Free dailies in a recession

Free newspapers are not immune to the economic crisis. In fact, they are more vulnerable than other media. Particularly in crowded markets, stand-alone free newspapers find themselves facing huge problems. The reasons for this are fourfold:

  • In a recession newspapers are hurt more than other media, the advertising they rely on (retail, jobs, real estate, classified, entertainment) is directly linked to consumer trust. Advertisers base their spending on what they earned recently and what they expect to earn in the near future. Both prospects are not good.
  • The more newspapers rely on advertising, the more vulnerable they are. This explains why free papers and paid newspapers that rely mostly on advertising (like in the US) are hurt more.
  • In competitive markets free newspapers find themselves competing with other free dailies. Because most free dailies are distributed in the same way, the chances of finding a specific target group are not great. Advertisers will use the competition to ask for more discounts.
  • Stand-alone free dailies don’t have protection from the media group – having paid newspapers, magazines or TV-stations in the family helps: it spreads the risk and helps to stand up against advertisers, combined offering of ads is an option.

All ‘commercial’ newspapers feel the first two problems. Dailies – free or paid – that are supported by political or business interest groups may flourish however. In the Ukraine the two ‘oldest’ free papers 15min and Obzor, both published by commercial companies (US-originated KP Media and Dutch TMG media group) closed down because of economic problems. Two new free dailies: Vecherkom (by the Segodnya group) and Puls Kieva just launched. Both have powerful political/business interest groups behind them. In Romania Compact (by a Swiss media group) and an Expres editions (by an Austrian owner) closed down. Ring and Adevarul de Seara, both part of powerful business groups, launched in 2008.

The third problem seems to be less pressing every month. Competition is decreasing. In Europe, Sweden, the Czech Republic, Turkey, Iceland, Finland, Poland, Croatia have ceased to be competitive markets. Denmark saw the number of national dailies drop from five to three; in Spain now three of the four national dailies remain, the Netherlands went from four to three national titles.

From 2007 until March 2009 40 European free dailies closed down, with more than a 100 editions. Circulation dropped with 5% in 2008 (higher than reported earlier because more 2008 data are available) while in the first two months of 2009 circulation dropped again with 7%.

The fourth problem is only slowly going away. Metro is finding partners in Sweden, Denmark, Finland and the Czech Republic while most of the closed down papers were stand-alone titles. Publishers of paid newspapers control now 56% of the European free newspaper circulation – a percentage slowly rising over the years.

In a monopoly a free paper still is an excellent business model, even in a recession. Mature markets can easily support two free papers; anything more than that could lead to huge problems if the recession gets worse. Particularly for papers not being part of a bigger media group.

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