When thelondonpaper ceases publication in the autumn thousands of evening commuters will mourn the loss of their daily dose of gossip, complete with photos of celebrities stumbling out of nightclubs in the early hours of the morning.
Commuters will still be able to pick up a copy of the paper’s evening rival, the London Lite, or the morning Metro, but industry watchers wonder whether News International’s decision to close the lossmaking paper is a sign that the free model is no longer viable.
Douglas McCabe, analyst at Enders, says: “The freesheet model relies exclusively on advertising for revenues and this becomes very difficult in a recession. Free newspapers are making huge losses.”
The economy may be on the turn but regional newspaper advertising revenue is forecast to plunge 31.9 per cent this year, according to GroupM, a media agency. At national papers, it is expected to fall 18.6 per cent.
News International’s decision to close its only freesheet highlights the newspaper industry’s move towards charging for content in print and online and away from the focus on “free”, which gave us the London Lite, Metro, thelondonpaper and City AM, the morning business paper.
Mr McCabe adds: “Rupert Murdoch wants to get value back into this model and in order to create consistency in his strategy he is prepared to close down a free newspaper that he has been backing for the last three years.”
Daily Mail & General Trust is also understood to be reviewing the London Lite. While the company declined to comment, some analysts believe DMGT may decide to keep it running on the basis that it will be the only free evening London paper, but most are sceptical.
Together London Lite and thelondonpaper have a daily circulation of 900,000 but neither has turned a profit and last year thelondonpaper suffered a pre-tax loss of £12.9m.
But Metro, owned by DMGT and a decade old, is held up as one of the few success stories. The paper has achieved significant scale with distribution in 15 cities across the UK and daily circulation of 1.3m. At its peak, Metro was understood to be making annual profits of about £10m.
Metro distributes its newspapers at railway stations, bus stops and on the London Underground, with whom it has a lucrative contract that comes up for re-tender next year.
Tony Giordani, of media buyer Vizeum UK, says: “Metro’s distribution model has had an impact. They don’t have to pay vendors to hand it out. This was probably a massive overhead for thelondonpaper.
“Metro was on the market first. It was a sensationalist product that was a bit trashy. But the company really pushed its urbanite audiences to the agencies. Metro picked up higher-end advertising and now has more advertisers willing to spend with it.”
City AM, the morning business paper launched in 2005 with a circulation of about 107,000, has also been hit by the downturn in advertising.
Lawson Muncaster, managing director, says: “This has been a very difficult year. The advertising market has been absolute carnage.”
The paper, which employs 54 people, including 28 journalists, has racked up total losses of £6.7m over the past four years. Plans to expand into Manchester and Edinburgh have been put on hold.
However, despite the shakiness of the advertising-only model , ShortList, the weekly men’s lifestyle magazine, is bucking the trend. Mr Giordani believes this is partly because advertisers are increasingly attracted to publications with niche readerships.
Karl Marsden, managing director of ShortList, says the company is on track to be profitable this year – its second year. Plans are afoot to launch a female weekly version called StyList this autumn, aimed at 20-to-40 year-old commuters.
“We have a definite proposition for advertisers,” he says. “Our advertising revenues are up 82 per cent year-on-year.”
ShortList, with a circulation of 510,000, has the highest distribution of all men’s lifestyle magazines. Its backers include GLG, the hedge fund; DC Thomson, the Scottish publisher; and Stephen Marks, the founder of French Connection.
But analysts say the future for free publications, especially newspapers, looks bleak.
In the UK, Trinity Mirror and rival Johnston Press, which between them publish about 230 freesheets, have released dismal results this year. The only bright spots were increases in circulation revenue at their paid-for titles.
The demise of the freesheet may be a relief for London’s Evening Standard.
The paper has been under threat since the freesheet wars in London began in 1999.
That battle culminated in the sale of the title to Alexander Lebedev, the Russian oligarch, for £1 this year.
