If Newspaper Industry Salvation Means Very Rich Entrepreneurs Investing In Better Journalism To Reap Just Rewards, Then Let’s Wish The Russian Oligarch Good Luck In London With The Independent!

Philip M. Stone April 1, 2010 Follow on Twitter

In his early life in London Alexander Lebedev was a KGB man, but he struck it rich with the fall of communism and it is now he who often publicly expounds all the good thoughts about freedom of the press that those in the West grew up with. He is now backing up his words with deeds by buying two London national newspapers, promising to breathe new life into them as they lay practically at the mortician’s door.

It has been a common theme for the past few years that the only salvation for newspapers is that they are either taken over by very rich people on an ego trip who say they are willing to invest whatever it takes and profit is not the top priority — top journalism is – or that newspapers should come under tax protection as non-profits, or even become charity cases.

But it is now a Russian who is taking the lead in the UK in trying to resurrect an industry in dire financial trouble – it may be partly an ego trip, it could well be he truly does believe in freedom of the press and is making the investments necessary to maintain a vibrant competitive national UK press, but he is also a businessman willing to make the investments he thinks necessary to produce a superior product that will win back readers and if that doesn’t work then he would likely give up the ghost . That gives him an easier time than Rupert Murdoch who does not want to go down in history as the man who killed The Times of London even though it is now losing more than £1 million a week.

The headlines say Lebedev stole the Independent and Independent on Sunday for just £1, but you know it’s not as simple as that. The newspapers are said to be bleeding around £12 million a year and with its parent, Ireland’s Independent News and Media (INM) also hemorrhaging badly, cutting back has been the name of the game there for some time, not investment. 

Lebedev, said to be one of Russia’s richest oligarchs, struck a tough deal. INM is committed to meeting £9.25 million of losses over the next 10 months, and if Lebedev decides to kill the newspapers after five years then INM will have some printing contract liabilities to deal with. On the other hand, it would have cost INM more than £30 million to close down the newspapers so at the end of the day both sides could say they had a win-win deal.

But to bring the Independent and its Sunday title back to the forefront of UK journalism means big editorial investments. The Independent itself quoted Lebedev saying, “I invest in institutions which contribute to democracy and transparency and, at the heart of that are newspapers which report independently and campaign for the truth to be revealed. I am a supporter of in-depth investigative reporting and campaigns which promote transparency and seek to fight international corruption. These are things the Independent has always done well and will, I hope, continue to do.”

It would seem that Lebedev the businessman is willing to give the titles up to five years to succeed.  A big item in the negotiations was the 12-year Trinity-Mirror print contract but Lebedev insisted he would not accept liability for more than five years, so to get the deal done INM came in with some financial guarantees for after five years if necessary.

So while editorial investment is welcome what’s the real business plan to make the titles profitable? On that there is silence currently from the Russian camp. Could what he did with making the Evening Standard free apply with The Independent? Lebedev took a 75% stake in the London evening newspaper last year  and he  stripped the 50 pence newsstand charge, making it a freebie. Circulation increased from around 200,000 to about 600,000. That strategy seems to be working with monthly losses said to be halved because the loss in circulation revenue has been made up much more by the increase in advertising revenue based on higher distribution. Even so that still leaves an annual loss of some £13 million.

An improving economy will get those advertising figures even better. It’s possible there could be a scheme to charge for the newspaper in the suburbs while still staying free downtown (shades of what the Manchester Evening News tried with mixed success), or it may just be that Londoners will so much appreciate the journalistic product that the Standard has become (Lebedev has kept his promise there to  maintain, even improve standards) and maybe a newsstand charge might be reinstituted at some point. Lots of tweaks yet to come.

But would Lebedev consider turning the Independent free, too? That’s not so easy for a national newspaper as it might be for just a city newspaper – national distribution costs, for one thing, would be far higher than circulating just in a city and its suburbs. 

Perhaps like Murdoch, who often reduces newsstand prices to boost his titles (he’s doing it again now with The Sun), Lebedev might consider for a couple of months or so  reducing The Independent’s price. In the UK that strategy works – The Times started such a newspaper war in 1993 that went on for some 15 years and which nearly destroyed  of the bottom lines on Fleet Street, but The Times readership did improve considerably; the problem became as the low pricing gradually increased most of those new readers left so the lesson for The Independent and its Sunday paper is to be editorially up to snuff when/if that marketing strategy gets used so readers will appreciate not just the low price but the editorial content, too.

But what is really fascinating is that Lebedev may not go that route for fear that he could damage his competitors. He says he believes so passionately in the freedom of a strong press that he fears if there was another newspaper price war similar to what Murdoch started with The Times then this time around some titles wouldn’t survive, and that,  he says,  he doesn’t want to see.  

Now, how many capitalist publishers born and raised in the West do you know who would worry about that?