Analysis: GMG jettisons regionals to save mothership

For years the Manchester Evening News was the cash cow which bankrolled the losses of The Guardian in London.

But as the recession bit, profits at GMG Regional Media plummeted to just £500,000 – nowhere near enough to cancel out the £36.8m lost by the national newspapers division.

And so the Scott Trust has decided to sell the MEN, its 22 associated weekly titles and ten local newspapers in the South of England – including the Surrey Advertiser and Reading Post – for £44.8m to ensure Guardian Media Group‘s portfolio of businesses is in “the right shape” to safeguard the future of The Guardian.

The Manchester Evening News and The Guardian have been closely associated since 1879 when they moved into the same offices, becoming part of the same publishing group in 1924.

But in 1992 the Scott Trust, which owns parent company GMG, set out its primary objective for the first time: “To secure the financial and editorial independence of The Guardian in perpetuity”.

And so the regional media division has been jettisoned to save the mothership.

GMG chief executive Carolyn McCall has always said that the declining fortunes of regional newspapers are more about structural decline, the permanent exodus of classified advertising online, than about the economic cycle.

In March 2009, she told staff: “The downward trajectory is clear, and it’s getting worse. The division has, in fact, now been making an operating loss for several months…

“The structural changes at play mean revenues will not return to old levels even when the economy recovers.”

And evidently she has decided to sell the regionals division for a comparatively modest sum, rather than wait for the profits to return when the economy recovers.

The price paid is a small fraction of what GMG Regionals would have been worth five years ago.

In 2004/2005 it made a profit of £32.6m on turnover of £138.3m (against a loss in the nationals division of £18.6m).

The following year it made £21.6m (against a loss at the nationals of £19.3m).

The decline of the business since then has outpaced that of most regional media rivals and may have been hastened by some of the strategic decisions made by GMG management.

They decided to make made the MEN free in central Manchester in early 2006 – but late last year retreated on that strategy, making the title fully paid for on Monday to Wednesday and on Saturdays.

Since 2006 paid-for sales of the MEN have dropped from 114,676 to around 70,000, or perhaps less (no up to date ABC figure is available as the MEN withdrew last year).

Much has been made by MEN Media in recent years about its state-of-the-art integrated multimedia newsroom, including the city’s TV station – Channel M.

But it is notable that Channel M is not part of the sale. A question mark must now hang over its future.

GMG Regional Media chief executive Mark Dodson, now leaving the business, received a £47,000 bonus in 2008/2009 bringing his total pay to £309,000 for the year – despite presiding over a period when the business had gone into the red for the first time in living memory.

Journalists on the MEN and other titles will not take it well if he has also taken a further pay-off for shepherding through today’s deal.

GMG has not made a success of its regional media business in recent years but its decision to sell off its regional division will still be greeted as terribly sad news by the journalists who work there.

Drastic cuts have already been made, with 78 journalists being axed in Manchester alone last year.

Hopefully the relatively modest purchase price means Trinity Mirror will not find it necessary to axe too many more in order to recoup its investment.

Even if the division was to return to just a third the profit it was making five years ago, £44.8m would start looking like a very good deal.

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