Guardian Media Group chief executive Carolyn McCall has hit out at claims the sale of its regional newspaper business meant it was “betting the farm” on its digital strategy.
McCall said the idea was “ludicrous” and claimed the sale earlier this week of the Manchester Evening News and 31 other papers to Trinity Mirror came about because they had stopped acting at the ‘safety net’for the Guardian.
GMG‘s strategy was questioned in the wake of it breaking the link with the MEN in return for £7.4m cash and release from a £37m contract to print its papers at Trinity Mirror presses.
McCall said: “You can look at the cash value and say it wasn’t very much but the £70m revenue in that business [GMG Regionals] was in decline…regional newspapers have been at the very sharp end of disruption from digital and for us it was a very small scale business.
“It had just four per cent of the regional news market and despite really historic connections what it was set up to do for the Guardian was to be a safety net and it stopped being a safety net some years ago.”
GMG‘s regional division made a profit of just £500,000 last year. In the previous year the 32 newspapers made a collective profit of £14.3m.
McCall acknowledged the likelihood of job losses among the staff on GMGs papers but when questioned about Trinity Mirror’s reputation as heavy-cost cutters, she said she believed that journalism would be protected and developed.
She added: “Everyone at regionals knew that cost reduction programmes were not over so we would have had to have made more redundancies going forward because the business has fundamentally changed.”
McCall said she was surprised that Trinity did not see the Channel M television station, which was not included in the sale, as a “good strategic fit”. There will now be a review of its operations.
Despite one analyst claiming Trinity Mirror got “the deal of a century” McCall said the sale brought “real value” to GMG.
She added: “To say that GMG is betting the farm on our digital strategy is ludicrous, here we are with a profitable radio business, profitable property services business, a fantastic business in Trader Media Group, and a robust business in Emap.
“If you add all that together it makes somewhere in excess of a billion pounds a year even in a dire market, in addition to that we have £250m of cash, and we are not hard up we have to control costs.”
Funds generated by the GMG’s portfolio of publishing businesses are used to finance the losses made producing The Guardian and The Observer newspapers.
Guardian News & Media, which publishes the two titles, said late last year that losses were running at £100,000 a day as it embarked on a programme to make around 100 redundancies across editorial and commercial departments.
Speaking to the Guardian’s Media Talk podcast, McCall said The Guardian’s costs were “too high for the future cost base of any newspaper” and that the next financial year would show a massive reduction in GNM’s loss.
“It will be a significant step change for GNM going forward,” she said.
She also said the decision not to erect a paywall around the digital content of Guardian.co.uk was made with “complete editorial and commercial alignment” but she acknowledged this was not an “entrenched position” but one that currently suited GNM.
McCall said GNM would, however, look at charging for some niche content, and across mobile and ereader devices.
When asked if GMG was in talks over the possible sale of its radio business, McCall said it was not.
She said: “Our radio business is doing very well. It is increasing share and listening and it is increasing revenue.
‘It will be in profit this year. But the only thing that is never under review is the Guardian. That is the one thing we are all there to protect in the long term.”