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Indie: Lebedev paid to take it away

Robert Peston | 16:10 UK time, Thursday, 25 March 2010

Now we have a financial measure of the mayhem in the newspaper industry: the Russian billionaire Alexander Lebedev is being paid £9.25m to take the Independent off the hands of the existing owners, the Irish newspaper group, Independent News & Media.

My reaction has been melancholy.

Screenshot IndependentThe Indie was the first national title to give me a job: I joined it as a City reporter in 1986, a couple of months before it was launched as a fierce competitor into a self-satisfied, semi-cartelised British newspaper industry; and I retain a strong affection for it.

But after 24 years that can be characterised as sparkling debut followed by crises so regular that they became business-as-usual, its current valuation is considerably less than zero.

The Indie is a licence to lose money: £12.4m of losses in the past year.

In fact the vendor, INM, swaggered today that its earning per share will be boosted by this deal which sees it parting with cash.

Here is the sum that makes it a good deal for INM: the cost of closing the Indie, in respect of payments to staff and to the paper's printers and distributor - notably Trinity Mirror - would have been £30m; so getting shot of it at a cost of £9.25m is a bargain.

What's gone wrong?

Well the economics of what used to be called the broadsheets have been the economics of the madhouse for as long as I can remember.

In fact it's probable that the Indie's £12.4m loss made it one of the more successful (in a profit-and-loss sense) of all the quality papers last year.

The shocking truth is that most broadsheets are run to provide a living for hacks like me and to massage the egos of the proprietors.

Over many years - and with the exception of the FT, which is in a special market, and the Telegraph - quality papers have found it close to impossible to bring revenues and costs into equilibrium, let alone generate a sustainable profit margin.

And that challenge of living within their means has been made considerably harder since the internet started providing free-on-demand news and Google began to gobble up the advertising market.

Alexander LebedevSo what hope for any of the broadsheets?

Well Lebedev has in effect taken over a clean new business: there are substantial overheads in the form of wages, printing costs and distribution expenses, but no debt.

His wheeze may be to challenge the internet at its own game, by giving the Indie away (as he has already done with the Evening Standard in London)

He would maximise "eyeballs" on paper to stimulate advertising revenues.

His rivals may accuse him of unfair competition, dumping; but it's difficult to see how the competition authorities could intervene if the alternative to such a last throw of the dice for the Indie would be closure.

But in taking the road to free-subscription he would be sacrificing annual circulation revenue of £30m, so this would represent a very expensive investment in a new business model.

It will be fascinating to see whether this former KGB operative has the stomach for it.

Comments

  • Comment number 1.

    Just hope the Indie continues. It's the best.

    GDM

  • Comment number 2.

    1. At 4:46pm on 25 Mar 2010, GDM wrote:
    Just hope the Indie continues. It's the best.
    ------------------

    It will continue under a new name - The Dependent!

  • Comment number 3.

    The wages were too high, down in London. It was very Londoncentric, as most of the "broadsheets" are. Only the Telegraph prints for all of us. And it was up against the Guardian and the BBC.

    I'd go and buy it now (it's only 40p at the University) but it's just London, London, London. Forget it.

  • Comment number 4.

    "His rivals may accuse him of unfair competition, dumping; but it's difficult to see how the competition authorities could intervene if the alternative to such a last throw of the dice for the Indie would be closure.

    But in taking the road to free-subscription he would be sacrificing annual circulation revenue of £30m, so this would represent a very expensive investment in a new business model.

    It will be fascinating to see whether this former KGB operative has the stomach for it."




    Excuse me, Robert, but there are a couple of points here that are relevant. It could be that, for Lebedev, destroying the competition is more important right now than profit. Once the race to the bottom is complete, and only free newspapers are left, who will be the journalists of that new dawn? A robot churning out any old rubbish? Blatant propaganda will become quite acceptable, even more so than now.

    Secondly, wasn't the same argument used about bailing out the banks? I mean, that old chestnut of "it's too big/important to fail". The competition authorities should intervene, but will they?

    Your melancholy is very understandable!

  • Comment number 5.

    Sometimes bankers have so much money they can buy newspapers as playthings.
    There are worse things they can do with their money I suppose.

  • Comment number 6.

    The current situation for newspapers and other industries has been one of failure to change and failure to adapt. It is the problem in governments and business...we have failed systems that everyone thinks they can restart. The question is:
    Why would we want to repeat something that has failed? The once powerful die slow painful deaths.

  • Comment number 7.

    When I saw the news, my instant thought was he will give it away for free, nationwide. The Evening Standard is free across London at the moment, and it's the only one I see everywhere, on the tube one every other passenger has that paper in the evening. I'm sure if he can get the same distribution nationwide (similar to the Standard) then circulation will hit the roof and so will advertising income. I'm also guessing the format of the Independent may change.

  • Comment number 8.

    Heaven forbid that something socially useful like an independent quality newspaper could be bailed out as a casualty of the credit crunch. Mr Lebedev might turn out to be a very nice proprietor but it might be smart to beef up the oversight and regulation of the monopolisation of newspapers.

  • Comment number 9.

    3. At 6:13pm on 25 Mar 2010, Jacques Cartier

    I agree. London might be home to a lot of people, but those people are a minority of the UK population.

    Wasn't there a story that the BBC sports room had a huge banner Reminging them that England is not the UK at one point? Maybe the newspapers need one that says London is not the centre of the world, second only to the places inside the D.C beltway.

    Now what will happen with the quality of the news? What editorial line will it take? Will this be another case of individuals holding political power in their hands, manipulating whole electorates to suit their whims?

  • Comment number 10.

    The Independent is saved, for a while at least, and we should all be glad for that, at least those of us who desire a diverse, vibrant press that questions and challenges and provokes.
    Yep, the Indie has gone down market from the strident, genuinely Independent of 86-90. It is, are you, and all that.
    So has every other paper.
    The Telegraph used to be a serious newspaper, for goodness sake. Barring the sensational scoop of MPs' salaries (someone else's story, let's never forget, eventually passed to the DT via good ol' chequebook journalism), it's just another rag these days, churnalism with little personality or direction or guts. Its website sums it up: more hits (feel the quantity not the quality), less brain.
    The Guardian is broke, and sad and a not a little arrogant at the same time. The Times is okay but bland. Ordinary. Mail = brilliant and utterly, despicably horrible. The Express? Makes you weep if you remember the days it was a proper newspaper. The tabloids are what they are.
    Anyhow, I've digressed. The Indie could be, should be, would be . . .
    And the point is that it came v v v v close to ceasing to be.
    But it is.
    For a while longer.
    Precisely what it is can wait for a few days.
    It is. Are you?

  • Comment number 11.

    Newspapers are becoming increasingly like football clubs: completely impossible to run in any normal economic sense without the patronage of a wealthy backer or backers. Because of this they become prey to the whims and vanities of the extremely wealthy who are able to use them to put forward their own agendas without fear of intrusion.

    Personally I read the Times, but will I pay to look at their website? No. Because when I read the Times on the train I can read it cover to cover. If I was to pay a £1 to access the website, I would not be able to spend the same amount of time reading it. I used to read the Standard every day without fail. Since it went free, the amount and standard of editorial has dropped and it's now indistinguishable from the Metro or London Lite or whatever it replaced. The only time I see it now is littering the floors of trains and tubes. I do not read it any more.

    Although the Independent is not a paper I usually read, it has valid opinions that I respect on the occasions when I have read it. I fear that it will go the same was as the Standard, soon to be followed by the rest of Fleet Street.

  • Comment number 12.

    I'm sure that Mr. Lebedev has the best interests of the suppliers, workers and readers of the Independent and that he will use a 'hands off' as regards editorial freedom and taking over the paper is a philanthropic act because he believes that a democracy needs a free press.

    Would it not also be possible for him to sell the presses/infrastructure cheaply to one of his other companies in a leaseback arrangement (it would give a bit of cashflow for a while) and when the Independent finally runs out of money ship the whole thing lock, stock and barrel out to a different country leaving him free to buy the title and have it printed by the Standard.
    It would also allow him to default on redundancy payments.
    Would the pension funds also be at risk ?

    The guy is a banker, the Indie is losing money hand over fist but has been aquired debt free, call me cynical but I think that it will be leveraged up to the eyeballs to release 'shareholder value' and then crashed.

  • Comment number 13.

    I have just heard that Robert Mugabe is buying the Telegraph and Kim Jong Il is making a bid for the Times.

  • Comment number 14.

    12. At 09:35am on 26 Mar 2010, BobRocket

    I heard a discussion lately about the economy of a free press, particularly the American press - I fear the likes of Fox, the most outrageous (don't think the moderators would allow through my real thoughts) right wing bit of media I can think of! One suggestion was to have a tax akin to our BBC license fee, not for TV but for newspapers. I'm not sure about that idea - I don't think the press we have now is good enough to justify a tax - but we do need to ensure we have a free press for the good of our democracy, lest we go the way of other, bigger ones!

  • Comment number 15.

    Can't pretend to be too upset at the slide of the Indie. I'm one of the many readers who have abandoned it in the last 5 or so years on the basis of its wilfully alternative prioritisation of stories. For a number of years it seemed that if every other paper was leading with the same story, the Indie would deliberately place a different story on the first page, regardless of its relative news-value. Different can be good. Different for the sake of it is simply irritating.

    I found that it also came to rival the Mail and Express in terms of its one-eyed reporting and commentary, simply offering a perspective so far to the left that it could've fallen off the page.

  • Comment number 16.

    #14 copperDolomite

    We already have a 'free' press, it's called the blogworld.

    I pick up the news from currently trusted sources such as the BBC, Reuters etc. and

    I pick up comment from other places, some like these excellent pieces from the BBC journalists, others from independent bloggers who write in a style I like.

    I have assembled a feed stream so that when I open my browser in the morning I get what is in effect my own custom newspaper.

    If discover a new source I add it in, if an existing source becomes bland or the writing style goes downhill then I can remove them.

    I get the funnies (Dilbert)

    I get George Orwells' and Eric Rudsdales' wartime diaries. (70 years late :)

    In my day job I usually have chance to glance at the days papers, they are all getting worse, content is getting shallower and the style of writing is rapidly being moved downhill in what I feel is a race to the bottom and ultimate closure, most of them I would not pay for even if I were going on a long train journey and needed something to occupy my time.

    I wish Lebedev and all those with an interest in the Indie the best of luck but I can't see a future for them unless the quality of content and comment is raised and maintained.


  • Comment number 17.

    Did anyone notice in A Darlings budget statement at 1035PM Wednesday on BBC1 he clearly said "We've bought taxes down" or a similar phrase? Is he living in the same UK as the rest of us or has Brown brainwashed him?

  • Comment number 18.

    Have I missed something. News may be free, but who will take the trouble to give newspapers away at newstands ? The vendors provide a service that can never be free, and without the newsvendors how do you get distribution as a publisher ? Free information may be finished, but free labour has barely been seen in the western world since the end of US slavery. Anyone fancy buying a WH smiths newstand ?

  • Comment number 19.

    It is very sad to see the Independent go. The fundamental problem is price competition, and the race-to-the-bottom. This undercuts the economic model of most quality print-journalism. I am a libertarian on most things, but it strikes me that this market has systemic failure and cannot deliver quality, unless there is some smart regulation.

  • Comment number 20.

    "It will be fascinating to see whether this former KGB operative has the stomach for it."

    Good irony :)


    I tend to agree with BobRocket - Lebedev will probably look to roll the dice on the free model (as the existing pay model obviously isn't working) and if that fails asset strip the company for all its worth and leave the liabilities hanging.

    Unless of course he has other associates who would consider having a mouthpiece worth the ongoing costs..

  • Comment number 21.

    re #19

    It could be seen as a reflection of our society, less and less people being prepared to put the time in to read in depth articles, wanting news spoon fed via TV (if they bother with news at all).

    Regulation isn't the solution, its a competitive environment, the independent is probably too big for the market it now finds itself in.

    Perhaps reinventing itself more towards an online model will allow it to retain its journalistic core, rather than holding on to the historical printed model.

 

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