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Not the best guardian for the Observer

David Hellier
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EVEN without a downturn in the economy, the short-term future for paid-for newspapers was always going to be tricky. <br /><br />Newspapers face a myriad of threats, ranging from growing competition from online news and social sites to the rivalry from free printed titles. Circulations of the paid for titles have been gradually declining for years and look unlikely to revive anytime soon.<br /><br />But the severity of the downturn in the economy, pushing advertising rates on the weakest titles down as much as 40 per cent, has for some turned a knotty problem into a crisis.<br /><br />So, sad though it is, it is no surprise to learn that one of the UK&rsquo;s top titles is in danger of closing. That the title currently in fear for its life is the Observer is unfortunate, though, given that the Sunday paper seems to be bearing up in terms of its circulation. Its marginal costs can not be that high given that it shares most of its costs with its six day-a-week stablemate the Guardian.<br /><br />The Observer&rsquo;s main problem is its owner&rsquo;s predilection for spending cash on other projects. Guardian Media Group (GMG) has spent &pound;60m on trendy presses that only publish in-house titles; millions and millions of pounds have been poured in to the Guardian web-site by editor Alan Rusbridger without a clear plan for when it might recoup some of that investment; and at the top of the market it got into bed with the private equity group Apax to buy out Emap&rsquo;s business to business titles.<br /><br />When the Emap deal went through, many of the executives there felt happy that they would benefit from being part of the Guardian group. But instead of finding themselves benefiting from GMG&rsquo;s massivle online presence executives talk of the business being used to ultimatley become a prop for the group&rsquo;s papers.<br /><br />The problem for GMG is that the business to business specialist market is also in the doldrums, forcing cuts on the owners such as the amalgamating of editorial teams at fashion title Drapers and Retail Week, which are on the surface two distinctly different titles.<br /><br />With Rupert Murdoch promising to charge for online content for his titles, the Sun, Sunday Times, Times and News of the World, perhaps GMG sees some light at the end of the tunnel for its so far marginal online revenues.<br /><br />Its media web-site is one that might be able to derive subscription income without too great an overhaul, especially if it starts to report its own tribulations as well as everybody else&rsquo;s (as usual, news of GMG&rsquo;s deliberations over the future of the Observer, was reported a good 24 hours after it appeared on rival web-site; not good if you&rsquo;re trying to convince readers to pay for a premium site with all the news).<br /><br />Fractional increases in revenues elsewhere may not be enough to save the Observer, whose staff must now be wishing they were back in the hands of a company run by an egotistical tycoon such as former proprietor Tiny Rowland. Rowland may have interfered in the business section of the publication but at least he cherished the title beyond its money-making potential, unlike the Scott Trust whose objective at GMG is to safeguard the interests only of the Guardian. david.hellier@cityam.com<br /><br /><strong>&bull;Allister Heath is away</strong>