One of the great misunderstandings about the newspaper business today is why companies, families, individuals, trusts, unions, and non-profit associations own newspapers.
Ex-KGB agent Alexander Lebedev is expected this week to pay a token £1 for control of The Independent, a last-place, money-losing quality daily in the United Kingdom's hyper-competitive national newspaper market. This, after he took the under-performing Evening Standard off the hands of the Daily Mail General Trust a year ago. This is hardly a first: Rupert Murdoch has reportedly lost money on the New York Post for years, while quality dailies worldwide have also frequently been money-losers.
What's the motivation to own a newspaper?
Newspaper publishers are complainers by nature. I heard a story once that in the 1960s and 1970s, Canadian publisher Roy Thomson would quietly show up for industry board meetings only to hear complaint after complaint about how hard the business was, how obstinate the unions were, how new competition was killing them, and so on. Thomson would hear them out, then raise his hand and volunteer to take those pesky newspapers off their hands. And Thomson built a newspaper empire that way.
Similarly, the major corporations in North America, the United Kingdom, and the South Pacific patiently waited for the passion to erode in second-, third-, and fourth-generation family ownership structures before taking those troublesome newspapers off their hands.
The misunderstanding is that profit is only one of many factors that goes into ownership. That is the value proposition sold by the big publicly traded corporations to shareholders, and that gets the lion's share of public attention.
Rupert Murdoch owns The Times and the Wall Street Journal to advance his global agenda in London and New York. Latin American families often operate their quality dailies at a loss to influence their political and economic agendas that pay far more than an extra margin point in their print newspaper. The Toronto Star's charter says that it exists to influence Canadian society. The Guardian in the United Kingdom exists to advance liberal thinking and needs only sufficient profits to sustain the trust that operates it “in perpetuity.”
The Great Recession has been a destroyer of another ownership motivator: asset appreciation over time (regardless of annual P&Ls). That will return, in time, though too bad for yesterday's owners.
The private-equity firms that are gobbling up newspapers in the United States don't make their motivations known publicly too often, but most are convinced that newspapers are waste machines that can be stripped down, made more efficient, and sold in a few years at a healthier profit than the market will otherwise bear for investments.
Big-brand national newspapers worldwide often own smaller regional dailies, weeklies, and niche publications as cash machines to feed the financially under-performing mothership.
Just a few weeks ago, the Guardian Media Group agreed to sell its regional newspapers to Trinity Mirror for a pittance. Some speculated this was to allow management to focus on the commercial revitalisation of The Guardian. Others suggested the former cash cow regional newspapers weren't worth the hassle.
And don't forget old-time family ownership where benevolent entrepreneurs still agonise over their priorities in ownership: money, community, employees – even outright pride of ownership.
Now, whether you're a Danish newspaper owned by a union that only expects 2% margins or a major U.S. corporation that aims for 25% margins, what unites us are the tools and skills and people to maintain our targeted margins. You would think the Danish company would be devastated by losses from the recession, but I've heard more complaints from American companies suicidal over dropping to 10% margins and wondering whether the fight is worth it.
For Alexander Lebedev, nobody yet knows his motivation for becoming a major player in the U.K. newspaper market. Is it for money? Love of the fight? Long-term asset appreciation? Or some other kind of political intrigue that sets the U.K. trade press' collective tongues wagging with his every KGB-like move?
There are many motivations to own a newspaper – variations and nuances that are important to understand. This gets lost too often in the storylines of our industry.