You won’t believe what we uncovered by investigating the Telegraph’s secrets | Financial Times

A typical introduction for a new reporter to the Telegraph in recent years included a history lesson on the telegraph pole, the revolutionary communications infrastructure from which the newspaper took its name when it was founded in 1855.

The official story says the name “embodied the latest in electrical communications”; in fact its era is equivalent to names like The Block or Decrypt.

The conservative manifesto, which American readers may recognize as the workplace of Kate Winslet’s character in the Christmas rom-com classic The holiday (2006) – is up for sale, after being seized by Lloyds Bank by the tax-efficient Barclay family. Dan Thomas of MainFT has the inside story here.

It’s not often that newspapers go on sale, so we thought our readers (particularly billionaires) might be interested in some of the numbers involved.

(The author was, until August of the year, employed at the Telegraph, so ethically this is a humble equivalent to Robin complaining about Blömbörg Still AND Still AND Still.)

The price is right

In an email to reporters yesterday, Telegraph editor Chris Evans circulated this panel from the newspaper’s chief cartoonist, Matthew “Matt” Pritchett:

✍️ ‘I heard we are about to be bought by Prince Harry. He has always been interested in journalism’

My last comic for tomorrow @Telegraph

Buy a print of my cartoons at https://t.co/ILFJjPmckx

Or find the original at https://t.co/bVPAkgE34y pic.twitter.com/X0mSDEb27m

— Matt Cartoonist (@MattCartoonist) June 8, 2023

Evans added:

I thought you all might like to see this, depicting you all at work. . . I have nothing to add to Nick [Hugh, Telegraph Media Group’s chief executive]Yesterday’s note, plus my thanks. Thank you all for your professionalism in a good mood. I expected nothing less. As Nick said, there’s every reason to be optimistic, whatever the outcome. The Telegraph is a successful and profitable title.

It’s true: Telegraph Media Group makes money, at the rate of £29.6 million pre-tax in 2021.

Here’s his profit history, go Enders analysis:

Staff were told earlier this year that year-over-year revenue growth starting in 2021 would be double-digit. Alphaville’s back-of-Google-Sheet calculations put subscription revenue growth at a healthy 14.9% for 2022.

The result is: eliminate any point of view you may have elements of the editorial production of the Telegraph – a seemingly solid business. Enders notes that he’s also quite svelte:

[Our] the judgment is that the Telegraph has not much fat to trim: it has no real estate to sell off; its printing operations are outsourced; its print and digital advertising sales functions are outsourced; and the level of staffing seems fair in relation to other premium stocks operating in the UK and US.

Valuations are largely landing in the area of ​​over half a billion pounds: media analyst Ian Whittaker calculates over £500m on a valuation of 12.5x adjusted ebitda, Enders says around £452-£586m, Lex optimistic thinks the trophy’s worth could be worth the whole yard.

Many of these estimates are a bit fuzzy because the Telegraph, which has published last year’s accounts in May for the past two years, did not do so this year. The CEO said 2022 will be even better, with Nick Hugh speaking at an Enders conference just last month. . .

[Our] the ebitda is between 57 and 60 million pounds, a percentage that represents a very good margin. This is important because it helps us reinvest.

Based on Whittaker’s valuation model, that’s about £750 million.

TMG declined to comment on the lack of accounts or any other questions we asked. A person familiar with TMG told FT Alphaville the accounts are likely to drop before the summer, which goes on astronomical definition it’s an imminent deadline, even if to be honest they didn’t specify which summer.

Dominated by subtitles

It is well known that many newspapers have struggled to respond to the structural decline of print media and the hugely lucrative advertising that came with it. The Telegraph is no exception. After spending much of the 10s chasing clicksby the end of the decade it leaned towards pursuing a subscription-based model similar to that of The New York Times, focused on replacing dwindling advertising revenue with quality content.

This prompted a major change: the top revenues are now about 70% from subscriptions and 30% from advertising. As a testament to how non-essential advertising has become, TMG outsourced its print advertising to the Daily Mail owning group in March 2021.

TMG’s flagship strategy in this is “10-1-23”, aiming for 10 million registrations and 1 million paying subscribers by the end of 2023.

Speaking last month, CEO Hugh was optimistic about this:

The metrics that I look at very regularly are subscription volumes, where we’re just a shade under a million; we will definitely reach the million mark this year.

Truly? Truly?

TMG extension extracted from UK Audit Bureau of Circulations standard figures in early 2019, saying:

. . . the ABC metric is not the key metric driving our subscription strategy and it is not how we measure our success.

We will be transparent with our core subscriber numbers which are omnichannel and we will report these numbers every month. We will share both volumes and average revenue per subscription.

To his great credit, he did, until he stopped. Subscription numbers were published monthly until last October, with quarterly assurance notes from the PwC auditor. The updates then moved to quarterly, which basically meant another release, covering December 2022, in January. No new figures have emerged since then.

The delay, a person familiar with TMG told FTAV, is due to the processing of new season tickets from the Telegraph’s March acquisition of The Chelsea Magazine Societypublisher of “specialty consumer brands including; The English house, The English Garden, Artists and illustrators, Classic boat AND Great Britain”. We’ll talk about it later. The person added that the updated numbers will drop in July.

Our analysis of the available data shows that subscription growth hit a wall last year, with digital additions no longer able to offset the steady decline in print:

Enders thinks there may be some fraud going on with the title numbers here:

[W]We suspect this figure includes some of its new subscription products, such as Puzzles which launched as a standalone product in August last year

This is only part. While TMG-released monthly figures have digital/printed secondary titles, PwC-approved quarterly quarterly variants come with cautionary notes. Here is one example from the last (check the bit at the bottom):

We’ve found similar warnings going back as far as June 2021. If these subscriptions (free or free with a paid subscription) are discounted, the numbers look a little worse:

Free captions weren’t always disclosed in the audit commentary, but they always were. Here is an excerpt from the January 2021 audit:

It appears that cap has been relaxed: Free trial memberships were nearly 6% of the total as of last December.

When asked about the discrepancy between paid and free accounts, TMG declined to comment.

So how does Hugh get his million subscribers? Let’s go back to The Chelsea Magazine company.

In March the Gazette of the press reported:

According to ABC The English Home, one of its biggest titles, had an average monthly circulation in 2022 of 72,494 copies, of which 70% were paid subscriptions. The English Garden had an average circulation of 51,972 copies, of which 75% were subscriptions.

Here is the data ABC released on The Chelsea Magazine headlines, which derive the vast majority of their circulation from subtitles:

All of a sudden, given these earnings, 1 million subs feels like . . . possible? Hitting seven figures might just require pumping the main numbers with freebies and extras bolted on.

Since 10-1-23 is Hugh’s main focus, it will be interesting to see how he rolls it out at the end of the year. If by then he still works at TMG.