Viability of the Free Newspaper Business Model

Viability of the Free Newspaper Business Model

FEATURE Podcast: this article is also available as an audio fi le from www.incirculation.co.uk NEWSPAPERS (with the latter more likely than the former), publishers need very deep pockets to keep the Viability of the presses going. Saturation point? The second point the table illustrates is that total circulation seems to be reaching a saturation point. With a 6% growth in the fi rst six months free newspaper of 2008, an all-time low in circulation growth has been reached. A more detailed investigation of some mature markets confi rms this view. The Danish example has been mentioned before: business model from eleven to four titles in two years while circulation dropped by more than 30% in this Travel into any large metropolitan area in Western Europe, and you period. But also in Sweden, the Czech Republic, struggle to avoid them! Free newspapers are everywhere, and, if success Spain and Italy, titles folded and circulation went down. Not all markets, however, follow were measured by total circulation, then they would be doing extremely this pattern. In the UK, the Netherlands, Hong well. But, being free, it’s not and most are losing money. Piet Bakker looks Kong, and Iceland, free circulation has shown a steady growth for at least fi ve years. at whether there can be a profi table future for free newspapers. Three models of free newspaper seem to be the most diffi cult to sustain: afternoon papers, ith 240 titles published in almost 60 don’t expect to make money yet. sports papers and home-delivered papers. countries worldwide, and with a total Total circulation of free dailies has increased Afternoon papers suffer from distribution Wcirculation of 44 million copies a day, every year since 1995 – with an average growth problems, readers are more tired and probably free daily newspapers have proven to be more than rate of 60% (see table). But this growth was in have read news online during the day, while they a passing phenomenon. In terms of circulation no way linear. In both 1999 and 2000, circulation also compete with morning papers that are still and readership, free dailies are indeed a ‘success’. increased by more than 250% but the recession of lying around. In Sweden, Germany, Spain, Italy, In terms of revenues and profi ts, however, the 2001 slowed down growth to 33% and to 13% in the Netherlands, Denmark, Switzerland, Chile, picture looks rather different. A quarter of the 2003. After that, growth picked up again, to almost and Singapore, free afternoon dailies closed 320 free dailies that have been launched so far 50% in 2006. Between 2004 and 2006 circulation down. In fact, almost half of the afternoon have already closed down. Metro International, doubled from 18 to 36 million. In 2007, the growth papers have closed down so far, while in total, the largest publisher of free dailies, only made a profi t in 2006. In Spain, three of the four national titles are losing money. In the London evening “Total circulation seems to be reaching a saturation point.” market, two free papers are engaged in a vicious battle leading to losses for both. In Denmark, the number of free dailies dropped from eleven in rate dropped to 16% while in the fi rst six months of 25% of free dailies launched stopped publication. 2006 to four in 2008, three of them losing money. 2008 circulation increased by no more than 6%. In France, Croatia, Switzerland, the UK, the This begs the question whether free dailies are the Newspapers, and free dailies in particular, Ukraine, Argentina, Chile, Australia, Israel and reinvention of the newspaper which can bring are vulnerable to economic changes because of Korea, free afternoon papers are still published. new readers and revenues to the industry, or just their dependence on recruitment and consumer Sports newspapers have problems attracting a bubble about to burst. goods advertising. This does not mean that advertisers. While there are many men interested the free newspaper model is problematic per in sports, not many advertisers seem to be Launch of Metro se, but it does mean that the stand-alone free interested in these men, and when they are When Metro was launched in February newspaper will fi nd it diffi cult to survive a interested they use their budget for sponsoring. 1995 in Stockholm, the business model was recession as the publisher will have no other Sports papers in Spain, Italy, Germany and rather simple. Save costs on distribution and sources of income. With launching costs being Portugal folded, mostly within one year. subscription, concentrate on material from press between €5 and €20 million and an expected Home-delivery of free newspapers on a agencies, employ a small staff and hand out a break-even point of three to seven years substantial scale was fi rst used in Iceland, lack tabloid to people with free time on their hands: commuters. With lower rates than paid papers The development of free newspapers. but with a high circulation and an attractive demographic, the new Metro made money 1995 1996 1997 1998 1999 2000 2001 within a year. This success-story soon came Countries 2 2 4 6 13 24 29 to an end. Operations in the UK, Argentina, Switzerland and Poland were closed, while the Titles 2 2 5 7 30 64 82 Czech and the Finnish editions were sold. Other Circulation publishers had similar experiences; while Metro 231 249 558 918 2891 7566 10043 UK (Associated Newspapers) and the Swiss 20 (,000) Minuten (Tamedia) proved to be successful 2002 2003 2004 2005 2006 2007 2008 within a few years, most publishers were less lucky. In 2008, probably 70% of the remaining Countries 32 32 37 43 51 56 58 240 titles are losing money – the exact number is not certain as most publishers do not break Titles 85 99 127 161 225 247 238 out separate data for all publications. The main Circulation reason, however, is that the majority of these 12596 14 674 18073 24634 35861 41511 44014 (,000) titles launched only in the last few years, and InCirculation July/August 2008 13 NEWSPAPERS FEATURE “A free-daily-monopoly is in fact quite rare. The result seems to be quite devastating.” of public transport being the obvious reason. The London slugfest The model was later introduced in Denmark, The launch of Metro UK (Associated Newspapers) the US, the Czech Republic, the Netherlands was a deliberate attempt to prevent Metro and Switzerland. In Denmark, one of the papers International launching in London. When this using that method (Dato) closed down, while did not happen, Associated found itself with a the others (24timer, Nyhedsavisen) cut down on paper that made money without hurting their home-delivery. Also the Czech paper closed, while fl agship, the Daily Mail. When they recovered the Examiner (US), .CH (Switzerland) and De from the surprise, the publisher decided to keep Pers (the Netherlands) all reduced home-delivery. Metro in the market, and protect their new brand The costs of the model were approaching that of against competitors. So, when Murdoch wanted delivering paid newspapers, while it resulted in to start his own free paper, Associated reacted fi rst a low number of readers per copy; Free dailies by launching Standard Lite, changing that later to handed out in public transport can have two to London Lite. This didn’t prevent Murdoch from four readers per copy, home-delivered newspapers starting thelondonpaper, with the result that both may have less than one reader. evening papers are losing money now, as is paid competitor the Evening Standard. Victims of own success The biggest problem for free newspapers, Conclusion however, does not concern recessions and With a quarter of all free papers launched so far saturated markets but their own ‘success’. The closed down, and with an estimated 70% of the table shows growth, not only in circulation but remaining titles still in the red, the business model also in countries with free newspapers and in may seem very problematic. But we have to keep titles being launched. For the fi rst four years in mind that of those remaining titles, more than (1995-1998), the number of titles was equal half were launched in 2004 or later, and, because to the number of countries, monopolies in most publishers don’t expect to make money in every market. In 1999, there were 27 titles in the fi rst years, the number of non-profi table free 13 countries, growing to 96 in 32 countries dailies actually is not surprisingly high. Moreover, in 2003 and 200 titles in 50 countries in 2006. with paid papers losing ground in almost every As most free dailies are published only in Western market, and the demographic profi le major metropolitan markets, competition has of the growing amount of non-readers still increased dramatically. In the Korean capital being very attractive to advertisers, the model Seoul, eight titles compete, in Italy fi ve titles seems to have real chances. A growing amount are available in most major markets, in Spain, of advertising money is directed online while Portugal, the Netherlands, Switzerland, France television is still the major advertising medium and Denmark four titles compete. Even in small in many countries. Both media, however, seem to countries like Iceland, Andorra, Macedonia suffer from fragmentation. Print, and newspapers and Luxemburg, free dailies compete. A free- in particular, can deliver a substantial and attentive daily-monopoly is in fact quite rare. The result audience within a fi xed time span, something seems to be quite devastating. Advertisers online is hardly capable of.

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