Saved from Closure p.

By: Robert O'Connor

Demise of The Observer, Britain's oldest Sunday
newspaper, is prevented by its sale to the Guardian
THE OBSERVER, BRITAIN'S oldest Sunday newspaper, has been saved from closure by its sale to the Guardian.
The newspaper, founded in 1792, had been losing money for years, and its owner, the multinational company Lonrho, had finally decided to sell the paper. It had been widely reported that Lonrho was on the verge of accepting an offer from Newspaper Publishing, publisher of The Independent and the Independent on Sunday. The Independent was expected to shut the Observer in order to boost the prospects for the Independent on Sunday, which is struggling in a tough Sunday broadsheet market.
Instead, Lonrho accepted a rival offer from the Guardian. There has been speculation that Lonrho joint chief executive Tiny Rowland did not want to see the Observer die, and also that he was annoyed at the apparent overconfidence of the Independent before any deal was announced. The Independent, for instance, had sent executives to watch the Observer being printed in obvious anticipation that it would soon be in charge.
The Guardian will pay about $40 million for the Observer. The deal was approved on May 27 by the British government. Michael Heseltine, secretary of the Department of Trade and Industry, could have delayed the purchase by referring it to the Monopolies and Mergers Commission. But he explained that he avoided this course and moved quickly in order to safeguard the survival of the Observer.
The Guardian and the Observer are regarded as a good fit. The Guardian has long wanted a Sunday paper, and both newspapers have strong liberal traditions. The Guardian and the Observer are still remembered for opposing, at some commercial cost, the 1956 British-French invasion of Suez. "We are soul mates with the Guardian," said Observer home editor David Randall. "We're the two singles in town that everyone said should get married, and now we've named the day."
Andrew Neil, editor of the Sunday Times, believes that the Guardian will make the Observer a "stronger, more formidable rival. It hasn't been that for quite a while. The Guardian group is a profitable group. They've got the resources to put into the Observer and develop it, and also the economics of a seven-day-week operation will give it more resources than it had a stand-alone Sunday."
Simon Hoggart, the Observer's political editor, said the newspaper's staff was "thrilled" by the rescue. "Basically, it means that the paper's going to survive," he said. "It's going to survive independently. Certainly some people will lose their jobs, and that's a cause of great sadness, but far fewer than would have lost their jobs if the Independent had taken us over instead."
Before the sale, Observer staff members had written to Rowland asking him "not to allow this great newspaper to be sold to Newspaper Publishing Ltd. and merge with the Independent on Sunday. This would effectively mean the death of the Observer." The Guardian, the letter argued, "would be a more effective guarantor of the paper's identity and character than any other bidder."
Had the Independent been successful, there would have been strong political pressure for the deal to be referred to the Monopolies and Mergers Commission.
The sale complicates the highly competitive quality Sunday newspaper market, which is dominated by the Sunday Times. The Independent on Sunday, with a circulation of 387,000, had stood to pick up a large chunk of Observer readers. It now faces a revitalized Observer.
The daily Independent, founded in 1986, quickly won a respected place in the weekday broadsheet market, but the Independent on Sunday, launched in 1990 into a harsher economic climate, is a distant fourth among quality Sundays. It trails the Sunday Times (1.26 million), the Sunday Telegraph (573,000), and the Observer (504,000).
Last year, the Observer lost more than $20 million. According to the Financial Times, the Observer's losses for this year are on course for around $12 million. The paper's financial problems, Hoggart said, have had their effect on the staff. "For two years or more," he said, "we've been told that we're a terrible loss-making paper, that circulation is declining, and morale's been poor."
The Observer was long owned by the Astor family, which sold it to Atlantic Richfield oil company in 1977. Lonrho bought it in 1981.
The Observer's credibility has suffered under Lonrho. In March 1989, editor Donald Trelford brought out a special midweek edition attacking the Fayed brothers, two Egyptians who had beaten out Rowland in a contest to buy Harrods department store. The special edition, which carried the lead headline, "Exposed: The Phoney Pharaoh," revealed details of a leaked government investigation into the Fayeds.
John Cole, the BBC's former political editor and former deputy editor of both the Guardian and the Observer, recalled that he left the Observer because "I didn't think [Rowland] was the right proprietor for the Observer." The newspaper, Cole said, "has not been as fat as it ought to be, and I thought it lost its way a bit over the whole Harrods affair and various other things."
David Astor, who was Observer editor from 1948 to 1975, said that, while Lonrho had undoubtedly put money into the Observer, Rowland used the newspaper "in his battle to get Harrods in a way that was very unfair to the paper. The paper was really used as a battering ram in a commercial battle, which was quite damaging to the paper's reputation."
The Observer's credibility under Rowland's ownership again came into question on May 23 when Trelford published a 7,000-word autobiographical piece by Rowland. Incensed at this decision, some staff members presented Trelford with a protest letter, which he refused to print.
The Independent described the incident as "an ironic epitaph to Mr. Rowland's controversial 12-year ownership of the paper."
The Independent also quoted Trelford as saying: "Any editor would have jumped at the chance to publish this piece because it is the inside story, for the first time, of one of the most intriguing and legendary people of our time."
The Observer sale has been an embarrassment for the Independent, which stands accused of having tried to kill off a British institution. The two Independent newspapers have also been criticized for not reporting on the issue while the rival offers were on the table. In an editorial published when the Independent looked as if it would win the Observer, the tabloid Evening Standard said, "Let's not be arch about it. The Independent is the reported buyer and the rumored executioner, and it finds the details of the deal too sensitive or too embarrassing to report."
Sunday Independent editor Ian Jack, writing after the sale was announced, said the newspaper "did ourselves no good" by not reporting on the impending Observer sale. "We kept quiet because the talks between Newspaper Publishing PLC and Lonrho were still taking place and would stop if we broke the confidentiality of the negotiations . . . ."