So the Barclay brothers’ bid for Conrad Black’s controlling share in Hollinger International has been vetoed by an American judge. We are back to square one. A lot of time has been wasted. Meanwhile the patient itself — i.e., the Daily Telegraph — is ailing. Mercifully its journalists have called off a strike, though they remain sunk in gloom. But the paper is losing sales (though not on a Saturday) as some readers defect to the tabloid Times or the tabloid Independent. The Telegraph’s management has its own tabloid plans, and a budget of £15 million to launch the thing, but dares not push the button until it becomes clear who the new owner will be.
The thought that the sale of the newspaper might take several more months is not a happy one. (By the way, in writing about the Daily Telegraph I should declare an interest, since the upmarket newspaper I am planning with colleagues might be accounted a potential competitor. In fact I have inexhaustible affection for the Telegraph.) It so happens that Nick Shott, who is handling the sale of the paper on behalf of Lazard bank, is a former Telegraph senior executive. Stephen Carter, the head of Ofcom, the regulatory body which will assess the suitability of bidders, dealt with the Telegraph’s account when he was an advertising executive. If either of them has any residual affection for the newspaper, they will realise how important it is that there should be a speedy conclusion to this process.
Not that I think that any of the suitors has a miracle cure for the Daily Telegraph. There is no such cure. If a newspaper has gradually been losing readers for 25 years, it is not possible to turn it around in an instant. Possibly the decline cannot be reversed but only stabilised and managed. Looking at the various suitors, it seems to me that some of them may not have the long-term interests of the Daily Telegraph (or of the Sunday Telegraph and The Spectator) at heart.
One category of investors is looking for a quick turn. They know that the Telegraph Group made £69.7 million in the year 2000. In 2003, after a 20 per cent decline in advertising revenues, the profit was £43.7 million. As advertising recovers, Lazard is hoping for better profits in 2004 and better still in 2005. These investors are licking their lips. They look at the Telegraph Group’s editorial complement of 542, and overall staff numbers of more than 1,200, and not unjustifiably ask whether there might not be substantial costs savings which could boost profitability in the short term. But I can’t help wondering whether these prospective investors, who mostly comprise financial institutions and venture capitalists, have a long-term strategy for the Daily Telegraph once they or their backers have pocketed the savings.
Richard Desmond of the Express Group surely comes into the same category. At the Daily Express he has improved profitability not by increasing sales but by slashing costs. This works in the short term but offers no longer-term strategy for arresting circulation decline. Of course there are other objections to Mr Desmond, namely that he is a pornographer. No one should be fooled by his announcement that he is selling off his porn magazines, since he is hanging on to the much more profitable, and no less pornographic, Fantasy Channel. Actually, it would help our own newspaper venture if Mr Desmond were to acquire the Telegraph Group, since readers and journalists might defect to us. But it would be a disaster for the Daily Telegraph and the general wellbeing of this country.
A second category of prospective investors is looking to the longer term. This group may include foreign newspaper companies — the American company Gannet and the German Axel Springer have been mentioned — but one wonders how successful they would be in operating in a strange (and highly competitive) market. That leaves the Barclays and the Mail group. I am assuming that the Barclays will now make a bid for the Telegraph Group itself. Although, as I have pointed out, they are not the world’s most successful newspaper publishers, they are very rich and usually invest for the long term in other businesses. If they found the right people to run the Telegraph Group for them, they might turn out to be excellent proprietors.
That leaves the Mail group. Since I write a column for the Daily Mail I am hopelessly compromised, and readers had better ignore anything I say. The case against the Mail as owner of the Telegraph Group is that it would be too dominant. The Mail group is apparently trying to deal with this fear by bidding with partners (so that it would not have a controlling interest) and offering guarantees about the continuing independence of the Daily Telegraph. The case for the Mail group is that it invests in journalism, and is not looking for a quick turn.
If speed is of the essence, a bid by the Mail, involving as it would regulatory hurdles, might seem less than ideal. But in fact Ofcom would be bound to consider whether ownership by a venture capitalist was in the long-term interests of the Telegraph Group. Ofcom will play a role in any event. That only emphasises the need for speed, so that the Daily Telegraph can be handed over to its new owner in the best possible shape.
Suitors who fail with the Telegraph Group may find themselves bidding for the Financial Times within the year. The newspaper has just announced record losses of £32 million. The paper has been particularly badly hit by the recession in financial advertising, while its UK sales have fallen by some 8 per cent over the past year. As advertising recovers, the paper will return to profitability, but it does seem to be suffering from some deeper malaise. Over the past 50 years it has been blessed with several highly gifted editors who had no need of a strong proprietor to keep it on the straight and narrow. Now one seriously wonders whether Pearson and its chief executive, Marjorie Scardino, are capable of reinvigorating it. There will be renewed pressure on Pearson to sell a valuable but underperforming asset, and there are several potential buyers waiting in the wings.
Martin Newland, the editor of the Daily Telegraph, evidently feels that I have been getting at him. So I was very sorry that a Spectator subeditor changed a word in my article last week so that I seemed to be making a criticism that I had not intended. My phrase ‘the newspapers’ relentless drive downmarket’ was bizarrely altered to ‘the Telegraph’s relentless drive downmarket’.
Incidentally, when I described Mr Newland as ‘splendid’ several weeks ago, no irony was intended. He was appointed not long before the Daily Telegraph’s ownership was thrown into disarray. He has no proprietor to guide him, and he cannot know what the future holds. It seems to me that he is doing a good job in appallingly difficult circumstances.