News UK CEO criticises the Guardian's 'open' business model

05 Mar 2014  |  David Pidgeon 
News UK CEO criticises the Guardian's 'open' business model

If the serious news business wants to invest in a sustainable future, it must cease to give its content away online for free whilst charging ever increasing prices for print, the chief executive of News UK has said.

In a keynote speech at the Digital Media Strategies conference on Wednesday, Mike Darcey, who is in charge of The Times, The Sunday Times and The Sun, criticised the Guardian for offering free access to its online platforms and therefore relying on advertising as the key revenue stream.

"Journalism can have an immensely bright future, with digital as our ally, not our enemy," Darcey said as he recounted that many people thought placing News UK titles behind paywalls would damage the business.

However, citing a report by Enders Analysis, Darcey said his approach is now regarded as a sensible and sustainable strategy and that other newsbrands were treading on thin ice with current business models.

"There are some big positives" Darcey said about the Guardian's approach to charge for a printed product whilst offering all the same content online for free.

"The company is definitely trying to deliver its pro-journalism vision. And its free online approach and availability in multiple territories means it has very considerable reach. But the question I have is how will this pay for itself in the long run? At the moment it is still a loss making enterprise."

Despite seeing a 25% rise in digital revenues to around £70 million, the Guardian this week reported losses after tax of £31 million.

Darcey said that if the Guardian's strategy is to increase its reach as it patiently forges open a longer-term path to profitability, then the business is on shaky ground and print editions will likely cease to exist entirely as cover prices continue to rise.

"Chasing online advertising revenue at scale requires a deep, free online proposition and this in turn undermines the incentive for people to pay for the print edition.

"The Guardian web proposition is so good I wonder why anyone continues to buy the Guardian in print at all. They must be very wealthy people," he said.

The Times, which has been in existence for over 200 years, experienced, Darcey said, a "wobble" in 2009 when it had a "brief dalliance" with free content on the web.

At that stage, The Times was making trading losses of £72 million a year, but since pursuing a subscription-based model - which Darcey said offered "deeper engagement" for its 143,000 paying readers and therefore a better proposition for advertisers - that figure has been reduced to a £6 million per year loss.

"When print is switched off, all you have left is online advertising," Darcey said. "But online ad prices are low and falling [and] if this is your only revenue source, then you need to think about the fact that you are head-to-head with the global internet titans [Facebook and Google]."

Responding to the criticism, Andrew Miller, chief executive of the Guardian Media Group, the Guardian's owner, said Darcey's vision was out of touch with the spirit of "openness" that defined the digital age.

"Open isn't a luxury; it is not a nice thing we want to do, it is reality," he said. "Open is the way the web works, so we are working with the web."

Remaining open and free to engage with the likes of Facebook and Twitter is helping to deliver a growing reach for the newsbrand, Miller argued, and that in the long-term, this strategy can pay off.

Despite Darcey describing the Guardian as a "minnow" compared to the social media giants, the newsbrand still has a global audience of 90 million unique readers each month and has doubled its revenue in the last two years.

Miller also revealed that almost 20 million referrals currently come from Facebook, and that at this stage it was not an option to close this off to the business.

"If we could do a paywall, of course we'd be doing it now because we'd love to do it," he said.

"Unfortunately, that horse has bolted long ago, particularly in a world where in the UK, with the BBC, you have a big, free news provider."

Miller also said he could easily turn Guardian Media Group around from being loss making to profit.

"I could sack half our journalists. I could sack half our commercial team. [But] this is about building journalism for the new world we're in."

Miller said that the Guardian's 25% growth in digital revenues was proof that his "open" business model was on the right track in what is still a relatively new and changing global market.

"The new world only started four or five years ago. It didn't start 200 years ago," he said.



Image courtesy of Mike Darcey's presentation.

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