August 31, 1992

Independent' Ideal Faces Tough Test

Eric Ellis, London

After five years staking its reputation on being the conscience of Britain, `The Independent' newspaper finds its lofty ideal being eroded. ERIC ELLIS in London examines its fortune.

HOW independent is `The Independent', five years after being born as Britain's national conscience?

Perhaps the answer is best illustrated by the response to the newspaper's recent call for 34 voluntary redundancies from the newsroom.

No sooner had terms been posted than the desk of the newspaper's 54-year-old editor, chief executive and co-founder, Andreas Whittam-Smith, pounded with the resignations of 53 journalists, many of whom were hand-picked veterans of the 1986 launch.

``It was deeply embarrassing for him,'' said a senior founder staffer who walked. ``It revealed just how much the ideals of the paper have been compromised, largely at his hand.''

Five years down the track, much of the high-minded ideal on which `The Independent' was founded has been eroded, a product as much of the deepest advertising recession in history as of the misjudged expansion and pretensions of its founders.

Serious questions also surround the longevity of Newspaper Publishing PLC, the holding company making heavy weather of a financial crisis that saw it lose 6.45million ($A13.9million) in the six months to 31March.

Another sacred plank was removed last week when articles of association of `The Independent', designed to protect the paper's independence, were again altered to accommodate a cash infusion from two European shareholders.

Newspaper Publishing is seeking 16 million, having apparently exhausted a 22 million injection made just nine months ago, which itself replaced the 27 million raised from the 1986 launch. Spain's `El Pais' and Italy's `La Repubblica', both `Independent' soulmates, have agreed to underwrite an 8 million rights issue that in turn will release another 8 million in bank loans.

The generosity of the Europeans was confirmed last November when they bankrolled the first injection to each take a 14.9 per cent holding. This latest deal could see them emerge with a joint stake as high as 42 per cent, easily the largest shareholders.

The much-needed funding drives a coach and horses through the newspaper's previously sacrosanct articles, which restricted individual shareholders to a maximum of 10 per cent. Already lifted to 15 per cent to accommodate the November injection, they are being changed again for this deal.

By changing the articles `The Independent' has effectively put itself in potential play.

In the Byzantine world of Italian business, `La Repubblica' and, by extension, `The Independent' fall under the influence of the sophisticated deal-maker Carlo de Benedetti, a ``bottom-line'' man who not so long ago threatened Belgium's largest company with takeover and also put Britain's Pearson PLC, publisher of the `Financial Times', under threat by launching a chain of deals from which Rupert Murdoch emerged as a potential buyer.

And then there's Robert Maxwell, the scourge of Fleet Street and no great friend of `The Independent'. Mr Maxwell controls 6.1per cent of Newspaper Publishing and has been an active recent buyer of shares.

The paper was born on 7 October 1986, the brainchild of three disgruntled but ambitious `Daily Telegraph' journalists - its city editor, Mr Whittam-Smith, and colleagues Matthew Symonds and Stephen Glover.

Aimed directly at the free-spending ABC1 market, their timing was perfect. The paper also had good luck, most notably when Mrs Thatcher called an election for mid-1987, allowing readers to see how politically polarised Britain's media had become.

In a booming economy, `The Independent' seemed the perfect paper for Mrs Thatcher's yuppies - green, centrist, thoughtful, international, and where money wasn't a dirty word. The success quickly translated to the bottom line.

By the end of 1989 `The Independent' had returned profits of 3.26 million, a remarkable feat for any new business but particularly for a newspaper trading in the recessionary wake of the 1987 sharemarket crash (the backers had expected the same profit a year earlier).

But if the timing of the daily was perfect, the launch of `The Independent on Sunday' was the exact opposite. Perhaps emboldened by the 1989 results, Mr Whittam-Smith ignored advice and his own paper's analysis that Britain was entering a long and deep recession, and in January last year launched the `Independent on Sunday' into a deteriorating and already crowded Sunday market.

There was another player in the Sunday market. Three months earlier, a trans-Atlantic consortium, which included `The Guardian' as a member, also pitched in with `The Sunday Correspondent'. A newspaper war began and, within months, `The Sunday Correspondent' had died, the `Independent on Sunday' was gravely wounded and the other papers were nursing flesh wounds. The `Independent on Sunday' survives, but only just.

The dispute over the `Independent on Sunday' also led to the first schism among the partners when Stephen Glover resigned. The episode has lost Mr Whittam-Smith popularity among his once fiercely loyal staff. ``He now sees himself as right up there with the most powerful of media moguls,'' says a former staffer.

Mr Whittam-Smith was unavailable but Mr Symonds said the management had been chastened by the `Independent on Sunday' experience. Recent audited figures show sales of `The Independent' have slipped to an average 376,500 a day in the three months to August, down from 410,718 last year.

The `Independent on Sunday' circulation has risen to 365,584 from 326,538 in the same period. ``We are perfectly pleased with the circulation of both papers,'' said Mr Symonds. ``We have also got costs down to the barest minimum, far more than is actually required, even in a worse-case scenario. We are here to stay.''