Tortoise boss James Harding has made a last-ditch plea to staff at the Observer to back his takeover of the 233-year-old Sunday title or risk the future of the newspaper.
“We have a real plan to save the Observer,” the former Times editor told the Financial Times as staff at the Guardian and Observer voted to strike next month over the deal.
“We have a newsroom of more than 50 people. We have a consortium of investors who can bring not just capital but a commitment for the long term and editorial independence. And we have a plan.”
Staff at the Observer have so far rejected his approach, which has sparked widespread concern in the newsroom about swapping the deep pockets of the Guardian — backed by the £1.3bn Scott Trust — for a new employer at the lossmaking digital media start-up.
Staff in the Guardian’s office have taken to putting up posters with the slogans: ‘Not for sale: Save the Observer — democracy dies behind paywalls.’
The strike could threaten the sale to Tortoise.
“Observer staff are furious about how the approach has been conducted,” said one senior journalist. The vote to strike in early December was backed by more than nine in 10 UK members of the National Union of Journalists who work at the Guardian or Observer.
Harding admits to “a lot of shock and anger” among Observer staff but makes two arguments as he battles to keep the deal alive.
First, he wants to buy the newspaper as he sees the chance to create a sustainably profitable media group by combining the readership and long print legacy of the Observer with the digital savvy of the Tortoise team. Harding’s five-year £25mn plan projects a break-even point by 2027.
His second point is that staying with the Guardian is not a guaranteed future for the Observer, with the management of the newspaper group itself warning in a memo to staff last week and seen by the FT that “if the deal does not go ahead, status quo is not an option”.
“From the outside, it looked to us as though the Guardian would have to either fold in or close down the Observer within the next two years,” Harding said, pointing to the sharp falls in readership and staff numbers over the past decade.
In September Tortoise Media entered into exclusive negotiations with the Guardian Media Group to buy the Observer. Prior to the offer, the Guardian had already begun to think about the future of the newspaper, given it was increasingly seen as financially unviable as a UK-only, Sunday print newspaper.
The memo seen by the FT said that the Observer was forecast to be lossmaking within three years, if not sooner, and would be lossmaking already if shared costs were taken into account. This was “why we talk about needing to make difficult decisions if the deal does not go ahead”, it said.
Harding has set out a number of proposals to try to assuage concerns in the newsroom. Tortoise has committed to keeping all staff terms, including for freelancers, and to nearly double the commissioning budget.
He wants to invest in its operations and add a dozen or so staff to expand in areas such as sport, business and international affairs. The editorial board will be chaired by Richard Lambert, the former FT editor, to help ensure editorial independence.
Tortoise has promised to continue to publish the Observer as a Sunday newspaper, while its content online would be behind a paywall.
“If you’ve got a set of digital skills and you’ve got a big brand, you’ve got the capacity to build something at scale.”
Harding has assembled a group of investors to back the bid, including Gary Lubner, a South African donor to Labour. The Guardian’s Scott Trust will also retain a minority stake, he said.
It is unclear what impact the strikes will have on the sale. The likelihood is that any move to restructure, cut or close the Observer would yield similar industrial action, according to those close to the talks.
“Things are pretty bleak,“ said one person in the newsroom. Some are worried about their jobs, while others have questioned the validity of the £25mn investment figure, with at least a small amount expected to be derived in the latter part of the five-year period from reinvested revenues. “[There is] a lot of anger about,” they said.
But people close to the Guardian’s thinking said that returning to previous arrangements was not an option, while a strike was “always likely”. “It’s a commercial deal and this does not change the work being done. Just because it is not popular right now does not mean it is not the right thing to do for the journalists and the title.”
The union and management disagree over the responsibility of the Scott Trust to the Observer — the memo to staff said that the Scott Trust exists to support the Guardian, rather than the Observer, which is not covered by the protections of “in perpetuity” that apply to the daily newspaper.
The board of the Guardian Media Group, which operates the two newspapers, has already given its support to the deal, according to a memo sent to staff on Wednesday night. The Scott Trust is meeting next week to review its recommendation, although people close to the process said an ultimate decision could be postponed and that there was no hard deadline for the process.
The Guardian has also received letters from two law firms suggesting that they represent rival bidders for the Observer. A person close to Lord David Sainsbury — who had been linked with one of the bids — denied his involvement.
The newspaper’s management is now locked in further discussions with the union, with additional commitments offered this week including a voluntary redundancy programme for any Observer staff who do not want to move.
A spokesperson for Guardian News and Media said: “While we respect the right to strike, we do not believe a strike is the best course of action in this case and our talks with the NUJ continue.”
The NUJ has urged GMG to halt exclusive talks with Tortoise. Michelle Stanistreet, NUJ general secretary, said: “GMG has acted in poor faith, revealing hours into yesterday’s negotiations that recommendation of the sale had already been agreed despite previous assurances to the contrary.”
Harding, meanwhile, said that the future of Tortoise does not hinge on the deal, adding that the group was on track to become profitable for the first time this quarter.
While last year’s results have not yet been published for Tortoise, the company reported a loss of £4.6mn on revenues of £6.2mn in 2022.
“We’re in a happy position that if for whatever reason we can’t make it work we’ve got a company that is growing. We’ve got the financial backing.”
If the Scott Trust board gives approval, Harding sees the chance for a “managed transition” in the first quarter of next year. However, before then either the union will need to be won over or the newspaper’s management faces a potentially damaging and protracted fight with its own staff.
