The Guardian Adheres to Principles
May 20, 2016
In the 1930s, Britain’s newspaper the Guardian was founded, through a generous family’s endowment, on the ideas of an unfettered press and free access to information. In continued pursuit of these goals, the publication has maintained a paywall-free online presence, despite declining online-advertising revenue. That choice has cost them, we learn from the piece, ”Guardian Bet Shows Digital Risks” at USA Today. Writer Michael Wolff explains:
“In order to underwrite the costs of this transformation, most of the trust’s income-producing investments have been liquidated in recent years in order to keep cash on hand — more than a billion dollars.
“In effect, the Guardian saw itself as departing the newspaper business and competing with new digital news providers like BuzzFeed and Vox and Vice Media, each raising ever-more capital from investors with which to finance their growth. The Guardian — unlike most other newspapers that are struggling to make it in the digital world without benefit of access to outside capital — could use the interest generated by its massive trust to indefinitely deficit-finance its growth. At a mere 4% return, that would mean it could lose more than $40 million a year and be no worse for wear.
“But … the cost of digital growth mounted as digital advertising revenue declined. And with zero interest rates, there has been, practically speaking, no return on cash. Hence, the Guardian’s never-run-out endowment has plunged by more than 12% since the summer and, suddenly looking at a finite life cycle, the Guardian will now have to implement another transition: shrinking rather than expanding.”
The Guardian’s troubles point to a larger issue, writes Wolff; no one has been able to figure out a sustainable business model for digital news. For its part, the Guardian still plans to avoid a paywall, but will try to coax assorted fees from its users. We shall see how that works out.
Cynthia Murrell, May 20, 2016