“Peo­ple in this dig­i­tal age love the tan­gi­bil­ity of print and we have got to re­spect that.”

The Guardian’s boss David Pemsel has slashed losses and is eye­ing break-even, but big­ger chal­lenges lie ahead.

Campaign Middle East - - FRONT PAGE - By Gideon Spanier

DAVID PEMSEL, Guardian Me­dia Group CEO, on the role of paper in a dig­i­tal age

David Pemsel could soon feel he has done his job. His three-year plan to bring Guardian Me­dia Group’s steep losses un­der con­trol is on track for com­ple­tion by next spring, when the left-lean­ing pub­lisher should break even. “You’re not the only per­son to ask,” he says with a smile, shrug­ging off a ques­tion about whether he might be con­tem­plat­ing mov­ing on.

Pemsel, a for­mer ITV mar­keter who joined GMG in 2011 and be­came chief ex­ec­u­tive in 2015, in­sists: “There’s still a huge amount to get done.” He is work­ing on a new, three-year plan as The

Guardian pre­pares for its 200th birth­day in 2021. “One year of sus­tain­abil­ity isn’t an en­dur­ing sus­tain­able out­come,” he says.

When he and ed­i­tor Kath Viner took charge to­gether, news­pa­per arm Guardian News & Me­dia was on course to lose £87m that year. They be­gan slash­ing costs, which re­duced the loss be­fore ex­cep­tional items to £57m in 2015-16, £38m in 2016-17 and £19m in the year to April 2018. Break-even “on an oper­at­ing ba­sis” is, as men­tioned, now on the cards.

It is largely thanks to a pioneer­ing strat­egy of ask­ing read­ers to make vol­un­tary con­tri­bu­tions and be­come mem­bers, rather than set­ting up a pay­wall, while sav­ing money by switch­ing The Guardian and The

Ob­server from Ber­liner size to tabloid in Jan­uary.

Turnover in­creased 1 per cent to £217m in the past year, with more than half com­ing from dig­i­tal for the first time – a de­cent per­for­mance com­pared with ri­vals. In an­other mile­stone, rev­enues from read­ers through con­tri­bu­tions, subscriptions and print cover price sales out­weighed ad­ver­tis­ing. Ad sales were roughly flat, Pemsel adds – de­spite The Guardian run­ning an ef­fec­tive but ar­guably mislead­ing mes­sage at the end of news ar­ti­cles that urges read­ers to do­nate be­cause “ad­ver­tis­ing rev­enues across the me­dia are fall­ing fast”.

Pemsel says: “To get to break even at an oper­at­ing level, just un­der £1.1bn in the bank [in an in­vest­ment fund], no pen­sion deficit and no debt, that is an or­gan­i­sa­tion that is win­ning de­spite all the com­plex­i­ties that we’re deal­ing with. I think that’s a pos­i­tive story.”

Re­cent scoops such as the Win­drush scan­dal and Face­bookCam­bridge An­a­lyt­ica in­ves­ti­ga­tion have boosted con­tri­bu­tions. To­day, 570,000 mem­bers sub­scribe or make re­cur­ring pay­ments, plus there have been 375,000 one-off con­trib­u­tors, and the US and Aus­tralia are “now gen­er­at­ing a fi­nan­cial re­turn” after heavy in­vest­ment.

“I don’t think there’s a limit on how far The Guardian’s jour­nal­ism can travel,” Pemsel adds, point­ing out that its trusted con­tent reaches an au­di­ence of 155 mil­lion monthly unique browsers in the era of fake news. It wouldn’t have had that global reach if he had lis­tened to crit­ics who told him to set up a pay­wall and “tax for con­sump­tion”, he says.

Dou­glas McCabe, chief ex­ec­u­tive of En­ders Anal­y­sis, says: “It’s hard not to ad­mire David’s re­lent­less fo­cus on reach­ing break-even or prof­itabil­ity. He echoes Jeff Be­zos’ mes­sage at The Wash­ing­ton Post – ‘Good news busi­nesses have to be in­de­pen­dent and they have to be sus­tain­able.’”

David Abra­ham, the for­mer chief ex­ec­u­tive of Chan­nel 4, who used to work with Pemsel at St Luke’s in its glory days, adds: “Against the odds, DP has man­aged to get con­trol of costs while es­tab­lish­ing the ba­sis for a new way to mon­e­tise the un­doubted cul­tural and dig­i­tal reach of the Guardian brand – all while still sup­port­ing strong jour­nal­ism.”

Pemsel, 50, is mar­ried to Kate Stan­ners, global chief cre­ative of­fi­cer of Saatchi & Saatchi. Those who know him de­scribe the £706,000-a-year chief ex­ec­u­tive as “smooth”, “ar­tic­u­late”, “charis­matic” and “am­bi­tious”, with an eye per­haps on a FTSE lead­er­ship role, and “ex­pen­sive tastes” in shoes and cars, as be­fits a non-ex­ec­u­tive di­rec­tor of the Bri­tish Fash­ion Coun­cil.

One in­dus­try leader says: “He doesn’t spring to mind as some­one who is re­motely so­cial­ist.” But an ex-Guardian­ista points out: “Look­ing back over the his­tory of Guardian CEOs and MDs, some of the most suc­cess­ful were cap­i­tal­ists, red in tooth and claw.”

Pemsel finds turn­ing around GMG “fas­ci­nat­ing, in­tel­lec­tu­ally”, but is sen­si­tive to crit­i­cism. “I sat with a se­nior comms per­son the other day,” he con­fesses, “and they said, ‘Why you get frus­trated is be­cause you’re part of a legacy in­dus­try that’s strug­gling its way through all this change.’”

He has chal­lenged the sta­tus quo, push­ing Sil­i­con Val­ley-style quar­terly “sprints” to tackle busi­ness prob­lems at GMG and driv­ing an in­dus­try-wide ef­fort to pool ad sales with The Ozone Project – a once un­think­able part­ner­ship with News UK and

Tele­graph Me­dia Group to sell dig­i­tal dis­play in­ven­tory. But he is win­ning recog­ni­tion.

The Guardian has been short­listed for sales team of the year and Pemsel has been short­listed for me­dia leader, a new prize in part­ner­ship with The Light­house Com­pany, at next month’s Me­dia Week Awards.

Pemsel was part of GMG’s an­cien régime, serv­ing as chief com­mer­cial of­fi­cer and deputy CEO, when it bet on dig­i­tal ad­ver­tis­ing and on­line reach be­fore 2015. He over­saw the Cannes Lions award-win­ning “Three lit­tle pigs” cam­paign and won sales team of the year at the 2014 Me­dia Week Awards. Yet the com­pany was fac­ing a po­ten­tial £87m loss a year later, so what went wrong? “Reach does breed com­pla­cency,” Pemsel ad­mits. “You think it’s im­por­tant just be­cause you’ve got a big num­ber, but you re­alise you’ve got no [di­rect] re­la­tion­ships [with read­ers who are largely anony­mous].”

What’s more, that reach started to look “niche” in the face of the Face­book-Google du­op­oly. “The re­la­tion­ship be­tween reach and ad rev­enue snapped as ag­gres­sively as I’ve ever seen,” Pemsel re­calls. “It was al­most a quar­terly shift.” At the same time, agen­cies were au­tomat­ing spend, which re­quired the sales team to pivot to pro­gram­matic trad­ing.

Look­ing back, he in­sists it wasn’t “a mis­take” to de­pend on dig­i­tal ad growth but he re­alised “you can never be com­pla­cent”. He and Viner were forced to face “some un­var­nished truths” about “what would hap­pen if we didn’t change pretty quickly”. Pemsel was “ob­sessed” with re­duc­ing their new strat­egy to a sin­gle page and boiled it down to four pri­or­i­ties:

Build deeper re­la­tion­ships with read­ers.

En­cour­age read­ers to make a greater fi­nan­cial con­tri­bu­tion to The Guardian’s jour­nal­ism.

Face up to the re­al­i­ties of the ad mar­ket and sell pro­gram­mat­i­cally.

Be­come more ag­ile and cut costs. At that stage, read­ers do­nat­ing money was only an idea. A small team worked on the con­cept in a “sprint” over sev­eral months and tested it on a small per­cent­age of read­ers. Once it got a good re­sponse, they scaled it up.

Pemsel re­mains a cham­pion of ad­ver­tis­ing, in­clud­ing branded con­tent, as a sec­ond rev­enue stream after reader rev­enues. But he sees the logic of pool­ing ad sales as un­de­ni­able be­cause of the tech giants’ dom­i­nance. He backed Project Juno, the failed talks with other pub­lish­ers, in 2016, but stayed at the ta­ble to set up The Ozone Project. “The rea­son why I re­main an ad­vo­cate of pre­sent­ing our­selves in one place is that it’s what our clients and agen­cies are ask­ing for,” he says.

Pemsel axed the Ber­liner to save “mil­lions” a year and is “com­fort­able” with the “trade-off” as cir­cu­la­tion and ad sizes took a hit.

The Guardian’s daily print sale has been fall­ing by about 10,000 an­nu­ally for many years and plumbed a new low of 138,000 in July. If trends per­sist, the week­day tabloid, which sells 115,000, could be gone by 2030.

The Scott Trust, the paper’s char­i­ta­ble owner, has a man­date to safe­guard The Guardian “in per­pe­tu­ity” but when might the trustees de­cide it no longer needs to print seven days a week? “The Trust clearly has a vested in­ter­est in un­der­stand­ing the num­bers that sit be­hind any de­ci­sion,” Pemsel says. “In the end, it falls to the ed­i­tor, pri­mar­ily. As long as our read­ers value the print prod­uct, we will con­tinue to print.”

He sug­gests GMG might en­gage in a sim­i­lar brain­storm­ing ini­tia­tive to that around reader con­tri­bu­tions: “You can imag­ine at some point there will be a brief, say­ing, ‘What are the var­i­ous ways that print can add value to peo­ple’s lives?’ But then there’s this bi­nary thing of, ‘When are you go­ing to turn it off?’ – it’s much more nu­anced than that. Peo­ple in this dig­i­tal age love the tan­gi­bil­ity of print and we’ve got to re­spect that.”

Google and Face­book cast an im­mense shadow, so does Pemsel think reg­u­la­tors should break them up? “The maths say yes. I don’t think that’s a [sub­jec­tive] judg­ment. The maths have to get you to the place where some kind of in­ter­ven­tion from gov­ern­ment is in­evitable.” Pemsel has also asked whether

The Guardian should keep its jour­nal­ism on the tech plat­forms. He con­cluded that “any plat­form that pro­vides anony­mous reach” with no abil­ity to have a di­rect re­la­tion­ship with the reader plays “no role in our busi­ness strat­egy – that’s why we’ve come out of Ap­ple News and [Face­book’s] In­stant Ar­ti­cles”.

For Pemsel, it is an im­por­tant les­son: “Be re­ally sure of your own strat­egy and do not al­low the plat­forms to dis­rupt you. Ap­ple and Face­book will say they’ll give you reach. But we don’t have a traf­fic prob­lem. We’ve got a re­ally clear strat­egy about how to have a deeper re­la­tion­ship with our read­ers and en­cour­age greater con­tri­bu­tions.”

In­sid­ers say Pemsel keeps tak­ing out costs, and an­other wave of se­nior jour­nal­ists took vol­un­tary re­dun­dancy in the sum­mer in the cru­sade to break even. “The chal­lenge will come on the day after the cur­rent plan is de­liv­ered,” McCabe warns. “What will the next three- or five-year plan look like? With­out in any way di­min­ish­ing what’s been achieved in this phase, the next phase could be more de­mand­ing still for the ex­ec­u­tive team and the Trust.”

As Pemsel would ac­knowl­edge, se­cur­ing the fu­ture of The Guardian is a marathon, not a sprint.

“Be re­ally sure of your own strat­egy and do not al­low the plat­forms to dis­rupt you. Ap­ple and Face­book will say they’ll give you reach. But we don’t have a traf­fic prob­lem. We’ve got a re­ally clear strat­egy about how to have a deeper re­la­tion­ship with our read­ers and en­cour­age greater con­tri­bu­tions.”

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