News UK chief executive Mike Darcey today revealed that The Times and Sunday Times were on the brink of turning a profit as he condemned The Guardian and Mail Online as irrelevant to discussions about finding a sustainable model for professional journalism.
He described Mail Online as a site based on copying and rewriting content from social media sites and other news outlets and said he doubted whether it would ever be profitable. And he said that despite its popularity online, The Guardian offered no lessons for other publishers because it was "systematically loss-making".
Speaking at a conference organised by Enders Analysis, he said that News UK is "looking for a strategy that secures a ‘sustainable model for professional journalism at scale’."
Explaining what he meant by that, he said: “When I say ‘professional journalism’ I am talking about the generators of news and informed comment, not simply those who redistribute the news generated by others.
“Because if all we have left is redistributors, then eventually there is nothing to distribute – someone has to dig out the story in the first place, establish its veracity and give it life.
“Scale means continuing to be relevant to the national debate, having a credible voice that is noticed and picked up among the cacophony of voices that now surround us.
“And ‘sustainable’ means something that can endure well into the future, for which I would suggest that profit is a basic pre-requisite to feel secure.
“And I would suggest some insulation from fluctuations in the ad market would also be a good idea.”
Talking about Mail Online, Darcey said it “is a very interesting experiment in operating a global, free, celebrity gossip website”.
“It is a model based on reach, accepting that its engagement with its 160 million unique users is somewhat shallow.
“It is even possible that it might be a success one day, although the jury is still out. It remains unprofitable today and it seems that every increase in revenue is accompanied by a further increase in cost, with staff numbers now at an astounding 450 or more.
“Does this ever resolve itself, do revenues ever outstrip costs? Personally I have my doubts.”
He said that online ad rates are continuing to fall and that Mail Online remains a “minnow” compared to the likes of Facebook and that in any case "competing with these guys looks like a loser, because they have the advantage of no real content costs – their content is created by their customers – and their ad sell is awash with viewer data, which is less true for Mail Online.”
Even if Mail Online does become profitable, Darcey said: “So what?
“Because it shouldn’t be confused with a business based on professional journalism in the sense I outlined when discussing purpose.
“It is largely a redistributor, rather than a generator, copying and re-writing content from social media sites, and from other traditional news outlets, including The Sun.
“And of course the focus is on a genre of content which is unlikely to be holding our politicians to account.
“So it’s not a model that 11 UK national newspapers can all follow while seeking to preserve their purpose.”
Talking about the UK’s second most popular national newspaper online, The Guardian, Darcey said that it is “certainly remaining true to its roots and remains an undertaking based on professional journalism”.
He said: “Like Mail Online, it boasts impressive statistics for unique users which means that I am often asked ‘what about the success of the Guardian?’ To which I answer, what success?
“The problem of course is that The Guardian is systematically loss making, to the tune of about £40m a year.
“There are vague hopes, it seems, that a global online presence might lead eventually to vast digital revenues, but this idea suffers from the same problem as Mail Online, with prices falling faster than volumes grow, and from cost-creep.
"All the while, the free offering undermines demand for the paid-for print product, now at risk of a deadly spiral of falling circulation and rising price, with the Guardian now at £1.60 on weekdays.
"It seems fairly clear where this ends. The cover price keeps rising, the print circulation keeps falling and eventually the print product is abandoned when average production and distribution costs become unsustainable.
"This is the true dividend of a free online model, and then all you have left is online ad revenue, which is not going to pay for many professional journalists in the long run. “
He said that The Guardian will "maintain scale for an extended period, because it has a lot of money in the bank, but it provides no lessons for others on strategy”.
The Times and Sunday Times put all their digital content behind a paywall at the end of May 2010 and The Sun did the same in August last year. All the sites also offer access to near-live Premier League football highlights.
In December last year, Darcey said, The Times and Sunday Times had 153,000 paying digital subscribers.
The Sun claims to have more than 100,000 digital subscribers.
“This progress shows that people, including the younger cohorts, are willing to pay for a bundle, with news at its core, in a digital environment.
“So why is it that the digital revolution is still seen as sounding the death-knell for the newspaper industry?
“Because rather than hurting, new technology is helping us to build deeper customer relationships, a more distinctive product, a more personal service for our customers and an enhanced opportunity for advertisers.”
Challenging the view that printed newspapers will soon disappear, Darcey said: “It’s true that printed newspapers will probably never again sell the volumes that they did in their heyday. But then television’s evening news will probably never again get the audience that it enjoyed in the past, and the same goes for Coronation Street, which used to hit 20 million viewers in the 1970s.
“The diversification of media means the old volume metrics provide an overly simplistic measure of today’s performance, for most of us.
"Notwithstanding lower print volumes, printed news continues to have a value which some seem to underestimate.
“Even with deep penetration of web, smartphone and tablet devices among our readership, and even with great products offered on each of those devices, many still prefer to read the paper edition, and all the evidence is that that will endure for some time … unless of course publishers actively choose to drive them away through print price increases set against free or cheap digital alternatives.”
He said that paper readers typically spend 32 minutes a day with The Sun, 44 minutes with The Times and 92 minutes with The Sunday Times. He said that “dwell times” for readers of the tablet editions of The Times and Sunday Times were 40 minutes and 55 minutes each.
Talking about the profitability of The Times and Sunday Times, he said that their combined losses hit a “high-water mark” in 2009 of £72m – and were getting worse at that point, he said.
He said that Times Newspapers Limited trading losses for “the most recent year” were £6m and that when depreciation is taken out of the equation they were in profit.
Press Gazette understands that this £6m figure is an operating loss and covers the year to June 2013
He said: “I am generally optimistic that an improved economic backdrop, combined with further delivery of our paid-for strategy, focused on engaged audiences, will in time lead to a sustainably profitable future for the professional journalism that The Times and Sunday Times embodies.
“So rather than newspapers being on their last legs, I believe we are entering a new age where digital and print will grow stronger together, each offering subscribers and advertisers an experience worth paying for.”
He concluded by saying that the internet has been “ a whirlwind for all news businesses, just as it has with many other sectors”.
Adding: "But through this storm we need to hold firm to what makes the news industry distinct and remember what we are here for. Our role is to provide quality, professional journalism which influences the national debate.
"A sustainable model for professional journalism at scale cannot be achieved by turning all of our national papers into celebrity gossip sites, however interesting that model might be in its own right.
"Nor do I believe it is achievable by giving away our hard work for free and hoping that online ad revenue will fund our future. The evidence is to the contrary.”
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