The new crisis at the French daily Le Monde epitomizes two issues any modern (and mature) newspapers is facing these days : one is the governance of the company - basically the constant antagonism between the business people and the newsroom -, the other being the increasing importance of online activities, both for current and future P&L.
Indisputably, Le Monde personifies the “Journal de Reference” as he likes to call itself.Le Monde is utterly convinced of its indispensability for the elevation of the French elite - which is, sorry to say, is a bit overrated. Its motto : it’s not news until we say so. Over the year, this puffiness allowed the paper to be mismanaged in many ways : ignoring superbly the very notion of profit, operational margin, return on investment. Le Monde did so both in its business pages - notoriously weak for years - and in its management practices. The group Le Monde is formed by the paper itself, a set of magazines, and the online subsidiary called Le Monde Interactif. Over the years, the previous management had wanted to build a true “Groupe de Presse”. Doing so, it accumulated a mountain of debt (€150m), half of it securitized in bonds redeemable as shares - at the time, it implied that Le Monde would become a publicly traded company. It never occurred simply because Groupe Le Monde had six consecutive years of losses. 2006 : €14m in the red, for a revenue of €631m ; this year should yield a small profit of €1m for the group - before financial charges (€10m) and exceptional costs (another €10-15m). And 2008 will be much worse. Even though the maturity of the exotic redeemable bonds has been extended to 2014 thanks to some arm-twisting technique, a cash crisis is looming. The reason is simple : the operating cash flow is insufficient to sustain the financial charges linked to the debt, let aside dealing with the challenges ahead. On the magazine front, some titles used to pump cash into the flagship paper are now loosing money as well. Of course, some assets sales are under way. Nevertheless, harsh measure are necessary.
Bleeding money
Take the flagship paper for instance. Le Monde is is bleeding money. Its circulation is down 21% from its high in 2002 to 360,000 copies, advertising volume and prices are down as well. The production (printing, pre-press operations) costs are way too high because of a decade of cosiness with the unions. The previous “directoire” (even this term sounds like an old Victorian saving bank) was unbeatable its concession to the printers unions for instance, keeping production costs at stratospheric level (twice the European average).
In the newsroom, to put it gently, the workload is unevenly distributed among its 600 staff members (including 350 journalists). The setup is well-known : a fraction is tirelessly putting coal in the boiler, another is doing its job but mostly “resting on the brand” (doing books, polishing notoriety) and a small group (10-15%) is not doing that much, dispensing bylines and (sometimes real) expertise, on a parsimonious way.
In the meantime, Le Monde Interactif, the online subsidiary, is circling the wagon. LMI has a third of its capital controlled by Lagardère Groupe (media + defense/aerospace industry giant), and it is making money : €3m profit expected for 2007 (for a revenue of €15m), when the paper itself will lose €5m this year. The company runs LeMonde.fr, n°1 French news site, plus few other online properties. Prospects are great for this small, well-protected enclave. Not everyone is happy with the way the online operations are managed. The Société des Rédacteurs du Monde is definitely not happy.
Power struggle
In the permanent power struggle at Le Monde, the virtue-armored SRM has a big stake. Technically speaking, the editorial representatives control a third of the votes and have veto power at the board level. Last Thursday, the SRM leaked to its constituents a memo stating that Le Monde Interactif was not paying back to the mother ship its fair share of profits ; for the SRM, that is an outrage at a time where editorial-staff reductions are in the pipe. Plus, says the SRM, the editorial control was too loose on the fiercely independant online subsidiary. It was grossly demagogic, but it worked. In consequences, the SRM, acting as the main shareholder of Groupe Le Monde refused to approve the 2008 budget. Ensuing an heated discussion at the board, in which the entire directoire (elected six months earlier) handled its resignation. On January 4th, the chairman and publisher, the vice-chairman (also CEO of online), and the editor of the paper will leave their duties, leaving a unbearable vacuum.
A dual crisis
This is both a governance and an identity crisis. The Société des Rédacteurs thinks its veto right (which is supposed to be exercised mostly editorial and ethics questions) empowers it to go into management and strategic issues — its main managerial vision being: protecting employment and the dreamlike working conditions of its members ; their financial principle being : cash pumping from subsidiary should be done primarily to preserve employment. Of course, the vision of the directoire is diametrically opposed : we should, its members said, balance P&L of the paper and other money-loosing entities, but doing so without impairing the growth of our online activities, in which lies most of our future.
Irreconcilable differences it seems, fueled by opposite ideologies. At stake: the very future of what remains the best newspaper in France. (To be continued next year)
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