Media: Spotlight on Guardian Media Group - Guardian Media Group bucks the trend of economic gloom
campaignlive.co.uk, Friday, 01 August 2003 08:00AM
GMG needs to decide which operations it wants to focus on soon, writes Alasdair Reid.
According to Bob Phillis, the chief executive of Guardian Media Group, the moral to be gleaned from the company's latest set of results is that "tough times can bring the best out of an organisation". And who can quibble with that interpretation? GMG has turned in a very fair set of figures and these are tough times, especially, you'd think, for a modestly resourced outfit with a couple of newspapers and a handful of radio stations.
In the year to 30 March, the group's pre-tax profits were a whisker shy of £37 million, compared with close on £10 million for the same period last year. So what's the story behind the maxim about profiting from diversity?
The first thing to realise about GMG, of course, is that it contains much more than two newspapers and that handful of radio stations. There are the regional papers, obviously, not just in the company's historical north-west roots, the Manchester Evening News and all its Lancashire and Cheshire satellites, but in the home counties too.
And then there's its stake in Trader Media Group, a company that publishes more than 70 titles including the flagship Auto Trader. The TMG contribution isn't broken out in the balance sheet but it is believed to be a large chunk of the £42.6 million profit attributed to magazine activities. This is larger than total profits, should you be wondering, because the total figure is brought down by losses on other divisions.
No wonder GMG is thinking of moving to acquire total control of TMG.
Especially as radio continues to look pretty shaky, with losses of £4.3 million - almost the same as last year. Many observers believe GMG will have to choose between one or the other - radio or the Auto Trader magazines.
Mark Helm, the head of radio at MediaVest, likes what the group has been doing in the medium. "It has good brands (including Jazz FM) and it has been consistent with the product, and with Real Radio, especially in Wales, it has managed to reach a market crying out for decent commercial radio. Even in Scotland, where there are commercial alternatives, it has brought something new to the market. GMG has solid radio brands, sold well."
Its problem, though, is that in a consolidating market (the Communications Act gives the go-ahead for concentration in the radio market, which will happen just as soon as an end to the recession hoves into view), GMG will have neither the funds nor the inclination to bid aggressively. And the inexorable logic is that those who aren't hunters become the hunted.
"I see no reason why it shouldn't stay in radio," Helm responds. "It is very brand conscious. GMG's good at adult contemporary radio and I'm sure if it wanted to it could expand those brands."
But, inevitably, it will be the flagship newspaper brands that come under greatest scrutiny, and again it's a game of two halves. Profits from newspapers were a healthy looking £26.5 million but Phillis admits that this is all driven by The Guardian and that The Observer continues to make a loss, ten years after being acquired by the group. On the plus side at The Observer, circulation continues to creep up (it's now more than 460,000) and its product innovations have been widely praised.
So, on balance, the group is pretty handily placed as we head out of recession, isn't it? You could argue, though, that GMG is always handily placed. As a non-plc managed by a charitable trust, it is unique in the UK media scene. And rather old-fashioned too, like the Co-op or a mutual building society. Yet stability is arguably its greatest asset.
GMG is the closest thing that the UK has to a continental European media company - a liberal-left cultural institution that is immune from takeover and free from the distracting demands of shareholders. Public companies such as Trinity Mirror have to report quarterly results and its chief executive, Sly Bailey, can't so much as cough without the whole media world talking about it.
If public companies work to a 100-day plan (and that's if they're lucky), GMG sometimes seems to have a 100-year plan. Managers can manage without fear. They can also keep a toe in difficult waters for longer than rivals can - as in its loss-making online division.
But there is a downside, too, as one observer points out: "On the commercial side, individual managers have long-term careers and the disadvantage is the only route to promotion is dead men's shoes. That can lead to a lack of vitality."
But the company's small "c" conservative nature and its regional roots actually mean many companies would rather be taken over by GMG than some rapacious conglomerate. Which has to be worth something in the journey ahead.
Greg Grimmer, the commercial director of ZenithOptimedia, says that the flagship remains in fine fettle. He states: "It's about the strength of the brand. Pro rata to copy sales, it must spend three or four times (on advertising) what The Times or The Daily Telegraph does. When the cover-price war between The Times and The Telegraph was on, it didn't have to drop its cover price and its sale held up.
"On the newspaper sales side, it's as good a team as there is out there and it's now as well paid as its rivals. It can't compete in terms of share against The Times and The Telegraph. Carolyn (McCall, the managing director of The Guardian and The Observer) is still out and about and highly respected. It punches above its weight."
Steve Goodman, the director of press at MediaCom, agrees: "It is investing in the (national newspaper) product and it's paying dividends. I'd also say the sales team was the most innovative in the industry. They talk about solutions rather than just selling space."
This article was first published on campaignlive.co.uk
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