For most of the 20th century the London-based Reuter Ltd.’s news agency has been widely respected for the fast, accurate coverage that it dispenses to newspapers, magazines and broadcasters around the world. But until recently the glories of the news operation largely obscured a dramatic reversal in the fortunes of an enterprise that had to be saved from financial ruin in 1941. Reuters, despite its structure as a nonprofit trust, has become a gold mine.
For Reuters’ owners—a complex consortium of British, Australian and New Zealand-based media interests—the development is a welcome one. Reuters is estimated to be worth $1.8 billion, and they want to cash in on the profits. This month they hope to start a process that will make the agency a company like any other with shares traded on the London Stock Exchange. The offering could mean that millions of dollars will flow into the owners’ corporate coffers, but many are concerned that the agency itself may be the ultimate loser. The current ownership arrangement assures the agency of independence. But subscribers to the service worry that the shareholders’ desire for profit will force the agency to reduce the emphasis that it places on news gathering.
It is not the general news service, which remains costly and not particularly profitable, that has made Reuters rich. Instead, 90 per cent of the agency’s $67-million pretax profit last year came
from a service that has only flourished in the past decade. Rather than covering all the world’s affairs for the media, the new operation offers corporations rapid, highly specialized statistics and information.
The profitable new enterprise is largely a product of the recent upheaval in the world’s financial markets. The first of the financial services, which provided U.S. and European stock prices on video screens, was set up in 1964, but it did not begin to flourish until 1973.
That year the company started to monitor second-by-second changes in currency rates around the world and it offered them initially to five subscribers. But the growing volatility of money markets, combined with the first of the Middle East oilprice shocks, rapidly made the service a sought-after source.
Currently, it flashes numbers and news about 47 financial markets to 13,000 subscribers.
For its part, Reuters denies the charges that the financial service will reduce the scope of its news operation. Indeed, the agency recently has opened nine new bureaus and reorganized its news department.
Still, the increased emphasis on serving businesses probably would have pleased the firm’s founder, Paul Julius Reuter. In fact, his original operation— set up in 1850—carried only share prices and news to European businessmen. He used 40 carrier pigeons, which moved Reuter dispatches much faster than the trains that his competitors relied on.
After the German-born Reuter moved to London, the agency expanded dramatically, buoyed by improvements in communications technology and a growing interest by newspapers in foreign news, at least until the Depression of the 1930s forced Reuters’ clients to cut back expenditures. Then the war that followed added to the agency’s financial woes by cutting it off from a large number of clients. Rather than accept British government aid to stay afloat in 1941, Reuters ensured its independence by setting up an arrangement under which several newspaper interests bought shares in a trust where they could not be treated as an investment.
It is that original agreement that has come back to haunt the press barons. Anxious to cash in on the agency’s treasure chest (Rupert Murdoch’s News International Ltd., for one—which counts The Times of London among its holdings—could net $164 million out of a share offering), the newspaper barons argue that the company is governed by a 1953 shareholders’ agreement. On that basis, they say, they can go ahead as planned at a board of directors meeting on Dec. 14 and start the process of selling stock.
Regardless of what the board does this month, opponents of the share plan may block the media owners’ plan. Already, former British prime minister James Callaghan has argued that the agency’s owners are bound by the 1941 agreement and that they need the permission of Britain’s Lord Chief Justice for a selloff. Even if the objectors are unsuccessful, the current shareholders’ plan still faces another hurdle. Overseeing the board’s operation is a panel of 10 trustees. Before acting on any recommendation by the owners, the trustees say that they will review the directors’ final position. Still, with the stakes running at over $1.8 billion and the trustees owing their appointments to Reuters’ directors, it seems unlikely that the press owners’ plans will be thwarted.
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