UK: Challenge for the Mail heir.

UK: Challenge for the Mail heir. - Following the death of its two key players, the 30-year-old Viscount Rothermere finds himself at the helm of the Daily Mail & General Trust, a global media empire. How will he cope?

by Roy Greenslade.
Last Updated: 31 Aug 2010

Following the death of its two key players, the 30-year-old Viscount Rothermere finds himself at the helm of the Daily Mail & General Trust, a global media empire. How will he cope?

It was, the finance director assured everyone, just a coincidence.

There was no link between the death of Viscount Rothermere and the announcement a day later that his company's loss-making cable television channel was to close. Nor, supposedly, was the timing related to the death three months previously of Rothermere's right-hand man, Sir David English. Channel One's future had been under review since just before he died.

But what Peter Williams, the Daily Mail & General Trust's (DMGT) finance director, did not say, quite naturally, is that the outcome might have been very different indeed if the two men had lived. English might well have prevented the axe from falling on one of his own ventures by relying, as he had done for 27 years and more, on his special relationship with Rothermere.

The fact that Rothermere succumbed to his executives' demands to pull out of TV, thereby killing off his old friend's dream while still mourning him, illustrates how great a wind of change was already blowing through the Daily Mail organisation even before Rothermere's unexpected demise.

Now, with both he and English gone, the wind is sure to blow longer and harder. The central problem will be ensuring that gusts don't dislodge those key elements which have made the company such a formidable performer in the past quarter century, increasing in value from £30 million to £2.5 billion.

If that warning sounds far-fetched, given DMGT's track record thus far, it is important to remind oneself of the fragility of media businesses and, even more crucially, of media dynasties. A great deal now rests on the shoulders of 30 year-old Jonathan Harmsworth, the untested, almost unknown, fourth Viscount Rothermere, the new chairman and, given the oddity of the ownership structure, an old-style proprietor.

He now presides over a global empire of newspapers, magazines, radio stations and a host of other media-related ventures which require subtle handling. Moreover he cannot he afford to sit back and let the riches flow in. The status quo isn't an option in the world of media at any time, and with the world's markets currently in turmoil, he needs to be even more engaged.

Rarely can a conglomerate of such importance have lost its two key players within such a short space of time, creating an unprecedented power vacuum and an inevitable jostling for position among senior managers which has the potential to reverse the company's fortunes. To grasp the significance of DMGT's loss, we must first consider what English and Rothermere achieved.

When Vere Harmsworth, as he then was, appointed English as editor of the Daily Mail in 1971, the prospects for the group looked bleak. His father, by then suffering from Alzheimer's, had had no strategy for his papers and had made a number of tactical mistakes. The broadsheet Mail was losing sales month by month and its tabloid stablemate, the Daily Sketch, was losing them even faster. In merging the titles and creating a quality tabloid, he took a huge risk. But, whether by luck or by judgment, this proved to be a strategic decision of immense importance. An aspirational paper aimed at the emergent middle classes, articulating their concerns, airing their opinions and appealing to their prejudices, was a brilliant conception and English was the ideal editor.

He was a passionate professional, committed to journalistic excellence, and so at one with his audience he knew what they were thinking before they did.

Even so, it was a long slog and for some years it was thought the Mail would be squeezed out of the market by the broadsheets above and the rampant red-top tabloids below. Sales didn't come easily and by the time Vere inherited the viscountcy in 1978, the new Mail was still lagging behind its old rival, the Daily Express. He didn't waver even when circulation started to slip again through the 1980s, putting his faith in English and in his own belief that the market would come to them as, eventually, it did.

That signal success with the flagship paper was the bedrock of the company.

What Rothermere and English were doing, probably unconsciously in the early stages, was creating a powerful brand. The Daily Mail was to stand for quality and they insured that, despite the daily need to compete, they never lost sight of that long-term requirement to symbolise excellence. They imbued their other papers with a similar ethos, launching the Mail on Sunday in 1982 and winning full control of the London Evening Standard in 1986.

There is no doubt that Rothermere loved newspapers and respected the people who wrote them. Above all, he revered English. This made English a pivotal figure and he gradually acquired the greatest business power any working editor has ever enjoyed. By 1992, when he became chairman of Associated Newspapers, the national paper arm of DMGT, he was already involved in many company activities outside his beloved Mail.

But English, the journalist's journalist who attained an iconic status among his peers, viewed everything in terms of his editorial experience.

He spoke of making TV in the image of the Daily Mail and he saw on-line media opportunities as extensions of the Mail. Quality was his byword, and he believed the only way to achieve it was through investment. Despite Rothermere's caution, and often in the face of hostility from other senior executives, English persuaded him to part with millions to further his ambitions for a cross-media company using the Mail brand.

English also made no secret of his distrust for management which was 'the uncreative side of the industry'. He viewed managers - especially accountants - as 'bean-counters and number-crunchers' who were fine as long as they recognised their place, acting as auxiliaries to journalists.

For him, the skills which went into editing a paper - the ideas, the story-getting, the headline-writing, the page designing, the marketing, the man-management, and the stamina required to do it day after day - were the most precious of all qualities. His unshakeable belief in journalists, in their spontaneity, their sense of fun, never faltered. He saw himself as a journalistic buccaneer and managers as joyless bureaucrats. He spent, they cut. He took risks, they were timid. He saw the future, they remained in the past.

If this sounds oddly romantic, even naive, then many within DMGT thought so too. They were appalled at the heavy investment in 'David's pet projects' which, they contended, ate up money without guarantees of returns. His corporate detractors were numerous. 'He wasn't liked on the sixth floor,' said a former colleague, echoing a traditional journalistic dislike of 'the suits' in the management offices of the group's Kensington offices.

No one is prepared to air anti-English sentiments on the record but, once guaranteed anonymity, they are more candid, 'between you and me, old boy'.

Though they respected English as an editor, they argue that he had bad business ideas, spent too much on them, and their objections about his extravagance were ignored (or silenced) because he had the boss' ear.

Within a month of English's death I was told that DMGT was engaged in a thorough re-evaluation of several businesses. 'We're in a period of post-English revisionism,' one senior executive told me. 'But that isn't surprising and it isn't necessarily a bad thing, either.' It was also clear that the rethink centred on many of English's broadcasting and new media ventures. Another executive said: 'I think it's fair to say there's a question mark over the group's commitment to investment outside print.'

That soon came to pass with the closure of Channel One, a 24-hour-news cable TV channel. Despite poor predictions for the cable take-up rate, it was launched in lavish style. There was heavy investment in state-of-the-art equipment, generous staffing levels and marketing razzmatazz.

Yet, in its three years of life, it was reputed to have lost anywhere between £40-£50 million and the review revealed no signs of future profitability.

The problems were obvious from the outset. Cable was in its infancy and, in Britain, its TV possibilities had already been eclipsed by satellite.

But English, putting far too much faith in the very different situation in New York where a similar news-and-weather cable station has been successful, believed London would follow suit. But London cable penetration has reached only 600,000 households and only a small fraction of those ever bothered with Channel One.

Necessary cost-cutting and a relaunch in August 1997 hit the quality of output, further reducing its chances of attracting an audience and revenues. 'What David set out to do was translate the values of the group's newspapers into television,' says Channel One's managing director, Julian Aston. 'A lot of people in TV wanted to copy the Daily Mail and who could do that better than David?'

But there is a world of difference between print and broadcasting. When I met English at the company's Charlotte Street studios just before the launch I questioned his research which suggested there was an appetite for 24-hour news among Londoners. English, betraying the lack of objectivity which afflicts so many techno-missionaries, waved aside my scepticism. 'It's the weather,' he said, followed by his trademark giggle. 'They'll all want the weather.'

In fairness, English's failure with Channel One must be viewed against the background of his success with Teletext, which has become the biggest electronic publishing venture of its kind in the world. When it bid £8.2 million to win the text services franchise on ITV and Channel 4 in 1992, many analysts thought it was far too high and would never pay. In fact, says Teletext's editor-in-chief, Graham Lovelace, it proved to be 'a shrewd and bold move by David'. It soon became more popular than the Ceefax alternative on the BBC channels and now has 20 million viewers a week.

'David got involved in everything,' says Lovelace. 'He set out to bring his popular newspaper skills to an entirely new medium. He worried over the design of the font, he checked that the editorial information was of the best quality, he decided to introduce female features and lifestyle material. People laughed, but it has worked.' In 1994, English began to look closely at the possibilities opened by the rise of the internet and this eventually led to the creation of Digital Teletext, which will appear as a separate channel once terrestrial digital TV is launched later this year. In place of the current text service will be pages resembling material now available on the internet, with pictures, graphics and charts. It is a big step towards eventual convergence between TV and computers.

The hallmark of English's approach was intense involvement in detail.

At the 1995 Interactive Newspaper Conference in San Francisco, English attended a workshop peopled largely by teenagers in T-shirts and baseball caps. When delegates were asked to introduce themselves, he stood up and said: 'I'm David English from the London Daily Mail. I'm here to learn.' Minutes later the pinstripe-suited English could be seen hunched over a computer talking excitedly with the young nerds.

There are two opposing reactions to that tale: English was a visionary who never gave up learning and wasn't afraid of detail and getting his hands dirty; or, English had lost the plot, becoming a devotee of the online computer cult and losing sight of the broad canvas. It's fair to say that it is the latter view which is most prevalent among DMGT executives.

Rothermere was probably aware of the anti-English sentiments. He, too, was a romantic, but with a realistic streak, which is the reason his company performed so well. DMGT's last annual results recorded operating profits of £89.8 million on a turnover of £1. 2 billion. Its most important business by far is Associated Newspapers which publishes the national titles. But Northcliffe, one of Britain's leading regional publishers with 17 daily papers and 14 paid-for weeklies, also produces good profits bolstered by high advertising volumes.

Harmsworth Publishing, which includes lucrative educational businesses such as Hobsons, the Cambridge-based education and careers publisher, makes a healthy contribution. Through its 71% ownership of the separately-quoted Euromoney (the market leader in international financial publishing with 100 specialist magazines worldwide) more profits flow in to DMGT.

Even its small Hungarian division, a hangover from the days when Rothermere's grandfather was offered that country's throne, has moved into profit in recent years.

It's the sixth division, Harmsworth Media, the only one not devoted to print, which was under close scrutiny just before Rothermere's death.

It is certainly profitable, with its large stake in Teletext, big holdings in British commercial radio and a major exhibitions business. Now its greatest loss-maker, Channel One, has been axed, the next to go could well be unprofitable Australian radio stations, such as the one in Adelaide.

Doubtless, even though DMGT's shares took a downturn in early September in line with other media stocks hit by the market jitters, the City will be pleased about the ruthless cutting of such ventures. Analysts have been generally warm about the group in recent years, though they point out that, with advertising revenues high and newsprint costs low, it has been the most benign phase of the cycle which affects newspapers. Derek Terrington, media analyst with Teather & Greenwood, reflects the general view: 'People are wary of the cycle but the company is well respected. It has done well with the Daily Mail and Mail on Sunday, and it has grown Northcliffe as well. They've also become more open about what they're up to of late.'

The death of Rothermere cast light once more on the area which has long raised eyebrows in the City: DMGT's dual share structure. There are two classes of share, voting and non-voting, in which the majority of the capital is owned by the latter while control is exercised by the former.

Since the Harmsworths own almost 80% of the voting stock, the new Lord Rothermere can, in effect, do as he wishes. The company is effectively bid-proof. This is an increasingly rare phenomenon which is, says one critical analyst, 'an anachronism, and affront to shareholder democracy'.

Institutional investors have overturned many of these archaic two-tier structures once prevalent in family-owned businesses. But there has been no pressure to force such a change on the Mail group due to its excellent performance over the years and its perceived fairness to non-voting shareholders.

All the analysts agree that investors have benefited from buying DMGT stock. Its value has continued to increase (shares have risen from £9 to £27 over 10 years) and dividends have been generous. 'But,' said an analyst just before Rothermere's death, 'the share structure is a potential worry in the longer term.'

That was, of course, a euphemistic reference to life after Vere, which arrived just weeks later. As the Financial Times' Lex pointed out after his death, with the 'end of the Rothermera ... DMGT should now consider becoming a normal company'. The City will certainly be watching Jonathan very closely on this matter.

Indeed, watching Jonathan is going to be an intriguing pastime for anyone connected with the media in the coming months. Harold Jonathan Esmond Vere Harmsworth is 30 years old and it's obvious that he isn't yet imbued with the knowledge and experience to run a corporation. Months before he died, English told me: 'Part of what I'm doing is passing my knowledge on to Jonathan. We're all working very hard to make sure that Jonathan will become another Vere.' He must now learn while doing the job, though he has been prepared for this eventuality since his birth. Educated at the tough Scottish school, Gordonstoun, he went on to Duke University in North Carolina, graduating in May 1991 with a degree in history. His first taste of newspaper life came as a reporter on the Sunday Mail in Glasgow, a paper owned by the rival Mirror Group but with a managing director, Murdoch MacLennan, who had previously worked at Associated.

He coped well and is remembered fondly by former colleagues. His charm won him more friends than critics and though some of the stories about him refer to his naivete, they are little different from those told about many other journalists in their first years of learning the job. He then took up various postings around the Mail empire, learning different facets of the job, from advertising to circulation, before becoming managing director of the Evening Standard. What has struck people most is his cost-conscious approach to the business. This may well please the City while alarming Mail journalists who have enjoyed the best of conditions for years.

There have been broad hints that Jonathan isn't, to borrow the Sunday Times' phrase, 'the smartest cookie in town'. But his father was also dismissed as 'mere Vere' in his early years at the helm. Was he, people wondered, a smart man who pretended to be otherwise or a stupid one who got lucky? The common verdict about Rothermere, Lynn Barber once remarked, 'is that he is twice as clever as he looks, but only half as clever as he thinks'. Jonathan will have to suffer similar insults until we know more about him.

One other unknown factor is the influence of his pretty and formidable wife, Claudia Clemence. This daughter of a property developer and former Bond Street art dealer is, according to an insider, 'a big unseen player'. He adds: 'She is charming, beautiful and driven.'

Unsurprisingly, there has been a battle for Jonathan's soul among ambitious senior journalists. Who, everyone wonders, will become his David English?

In fact, he finds the obvious candidate firmly in place: Paul Dacre, who succeeded English as Mail editor, was appointed editor-in-chief five weeks after English's death.

Rothermere gave him the job in order to instill a sense of stability and to ensure continuity at Associated. It was a shrewd move, a reminder to those executives within the company tempted to take advantage of English's demise to make journalists more accountable to management, that journalism comes first. 'Paul will see off the suits,' said a colleague after his appointment.

It is taken for granted that Dacre will ensure that the papers are generously resourced, but his main focus will be on maintaining the quality of editorial output. In that sense, he has a fine inheritance since both nationals are circulation success stories. The Daily Mail sold an average of 2,295,000 in the first six months this year, an increase of more than 6% over the previous year, and it is within a whisker of overtaking the Daily Mirror.

The Mail on Sunday, with a circulation of 2.2 million, is one of only two Sunday papers regularly adding sales. The Evening Standard, after a rocky patch, appears to have stabilised at about 450,000.

Dacre will not be complacent. At 50, he has been a Mail journalist for 18 years and an editor for seven years, so he knows the company inside out. His watchword is 'quality control' and he will ensure that everyone is on their mettle. But gossip suggesting Dacre would quickly turf out Mail on Sunday editor Jonathan Holborow and Standard editor Max Hastings because, supposedly, of antipathy towards them, proved wide of the mark.

Dacre shared Rothermere's view that the appointment of editors is the most crucial of decisions. As one of his closest friends told me before Rothermere's death: 'Paul won't move fast but in 18 months to two years' time you can be certain he'll be itching to make changes.'

That friend argues that the accession of Jonathan to the chairmanship will not change Dacre's mind. Suggestions that the two don't get on have no basis in fact, and no one inside the Mail group is in any doubt that Jonathan would be wise to build a good relationship with Dacre. He has read the history of his family company and knows that the success of its founder, Lord Northcliffe, depended on the genius of his Mail editor, Thomas Marlowe. At first hand, he witnessed the importance of his father's partnership with English.

Dacre will doubtless be hoping that his new boss will not be quite as mercurial as his father. In the run-up to the 1997 general election, Rothermere gently rebuked Dacre's anti-euro stance and then, in an astonishingly frank interview with the Daily Telegraph in August, he was even more critical.

He even gave Dacre a lecture on editorial content: 'There is too much tabloidy reporting. That kind of thing leads in due course to slovenliness and sensationalism, something reporters use to cover up the fact they've done no work. I want it to stop ... At the moment Paul is playing a dangerous game of footsie. He has to be very careful.'

Many believed this to be an example of Rothermere's characteristic mischief-making. The Times' Brian MacArthur pointed out that it was a reminder to a newly-appointed senior executive that 'it's the boss's train set ... Just a small warning, Paul.' But it's surely significant that Rothermere never felt the need to criticise English in such terms. It was a bizarre outburst and Dacre, on holiday when it was published, evidently fumed on reading it.

What Jonathan thought isn't known. Not yet, anyway. Apart from Dacre, he will also rely on the good sense of MacLennan, who left Mirror Group to become managing director of Associated, and Charles Sinclair, the chief executive of DMGT. Their advice will be crucial as he confronts his first major task: deciding on the company's strategy for the millennium.

Having turned its back on cable TV for the moment, there is still a question mark over the need for diversification from print into other forms of media. 'What happens when the traditional sources of revenue dry up?' asks Harmsworth Media's Aston, who remains a fervent supporter of the need to move into broadcasting. 'As David (English) would have said, it might be costing us money now but it's an investment in the future.'

Getting that balance right might well decide whether Jonathan enjoys the success of his father and, in the next century, is able to hand on a giant company to a fifth generation of Harmsworths.

Roy Greenslade is the Guardian's media commentator.

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