Tortoise founder James Harding has spoken out in support of his bid to buy The Observer amid a staff backlash over the deal.
On Wednesday, around 250 Guardian and Observer journalists attended an emergency National Union of Journalists meeting to discuss news broken to them on Tuesday that a deal was on the table for Tortoise to buy The Observer from The Scott Trust.
They unanimously passed two motions. The first said they were “united in opposition to the sale of The Observer newspaper to Tortoise Media” and that it was a “betrayal of the Scott Trust’s commitment to the Observer as part of the Guardian News and Media Family”.
Whilst acknowledging the promise of £25m investment over five years and assurances that the 70 Observer staff affected will keep their jobs, the motion notes: “The proposed sale does not, and cannot, offer the same security to the Observer and its staff as they seek to maintain their reputation for journalistic excellence, independence, courage and integrity.”
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The motion also notes that there will be “no security” in a “relatively small business with scant resources to withstand headwinds”. (Guardian Media Group is protected by a £1.3bn endowment fund).
A motion of no confidence in The Scott Trust was also passed unanimously, saying the proposed sale has wider ramifications “for the future of liberal journalism and the trust’s ability to protect the Guardian, the Observer and liberal journalism in perpetuity”.
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James Harding responds to NUJ statement on Observer bid
James Harding responded to the NUJ statement, telling Press Gazette: “We are pleased that the NUJ recognises the £25m investment in The Observer and they recognise we are securing the jobs of the people at The Observer. We don’t think this is going to reduce the resources going into liberal journalism, evidence-based reporting and informed opinion. It is going to increase them.
“This puts new money into The Observer for the first time in a long time and, it seems to us, also makes possible more investment in The Guardian.”
Press Gazette understands that the £5m a year investment over five years is intended to be spent on editorial, marketing and a new digital platform and is separate from any general running costs for the title.
The question of whether there will be any further purchase price for the Observer (in addition to the promised investment) remains unanswered and is presumably the subject of confidential negotiation.
Tortoise Media is currently in a 90-day period of exclusive negotiations with Guardian Media Group. Although staff have been told the deal is not a “fait accompli”, The Scott Trust (which owns The Guardian) made an oblique reference to The Observer deal on Tuesday as it announced revenue down for the year to the end of March and cash outflow from the business of £36.5m.
Scott Trust chair Ole Jacob Sunde said: “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.”
It is widely assumed that The Observer loses money and that this a key motivator for the deal.
However, Press Gazette understands The Observer newspaper made a contribution of £3.4m to the business for the year to August 2024 if you subtract directly-attributable revenue of £16.4m from directly-attributable costs of £13m.
Revenue directly attributable to The Observer for the year included £13.9m from newspaper sales and £2.6m from print advertising.
Costs directly attributable to The Observer included staff and contributor costs of £7.3m and newspaper cost of sales totalling £5.6m.
But it should be noted that these figures do not include any shared Guardian resources which include: editorial, marketing, technology and office. These figures also don’t include any digital revenue driven by Observer journalism.
Staff reacted with fury to news
Guardian staff were briefed on Tuesday morning about the proposed Tortoise deal and one insider said they were left furious about the lack of detail they were given.
Some Observer staff were also upset at the suggestion that they were not part of The Guardian and never had been. The Scott’s Trust’s remit is to protect the journalism of The Guardian “in perpetuity”.
All Observer journalism is uploaded to the Guardian website and staff are employees of Guardian News and Media.
Key questions raised by staff include: who is funding the deal and how will the new Observer fill sections which are currently provided out of shared Guardian resources (such as business, sport and international)? Observer journalists also fear they will lose protections currently enjoyed under the NUJ house agreement with Guardian Media Group, which include a ban on compulsory redundancies. They fear that if the standalone Observer fails, they will be out of jobs.
Meanwhile, Guardian journalists have concerns that they will now be required to fill the gaps in weekend coverage caused by the loss of Observer journalism.
Some Observer journalists are annoyed that the news was broken directly after the closure of a voluntary redundancy scheme, during which around 30 Guardian and Observer journalists left on enhanced terms. Requests to re-open the redundancy scheme are understood to have been rebuffed.
How will a standalone Observer work?
Press Gazette understands that the model Harding plans to follow for The Observer is similar to that of The Atlantic, a monthly US current affairs magazine which was bought by billionaire Laurene Powell Jobs in 2017. That title went from losing $20m a year in 2020 to profitability. It currently has more than one million subscribers equally split between print and digital.
The hope is that The Observer can be transformed from a declining print business into a growing print/digital one funded by a paywalled website.
The Observer does not publish an ABC circulation figure, but Press Gazette understands it had average weekly sales of 109,000 as of March (the end of the financial year).
Funding for The Observer deal is being backed by existing Tortoise shareholders – who include David Thomson, Lansdowne Partners and Local Globe – and other as-yet unnamed investors. Thomson is the chairman of Thomson Reuters with an estimated personal wealth of more than $70bn.
Press Gazette understands that, as with Tortoise, no single investor would have overall control of The Observer if the deal goes through.
Guardian Media Group chief executive Anna Bateson said on Tuesday: “This is an exciting strategic opportunity for the Guardian Media Group. It provides a chance to build the Observer’s future position with a significant investment and allow the Guardian to focus on its growth strategy to be more global, more digital and more reader-funded.”
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