Throwing in the towel

The Guardian has received much coverage this week for it’s new strategy, to go “digital first” and cut its costs massively.

There’s no doubt that the Guardian has an enormous amount of cost they can cut before it shows, and perhaps their CEO’s grim warnings about the fatal consequences if they don’t is as much a way of side-stepping the inevitable howls of anguish from unions and staff as it is the true reason for making what others might look on as sensible adjustments.

But the “digital first” thing is a bit more worrying, to me anyway. The logic is really hard to understand.

On the one hand, they have a determined policy of keeping their digital product free, because doing otherwise “closes down digital opportunities”.

On the other hand it doesn’t seem at all clear what these opportunities are. They have recently made a big move to set up an office in the USA, where much of their audience lives, in the hope that they can make that audience more profitable.

It seems to me like the triumph of hope over experience. You could sum up the whole digital business strategy of virtually every newspaper on the web as having been “build audience now, make money later”.

Even as the audiences have grown like topsy, the money has lingered far behind. The early, optimistic belief that digital would provide a thick layer of icing on the print cake gave way to hopeful speculation that while the digital audience might not be worth much, nor would it damage print – so it was a form of viral marketing.

The more current realisation that print is dying (and the Guardian is explicitly planning for, even accelerating, this change) has been greeted by most, privately at least, with an increasingly panicky desperation to find a model that works or – for many – find a new job before their business impodes.

The curious thing about the Guardian’s position is that while they’re bravely facing up to the realities of their perilous position (Andrew Miller says they have £200m left in their trust fund – which for a company which has lost considerably more than that in the last few years and still loses over £30m per year isn’t much of a safety net) they still seem to just have blind hope that the web will somehow come good in time to save them.

Perhaps it will, and if they deliver their goal to make £91m from digital in five years then I guess they stand a fighting chance (although that’s still only half their current turnover, and they don’t say how much of it comes from services like dating, separate from the actual newspaper).

But there have been countless digital newspaper business plans with that sort of number in them, usually justifying some large capital investment in digital (The Guardian is going to invest £25m this year), and they have mostly proven to be complete fantasies. A new guru presents an even more fantastical plan the year after, but rarely if ever are the enormous returns actually delivered.

In other words, seen from the outside the Guardian seems to be trying to reconcile two inherently conflicting points of view into something they can present as a rational strategy.

On the one hand, they have a strong belief that by growing their online audience they can grow their influence and stature and become a sort of world newspaper. Released from the constraints of print they have the freedom to find their audience all over the world and they don’t want to put barriers in the way of that.

On the other hand they need to make more money, or at least lose less.

So they’re dramatically cutting costs to address the urgent need to improve the bottom line.

They’re making an optimistic five year plan safe in the knowledge that it will be a long time before anyone will know if it can be delivered (and plenty of time to change it before the deadline anyway).

And they’re hoping it will all come good in the meantime.

I hope that’s not it, and that the Guardian has some amazing secret masterplan up it’s sleeve.

But it’s basically the approach adopted by most newspapers for most of the history of the internet, and so far it has an unbroken record of failure.

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