Profitability & myopia
Sparked off by the Q1 2008 loss of Metro International, the closure of BostonNow, and substantial losses of Murdoch’s thelondonpaper in its first year, the topic of free newspapers being not profitable has been much discussed lately.
Last week it was on Philip Stone’s Follow the Media website (see previous), in the Wall Street Journal and on MediaLife. The last article was heavily criticized by free-daily.com for being inaccurate.
This Wednesday Jyllands Posten will have an article on the Danish situation. In Follow the Media I was quoted for the rough estimate of 70% of the free dailies not making profits (I indeed said that). (A ‘rough estimate’ because most publishers are either privately owned or don’t break out results for separate titles.)
Many other media copied these stories, mostly ending with the catch phrase that free apparently doesn’t equal profitable. Some media almost seemed to be gloating over it. The question of course, is whether this really means that the ‘free daily’-model has no future.
Of the more than 300 free dailies that ever were launched, almost a quarter (74) has been closed down already, mostly within the first years. Defensive papers, sports papers, afternoon papers and last entries in crowded markets were the first to go. These obviously didn’t make any money.
Almost half of the remaining 235 titles were launched in 2005 or later. Launching costs are substantial and almost no paper expects to make a profit in the first years. Circulation and readership data are not yet available while advertisers have to be convinced as well.
Furthermore, many of these papers were launched in markets with already two or more free dailies; Denmark, Switzerland, Spain, France, Netherlands, Italy, Portugal, Sweden, Korea, Hong Kong, Israel. Competition is high and advertising rates are under pressure.
While some first entries made profits rather quickly (Sweden, UK), most count on three years at least while some publishers (like Bolloré in France) think it may even take longer.
Titles that are longer in business usually make money although not all of them. Sometimes because of difficult markets (US) or fierce competition (Denmark) but also because they launched new editions which again lead to new start-up costs.
The economic recession did not help. That the three closures of 2008 are in the US is no coincidence. In my view the Boston-closure and and not finding a new investor are definitely recession-related. Print is extremely vulnerable for economic downturns. Of the 75 closures, most of them were in 2001 and in 2006/2007.
In other words: most titles don’t expect to make profits. Actually, most businesses don’t expect to make money in the first years.
More interesting is why so many media cover the non-profitability of free dailies (at least 4 times a year when Metro International publishes its quarterly result, and again at the annual report). There seems to be some myopia concerning money-losing newspapers.
The non-profitability of paid papers is covered less. And there is a job to be done. What about The Times of London, the Evening Standard, The Independent, The New York Post, The New York Sun, The Washington Times, Le Monde, Le Figaro etc.
One of the interesting stories concerning profitability was the launch of Metro Halifax in Canada on the remains of the Halifax Daily News last year. There was a fair amount of criticism on the takeover, but the fact that the Halifax Daily News lost money for 18 years in a row, was apparently taken for granted.
Another thing not often covered is the difference between free and paid dailies when it comes to press subsidies. In many European countries (mostly in the Nordic and Western area) the paid press is subsidized by the state, either directly or through special tax laws and postal rates. Free papers usually are excluded from these subsidies.
Money-losing paid newspapers apparently have hardy any news value while their state subsidies are seen as natural benefits. When free newspapers are losing money, the fact seems to be celebrated as often as possible as the death wish of a mortal enemy.