The imminent auction of the Telegraph is being viewed as a litmus test of the value of influential national newspaper titles in the era of increasingly digitally led profitability. Media barons and conglomerates, who have hung on to old-world assets for decades in the belief it was right to bet on a sector largely unfancied by tech-obsessed investors, are watching it keenly.
Since the onset of the digital era at the start of the century, newspapers have, with a few notable exceptions, been a precarious investment at best.
The impact of the lightning-fast changes in media habits – with consumers and advertisers increasingly heading online to a world dominated by Silicon Valley giants – makes for grim reading.
Since 2009, the number of national newspapers sold each day in the UK has plummeted from more than 9 million to less than 3 million, according to Enders Analysis.
And in the past decade the UK national newspaper advertising market has halved, from £1.2bn in 2013 to £600m this year, according to WPP’s Group M.
Those hoping to survive the industry-wide search for sustainability have had to show steely resolve.
Rupert Murdoch ploughed more than £500m into supporting the Times and Sunday Times through the darkest loss-making years between 2002 and 2014.
Last week, Murdoch’s News UK and the Daily Mail owner, DMGT, gave a stark reminder of the increasingly challenged status of traditional newspapers.
The giants, home to titles including The Sun, i and Metro, announced they would have to combine their national printing businesses in order to create a sustainable future for the physical papers as costs soar and paying readers continue to decline.
Douglas McCabe, the chief executive of Enders Analysis, estimates the sunset on the traditional printed national newspaper model will potentially be around 2030.
At this point, many titles will have been forced to transition to models including digital-only, dropping less popular weekday editions, or morphing to hybrid weekend magazine-style formats of deeper reads, with news being found online.
But the auction of the Telegraph, which has prompted frenzied international interest and a potential sale value of about £750m, is testament, at least in part, to a sustainable commercial renaissance in the industry.
“If you’d bought the Telegraph five years ago you’d be doubling your money selling now,” says an executive at one of the UK’s biggest newspaper groups.
The pandemic and home-working fuelled a subscription boom and between 2020 and 2023 it is estimated the major national newspaper publishers added more than 2 million new print and digital subscribers, paving the way for a digitally led, profitable future.
The Telegraph has more than 1 million print and digital subscribers, with more than half of total revenues now coming from subscriptions, and it reported £39m in profits last year.
The shift to reliable, recurring and growing income streams is catnip to investors and shareholders, and the transformation has been even more dramatic at the Times, which introduced a paywall in 2010. Profits leapt from £44m in 2021 to £80m last year.
“It has been a long time coming,” says Chris Longcroft, an executive vice-president at News UK and publisher of the Times and Sunday Times, the sister titles of the more challenged, but still operationally profitable, Sun, phone-hacking costs notwithstanding. “Print is still very material. But you reach an inflection point where you have enough subs and revenues covering fixed costs, then every additional subscriber is pure profit,” he says. “Look at the New York Times and Wall Street Journal, and think of them as moving faster into digital than we have needed to in the UK; in their markets they were forced to go faster. I greatly hope we can make that transition.”
Other titles have also reached a new-found financial stability, including the reader revenue model adopted by Guardian Media Group, the parent of the Guardian and Observer, which just seven years ago reported a £69m annual loss.
More than 1.1 million multi-platform subscribers underpinned a record £264.4m in revenues in the publisher’s most recent annual results, with digital reader revenues accounting for 31% of the total.
DMGT reported adjusted operating profits of £52m last year, although its slim operating margin of just 8% across its newspaper holdings is a reflection of its still heavy reliance on advertising.
MailOnline, with its global scale being the poster child of the belief that online advertising alone might be the saviour of the newspaper industry, has been a late mover, diversifying to date with just 160,000 subscribers to its paid-for offering, Mail+.
Reach, the owner of the Mirror and Express titles, is also a late mover into reader revenues although the group still reliably makes in excess of £100m in annual profits.
et internationally some of the biggest newspaper brands are struggling to make it work. While the New York Times and Wall Street Journal have provided a template for success, earlier this week the Washington Post announced plans to make 240 voluntary redundancies.
The newspaper, owned by the Amazon boss, Jeff Bezos, said the cuts, which make up about 10% of its workforce, were because its “subscription, traffic and advertising projections” in recent years had been “overly optimistic”.
Nevertheless, the hefty £750m potential price tag for the Telegraph, which has attracted interest from domestic heavyweights, American billionaires, Middle Eastern investors and a German media conglomerate, goes far beyond the prospect of owning a profitable title in a market enjoying a post-pandemic renaissance.
Such trophy assets coming up for sale are rare: it was last on the block in 2004, and its close relationship with the government and right-leaning readers gives a buyer immeasurable potential political influence.
Bezos wasted no time stumping up $250m to buy the Washington Post a decade ago. He was also rumoured to have taken an interest when the Barclays tested the market value of the Telegraph in 2019, as part of a family feud between Frederick and his late twin brother, David.
In the case of the Telegraph, arguably the most intriguing bidder to have shown their hand is Sir Paul Marshall, the founder of the London-based hedge fund Marshall Wace and a minority investor in GB News. He is one of a five-strong board, but has no editorial or operational decision-making power over the TV station.
“Should we decide to enter the bidding process when it kicks off, we are confident that we will have built a world-class team with the commercial and media expertise needed to revitalise this iconic British brand,” said a spokeswoman for UnHerd Ventures, the vehicle Marshall is using to put together the potential bid.
The move by Marshall, who is forming a consortium that includes the US hedge fund billionaire Ken Griffin, appears to be echoing a very Murdochian strategy of building a cross-platform media empire appealing to the political right.
Murdoch sold Sky, including its influential Sky News operation, to Comcast in 2018 in a top-of-the-market deal. Last year, Murdoch, who has designs on buying the Spectator magazine but not the Telegraph, launched the Piers Morgan-led TalkTV, a response and rival to GB News.
McCabe, of Enders Analysis, says: “Newspapers still have tremendous influence, and are still originators of the news agenda. These assets do not come to market very often. The Telegraph represents an extraordinary and rare opportunity to buy influence that, if it wasn’t up for sale, money couldn’t buy.”
For the Telegraph owner, Lloyds Banking Group, which is using Goldman Sachs to run the sale process, a buyer like Marshall represents one of the “cleanest” potential transactions.
Marshall would probably have to offer binding commitments not to meddle editorially with the Telegraph, keeping it independent of the harder rightwing views of GB News, given any deal would spark scrutiny with a public interest and plurality test by the government and the media watchdog, Ofcom.
The owner of Bild, Axel Springer, which lost out to the Barclays when the Telegraph went up for sale in 2004 and narrowly missed acquiring the Financial Times in 2015, is also unburdened by potential competition and plurality issues in the UK.
DMGT would face both hurdles, with any deal being subject to lengthy investigations, while others, such as National World and Sir William Lewis, are still seeking financial support.
For the industry, the first post-pandemic sale of a national newspaper will provide a key benchmark for a potential resetting of the value of print publications that have navigated through precarious times.
Last month, Murdoch made the shock announcement that he was standing down as chair of his media empire, handing the reins to his eldest son, Lachlan, although he will still ultimately call the shots through his control of the family trust which holds voting power over his assets.
Lachlan, who is not as enamoured of newspaper assets as his father, will nevertheless be closely watching as he seeks to build the $11bn market capitalisation of News Corporation – or ponder the value of a future sale of some titles.
Says the top executive at one of the UK’s biggest newspaper groups: “I’d like to think the Telegraph is an asset that is correctly valued. It’s been making £40m – £50m profits annually over the period from 2002 to 2014; the Times cumulatively lost £500m to £600m. It is important for the industry that it is valued as a business that can continue to make healthy profits.”
• This article was amended on 16 October 2023. A previous version incorrectly described Chris Longcroft as News UK’s “chief financial officer”.