The spy who loves papers needs deep pockets

JOURNALISTS at the Independent cheered when they found out that former KGB spy Alexander Lebedev had finally bought the newspaper. Their reaction couldn’t have been more different to the doomed silence that descended on the Evening Standard offices in January 2009, when hacks at that title learned of its sale to the Russian billionaire.

But Lebedev has turned out to be a responsible proprietor so far, while his decision to make the title free has paid off. Sources close to Lebedev say the paper’s revenues are now higher than they were when it was a paid-for title. Performing the same trick with the Independent and its Sunday stable mate will be much harder, however.

Sources close to the tycoon insist that he has the funds and determination to shoulder the huge losses at the Indy titles, especially now the Russian stock market has started to recover. Still, the financial performance of the papers is dire: they lost a combined £12.4m last year, and that was after parent group Independent News and Media slashed costs by £20m. Circulation – which hit a peak of 400,000 in the glory days of 1989 – was languishing at around 184,000 last month. Astonishingly, just half of that was paid for at full price.

Of course, Lebedev wouldn’t be the first proprietor to hang on to a loss-making newspaper. Last year, every paid-for quality title lost money, with the exception of the Telegraph and the Financial Times. But while such newspapers rarely make profits, they can buy status and power.

The currency of that status and power is incredibly high in Russia. For rich Muscovites, London has become an extension of the Moscow social scene, where ownership of an English-language media asset confers serious kudos.

Although he might be able to absorb some losses in the short term, Lebedev will be keen to stem declining revenues at the Independent. Previous management has already cut costs to the bone, but the new owner will try to find further synergies by sharing resources with the Evening Standard. According to Numis media analyst Lorna Tilbian, that means there will “almost undoubtedly” be redundancies across the three titles.

People familiar with Lebedev’s plans say he has no intention of making the Independent free in the “near to medium term”, although that clearly leaves the door open for a change of heart down the line.

Unfortunately, its long-term prospects are still grim. As Clare Enders of the eponymous analysis firm points out, paid-for national newspaper circulation has declined by 20 per cent over the last decade – but we still have almost exactly the same number of titles. That situation is clearly untenable, and as the smallest of the pack, the Indy will suffer the most. Its future depends on the depth of Lebedev’s pockets.