John Ridding: I’m literally just off the plane back from Tokyo where we agreed on our plans and priorities for this year. In terms of context, it’s another phase of disruption and existential challenge — not least because of the implications of generative AI, but also, you know, pressures and structural challenge in some key revenue lines for the industry, notably advertising. And there’s been another wave of significant job cuts, including, as you well know, major titles in the U.S..

We approach all of this from what I see as a strong position relatively and absolutely. We’re at an all-time high in terms of readers and paying readers. We broke the £500 million revenue line last year for the first time. [Note: That’s about $545 million USD.] Our global paying audience reached 2.6 million and our audiences are more engaged than ever. So while we aren’t complacent — we can’t afford to be complacent — and while I think this is a phase of, frankly, major risk and danger for the news ecosystem, I’m pretty confident about the FT’s formula and strategy. And I do believe that quality news can be a quality, growth business.

That [FT] formula is a commitment to editorial independence and excellence, illustrated by sustained expansion of the newsroom. A strong focus on our core subs business, helped by the fact that we started our transformation early, along with the the digital innovations that have deepened engagement and broadened our reach. And, yes, one other point I wanted to emphasize because it doesn’t, I think, get enough attention in terms of formulas for growth and sustainability and news media is the ownership model.

Unlike public ownership and stock market listings — and we’ve been there — where that can be a fixation with quarterly earnings. And unlike what we might call the mogul model, where a tech tycoon or some other baron may intervene or neglect on a whim or a bias, our situation — which is private ownership by a business owned by its staff — enables us to invest through the cycle and through disruption with a focus on long-term, quality growth.

At the same time, the relentless disruption in our industry and, indeed, in the broader environment from pandemics, war, and inflation, requires fast decision making and short-term flexibility to combine with that long-term strategic consistency. I think that’s been another feature of Nikkei’s ownership. It might seem surprising to lots of folks, given the perception that Japanese companies can be consensus-driven and therefore sometimes slow to act, but that hasn’t been our experience at all.

Whether it was the rapid decision when Covid struck to sacrifice profit for sustained investment or a decision last year to enable us to use our profit to pay an all-staff bonus to help offset the impact of inflation, we’ve seen supportive decisions. And, of course, having an owner in the same industry provides significant potential for collaboration, whether it’s tech development, the current focus on AI, joint sales and events.

As ever, the figures prove the point. We’re eight years since Nikkei’s acquisition. During that period, our group revenues have more than doubled. Our paid circ almost doubled as well. And our headcount has grown by a third. I think those foundations — that ownership model — have been incredibly helpful in dealing with all of the disruption and challenges that we’ve seen to date and continue to see.

I should point out it’s a mutual benefit. Nikkei have been pursuing a similar strategy, drawing on some of our learnings from the art and science of subscriptions. They broke through the 1 million digital subscription level themselves last year and are now quite possibly the biggest digital news subscription organization in Japan.

Ridding: We have been fairly granular about it for some time, in that we have a metric for engagement where we measure each reader on the basis of the “RFV,” where “R” is recency, “F” is frequency, and “V” is the volume. For us, that’s the single most important metric. Because, obviously, one can acquire readers and subscribers but it’s all about building that level of engagement so they remain loyal readers.

I mentioned the growth in subscriber volume earlier, and, I think, probably more important is that engagement has grown strongly. In each of the past five years, engaged readership has grown by double digits. That is what we’re really focused on.

It’s a particular challenge as you grow and broaden your audience. Getting new readers as engaged as your original loyalists is a big challenge. One of the routes we found to drive that is through innovation in formats. We found, in particular, that data visualization and new forms of storytelling have really helped engage readers.

NEW: I’m not sure people fully appreciate how dire the US life expectancy / mortality situation has got.

My column: https://t.co/dBIhT9eZLv

And some utterly damning charts.

1) at *every* point on the income distribution, Americans live shorter lives than the English. pic.twitter.com/pOoziEK5mZ

— John Burn-Murdoch (@jburnmurdoch) March 31, 2023

I’m sure we’ll talk about AI in more detail, too, but one of the positives of AI from our perspective is the way that that can help drive engagement. We can use AI to really understand, in ever greater detail, reader interests and their propensity to read particular articles, and present those articles. Personalization will become even more important with AI in driving engagement. And, of course, there’s the basic, almost virtuous, circle that the more engaged readers we get, the more data we have to work with in terms of understanding the drivers of engagement.

Ridding: Despite all the challenges and pressures out there — and I really don’t want to belittle the pressures — I think the subscription and engagement model has significant growth opportunities on a number of fronts.

One is technological, using the kind of insights that one can get, as I mentioned, from AI to further deepen the connection and engagement with one’s existing universe. Two is geographical. We’ve been making a push in the U.S. where we have expanded our subscriber base, and, again, crucially, built our engagement with that subscriber base. We have about 280,000 subscribers, which is now about 20% of the global total. Our engaged subscribers increased to 125,000 and our target for 2025 is 150,000.

Another geographical area that we’re really excited about is India. We’ve had a number of go’s at the Indian market. I think we finally found the right formula. It’s not so much a retail market but more institutional and we’ve reached very significant subscription agreements with major, globally minded Indian organizations, which is really exciting given just how important India has become on the world business stage.

I think the other biggie, in terms of subscription growth opportunity, is in that institutional dimension. One of the things that sets the FT apart has been our focus in growing what we call FT Professional — the institutional, B2B part of the business. We made a strategic decision to really differentiate the product between consumer subscriptions and corporate or institutional subscriptions. Rethink the product position. Rethink the pricing. I think the particular power of that professional division is that you really can reach a deep understanding of the organization’s information needs and you become part of the decision making process. You can offer services [such as] alerts when one of their clients is doing something or when one of their rivals is doing something. You really get to understand and form a close information relationship.

I think there are various axes of growth, and we’re sort of pursuing all of them.

Ridding: I think we felt for a while that we were underweight in the U.S.. Obviously, our original headquarters were the U.K.; we expanded into continental Europe and Asia and the U.S. came after. But we saw a significant opportunity there for an internationally minded, nonpartisan approach that we represent in our editorial mission and coverage. You know, we never saw the U.S. as a quick win. We’re focused on sustained growth by targeting particular sectors — finance, energy, core FT sectors — and building engagement.

Total [U.S.] subs are now around 280,000, around 20% of total subs. It’s also the highest growth rate among various geographical markets, and it’s narrowing the U.K.’s lead on volume. Revenues have really increased sharply as well. Around 2019 was when we really started focusing more on the U.S. and our revenues have increased by over 40% since then. It’s now almost a third of total global revenues.

And then we’ve also been innovating and experimenting a lot in the U.S., actually. The U.S. is the FT’s biggest audio market and it’s our biggest audio team. Towards the end of last year we reached just shy of 800,000 listeners in the U.S., which was triple the previous year. FT News Briefing is our most popular podcasts out of the U.S. Unhedged has really seen rapid growth.

I think we see the same playbook continuing to work well. We just agreed with Nikkei to push ahead with this U.S. expansion

On the gender front, the reality is that over the 135 years of the FT’s existence, we’ve had a dominant male readership. There was a need and an opportunity to build our readership among women. The way we wanted to go about that was not through having special sections or whatever, but to make our overall coverage more relevant and more engaging. Women are around a third of all our subscribers now and the total number of engaged women subscribers is now about 130,000. That’s a big increase from less than 100,000 in 2022.

Ridding: We think that it’s really important for a brand publication that takes a long-term view that we continue to build the brand and the connection with a younger audience. One of the ways we’re doing that is through a schools program where we make a formatted version of the FT — which is easier to navigate, but it’s FT journalism — free to secondary schools and above. That’s now in around 7,000 schools in 120-plus countries. The idea is really just for them to build the habit with the brand.

There’s also a mission dimension. Nikkei is not about profit maximization; they’re about mission maximization. Obviously, sufficient profit is necessary for us to be sustainable and to keep investing in the long term, but it’s really about the mission. This educational dimension is something that matters very much to Nikkei.

Building that early relationship with them, so they’re familiar with quality, reliable journalism is a good thing in itself. It’s also good long-term business.

Ridding: It seems like everyone’s suing OpenAI. I’ve just seen a story splashed on the FT that [Elon] Musk is suing OpenAI. I’ll start with the second first.

I think one of the benefits of being around a long time is that we’ve seen a similar movie several times before. The cast might be different, but the themes are generally familiar. The narrative arc to a happy ending is: embrace change, play offense, recognize and build on differentiation. And, frankly, don’t expect help from the disruptors or the regulators. That’s our playbook.

We’re making a big push for AI engagement and literacy across the FT. We’ve made ChatGPT and Google Duet, now Gemini, available to all of our staff in the past month. There’s been a really strong take-up. There was one week last month where the FT was one of the heaviest — and possibly the heaviest — users of Duet anywhere in the world. We’re encouraging and even incentivizing our staff to find useful applications. We are developing a range of AI-based products and services for our readers: a way of interrogating FT’s news and archives, semantic search, summarization tools, audio articulation of our stories.

You asked a question earlier about where we see potential subscription growth. I’m excited about the opportunity for translation services. I mean, obviously the global business audience often speaks English, but even with English-speaking, global business people, they might want to read it in their mother tongue. I’ve just seen a step change in AI-driven translation. We launched a digital edition of the FT at the end of last year, which is immediately translatable into 28 languages. That’s a really big opportunity. In the newsroom, we do see helpful applications in newsroom processes and tools for editing [and] helping research in special investigations.

But despite all of that, we’re very clear that our journalism will remain very human. We’ve developed a craft and a culture of editorial excellence over more than a century with people processes that deliver accuracy and trust, not hallucinations or bias. That’s never been more valuable nor important.

When Roula [Khalaf], our editor in chief, wrote to subscribers last year about this essential human element of journalism at the FT, the response was huge and heartfelt. I think, again, that’s something that’s sometimes a bit overlooked. At a time of algorithms and bots, I think there’s a warm appeal of personality with a brand like the FT.

We’ve also doubled down in our coverage of AI through the appointment of specialists, including an AI editor. I’m obviously probably a little bit biased, but I think our coverage of AI and its impact — not just in business, but society — has been compelling and essential reading.

In your [email before our conversation] you also asked about the perils, and I think there is plenty of peril out there for the ecosystem. I think this is another defining moment in the relationship between news media and big tech. I’m confident about the FT; we’re well advanced in our transformation, we’ve got deep roots with readers and partners, and we have a brand and identity that differentiates us via our journalism and with personality and our global perspective. But I am worried about the ecosystem. I think there’s a risk of disintermediation. The reality is that big tech and social media are failing, again, to do the right thing. The other reality [is] that regulators are off the pace. With very few exceptions, big tech and social media are falling short of their responsibilities and I think, more surprisingly, their own self-interest.

If you train your AI program on someone else’s content, it seems clearly correct that they should receive recognition and payment. And if you talk in concerned tones about the danger of disinformation, it also seems correct to do a better job of policing it and supporting the quality sources. Or at least not compromising the quality sources of information that offset disinformation. Even through the lens of self interest, if you need to improve the reliability of results from Gen AI programs — and they are riddled with errors, not just biases, but mistakes — you need to verify those programs against reliable news and information sources. If you undermine the ecosystem that produces it, that feels frankly pretty short-sighted.

There was, I thought, a really interesting session in the House of Lords with U.K. publications, including the FT, and they were pretty forthright in their comments. One industry executive on the panel, I thought, put the point rather well: there’s a danger that the dog will eat its own tail. The argument is that if it develops in the way it looks as though AI developers want it to develop — where they just appropriate other people’s work without compensation — then they’re going to undermine the news content on which their models are trained.

The big players are investing big time in AI while degrading the ecosystem that supports it. And it’s unfortunate because there’s actually a real opportunity to do the right thing. You ground or validate AI programs, you pay providers of quality journalism to affect that grounding, and I think this validation represents a significant difference from the intellectual property wars round one, which was all about the volume of traffic online. There’s a mutual interest in the verification and validation of Gen AI content against trusted sources.

And what’s particularly frustrating is the epic sums being invested in AI by big tech and, at the same time, the justification when they talk about the challenges of paying license fees or even engaging in the same level that they did with news media. They talk about “financial pressures,” which, you know, you want to say “seriously”? The individual revenues for each of these big players, and their net income, probably match those of the news media industry in total.

Ridding: I mean, look, you’re right. We are fortunate. You can’t dictate your owners in the same way that you can’t dictate your parents. But the approach that has been validated by that ownership model — i.e. sustained support for quality journalism and engagement-based growth as an effective strategy — is of broader relevance to news media, whatever the ownership set-up.

It wasn’t that we were all-seeing when we started our digital transformation. Our platform was on fire, we were seeing structural change in key revenue lines that was moving fast and deep, and we were breakeven — or not even breakeven, in some phases. So we had to make some big calls, fast. Ultimately in moments like that, you have to think very hard about what is your core value and ours was brilliant journalism. So we weren’t going to give it away. We were going to double down, raise prices, and charge for that journalism online – even though that was controversial at a time when the mantra was “the Internet wants to be free.” It quite quickly became apparent that alongside the online revenues, and just as valuable, was the data and insight into our readers that the new subscription model generated.