Who is the ideal owner for a prestigious newspaper? First and foremost, it should be someone who respects editorial independence, and who will not interfere in editorial matters. The decision about what to publish has to be made by journalists: It can’t be a business decision designed to appease advertisers.
The owner should also have a very long time-horizon — ideally into perpetuity. A storied reputation is easy to lose and very, very hard to regain, and any attempt to squeeze cash out of a newspaper in the short term tends to destroy precious brand value. The ultimate goal is steady profits over the long term, from a sustainable business with relatively little debt.
Finally, newspapers should be owned by news organizations. News is not a business like any other, and the kind of management that works in nonjournalistic organizations rarely bears much fruit when people start trying to apply it to journalists.
Let’s rejoice, then, that The Financial Times, founded in 1888 and one of the world’s great newspapers, has been bought by Nikkei, another great financial news company. Nikkei is employee-owned, and has been around since 1876. It’s not for sale, and it isn’t anybody’s financial investment: Its only purpose is to put out an excellent news product every day. It does exactly that, making a decent operating profit of more than $100 million a year. The Nikkei, its flagship newspaper, has a combined print and digital paid circulation of 3.1 million — four times the equivalent figure for The Financial Times, which is 737,000.
Nikkei, indeed, could be a much better owner for The Financial Times than Pearson, which bought the newspaper in 1957. Pearson is an enormous global education company that made £470 million last year: The Financial Times’s £24 million in operating income was always something of an afterthought, and the brand was kept within the corporate stable mostly for reasons of pride and inertia. There was no synergy, let alone a love or even understanding of the news business.
While Pearson starved The Financial Times of investment in the United States, for instance, there’s a good chance that Nikkei will want the paper to become a real force here. And while Pearson’s main contribution to The Financial Times was its neglectful hands-off attitude with respect to the news operation, The Financial Times now has the opportunity to export its own aggressive approach to business stories, especially in Japan, to an owner that has historically been more deferential toward big business.
Nikkei is certainly paying a lot of money for The Financial Times — the price, £844 million, or $1.3 billion, is a whopping 35 times the paper’s operating income. But Nikkei can afford it. And in buying The Financial Times, Nikkei is gaining access to one of just a handful of newspapers in the world that has successfully managed to navigate the transition to a digital subscriber base. That transition is only just beginning in Japan, which means that the stakes there could not be higher. If The Financial Times’s experience helps Nikkei make fewer mistakes and remain a must-read for people who prefer phones to broadsheets, then that alone will justify the outlay.
Here in America, news organizations both young and old tend to be run on a basis of profit maximization. The parent companies of The New York Times, The Wall Street Journal and USA Today are all listed on the stock exchange, where shareholders look for margins and growth; younger upstarts like BuzzFeed and Vox Media are funded by venture capitalists who are seeking a tenfold return on their investment. But a quieter, more mission-driven model is a very attractive alternative. At places like Nikkei, or at The Guardian, in Britain, which is owned by a nonprofit trust, it’s the news that comes first, not the finances. And when you don’t need to dividend enormous profits to your shareholders, that can be quite liberating for your journalists — and, of course, even more valuable for your readers.
It is to the great credit of Pearson’s chief executive, John Fallon, that he understands how important it is that The Financial Times be owned by a news organization, rather than by an education company. “The best way to ensure the FT’s journalistic and commercial success,” he said on Thursday, “is for it to be part of a global, digital news company.” And it is to the great credit of Nikkei’s chief executive, Tsuneo Kita, that he is willing to write such a big check to help ensure a global, digital future for his company.
The price that The Financial Times fetched could never be justified on a discounted cash flow basis: Mr. Kita isn’t buying some hugely valuable stream of future profits. Neither is he a whimsical billionaire buying up a prestigious brand in the hope that doing so will help elevate him among his jet-set peers. Instead, Mr. Kita has created a genuinely global news organization. He understands that any financial news company today needs to talk to people in all countries, and be able to do so on a straitened digital budget, rather than with the comfortable margins he’s used to. He also understands that Nikkei could never realistically get there on its own.
It took The Financial Times 127 years to build the global reputation it has today. Now, as part of a news-focused organization, it can call upon Nikkei’s substantial financial and journalistic resources to extend that reputation even further. When Nikkei and The Financial Times were founded, financial news was a nationwide phenomenon, and they both found a lucrative business in selling high-end readers to national advertisers. Today, financial news is global, print newspapers are doomed, and advertising is becoming ever more narrowly targeted.
Surviving and thriving in the midst of such change will not be easy. But this transformative strategic acquisition on the part of Nikkei will certainly help it do so. And The Financial Times could not hope for a better parent as it breaks free of its English parochialism and tries to become a must-read for all professionals, no matter where they are in the world.
Felix Salmon is a senior editor at Fusion.