The Financial Times will freeze hiring and sharply cut travel costs. As the medium that sits at the top of the business journalism chain, it should be more immune from the economic cycle than most. The FT carries premium advertising and charges a small fortune for a year’s subscription — $348. If it has fallen on even modestly hard times, the signal is that the business and financial press are in trouble again, much as it was three years ago when layoffs in the sector were commonplace.
The Guardian got a copy of a memo from the chief executive of the Financial Times, John Ridding, to his management. In it he wrote:
Unless there is a clear commercial opportunity that will deliver this year, or an essential editorial trip, we should let our global network do the work (that is what it is there for). Only the most vital of journeys will be approved.
Ridding also indicated a hiring freeze. The reasons for the actions were the ones many media fear the most:
As you’ll probably have noticed from recent results publications and statements from advertising agencies and news media groups, the advertising market has taken another turn for the worse.
Some hope emerged in 2011 and 2012 that the extreme drag that the economy had put on print media company results had lessened considerably. That would give the same companies a longer time to make their moves from print to digital content. But two things have happened. The pace of digital revenue growth has been inadequate, as the quarterly results of The New York Times Co. (NYSE: NYT) and other public newspaper firms has shown. And, worse, the slide in the overall economy has undercut any recovery of the sales for these companies.
The solutions to the revenue problem for companies like The Financial Times are easy to identify, but almost impossible to implement. One plan already adopted by some media is to cut print editions to fewer days and force readers to rely on Internet versions of the same media. But the FT probably still makes money on its paper version, particularly with the large sum it can charge subscribers. The second solution is to drive more people to Internet editions by charging low subscription rates. This is a violation of one of the main rules business school students learn. It is not possible to make a profits while losing money on every customer, no matter how quickly that customer base grows.
Digital versions of papers carry advertising whether or not their parents charge for access to content. Clearly that combination has not been enough to press the FT’s revenue higher quickly. The lesson cannot be lost on media that include Fortune, Forbes, The Wall Street Journal and a number of other, smaller media that operate in their shadows.
The business and financial press are in for real trouble.
Douglas A. McIntyre