grew slightly to £1.275bn (up from £1.240bn a year earlier).
The Guardian is owned by the Scott Trust whose chair Ole Jacob Sunde said: “We must be honest about areas of the business that are not part of our future growth and adapt.”
Guardian explores sale of Observer to Tortoise
It has confirmed that Tortoise Media, run by former Times editor James Harding, is in talks to buy the Observer after approaching with “an offer that was significant enough to look at in more detail”. Tortoise plans to invest £25m over the next five years in the title.
Harding said: “We think The Observer is one of the greatest names in news. We believe passionately in its future – both in print and digital.”
Guardian Media Group has owned the Observer, which was founded in 1791, since 1993. It previously looked at closing The Observer in 2009 and turning it into a weekly magazine but the plan was scrapped after a campaign against the move led by Press Gazette.
The Observer has not published its ABC print circulation figure since July 2021 when it had weekly sales of 136,656.
GMG said The Guardian “will remain a seven-day-a-week digital operation regardless of the outcome of the negotiations”.
In a joint note to staff CEO Anna Bateson and editor Kath Viner said: “We think the offer has the potential to be very exciting for the Observer’s future – it is a sizeable investment in the title’s journalism with a strategy to build the brand. It could also be positive for the Guardian, allowing us to focus on our strategic priorities to be more global, more digital and more reader-funded.
“We are in formal and exclusive negotiations and that process will take time but we want to be as open as possible. We have spoken to the Observer team this morning. We will continue to keep everyone updated as far as we can.”
Guardian digital reader revenue growth
GMG grew total digital reader revenues by 8% to £88.2m, with 16% growth outside the UK (where more than 56% now comes from).
This is despite digital reader revenues coming in £3m or 4% below budget in the nine months to the end of December. This means 27% of revenues came in the final quarter.
Digital reader revenue covers subscriptions and voluntary contributions in any situation where the content is served online.
These revenues have more than doubled in the past four years and GMG is now aiming to exceed £100m in the current financial year.
The Guardian reported reaching a "record high" supporter base with "well over" one million recurring digital supporters. The Guardian has shifted from describing those who voluntarily hand over their cash from “members” to “supporters”.
"Other" revenues, which were down by 5% but up compared to 2022, encompass content licensing, job listings, events and philanthropic funding.
Across all revenue types, 70% are now digital and 35% are international.
Globally, Europe was the only market to have grown revenues year-on-year.
A dedicated Guardian Europe edition was launched in September last year, with the creation of 11 new editorial roles.
As a result digital reader revenues from Europe were said to have grown by 8%.
Guardian says investment led to cash outflow
GMG also reported adjusted net operating cash outflow of £36.5m - better than the £39m deficit expected after the first nine months of the financial year.
In 2022/23 GMG reported an adjusted net operating cash outflow of £21m while in 2021/22 it had a positive cash flow of £6.7m.
The outflow this year, GMG said, reflects "continued planned investment in Guardian US and a new Guardian Europe edition to drive international reach and impact, together with planned technology and product investment, including the launch of a new Guardian Feast cooking app".
The US investment has including the establishment of a new editorial investigations unit and new football and wellness sections.
The publisher said it has an "investment strategy to become more global, more digital, with more paying supporters and producing more world-class journalism".
Adjusted operating losses have almost doubled in a year from £18m to £33.9m.
'The long term strategy is working'
Chief executive Anna Bateson said: "An 8% growth in digital reader revenues is a significant achievement and proof that our strategy is working, against tough market conditions faced by the whole media industry.
"Our readers across the world continue to demonstrate their love and support for our journalism, which is at the heart of a business that is open to all, funded by many and beholden to no one."
GMG chair Charles Gurassa said: "The financial report this year reflects a difficult year for advertising as a result of one of the most challenging advertising markets in recent memory.
"A new strategy focused on the unique scale, influence and integrity The Guardian offers to brands, seeking to build more direct relationships, is helping Guardian advertising cut through in a very though market."
He added: "Overall the long-term strategy is working, building a global digital supporter base and readership against a backdrop of a rapidly changing external landscape."
Scott Trust 'not there to fill gaps in budgets'
Scott Trust chair Ole Jacob Sunde said in a letter to staff that a "core theme" of the accounts was "renewal": "While advertising revenues were affected by global headwinds, we continued to pursue a strategy of diversifying revenue streams and promoting internationally-focused, quality journalism around the globe.
"We made a series of planned investments to broaden the reach and scope of Guardian journalism in the US and Europe, which has led to an expected deficit.
"The strength of our ownership model means we had the confidence and the financial security to pursue this more ambitious strategy at a time when others were hunkered down."
However Sunde added: "The Scott Trust has provided a bridge through challenging economic periods. But it is not there to fill gaps in annual operating budgets.
"We still require The Guardian to be a sustainable business on its own terms – and we must be honest about areas of the business that are not part of our future growth and adapt.
"This means we can concentrate on global expansion, on increasing our investigations teams in the US, on leading reporting on the climate emergency, on developing partnerships like the recently announced deal with Sony pictures and on shining a light on under-reported issues."
The Guardian has just agreed to give its journalists a 3% pay rise and held a voluntary redundancy round thought to have resulted in the loss of about 30 members of staff.
The accounts show Guardian editor-in-chief Katharine Viner earned £584,000 in 2023/24 - up 4% from £562,000.
Total staff costs rose by 8% in a year to £165.7m with total staff numbers up 3% to 1,684 (of whom 907 were in editorial). Redundancy costs were £1.5m in 2023 versus £1.9 in 2024.
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