Stephen Glover: When an editor's ambitions were too grandiose

The notion that The Guardian would close The Observer, or turn it into a weekly magazine, always seemed unlikely. I don't say there weren't one or two members of the Scott Trust (which owns both titles) who did not seriously consider the idea. Some senior Guardian executives have undoubtedly had it in for their sister paper for years.

In the end, though, the powers that be understood that shutting the world's oldest Sunday paper would not go down well with the nation's liberal chattering classes. Anyone who knows anything about The Guardian realises it is run along lines that would bring a tear to the eyes of a Wal-Mart executive. But the paper likes to pretend it occupies a more elevated universe than the rest of us, and such an impression would hardly be promoted if it killed off The Observer.

Internally, the threats of closure had another purpose – to bring Observer journalists to heel. The title can be shut down, or most of you can continue in employment in a paper more closely integrated with The Guardian: that was the implicit threat, and it seems to have worked, with the National Union of Journalists cautiously welcoming last Thursday's announcement. A slimmed down, integrated Observer will be one step nearer what may well be the final outcome: a seventh-day version of The Guardian.

Naturally I am pleased that The Observer will continue in business, at any rate for the time being, but we should be in no doubt that deliberations over its future have been part of a wider crisis. Last week Tim Brooks, managing director of both newspapers, informed staff they are losing £100,000 a day, which he said was unsustainable. This was not necessarily news, since we already knew that the papers and their website lost £36.8m in the 12 months ending 29 March. The Scott Trust has considerable liquid assets, but these could not absorb losses of this magnitude for very many years.

Some journalists on The Guardian blame The Observer for their financial predicament, but the paper is not the chief culprit. The Guardian used to be run as a low-cost operation that kept an eye on the pennies. In recent years, its ambitious though mild-mannered editor, Alan Rusbridger, has tried to turn the paper and its website into an internationally renowned publication. He was the Gordon Brown of Fleet Street.

About £100m was spent on new presses. Staffing soared so that at one stage there were over 850 journalists on the payroll. The paper moved from cramped, but surely adequate, premises in Farringdon Road to capacious, ritzy new offices near Kings Cross containing a small concert hall. This was all nearer to Citizen Kane than the old Manchester Guardian. The trouble is that, far from challenging The New York Times for world supremacy, The Guardian has been slowly leaking sales (though not, to be fair, as much as some titles, including this one) while the costly website has never produced any profits.

Generally speaking, I am all for newspaper editors spending as much as possible, and I do not really blame Mr Rusbridger for presiding over a spending spree. The trouble is that high-rolling editors sometimes need to be reined in. Mr Rusbridger long ago galloped over the horizon. Now, as Tim Brooks indicates, The Guardian and The Observer have a cost base wildly out of synch with their ability to generate revenue. Savings achieved by further integrating the two newspapers represent only a small proportion of what will be needed.

The BBC has come under fire from all quarters

When James Murdoch recently unleashed a fusillade against the BBC at the Edinburgh Festival, the Corporation's top brass were pretty relaxed. They believed, probably correctly, that in a stand-off between Rupert Murdoch and his son James on the one hand, and dear old Auntie on the other, most of the public would support the latter.

Now, though, the BBC finds itself under more lethal attack. Last week Ben Bradshaw, the Culture Secretary, said that it had "reached the limits of reasonable expansion," and suggested it should come under the wing of an independent regulator. Meanwhile his Tory opposite number, Jeremy Hunt, went much further in an interview with the Daily Mail.

Forget the Murdochs. It is not good news for the BBC to have both main parties gunning for it. What Mr Hunt proposed amounts to a significant curtailment of its powers. Its online presence would be scaled back. Inflationary increases to the licence fee would cease, and BBC3 and BBC4 might be scrapped. Executives would have to make do with a maximum of £192,250 a year, which would mean that the salary of the next director-general would be less than a quarter of that of the present incumbent, Mark Thompson.

Of course, we don't know whether a future Conservative government would really do any of these things, but it is interesting that a party that is often timid about revealing its plans should be so upfront in the case of the BBC. This suggests that the Tories have worked out that, despite its claims of widespread public support, the BBC has lost friends in many quarters, notably on the centre-left.

It is no longer just the Murdochs and the right-wing press that have it in for the BBC. Even Labour wants to rein in its powers. Who will squeal if the Tories act?

Newspaper stocks are starting to make a recovery

Wherever two or three newspaper people are gathered together, you will hear tales of woe about their trade, and blood curdling prophecies about the future. Some investors, however, appear to be taking a more positive view.

Last autumn you could hardly give some newspaper shares away. At one stage, Trinity Mirror's shares plunged to just over five pence. Shares in the regional group Johnston Press fell a fraction lower.

Now almost all media stocks have recovered to a degree, in some cases far more sharply than the market as a whole. The recovery is not limited to companies such as Daily Mail and General Trust, more than half of whose revenues comes from non-newspaper interests. For example, Trinity Mirror's shares stood at £1.64 last Friday, while Johnston Press's were at just over 40p.

Last autumn panicky investors behaved almost as though newspapers had a few months to live. Now they appear to think that, although they may be ultimately doomed, some of them will produce profits, at any rate in the medium term.

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