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August 3, 2009

GMG mulls closure of the Observer

By Oliver Luft

Guardian Media Group is considering closing The Observer, the world’s oldest Sunday newspaper, as part of a drive to cut costs, according to reports over the weekend.

A heavy fall in the publishing group’s finances prompted members of the Scott Trust, the foundation which owns GMG, to discuss plans to turn the 218-year-old title into a mid-week news magazine.

Members were shown trial copies of the proposed revamp at a meeting on July 6, but the plans were met with some opposition, according to the Sunday Times.

Executives agreed to put the scheme on hold while an alternative was considered. According to the Sunday Times, the alternative plan would see the title remain as a Sunday newspaper but in a heavily slimmed down version. A decision is expected at next month’s trust meeting.

A “senior Observer source” told the Sunday Times: “At the moment, I would say it is 50:50 whether we are headed for the magazine, or for job losses and cost-cutting but keeping the paper.”

GMG declined to comment this morning on the Sunday Times’ story.

A further source, “close to the management of The Observer”, told the Financial Times: “They [GNM] came up with a similar plan to close us down five years ago, and it was fought off. This time it seems to be couched in terms of saving The Guardian, so you have to think it is much more serious.”

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Guardian and Observer staff were told earlier this year by management that it had developed a strategy to establish where the company would be in three years time, at what could be the heart of the advertising downturn, with a range of cost-saving ideas being considered.

A source at GMG told Press Gazette today: “This [Sunday Times story] should all be seen in the context of the three-year strategy that has been put in place, options are being looked at across the business…the work is ongoing.”

Last week GMG reported annual losses of £89.8m with its national newspapers division Guardian News and Media, publisher of the Observer and the Guardian, reporting an increase in operating losses to £36.8m (compared with £26.4m in 2008) on reduced turnover of £253.6m (£261.9m).

Carolyn McCall, chief executive of GMG, said on Friday that despite a £20 million cost savings programme at GNM heavy losses would continue this year.

She said: “Can we afford it this year? Yes, but can we afford it for the next three years? No.”

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