The Guardian may be profitable but its model damages journalism

There are many wonderful things to celebrate about The Guardian. In a few moments, about 12 paragraphs from here, I am going to accuse it of drastically and repeatedly damaging the future of quality newspapers in this country. But before I do that I want to sing its praises.

For starters, it is a fabulous product. Its online edition is constantly updated by a team of talented, proper journalists and columnists that readers seek out on a regular basis. Rarely will I make it through the day without several trips to The Guardian on my iPhone or laptop. It is my go-to place for football reporting, political reporting about the imminent immolation of British parliament, and reporting on the state of the world in general. I simply do not think there is a better paper.

READ MORE: Mark Ritson: The story of digital media disruption has run its course

And, as we learned earlier this week, it is a paper that is finally making money again after decades of pain. Its financial performance was, until this year, enough to induce heart failure in even the most robust CFO. In the last decade The Guardian has posted annual losses of £26m, £22m, £37m, £28m, £23m, £34m, £57m, £38m, and £19m.

But those losses have come to an end with a profit of £800,000 for the current year. It’s not a huge amount when set next to the size of The Guardian and its accumulated losses over the last 20 years. And a more churlish critic might point out that without the £25m the paper received from its charitable ownership structure the Scott Trust, it would still be in the red. But with these caveats aside, The Guardian has clearly turned a massive corner in becoming profitable again.

Digital renaissance

And it gets even better when you see where those profits are being generated. Last year The Guardian derived 55% of its revenues from digital editions. As much as many might want to portray newspapers like The Guardian as exemplars of ‘traditional media’, the new reality of the news media business, at least for those that survived the deadly digital decade just passed, is that they now operate ostensibly like any other online business.

Print editions will remain of course. For a decreasing but stubborn minority they remain the preferred form of news coverage. And the print version remains the premium line extension of any newspaper business.

Just as the great fashion houses keep producing couture – despite seven figure losses – because of the beautiful halo it projects across all their other businesses, newspapers need a physical daily edition to ensure they are not confused with accursed digital-only entrants of the new century like Buzzfeed and the Huffington Post. While most of the revenues and almost all of the profits now come from digital editions, a printed newspaper remains an important symbolic link to proper journalism and authentic mastheads.

No matter how good the digital versions of The Times or Telegraph might be they cannot compete with a product that is literally being given away every day.

The focus on digital at The Guardian means something else too. The newspaper now derives only 8% of its revenue from print advertising. Where once a national newspaper might have expected up to two thirds of its revenue to come from this source, today the only tenable survival path leads away from the once abundant ancient rivers of cash that came from classified and big brand advertising.

Like other suddenly profitable global news media brands – like The New York Times, The Washington Post and The Australian – The Guardian has realised that digital subscriptions are the only way to make its business work. That has meant radical restructuring, cost cutting and an awful decade of transition but The Guardian appears to be moving in the right direction.

Last year some 655,000 people subscribed to either the digital or print edition of the paper. And an additional 300,000 made a one-time donation. As you know if you have visited The Guardian’s site, it has avoided the traditional paywall approach beloved by most other newspapers and instead still offers its content for free. But it encourages readers to appreciate that it is “doing something different”, asking them to either pay a monthly subscription or a one time donation.

And this more nuanced, honest approach appears to be working for The Guardian. But my point, and here comes the downside, is that it is taking a massive and unavoidable crap all over most other quality newspapers as a result.

Competing with a free product

Although almost a million people pay to read The Guardian these days, the paper is consumed by more than five times that number in this country. According the industry body Newsworks, The Guardian is read by 3.3 million people on mobile, 1.5 million on a PC or laptop and 740,000 in print form.

Some of that latter group is also subject to the readership multiple that newspapers have always enjoyed. Mum might be the one who buys the paper, but everyone else in the house has a look. But the giant disparity between paying readers and all of those who access the paper for free is mostly a function of The Guardian’s aversion to a paywall.

READ MORE: The Guardian on its journey to become a supporter-led organisation

And while a paywall might have worked for The Guardian, not having one has had a crucifying effect on all the other national and local newspapers in this country who did erect one, but who are struggling to make a profit. Why would anyone pay for access to a newspaper when they can download The Guardian’s app and read all its content for free, and – with the exception of the little yellow annoyance at the bottom asking for their money – essentially get an amazing product at no cost at all?

No matter how good the digital versions of The Times or Telegraph might be they cannot compete with a product that is literally being given away every day. Even Apple would struggle to make a profit if Samsung started gifting its smartphones to everyone with a grovelling request to perhaps drop off a few quid later on if, you know, they like their free phone.

Twenty years ago most national newspapers made a massively stupid mistake and gave their product away online for free. The single biggest agents of the destruction of newspaper profits were the newspapers themselves, who convinced a generation of readers that they could get, and indeed should expect, a quality newspaper for no charge every day. To this day people under 30 continually complain about ‘stupid paywalls’ with the vehemence of someone who simply does not realise that, without them, all newspapers would disappear and journalism with it.

The Guardian should feel very proud of its fantastic product and its newly earned status as a profitable enterprise. But the cost of its success comes in the massive damage it has done to the rest of the newspaper industry.