MEDIA: Why the `Observer' isn't working

It is five years since the Guardian agreed to purchase the Observer from Tiny Rowland's Lonrho group. Five years of high ambition, too many editors, much internal angst - and falling circulation. In the five years of Guardian ownership it has lost some 20 per cent of sale, down from 500,000 to 400,000. It has also cost the Guardian a great deal of money - pounds 26m to buy it in the first place, regular losses of pounds 8m or pounds 9m a year since then and, in all, towards pounds 70m over the five years.

Last Sunday's edition of the paper proudly announced that the Observer was "the only quality Sunday newspaper currently to show a rise in its readership". There's a certain desperation in putting a six-month rise of 0.8 per cent on the front page, but you have to take comfort where you can, even from a statistic commonly exploited by those to whom circulation figures do not give the same opportunity. When the audited circulation figures are published later this week, it is believed that the 207-year- old Sunday paper will be even closer to the 400,000 threshold, and that nothing will prevent it dropping below that.

The Observer in the "300s" is the newspaper equivalent of Manchester City in the second division. A great club fallen on bad times; the long climb back a hard one. As always with newspaper circulations some perspective is needed. Aggregate newspaper sales figures are not what they were, but that does not mean that all sectors of the market are in decline. The Sunday broadsheet market is not. When the Guardian Media Group bought the Observer in 1993 the four titles in the Sunday "quality" market - the Sunday Times, the Sunday Telegraph, the Independent on Sunday and the Observer - were together selling some 2.692 million copies, of which the Observer accounted for some 19 per cent. Today, the same four titles are selling 2.880 million copies, the Observer about 14 per cent of them. So the size of the market place cannot be blamed. It has grown by nearly 200,000 copies, and still the Observer has managed to sell 100,000 fewer.

So we have an enlarging sector of the market with the most venerable title doing badly. Who is doing well? Not the Independent on Sunday, which has also lost sales in the five-year period we are considering. It follows then that the other two titles have enjoyed considerable success. The Sunday Times, consistently the dominant player, has powered on, up 120,000 or so on five years ago. The most impressive circulation growth has come from the Sunday Telegraph, up about 250,000 over the five-year period.

The marriage of Guardian and Observer appeared, on the face of it, to be a natural one. Both papers appealed to a predominantly middle-class, intellectual, left-of-centre audience. The Guardian saw great potential for economies of scale, for shared infrastructure between daily and newly acquired Sunday, and this has been realised. Unlike The Independent and the Daily Telegraph (for a short period), the Guardian never felt tempted by seven-day publication - though there were gestures in this direction. Guardian staff were appointed to responsible positions on the Observer. Foreign correspondents serviced both papers. Most significantly, the Guardian's editor, then Peter Preston, was editor-in-chief of both titles. Alan Rusbridger, who became Guardian editor in 1995, soon acquired a similar role. Preston had been responsible (through the Scott Trust) for the appointment of the first two Observer editors after the takeover - Jonathan Fenby and Andrew Jaspan. Rusbridger delivered the third, Will Hutton. Two editors in three years, three in five. Now Hutton, in charge of policy and opinion, is supported by Jocelyn Targett, de facto operational editor.

Internal argument between the two titles has not helped, either. Ex-editors have complained in public; Guardian staff speak freely of their resentment at the drain on "their" resources of the Observer; Guardian staff are moved to the Observer, and often return. There is none of the consistency of editorial management that successful rivals in the sector demonstrate. In dismantling "old" Observer culture, the new management has not yet created a new one.

Caroline McCall, commercial director of the Guardian and the Observer, told a recent Guild of Editors conference: "When the Guardian acquired the Observer it underestimated how big the job was. It was a newspaper that had been in decline for 15 to 20 years. The Sunday market is a really difficult market. Readers' perceptions of the brand are taking a long time to shift. The Observer is [now] a much better paper ... But its circulation figures do not reflect its quality."

Circulation figures seldom reflect the quality of the product, certainly not in the eyes of those responsible for it. McCall is right to say that the Sunday market is difficult. Here are some of the difficulties. First the traditional ones: little news tends to happen on Saturdays. Sunday is a different kind of day. Readers look for a different kind of paper. And the modern ones: Saturday newspapers used to be the flimsiest and the lowest sellers of the week. Now the broadsheets have similar bulk to the Sunday papers, and are significantly cheaper: similar content; better value. Sunday newspapers used to have a monopoly on live sport. Now a significant amount of Premiership football and other big sporting events take place on Sunday. Monday papers have big sports sections, as big as some Sundays'. Senior politicians prefer early Sunday television programmes to talking to Sunday newspapers - so their choice quotes run all day on radio and TV, and are still mopped up in Monday newspapers. Patterns of leisure have changed. Sunday is a doing day, rather than a day for lying in and reading newspapers.

But this doesn't let the Observer off the hook. Despite all the above, Sunday broadsheets sell more copies than five and ten years ago. The Sunday Times and the Sunday Telegraph are both successful and profitable. Both these papers have Saturday stablemates that are multi-section quasi-Sunday papers selling much more cheaply than their Sunday counterparts.

Interestingly, the two successful titles are Conservative newspapers that have flirted less with New Labour than most nationals, while the Observer is left of centre and has never supported the Tories. Concentrating on the Observer, how can it be that over the past decade, which witnessed the end of Thatcherism, the internecine divisions of the Major government, and the rise and success of New Labour, the newspaper that had so much to exploit, so much to gain, has done badly?

Quite simply, it did not know its readers. Worse, it thought it did. The consistent triumph of the Guardian, and the reason that, against all the odds, the Times price-cutting and the Telegraph give-aways had almost zero effect on circulation, was that the paper knew its immensely loyal readers so well. It has impressively developed a distinctive "brand" that permeates every aspect of its activities. While the Eighties should have presented the Observer with all the opportunities of opposition critique, it was unable to take on board the popularity of Thatcherism or the necessity for old Labour to change its agenda.

And when it seemed to catch up, by appointing the then guru of the chattering classes, Will Hutton, as its third editor in as many years, it failed to realise that New Labour had moved on again. New Labour was happy to use the chattering classes in the short term, to ensure coverage for their "project", to reinforce the message that the only worthwhile debate was taking place around them. But once they had power, the chatterers were discarded in favour of "the people".

And what the Observer failed to realise was that you need a lot more readers than chatterers, and that readers, even of the Observer, are interested in much more than politics. Trouble is, when the Observer isn't earnestly political it's just earnest. And when it isn't just earnest, as when it's dealing with lighter issues such as Ginger Spice and Dodi's dad, it's loftily earnest. While full of good things, it lacks the conviction the Guardian has when dealing with the less important things.

It could learn a lot from the Sunday Times, not in terms of the opinions it represents, but in its recognition that it doesn't need to represent those interests all the time. Trouble is, it hates the Sunday Times so much that it can't bear to look at it. If it looked at it, it could still hate it, but it could discover how much there is to the mix - to the inconsequential, to not having attitude about everything, to Sunday.

Peter Cole is professor of journalism at the University of Central Lancashire.