McCall: 'GMG is not fast enough at change'

Guardian Media Group chief executive Carolyn McCall is dubious when Press Gazette suggests her job might be better done by a journalist — rather than someone such as herself who has come up the ad-sales route.

"If you said to Alan Rusbridger, would you like to do Carolyn's job, he'd run a mile. I think the best partnerships are those where you have very, very clear differentiating skills and you work together to achieve the same end," she says.

"And so in my view you need a very strong commercial head. I'm sure it depends on the journalist, but in this job you need to have very strong commercial sense, and very strong commercial grounding. I don't think that at Guardian News and Media we've ever had a journalist as managing director."

McCall, 45, has been chief executive of GMG since August 2006 after spending six years as chief executive of Guardian Newspapers (now Guardian News and Media) and previously working as the company's advertisement director and then commercial director.

In her new role, she has gone from running a business with a £237 million turnover (2006 figures) to one with turnover of just over £700 million, which also encompasses Trader Media Group, GMG Regional Media and GMG Radio. But she is still answerable to the same overall owner, the Scott Trust, whose remit is: "To secure the financial and editorial independence of The Guardian in perpetuity: as a quality national newspaper without party affiliation…"

McCall — ever mindful of the new media angle — emphasises that it is the journalism, rather than the newspaper, which GMG must uphold.

She says: "The whole purpose of the group is to secure the long-term independence of The Guardian, both financially and editorially. The whole core of that is about the journalism — not about the paper, not about the format, it's about the journalism".

So while running The Guardian is about balancing the commercial and editorial aims, she explains that the role of the rest of the group is to maximise profits (just like any other plc). With that end in mind, GMG is in the midst of selling off up to half of its most valuable asset, the hugely profitable Trader Media Group, which owns Auto Trader and a host of associated titles and websites.

The good news, for Guardian journalists at least, is that she believes this sell-off could safeguard their journalism for another 50 years. But perhaps worryingly for journalists elsewhere, McCall says that the sale is an indication of the high risks now associated with classified advertising-based media businesses.

"If you look at our portfolio, Trader Media Group makes £113 million, but it's a classified business. If you look at the regionals, they are predominantly a classified print on paper business, Guardian News and Media has a huge number of job adverts and is largely a classified business. So you've got three very big divisions there which have the same risk profile.

They are subject to the UK economy and to classified advertising declines.

"The entire reason for [the sale] is we believe we will then own 50 per cent of the future up side of that business while we have divested and rebalanced the portfolio and the risk in that portfolio. Having so much classified print on paper business in your portfolio is high risk.

"It's not about today or next week, of course we will invest some of it in organic growth in The Guardian, it's actually about the next 30, 40, 50 years, and securing the long-term future."

So will from the cash from the sale (estimated by some as up to £750 million) not stay in media at all?

Could Guardian Media Group become Guardian Media and Property Group?

"We are a media group but there is nothing that says we have to reinvest any of our money into media assets. We haven't come to a conclusion on that, but clearly it is something that we are always thinking about."

Transition will be ‘bloody hard work'

The impending influx of all this cash does not mean Guardian and Observer journalists will have it easy for the next 50 years, though. Two weeks ago, Guardian editor Alan Rusbridger said editorial job cuts could not be ruled out as he revealed plans to create a more digitally-integrated 24/7 newsroom and warned that there may be no time for lengthy negotiations with the NUJ.

When asked what reassurance she can give journalists concerned by Rusbridger's comments, she says: "Our entire strategy is you absolutely invest in the journalism, because that is who you are. Everything else you do is about making money, making revenue and supporting that core — so we will not cut back on that.

"We will change structures dramatically and 24/7 means that. It's all about changing to equip us to be at the leading edge in digital… What we want is a dialogue with the NUJ but there is an urgency and a speed required that established, long-protracted negotiations — the old style way of negotiating — could be a massive bar to the way forward.

"The NUJ is full of very intelligent human beings, they know what is going in the world. We are not dealing with some faceless organisation that doesn't get it, we are dealing with a group of people who do get it… Having a very restrictive way of working — not having flexibility — is not going to be fit for purpose.

We need the flexibility to be able to work in different platforms, move people around — get people on The Observer to do things on the Guardian Unlimited website and so on."

McCall says that the pace of change — and by that she means the effect of new media — is "escalating not reducing" across the whole of GMG.

"This transition is bloody hard work, there's a lot of pain attached to it but there is a great opportunity.

We are not fast enough at change. We have to change things that are not even broken, just things that have to move forward and be different because we are entering a completely different age."

Regional revenue: decline then plateau This need for this change is, she says, most extreme in the regional newspapers division which, last year, like all the other major regional groups, suffered a dip in profits. McCall, unlike many of her counterparts, believes a long-term change is happening in the regional press, rather than just a downturn in the economical cycle.

"You look at every media group in regionals and profits are declining. The regional media group for GMG is no exception, it has been a fantastic performer for us, double-digit profit relentlessly over the past 10 years, but that has changed and so given that your revenue is changing, the shape of the business has to change."

She adds that in the regional press as a whole: "The pace of decline in your traditional base is such — especially in motors and jobs in the regionals — that they are going to have to step up the pace of change. It is harder for the regionals in terms of digital, because if Craigslist or Gum Tree [free classified advertising websites] are going to hit anyone, they are going to hit the regionals because they are hyper local sites.

"This is a deeply structural change in the regionals, about traditional revenues and audiences coming under pressure from a variety of media, not just the internet. There may be a minimal cyclical effect, but even when that cycle comes back, it will not come back into print."

So are the glory days of the 30 per cent plus profit margins enjoyed by some regional newspaper players in recent years now over?

"Margins are hugely under pressure in the regionals, unless you can really transform your business to get your costs in line with your new revenues. I think revenues will decline further before they then plateau."

McCall suggests the way forward for regional newspapers may lie with "more partnerships, more collaboration and more cooperation with other regional groups".

She adds: "If you are going to look at your cost structures and you don't want to deplete your quality, you have to think of other ways of collaborating on the back end.

"Supply, distribution, one day you might even think about going slightly further than that. Regional newspaper groups don't compete with each other head-on, so there is scope for a lot more collaboration and cooperation and formalised relationships on that, because I can't otherwise see how you would transform sufficiently over the next two to three years."

Dacre takes extreme position McCall says that is also tough in the national press.

But she refutes the suggestion that Guardian News and Media is struggling commercially because it made a £49.9m loss in 2006 (£19.3m after exceptionals).

"The trading loss this year is around £16 million — far, far better than allegedly commercial organisations.

The Times lost £40 million this year and that's from a very commercial organisation. The Telegraph's profits have declined by half, they are making £30 million but they were making £60 million when the Barclays bought them.

"You cannot escape the fact that national media is a very expensive business — and that's web investment as well as journalism. You can get that trading loss down, but you end up affecting the journalism, there's no question in my mind about that — look at Trinity Mirror.

"The golden egg is the journalism, whatever you do in every other medium is about your journalism.

You just have to say the best owners are the ones who look long term, have deep pockets and support their national media."

She adds: "There's a very important element there about responsibility to the public, i.e. to your readers, which is you've got to invest in journalism in order to give them the facts and a range of opinion, you need that in a democracy."

In January, Daily Mail editor Paul Dacre used the annual Cudlipp Lecture to argue that The Guardian actually harms democratic debate and presents a warped view of the world as part of a liberal media "subsidariat" insulated from the pressures of the free market. He said that it ignores the views of the mass of Britons and that some of its writers are hypocrites, because they lambast free market economics while being subsidised by Auto Trader.

Putting the alternative case, McCall says: "It's very hard to respond to Paul Dacre because he takes an extreme position. It is a free market, we have an owner who subsidises The Guardian for a very noble purpose.

"It's about active citizenship, it's about democracy, it's about reflecting what is really going on. Guardian journalists are truly independent, they can say what they want. You cannot say the same for Associated.

"This is GMG: we have a purpose in one division and that's the reason we are here. Everyone gets it in the group, but clearly Paul Dacre doesn't."

 

Company structure
The Scott Trust was created in 1936 to avoid death duties and
safeguard the independence and future of the then Manchester
Guardian. The 10-member trust is chaired by Liz Forgan (a former
journalist) and includes Carolyn McCall, Alan Rusbridger,
former Observer editor Will Hutton and Guardian economics
editor Larry Elliot.
It owns Guardian Media Group plc (year to April 2006 turnover
£700.3 million, operating profit £116.4 million, debt £394.4 million)
which comprises:
Guardian News and Media
The Guardian, The Observer, Guardian Unlimited
2006 turnover £237.4 m. Losses £49.9m (£19.3 m after
exceptionals such as the Berliner presses).
GMG Regional Media
2006 turnover: £126.8 m, operating profit £21.6 m
Titles include: Manchester Evening News and Channel M,
Reading Evening Post and 41 weekly newspapers
Trader Media Group
£303.3 m, operating profit £119.5 m
Comprises Auto Trader and associated titles such as Boats
and Yachts, Bike Trader
Websites include autotrader.co.uk and adtrader.co.uk
GMG Radio
£27.9 m, profit £2.7 m
Now the third biggest commercial radio group by total hours,
includes Saga and Smooth FM (soon to be merged), Real,
Century and Rock franchises.
GMG and the Scott Trust

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