What Is Tortoise Media? The Loss-Making Media Startup Trying to Buy the UK’s Observer
By: Kari McMahon
UK media startup Tortoise Media agreed to buy the Observer, the world’s oldest Sunday newspaper, from the Guardian Media Group.
That prompted journalists from the Guardian Media Group to picket outside its London headquarters last week, fearing Tortoise Media’s long-term plans for the publication, including a digital identity and the implementation of a paywall, even as the Guardian Media Group’s owner, the Scott Trust, intends to invest in Tortoise and the Observer. The group will also secure a seat on both the editorial and commercial boards of the media company. The Guardian is known for not having a paywall and instead depending on reader revenue.
The Scott Trust benefits from a £1.2 billion ($1.5 billion) endowment fund and exists to ensure the editorial independence of the Guardian in perpetuity and that its journalism is free from commercial or political interference. Under this trust model, journalism jobs at the Guardian are considered some of the safest in the UK. Observer staffers have been told that under the in-principle agreement there will be no staff job losses. Tortoise didn’t provide comment for this story.
What Is Tortoise?
Founded by ex-Times editor James Harding at his kitchen table in 2018, Tortoise Media, as the name suggests, focuses on “slow news.” It originally launched producing longform stories, which could take nearly 30 minutes to read, but the outlet found readers were spending only a few minutes with those stories before dropping off, according to a report from Press Gazette.
Tortoise has since pivoted much of its editorial focus to audio and events. While the startup loses money, its audio division reached profitability within 12 months, benefiting from intellectual property deals. Tortoise signed a first look partnership with Sky Studios, while three of Tortoise Media’s most popular investigative podcasts became available on BBC Sounds under a new deal. Sweet Bobby, a Tortoise Media podcast about the search for one of the world’s most sophisticated catfishers, was bought by Netflix.
Tortoise Media describes its business model as one “that’s responsible and sustainable.” However, for the 2022 financial year—the first year the startup reported its full accounts—it reported a £4.6 million ($5.8 million) loss for the financial year, a 45% increase compared to the prior year.
“2022 was a year we decided to invest in the business and are confident that will enable us to achieve our goal of profitability,” the startup said in the report.
The startup generated £6.2 million ($7.9 million) in revenue, up 15% compared to the prior year, while costs also surged, increasing 26% to £10.8 million ($13.7 million). Expansion of its proprietary business forums and the 63% growth of its audio business were cited as drivers of revenue growth.
The startup hosts a number of events from “ThinkIns,” which are live unscripted editorial meetings that anyone can join for a fee, to its Responsible Business Forums, which bring together industry leaders on topics such as artificial intelligence and investing. Out of 73 employees, 72% focused on production, per the 2022 results.
Tortoise Plus Observer
Tortoise Media is buying the Observer because it’s “one of the great names in journalism” and it believes it can make the Observer “fit for the 21st century.” The Guardian Media Group’s chief executive Anna Bateson has said the Observer, which the group bought in 1993, makes no money when shared costs are taken into account and that it will lose money regardless of costs within three years, per a report from Press Gazette.
The deal will see the six-year-old media startup funnel £25 million ($32 million) into the Sunday newspaper, which was first published in 1791. It is rare to see an early-stage media startup acquire a stake in a legacy media brand; usually it’s the other way round.
Tortoise plans to continue the print business on Sundays, while helping The Observer build its own digital identity. But how it can afford this remains to be seen.
“Between 2018 and 2022, [Tortoise Media] lost £16.3 million,” the UK’s National Union of Journalists (NUJ) said in a fact sheet. “A promised investment of £25m in The Observer has already been reduced to £20m. The proposed business plan relies on very optimistic projections for subscribers and ad revenue. It does not promote liberal journalism to put the Observer behind a paywall.”
A fifth of the £25 million going toward the investment in the Observer belongs to the Scott Trust, which owns the Guardian Media Group, and those funds will be used to take a stake in the startup “to show its commitment to the success of the Observer.”
“Why is the £5m not being invested directly in The Observer?” Laura Davison, NUJ’s secretary general-elect, wrote in an email to AMO. “Journalists are calling for additional representation in the governance structures. Members feel they have not been meaningfully consulted over the deal.”
Journalists at the Guardian and Observer voted to go on strike for four days in December. The NUJ expressed concerns about the sustainability of the Observer’s journalism if it is sold to the loss-making startup.
Who Backs Tortoise?
While Tortoise Media describes itself as “a membership business, built for and with our members,” it has mostly gotten to where it is today through the support of investors and those investors will play a key role in the acquisition of the Observer.
“Tortoise is proud to have a small group of investors who backed the business since our earliest days and we [are] grateful for their support to ensure liquidity or cash flow is not a significant risk,” said the startup in its financial statements. It also noted that it was confident it could attract further investment in order to deliver on its long-term strategy.
In 2018, Tortoise Media ran a Kickstarter campaign that raised £539,000 ($687,767) and attracted 2,800 founding members. The funds were a bonus since most of Tortoise Media’s initial launch funding came from investors. Backers included Woodbridge Investments, the family office of the Thomson family, who have a controlling stake in the media firm Thomson Reuters, as well as Yellowwoods Associates, an investment firm owned by the South African Enthoven family who are behind the chicken restaurant chain Nandos, according to a statement on Companies House.
Four years later, Tortoise Media raised a £10 million ($12 million) Series A round led by London-based hedge fund Lansdowne Partners, according to a 2022 confirmation statement. Other investors include members of the Persson family, which made its fortune through the clothing retailer H&M. Karl-Johan Persson owns a stake via Philian AB, while Tom Persson owns a stake through his investment firm Co-Made STHLM. In 2023, the startup received a further£1.1 million ($1.4 million) from investors, according to its financial statements, though it did not disclose the backers. Harding is the only person with significant control of the startup.
The NUJ are calling for an independent review of the deal for full clarity on investors, shareholdings and sustainability for the title, Davison said.
“The board has considered this issue in detail for a long time and weighed up all the alternatives, and we are certain we have made the right decision for both titles which will give them a sustainable future,” said a Guardian Media Group spokesperson. A Scott Trust spokesperson said they had “not received bids containing any substantive detail from any party other than Tortoise Media.”
Tortoise Media recently released more information on backers of the deal, sharing that new supporters Standard Investments, a backer of US media startups, and This Day, which is South African businessman Gary Lubner’s philanthropic foundation, were on board. It is unclear if this is the complete list of new backers for the Observer deal — Tortoise Media did not respond to a request for comment on this.
“All are in for the long term,” said Tortoise Media in a FAQ sheet on the deal. “Their backing is the first substantial new investment in a liberal news media company in the UK in decades. No investor will have a controlling stake.“
The NUJ is also concerned about the sale process and lack of due diligence. Dale Vince, a green energy tycoon with an interest in buying the Observer, told the I News on Dec. 10 that he was unable to make a substantial offer because he wasn’t allowed to see the Observer’s finances.
Vince’s next steps remain to be seen.
