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Nov. 6, 2019, 1:24 p.m.

Newsonomics: Four years in to their surprise marriage, what has the FT done for Nikkei, and vice versa?

The predicted culture clashes seem to have been mostly avoided, and they’re ready to expand their reach in Europe, Asia, and everywhere else.

On July 23, 2015, the Financial Times and Nikkei — the leading business newspapers in the U.K. and Japan — shocked the news business worldwide with its own acquisition breaking news. On that date, the two companies announced a tie-up that no one had seen coming.

The early conventional wisdom was that Nikkei had way overpaid (roughly $1.3 billion) for the prestigious but modestly earning FT — and that the new marriage would suffer through some major cultural headaches.

But today, four years later, both Nikkei and FT seem remarkably…happy. This corporate mix, both CEOs say, is working out even better than hoped. And word from inside the FT newsroom is one of satisfaction. Editorial integrity has been maintained. The new owners, replacing a struggling Pearson, have demonstrated a willingness to make targeted new investments in the newsroom and in product development.

“Basically, these [Nikkei] guys all come from a journalistic background, and they really believe in the value and importance of quality journalism, in reader revenues and transformation,” FT CEO John Ridding tells me. “So in a sense, culturally, they would do it the same way.”

I recently had the opportunity to speak with both Ridding and Nikkei chairman Tsuneo Kita, who doesn’t often give interviews. Over the next two days, we’ll publish excerpts of those conversations here at Nieman Lab.

It’s a check-in on a M&A deal that’s all about long-term strategy — not the sort of shorter-term, cost-cutting-driven deals we’ve seen in the United States, most notably in the pending combination of Gannett and GateHouse Media.

That deal will end up having roughly the same price tag as Nikkei/FT. But the differences between the two show the different fortunes facing the local and national/global newspaper businesses. The biggest players still face challenges, of course. (The New York Times reported a 6.7 percent drop in ad revenue this morning, for instance, tarnishing its latest good digital subscription news.) But by and large, they have the digital talent, experience, data capabilities, and products to let them enter the new decade with confidence. For local press, the questions are growing rapidly existential.

The Financial Times has seized global opportunities from its London base. We’ve been writing about it as a global leader in data-driven reader revenue for the past decade. I still recall when then-FT managing director Rob Grimshaw told me years ago that his emerging goal was to become “Amazon of newspapering.” In many areas, we can trace how the FT’s customer-centric and data-driven strategies have acted on that impulse. We can also see how much of the publishing world has come to accept such strategy as fundamental to their own futures. (The FT was the first major publisher to launch a metered paywall, all the way back in 2007 — four years before The New York Times followed suit, followed by much of the rest of the industry.)

That’s one reason everyone in news publishing should watch the FT. Whether your company can afford a fleet of data analysts or only one, or a small fleet, it’s the transformational thinking here that demands attention.

John Ridding has long been more measured in his public ambitions than the more expansive Mark Thompson, the New York Times CEO who publicly announced a 10 million subscriber goal three years ago. (It’s on pace to hit it by 2025.)

Nonetheless, Ridding’s company reached a true milestone in the spring, joining the small 1 Million Subscribers Club — 80 percent of them in digital.

Likewise, Nikkei is a major global player, focused primarily on Asia overall and increasingly driven by the same kinds of customer-centric and data-driven strategies.

While little understood in the U.S. or Europe, Nikkei is dominant in Japanese business journalism and now aims to be the business and tech news leader in Asia. Just this year, it’s bought stakes in startups in Singapore and India. As a Tokyo-based company, it deals both with Japan’s own population decline and difficult economy, and the wider digital disruption trends suffered by all the world’s press.

As New York City-based Jacob Margolies, who has long represented the Japanese daily Yomiuri Shimbun in the U.S., puts it: “All trends in Japan are in the same direction — except slower.” To put that in perspective, consider that Yomiuri — the world’s biggest newspaper with a daily circulation of 8.9 million — could count 10 million not long ago. It’s a decline, but still from a high, high start.

Long-time business journalism veteran Gordon Crovitz, former publisher of The Wall Street Journal and co-founder of NewsGuard, puts Nikkei in perspective. “Nikkei does world-class journalism, but differs from The Wall Street Journal in its good fortune to operate in a country with a culture of deep engagement with news,” he says. “Nikkei’s circulation in print is much larger than that of any U.S. news publisher, even though the population of Japan is well under half the population of the U.S. When Nikkei launched its digital subscription program several years ago, it was a quick success, at digital subscription prices that were the highest in the world.”

Overall, the Nikkei purchase of the FT stands out as strength buying strength, and an aim to make the combination more than the sum of its parts. These are two of the very few news brands that we can be confident will survive and likely prosper well into the 2020s. We can’t say that with much certainty about many other publishers. As Tsuneo Kita put it in 2016, Nikkei will judge the success of the deal over the next 10 to 20 years — not the next 3 or 4 quarters.

Take a look at a few of the top-line numbers at these two significant (if not discussed enough) global news players.

2015 2019
Total subscribers
FT 737,056 1,022,191
Nikkei 3,134,517 3,031,657
Digital subscribers
FT 517,754 841,313
Nikkei 363,492 723,808
Newsroom headcount
FT 550 550
Nikkei 1,452 1,439

Most noteworthy here is the explosive growth of (expensive) digital subscriptions. The FT, given its global opportunity, has managed significant overall growth, with digital subscriptions now far outpacing its print numbers at their peak. (It sold 504,000 copies a day back in 2001.) Nikkei has largely offset its print losses, doubling its digital subscriber rolls in four years. Both companies have retained their sizable and experienced teams of journalists, considering them the lifeblood of their businesses.

Notably, the FT has begun to find the profitability bonus that should await publishers that become more fully digital. (After all, the marginal cost of 1,000 new print subscribers is real, in terms of paper, printing, and distribution. The marginal cost of 1,000 new digital subscribers is negligible.) In 2018, the FT made a profit of £25 million, up only £500,000 on 2017 — but double what it made in 2016.

In both of the interviews we’ll publish this week, there’s a strong emphasis on technology as a business driver and as a force multiplier. The FT is plainly farther along in most of these areas, but as Nikkei’s Kita told me, as a point of pride, “Probably in the field of AI, we are ahead of them [the FT]. We are doing research and developing AI in Tokyo. So, this is something that we will be able to share with FT.”

Photo of Nikkei newspapers at a kiosk in Yokohama by AP/Shuji Kajiyama.

POSTED     Nov. 6, 2019, 1:24 p.m.
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