Two words come up time and again when City AM editor Allister Heath is asked to talk about the newspaper’s strategy over the past four years: ‘discipline’ and ‘prudence’.
While they might not be the two sexiest words in the English language, they are the qualities that helped the London-based title grow revenue and profit at a time when a lot of other regional papers have floundered.
In 2008, three years after the free morning business paper was launched, it was on the verge of expanding into other UK cities including Manchester and Edinburgh. By December 2008, with the UK economy heading into its worst financial crisis since the 1930s, prudence kicked in and the plans were shelved.
City AM chief executive Jens Torpe explained to Press Gazette at the time that “in the present climate you’d be an absolute fool to invest heavily, unless you have a sovereign wealth fund behind you... As soon as the market gets back to something like normal again we’re absolutely ready.”
The paper instead renewed its focus on the City and by 2010 had moved into the black for the first time in its history. It has remained profitable ever since.
Judging by Torpe’s comments, 2012 must be the year the markets returned to something approaching normality, for it was the year that City AM ramped up its investment programme and expansion plans.
It all looked a bit different when Heath took over from launch editor David Parsley in February 2008. Accounts show that in the 2007 financial year the paper racked up losses of £1.8m.
“I joined literally when the credit crisis was beginning to explode,” says Heath.
“A few months after I joined we had that incredible Sunday night when Lehman Brothers and AIG were going down at the same time, which for business journalists was the most important, exciting, scary news night ever.
“There’s been nothing quite like it since. It’s been, from a journalistic perspective and an editor’s perspective, a great time to edit a business newspaper.
“It’s been an especially good time to edit City AM because we’ve really transformed the newspaper and what it stands for, its values and its place in London.”
Part of that transformation has seen the paper broaden beyond news, with Heath launching a comments section called The Forum, increasing features and lifestyle content, beefing up its politics coverage, and hiring new columnists.
He has also given the paper more of a campaigning voice. This include one to boost financial literacy among schoolchildren in London and another pushing for redevelopment of the Broadgate estate in the City.
And at a time when everyone else was giving them a kicking, Heath has consistently come to the defence of City workers.
He still insists, though, that it “all starts off with news”.
“The idea that newspapers shouldn’t be comprehensive anymore and they shouldn’t have all the top stories, that they should do a lot more features, I don’t agree with that,” he says.
“Most of the stories in our newspaper, if not the overwhelming majority, will be new to readers in the morning.”
Going to print at 1.15am helps, and the paper considers itself as much in competition with the internet as it does rival business titles.
“For people reading the paper at 6.30am in the morning, I want it to be very fresh. I want it to be the briefing – I want them to be able to just read City AM and know all the stories that matter and to understand what the big debates of the day are.
“This idea that all the news is old, everyone knows everything because they’ve been online all day and therefore you should only do analysis, it doesn’t work for us.”
“When we ask our readers, what’s the thing you value about our paper, they say, ‘I can very quickly get a great overview of all the top stories as I go to work’. There’s also a key role for good, concise and original analysis, but first and foremost it’s about news.”
Heath now has an editorial team of 38 journalists including designers.
On any given morning outside London’s train and tube stations commuters are confronted with vendors jostling to hand out free magazines, which is why Heath attaches such importance to the paper’s design.
Tabloid without dumbing down
Spread across two walls of the lobby at City AM’s office near Cannon Street hang some of the paper’s best splashes over the past few years, and what strikes you is how ‘tabloidy’ they are.
“That’s something I brought in and believe in passionately,” explains Heath. “I think the presentational values of tabloid newspapers can be applied to very upmarket subjects even though we are absolutely not a tabloid newspaper.
“The aim, and it’s a very deliberate strategy, is to try and learn from the high-impact tradition of tabloid journalism and apply it to business news, but without dumbing it down.”
High-impact splashes count for nothing if no one actually sees them, which is why the company has overhauled its distribution model since its launch, when City AM was only available at stations in the City and Canary Wharf.
The problem was that readers were only picking up copies at the end of their journeys.
In May, the paper more than doubled the number of stations where City AM is available from 105 to 212, expanding into commuter towns across Essex, Surrey and Kent.
By July its average daily circulation was up 41 per cent year-on- year to 131,194.
Given the rapid growth witnessed in 2012, could those UK expansion plans to be brought back off the shelf?
“I don’t know,” says Heath. “Every so often we consider that idea. We have no plans to do it at the moment, to be quite clear on that.
“At the moment we have this London and commuter belt strategy... so we can still expand quite substantially the number of readers in that area.
“We’re just very happy having put on 30,000 copies. Adding over 100 stations, it’s quite a big exercise.”
This is where Heath comes back to prudence. The reason we’re unlikely to see a move into UK cities, in the near future at least, is because “we’re a prudently managed company and we want to be run in a very successful and disciplined way”, he says.
“It’s a privately owned company that’s owned and managed by entrepreneurs, and we decided not to grow it too quickly because we just wanted to do it prudently. I think it’s paid off spectacularly.
“We could have massively increased our circulation a few years ago by putting a lot more stations on, but it would have been a wrong time to do it.”
Drop in profits
For all the talk of prudent management and disciplined growth, it came as a surprise to some that the company’s most recent accounts filed in October showed a 95 per cent fall in pre-tax profits in the 2011 financial year to just over £20,000.
Heath is unconcerned, noting it still has an operating profit of £454,716. The profit drop was put down to rising newsprint prices and investment in editorial and digital development at the paper.
More important, says Heath, were figures showing that revenue was up 11 per cent to £8.6m and newspaper advertising, which accounts for 90 per cent of total income, was up 16 per cent.
And the company confidently predicts double-digit revenue growth in 2012 thanks to its expansion into the South East and the launch of a new monthly luxury lifestyle magazine called Bespoke.
Revenue from its events and digital operations now account for 10 per cent of income, up from 3 per cent in 2009, and the next phase of the paper’s strategy will see it build up those sides of the business.
Growing strongly in print
Heath admits that digital has “not been the central focus of what we’ve been doing”, adding: “We’ve got a website, it gets updated, we’ve got a newsletter which is very successful, but we’re going to do quite a lot more digitally in the months ahead.
“It’s no accident we’ve done it in this way because we are in this unusual position where we’re growing strongly in print.
“We’ve got a lot more room to grow in print – I expect our circulation to eventually rise even further, and our revenues to rise further.”
Heath also notes that City AM is not alone in seeing growth in its print business.
In October, for example, the Evening Standard announced it was making a profit for the first time since going free, and accounts filed by the Daily Mail and General Trust in November showed Metro was now making record profits of £20m.
“We’re profitable despite having spent a huge amount of money in circulation distribution and also having the biggest editorial budget we’ve ever had,” says Heath.
“We’ve increased every budget, and that’s the exciting thing. I’m very privileged to be in a job where we’re actually spending more on journalism every year. It’s quite rare.
“I think we are the one segment [free papers] that’s doing well. People talk about the death of print, that’s nonsense.
“What’s happening is that there’s obviously a very bad decline in circulation for paid-for print, but free print, when produced in a very quality way with a disciplined business plan, can be very, very successful.
“You’ve got Metro, the Standard, you’ve got us. For those who do it the right way it can really work.”
Heath says that City AM has also managed to grow its advertising yields over the past seven years while others have dropped. This is linked with changes in the paper’s readership since 2005.
“At the start, the kind of people who read it were the junior people in companies. That’s completely and utterly changed.
“It’s now a whole range of people, from younger professionals to CEOs who are much more experienced.... First, we had to convince them of the quality of the product,” he says, “That was very, very important.
“The second step was making it available at more and more stations where they live. Say you live in Richmond, you’re a senior executive, you pick it up in Richmond and you read it on the way.
“Thirdly, there’s been a strong decline in paid-for newspapers. That’s created a void in the market, which we’ve filled.”
Failure of journalism to adapt
For all the talk of quality journalism, however, Heath, the former editor of Andrew Neil’s monthly title The Business, admits there is “some truth” in claims that business journalism failed in the run-up to the financial crisis.
“I wouldn’t want to emphasise the truth in it, I think the world went through one of its regular periods of collective delusion where everyone was enjoying a bubble,” he says.
“During those periods, and they repeat themselves across history, most people turn a blind eye to those things.
“So there’s that element but I think there was a failure of journalism to adapt to the modern business and financial environment.
“There weren’t enough stories on finance, on the debt markets, on macro-economics and so on. There was too much emphasis on big corporate M&S and things like that, which was what was happening at the top of the bubble.
“I think that was an error that has been quite substantially rectified by people since. Of course there was a failure, no doubt about it, but I’d say it’s very hard to find any part of society that wasn’t failing.
“The lesson is this: journalists have always got to ask questions of everybody, including regulators and governments; they’ve got to always try and work out both sides of every story. There was a lot to learn and there’s still a lot to learn.”