‘There's no longer this church versus state’ – How City AM is tearing down the editorial/commercial divide

Covering the most powerful media companies to the smartest startups, former Independent media editor Ian Burrell examines the fraught problem of how news is funded today. Follow Ian @iburrell.

On the third floor of an office block behind the late-medieval Leadenhall Market in the City of London, a revolution in news publishing is underway that will both shock the industry and break one of its most sacred taboos.

The creators of City AM have confounded traditionalists before; just over 10 years ago, they launched a specialist business newspaper and gave it away on the streets for free. It's now firmly established. Now they are tearing down publishing's hallowed wall of 'church and state', which for generations has divided the newsroom from the advertising department.

It has to be a gamble. By dispensing with one of the central tenets for commercial news organisations they risk the wrath of journalists everywhere, the scorn of rivals and the loss of credibility with their readers.

But City AM's co-founders have never courted the approval of their peers. As they sit alongside each other at a boardroom table to reveal their strategy to The Drum, Lawson Muncaster – a hefty Scot with a fill-up-the-room energy – and Jens Thorpe – a shrewd Scandinavian industry veteran – are clearly excited by the potential of their plan to change the business model for news.

Before Christmas they hired Charles Yardley who, since 2004, has been a senior member of the team that has turned Forbes magazine into a cash cow that makes 70 per cent of its revenues online but has won a growing and younger readership for its print product. It is Yardley, the new chief operating officer, who will mastermind the radical repositioning of City AM. "The changes we will go through could fundamentally change the UK publishing culture," he says.

City AM will no longer be produced solely by the staff team (the company is 69-strong). From now on, articles will also be generated by a raft of new 'contributors', paid according to the number of page views they generate, and – most controversially – by corporate brands and their advertising and communications chiefs, who will be given direct access to the content management system (CMS) of the newspaper's website.

"We are definitely turning the commercial model upside down on its head – now we will give the marketers and the advertisers access to the same content management system that all the journalists and contributors are using on a day-to-day basis," says Yardley.

"This isn't happening anywhere else in the UK. And it probably won't for quite some time because journalists think it's their environment, and we are ripping that up. Anyone can publish at anytime, anywhere in the world. There's no longer this church versus state."

He recognises the enormity of the move. "A few years ago... from a commercial standpoint if you walked onto the newsroom floor you would be marched out. But that's definitely not the case here in any shape or form."

Corporate brands will be charged a monthly tenancy fee and will be required to sign up for a minimum of six months for a package called City Talk. The name of the purchasing brand is substituted for City and will head up the page. "So it's going to be Credit Suisse Talk or Microsoft Talk or whoever it might be. Every brand will have their own homepage on the site, in just the same way that every staffer and contributor has their own homepage. Each of these brands, in just the same way a journalist does, will programme and curate and filter the content that goes onto their [marked] homepage."

City AM believes this radical approach will be more attractive than the native advertising offerings being made by other news organisations because the content will be more visible to users of the site. If a content marketing piece generates more pageviews than City AM's editorial stories it will be allowed to head up the overall 'most popular' rankings. "Lots of our competitors are building studios or labs... essentially they are glorified advertorial products," says Yardley. "The difference here is that you can find it – this content that these brands are producing is an integral part of the organic news flow of content that goes through our site."

Muncaster says that the strategy is possible because the City AM audience is open to "thought leadership". He is surprisingly confident that if ad clients abuse the system, the readers will blame the authors of the misinformation, not the newspaper. "The anger, disappointment and negativity will not feature on the brand of City AM."

Thorpe claims City AM's handing over of its CMS keys to marketers is modern business practice, similar to department stores such as Selfridges allowing brands to occupy its hallowed floor space.

He also argues that corporates can produce better-informed copy than journalists. "They all have some of the biggest experts in their field, much better than probably any journalist in London." Marketers are smart enough to realise, he claims, that the rules to effective publishing include "don't slag off your competitors, don't talk too much about yourself". He says: "It's for them to establish a leadership position as the brand with the biggest knowledge within their area."

Yardley's new phalanx of chosen City AM "contributors" mirrors the Forbes model, where digital head Lewis DVorkin has built an army of around 2,000 writers, paid by click rate and generating traffic way beyond the means of the US magazine's modest newsroom.

Ahead of its new strategy, City AM appointed a new young editor, Christian May, a year ago. His background as a PR at the Institute of Directors, provoked disparaging responses from some City journalists. But May is praised by Thorpe, who says "if you look at the track record of printed press over the last 20 years, I don't see why it's a necessity to get anybody from the old world to lead us forward into the new world".

There will be those that think City AM is acting out of desperation. After making profits until 2012 and expanding its circulation to 100,000, the company has posted losses of £116,000 in 2013 and then £625,000 in 2014.

These losses are the result of the company's investment in digital, says Thorpe. "We have put down £2.5m in getting the website from no visitors to a monthly audience of 1.5 million uniques." He says the digital side of the company has been "profitable" for the past three months and that online revenues were up 300 per cent year-on-year in March to May.

City AM remains committed to print. Yardley says it is "the front door of the brand". The publisher produces three specialist City AM supplements, on fashion (Bespoke), property and lifestyle (Living), and investment (Money), designed to attract ad clients who would not spend money inside the newspaper. Two more magazines, one on food & drink and the other on travel, will be launched in the final quarter of this year.

Events are another key revenue stream. City AM staged a London Mayoral "hustings", with front-running candidates Sadiq Khan and Zac Goldsmith debating at the IoD, and hosted a Power 100 Women's List, which was won by Virgin Money CEO Jayne-Anne Gadhia. In another cross-platform project in August it will designate the "most marketable" athletes at the Rio Olympics, the sort of list Forbes is known for.

Last year City AM held its 10th birthday party at the London Guildhall. Muncaster says the typical age of a reader when the paper launched in 2006 was 32. Now it's 38. He says City AM has become less "laddish", less interested in spread betting and more mature. CEOs now take its calls. Thorpe says the "younger guys and girls" who took the paper when it started are still reading it and have "managed to establish a foothold within management".

It's unlikely that the Financial Times will feel too threatened, although Thorpe is happy to note that City AM has a higher (if unpaid) circulation in London. There is hope that the expanded digital offering (not bound by a paywall like the FT) might attract new readers in distant business hubs, including Singapore and Hong Kong. Some 25 per cent of City AM's traffic is from outside the UK, with a further 37 per cent from beyond the paper's London commuter-belt distribution area.

With news media brands from the Guardian and the Daily Telegraph to Vice News and Mashable all recently announcing staff layoffs, these are tough times for the industry. In an era when everybody can produce online content, Thorpe is convinced radical measures are required: "We are in competition with 6 billion publishers."

Muncaster is more brutal. "This is 2016. The historical slowing down of paid for newspapers globally and the inability to understand the web is due to the fact that the top of the tree on the journalistic side was far too elitist. I think this is a far more fair reflection of society today, allowing the readership and online traffic to start being the editorial integrity of the newspaper."

Ian Burrell's column, The News Business, will appear on The Drum each Thursday. You can follow Ian on Twitter @iburrell

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