In search of owners who are rich, insane and generous

The American Journalism Review (AJR) had this to say in its latest story about the new generation of US newspaper owners: “Are these guys crazy?” It is a question we need to ask in this country.

With newspapers in trouble in many parts of the world, especially the USA, why are there still people who want to buy newspaper companies, the AJR asks. They offer three different kinds of reasons: they are going cheap, and people like Warren Buffett can’t resist a bargain; they think they can run them better than the previous owners, and there is often truth in this; they think newspapers are important and are doing it as what someone called “a civic mitzvah”.

But it is all at a huge risk, they add, as nobody is certain of the future of newspapers.

In South Africa, I hear, there remains a massive gap between what the Irish sellers of the Independent group want for their titles, and what locals are offering. That is to be expected: the Irish have debts to pay and want a high price-earnings ratio from a business which is producing good profits; the local want a bargain, they may expect an empowerment discount, they think the Irish are desperate to sell, and they know they are taking on serious risk.

After all, our newspaper sales have been in serious decline in the last two years, with the sole exception of the isiZulu newspapers.

And there is another factor: the politics of it. Empowerment shareholders who get newspaper assets are going to face two major challenges:

* The need to invest seriously in the Independent titles. These papers have been seriously neglected in recent years, with the Irish harvesting as many short-term profits as possible, and will need a serious capital injection if they are to build a digital future. This will be hard to do if the buyer has borrowed heavily for the purchase or paid a full price. The best scenario would be that they have to sell off some of the titles to reduce debt, like the Cape Times and the Mercury of Durban
*The conflicting demands of politicians who believe these papers have been too hostile and critical of them. The biggest lesson that any new owner will learn quickly is that you can’t satisfy the politicians. If you are buying newspapers to give you power and influence, you have to take a very long view. For one thing, it is highly risky – particularly in the current economic climate – to make major changes and lose existing readers. Saki Macazoma made this mistake at the Sowetan and nearly killed the paper. For another, you face fierce resistance from your staff, who don’t take kindly to interfering proprietors. Over time, through the selection of key staff and other slower influences, an owner can shift a paper without destroying it. But what they can’t do easily is deliver that paper quickly to their political allies.

These are the reasons the likes of Macazoma, Tokyo Sexwale and Cyril Ramaphosa have all got in to the industry, and got out when they could. Remind Ramaphosa of when he was chair of Avusa and his flagship Financial Mail, under Peter Bruce, called on its business readership to back Bantu Holomisa’s United Democratic Movement. Remind Sexwale of what price he paid for Avusa, and how much less he sold it for.

So, who are the right owners? Investment funds are not, as they are looking short term. It was these funds that forced Avusa to sell its MNet shares, a move that brought short-term value but caused long-term damage by removing the annuity, cash-producing business that smoothed out their seasonal profits, for example. Listed groups have mixed results, as we have seen in the US, because these companies usually need the kind of investment, risk and long-term strategies which are not favoured on the bourse. Private investors – the rich individuals who play with newspapers – are also a mixed lot: occasionally benign but often not.

There are trusts, such as those which control the Guardian of London, the Economist and Le Monde. These have the advantage of sometimes being able to balance the financial and the political, the short-term and the long-term. They are best at preserving the independence which makes for the best kind of journalism. But when they run into trouble, have to make hard decisions, or are divided, they can be terrible.

They can also be stalking horses for politicians, as they were in Zimbabwe, allowing a powerful ruling party to get control of newspapers and bend them to their needs.

I am not even going to discuss public ownership, given the extent to which we are struggling to make our public broadcaster work without losing pots of money even when it is dominant in a growing market.

So it seems we need owners who are very rich, slightly crazy and entirely benign about journalism and journalists. Any offers?