Strategy & Operations » Leadership & Management » Interview: Guardian Media Group CFO Darren Singer

TURNING award-winning journalism into a profitable bottom line is the conundrum facing Darren Singer, chief financial officer of the Guardian. On the former, the left-leaning newspaper has had a storming year. The latter still requires some work.

From exposing phone-hacking at the now-defunct News of the World, to publishing a series of records covering US diplomatic or intelligence reports from whistleblowing site WikiLeaks, the Guardian has had many journalistic triumphs in recent years. Most notably, the newspaper was awarded the highest accolade in US journalism, winning the Pulitzer Prize for public service for its ground-breaking articles on the National Security Agency’s surveillance activities, based on the leaks of Edward Snowden.

But journalistic prowess doesn’t necessarily convert into good business. A first glance at the Guardian’s latest accounts reveals how difficult the publishing game can be. Last year, Guardian News & Media, publisher of and the Guardian and Observer newspapers, lost £30.6m, while parent company Guardian Media Group – of which Singer has been CFO since 2011 – delivered operating losses of £26.1m.

The business remains loss-making, but this is not something that threatens Singer in the way it would some CFOs – though the aim naturally is to turn a profit. For one, GMG is backed by the Scott Trust, which is designed to ensure it survives “in perpetuity”. As the sole shareholder, the Trust was created in 1936 to “safeguard the journalistic freedom and liberal values of the Guardian”. But while the Scott Trust isn’t running for profit per se, Singer says it shouldn’t be seen as a not-for-profit organisation.

“We are profit-seeking,” Singer says. “Because of the trust and the way it is set up, we have a very long-term horizon. There isn’t a goal [to be profitable] in itself by this date or that date. We think of it as the sustainability of the Guardian.”

Indeed, losses continue to narrow year on year – from £43.9m in 2013 and £75.6m in 2012 – as costs are stripped out of the business and revenues, particularly from digital sales, have been improved.

“There is a goal [to be profitable] but it isn’t an overriding goal. The goal is sustainability and the independence of our journalism,” Singer says.

War chest

Nor should continuing losses be much of a concern for Singer. The sale of Guardian Media Group’s stake in Trader Media Group, the publisher of Auto Trader, earlier this year resulted in a threefold increase of the group’s reserves to £842.7m. A deal, the company said, that will sustain its finances for “generations to come”.

In March, GMG divested itself of its 50.1% stake in Trader Media Group, to Apax Partners for £619m. The windfall helped the business swing to a pre-tax profit of £549.2m. However, Singer says the company has no plan to use the funds for a major acquisition; instead, most of it will be invested with an aim of a real return of 5% to support an annual loss level of about £40m.

The portfolio of assets in the investment fund is designed to spread group asset risk over a wider base than its historical UK media sector focus, Singer explains.

“We will lock away quite a large part for a long time. About £500m to £600m will be put into a series of investments. We will try to diversify away from the UK and media,” he says. “About £200m to £300m will be used for the ongoing financing of the Guardian, and future investments as we move from a print organisation to any platform for our content.”

The Guardian launched its digital-first strategy back in 2011, at the same time as it launched its Guardian US operation – followed by the launch of Guardian Australia in 2013 – as part of its strategy to grow its global audience.

Though Guardian US delivered record online traffic in 2013, with more than 20 million unique monthly users – representing year-on-year growth of 12% – commercial success has been elusive. One industry source told right-leaning rival The Telegraph that the newspaper has yet to get to grips with American media sales, but things are improving. Revenues from US operations more than doubled on the previous 12-month period, reflecting advertising demand and sponsorship deals with partners such as HSBC and Netflix.

Nevertheless, Singer admits the commercial model has been challenging. “It’s a vast market. We were slower to establish ourselves than we thought when we first set up,” he explains. “Because it’s such an enormous market, you need a substantial presence there.”

The publisher has already spent millions of pounds trying to break into the US and intends to build on its existing operations, opening a West Coast office to accelerate its commercial and digital presence, while adding a number of senior editorial staff. The new office, Singer explains, will leverage business and technology links in Silicon Valley and other parts of California.

“We are very New York-focused. Part of our strategy to expand is to look at other major cities,” he says, adding the office will be “small to start with”: “The commercial market in Silicon Valley is different; it has a different set of clients.”

Digital model

Sales, particularly from digital, have continued to increase as the publisher has pursued its global aspirations. Last year, revenues increased to £210.2m from £196.3m, while digital revenues increased by almost a quarter to £69.5m. Online traffic went up from 78.3 million in March 2013 to 102.3 million in March this year.

The growth in digital revenue is clearly healthy, given that many British newspapers are suffering from falling circulations and weak online advertising revenues. The dilemma is particularly acute for the Guardian, which, unlike many of its peers, does not charge for its online content. Rivals including The Times, The Telegraph and the Financial Times have all introduced various paywall models in recent years.

According to Singer, introducing a paywall would jar with the “open philosophy” of the publisher’s journalism and would be detrimental to its plans to become a global news outlet.

“It is the right model commercially and editorially for our strategy to be a global and sustainable business,” Singer says.

The publisher has also developed a “different commercial model” in how it uses the Guardian to generate money through various sponsored, branded content deals and various ancillary businesses, such as its personal dating site.

In February, it launched a branded content division, Guardian Labs, striking a £1m-plus deal with Unilever to push values of sustainable living and “open storytelling”. The division – essentially a branded content and innovation agency – will include a mix of interactive and cross-media content as well as live events. “A big part of our success has been in moving away from selling each platform separately,” Singer explains.

Analytics has formed a big part of that strategy, which has been supported by having the finance department embedded within, and working alongside, the business. “I believe in a model where finance is in the middle of a company,” he says.

The model, Singer explains, is similar to the one adopted by BSkyB, where he was a director of group finance and reporting. “We have a team that sits alongside the commercial director and team. There is a better understanding of the return on particular deals and of the revenue and margin of the deals,” he says. “We do a lot of work-around analysis: when is the best time to put up price; how do we bundle together and maximise revenue?”

Hard-nosed experience

Singer feels he really benefited from the experience at Sky, which he describes as a “brilliant grounding for finance people”. During his time at the broadcaster, he was involved in negotiating the rights to broadcast the Premier League along with securing various movie studio deals.

“The hard-nosed experience of it was helpful. The movie studio deals were very traditional; they had to be thrashed out,” he says. “There was a ferocious level of detail”, he adds, which emphasised the “importance of analysing pricing and making a case around value”.

Making a case for value is equally applicable to cost-cutting, which has “become quite part of the agenda” at the Guardian. Indeed, in its annual report, chief executive officer Andrew Miller said the publisher “must focus relentlessly” on cutting underlying operating losses. Part of that will come from increased sales, but the group is three years into a five-year cost-cutting programme. Alongside the “normal cost disciplines” and cutting expenses, Singer says the group has restructured its print site and done a lot of work in procurement.

“We have implemented better processes and have worked to negotiate costs down with clients,” he says. In finance, Singer says the team has consolidated the use of back-office resources by bringing the back-office teams of Guardian Media Group and Guardian News and Media together. “The group has got a lot smaller, so it made sense,” he says.

The group has also disposed of a series of non-core assets. In addition to the sale of its stake in Trader Media Group, it raised £29.5m from the sale of its stake in automotive information provider CAP to Top Right Group, a business-to-business publisher it jointly owned with Apax Partners.

“All these things add up,” Singer says. But he is keen to stress the business has been investing in new areas. For instance, the publisher will invest more resource into video in the future, as well as doing more things with membership to the Guardian and its products, such as live events.

“We see a fragmentation in the way people consume news in different ways during a day. Different generations consume in a different way,” he explains.

As the Guardian strives to become a profit-making publisher, the key balancing act for Singer is how much to re-invest and how much to take to the bottom line. “Cutting costs has to be one facet,” he says. “If you cut costs and do nothing else, it is a recipe for not surviving.” ?


2011-present CFO, Guardian Media Group
2010-present Director, Emap
2010-present Director, Trader Media Group
2008-2011 CFO, EMEA, GroupM
1998-2008 Director of group finance and reporting, BSkyB