Like the City and the moneymen on which it reports, the Financial Times is hoping the new year will bring an upturn. John Cassy on tough times at the pink 'un
Monday January 6, 2003 The Guardian
During the good times the Financial Times is a licence to print money. As the bible of the business world it is the natural choice for corporations seeking to advertise and City workers looking for the latest financial news and jobs.
Yet three years after the dot.com boom helped the pink 'un to record profits, its journalists are writing about the latest economic downturn with first-hand experience.
Thousands of City job losses have hit the FT's circulation hard, while a collapse in corporate advertising is depriving it of its financial lifeblood. On the editorial floor lunches, foreign travel and taxis - perks that journalists take for granted - have been strictly rationed.
Even pens and notebooks appear in short supply. Before Christmas some staff were told that the stationery cupboard would not be replenished until the new year, leaving reporters to pick up freebie supplies at press conferences.
And in a development that would have been unthinkable two years ago, it was recently reported that the FT has been talking to its similarly stretched arch-rival the Wall Street Journal (WSJ) about merging their European printing and distribution operations in an effort to reduce costs. Just like the companies that it reports on, the FT is caught in the eye of an economic storm and it could hardly have come at a worse time.
Andrew Gowers, editor of the FT, admits that times are tougher but is resolutely sticking to his guns: "The downturn has made things more difficult but it hasn't changed our ambitions one jot," he says.
Voted one of the world's most valuable brands two years ago, the FT is aiming to capitalise on its position in a race with the WSJ to become the first truly global business newspaper. Its aim is to deliver information around the globe and around the clock using editions in the UK, Germany, US and Asia, plus the FT.com website.
Yet some staff are beginning to wonder whether the newspaper can really afford to be fighting so many expensive battles on so many different fronts when even the pens and paper that allow them to do their jobs are in short supply.
Gowers insists: "We are holding to our course. This is not a strategy dependent on cycles, it is about addressing a new type of market that is opening up for business information. We are going through a very tough budget process and have been very careful with our costs. That does not involve crimping what we do editorially; it is about building a platform from which to invest."
Marjorie Scardino, the chief executive of the FT's owner Pearson, says she remains committed to the newspaper's development. "One of our rules is to never compromise the quality of the product and we have done our very best to protect editorial integrity and spending on the paper," she said in a recent conference call with investors.
The impact of the economic turbulence that followed the bursting of the dot.com bubble has been severe. In 2000, when the "new economy" was in full swing, operating profits at the FT touched £81m. This year analysts expect the paper to clear just £11m and even less next. "Advertising has simply evaporated at the FT," says Paul Richards, analyst at Numis Securities. "When you have such a big party you suffer a big hangover."
Profits are only being delivered after a 25% cut in the cost of running the FT group since 2000 and a huge reduction in investment in FT.com, the popular but expensive internet portal. The FT Group includes newspapers in France, Spain and a 50% stake in the Economist (see panel).
Around 300 people, including 30 journalists, have left the group during that time, although Pearson is at pains to stress that none of the redundancies has been compulsory nor does it intend to make any.
The WSJ has not fared any better, cutting hundreds of jobs, including some compulsory redundancies among reporters. Over at Reuters, the financial news and information provider, more than 1,800 people have lost their jobs and the shares are trading at lows not seen since the Gulf war.
With a freeze on hiring new staff from outside the newspaper now well into its second year, existing reporters are starting to complain of being overworked and constrained by a lack of resources.
Staff are now defecting at a rate which long-serving employees say is unprecedented. Last year Robert Thomson, the former head of the FT's US edition who was beaten by Gowers to the editor's seat, was poached by Rupert Murdoch to edit the Times. Several key FT staff have followed him.
More recently - and perhaps more worryingly - the highly-regarded news editor Will Lewis also jumped ship for Wapping, taking the business editor's role at the Sunday Times. Lewis, just 33, was one of the newspaper's brightest talents and had been credited with bringing more energy and direction to the FT's reporting.
"There was a time that even if you were offered more money by another paper you still wouldn't go because the opportunity at the FT was always greater, but now that doesn't seem to be the case," says one long-term FT staffer.
The mood on the editorial floor was hardly helped in October when Scardino said that financial journalists had not worked hard enough to "ferret out" big stories such as the Enron and WorldCom scandals. "We could have done a lot more digging. But business journalists often don't know a lot about business," she said in an interview with the Royal Society of Arts Journal that provoked fury at the FT. Scardino immediately apologised, saying her comments had been taken out of context and were not directed at FT staff alone, describing them as "the best in the world".
Gowers insists the storm has now blown over and plays down talk that cutbacks are causing unrest. "The stories have been exaggerated. We have asked people to keep a careful grip on travel and entertainment costs, to think carefully if their lunch is necessary, to ask us if they are unsure.
"People are very understanding of the position we are in. They don't think the sky is falling in on us because it isn't."
Despite the financial restrictions on what he can do, Gowers has reshuffled in an attempt to renew the vigour of a news operation that many staff concede had become sleepy under his long-serving and well-liked predecessor Richard Lambert.
One fifth of his staff have changed roles since Gowers became editor in October 2001. The changes have brought a culture that insiders say is less collegiate than under Lambert, while some companies complain it is overly aggressive for a paper of record.
The emerging powers at the newspaper are two Gowers appointments - Chrystia Freeland, the youthful editor of FT Weekend, and Richard Addis, the former editor of the Express originally brought in to advise on design.
In an effort to underline Pearson's continued commitment to the growth of the FT, Scardino has sanctioned what she described to investors as "modest" investment in the FT in 2003. The UK edition of the paper, which has seen sales fall from almost 200,000 in early 2000 to 155,136 today, is likely to be relaunched with a third section with more general features and sport.
The investment has been made possible partly because, after guzzling around £150m, FT.com is now operating at break-even. Earlier this year FT.com started charging for some services. It now has around 40,000 subscribers paying an average of £70 per year each.
"FT.com has been our great leap forward," Gowers insists. "We're getting to the point where FT.com is not a drain, it is an essential part of the way we will move forward. It is integral to our plan that we reach people around the world during all parts of their day."
Yet efforts to expand in the US and challenge the WSJ continue to be a drain. "The FT in the US simply hasn't changed the landscape for the Wall Street Journal," is the dismissive assessment of the WSJ's publishe r Karen House, of Dow Jones. "We're a 1.8m circulation paper, they're at 140,000 in the US, and it's unclear how many of their copies are paid for and how many are given away. There's simply no comparison between us."
Gowers says he is happy with the US performance and says the FT never set out to overtake the Journal. In continental Europe the FT's position is far stronger. Combined circulation in Europe and the UK is 310,000 - more than treble the 100,000 the WSJ has been able to attract after two decades of trying.
"In continental Europe we are absolutely and incontrovertibly winning, the Wall Street Journal has not made progress in the last 10 years," says Gowers.
After slugging it out in the US and in Europe, this year's battleground is likely to be the Far East. Scardino has agreed to back plans for an Asian edition of the paper. A dedicated team of hacks is likely to be based in Hong Kong, under the guidance of John Ridding, currently deputy editor. Again the FT will be in direct opposition to the WSJ, which has been in the region since 1976 and claims to have around 85,000 subscribers.
Success in Asia is crucial to both papers. Many of the fastest growing businesses in the world are based in the Far East and as "neutral" ground it is likely to provide an important indication of which of the two papers' distinct styles and editorial approaches is more appealing to a global audience.
The WSJ is taking the FT's arrival seriously and beefing up its own operations in the region, according to one insider. "Asia will be the true test of the internationalisation of the FT," admits one senior executive.
Adding extra spice to the competition could be the New York Times, which recently acquired full ownership of the International Herald Tribune. Analysts expect the NYT to turn the Tribune into a global newspaper capable of competing with both the FT and WSJ.
While both the FT and WSJ are conscious of possible extra competition, neither appears too concerned. Dow Jones' Karen House says: "I've no doubt the New York Times will do a serious job with the Herald Tribune but it has not been a big financial success in the years we have competed with it." Gowers adds: "The Herald Tribune has been struggling for a long time but we'll be treading cautiously on that front."
The reported talks between the FT and Journal over sharing print and distribution operations are likely to fuel persistent rumours that Dow Jones may eventually seek to buy the FT. Scardino's stock response to questions on whether the FT is for sale is a curt "over my dead body", although in a recent interview she added the caveat "I am, however, mortal."
Numis Securities' Paul Richards says Scardino is unlikely to change her mind. "I'd be extremely surprised if Pearson sold the FT," he says. "It's such a flagship for the group and so tightly associated with Pearson, even though if you started off with a blank sheet of paper and went to create an ideal media group it is unlikely it would consist of Penguin books, a US college education business and the Financial Times newspaper."
House also plays down suggestions of a merger of the two papers. "We have our plans, they have theirs. I think we'll both stick to what we do," she says.
Both papers will be hoping the economy improves before long, returning them to health in preparation for the bloody battle that lies ahead.
Family fortunes
The FT Group consists of the FT newspaper, FT.com, FT Business and FT Interactive Data (part of the NYSE listed IDC), Les Echos, Recoletos (Spanish media group including Expansion and Marca), and joint ventures including FT Deutschland, The Economist Group (Pearson owns a 50% stake), Vedomosti, BDFM in South Africa and CBS Marketwatch (Pearson owns a 34% stake).
FT Circulation
Total: 454,159
UK: 155,136
Ireland: 4,914
Continental Europe: 147,782
USA: 117,633
Asia; 28,694
Source: FT/ABC
FT.com has around 3.2 million unique monthly users and 50m page views.