Will free titles cost the newspaper industry dear?

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There was a time when “free” newspapers could be dismissed as local rags filled with classifieds, read by housewives and good for cat litter the next day. Today, more than 12m Europeans a day pick up a free title and circulation battles have broken out in Dallas, Chicago, Toronto and other cities across north America.

For many younger consumers, free newspapers - like “free” web content, television or radio - are the only type they know. Almost a third of Europe’s free readers are under 24, according to a survey by TNS/Gallup, the market researcher. Most were not previously regular newspaper readers, and a high percentage fall into the upmarket, ABC1 demographic which advertisers prize.

Whether the publisher is Scandinavian Metro International, Associated Newspapers’ Metro UK (no relation), or Norway’s Schibsted, owner of free title 20 minutes, the format of a takeaway urban tabloid condensing general news, colour pictures and consumerist features into a 20-minute read, remains constant and its appeal clear.

In a national newspaper market in overall, long-term sales decline, where executives continually worry about the age profile of their readers, this could be seen as a hugely positive development: a swathe of non-readers are acquiring the habit.

But the questions about how free titles can continue growing without undermining copy sales or advertising at paid-for newspapers, and the long-term impact of recruiting a generation of users with the idea that they get for free something their parents willingly forked out for, simply will not go away.

With national press advertising still struggling to recover from a long-lasting advertising downturn, the concept of willingly spurning the reliable cash-generation cover prices deliver seems perverse.

Indeed, Pelle Tornberg, the chief executive officer of Metro International, admits he wanted to be “contrary” when he launched the original Metro in Sweden in 1995.

”The paid-for newspaper market was aging and in decline,” he says. “TV, radio and the internet were stealing younger readers with content that was free.”

He concluded that in the traditional news publishing model, a good percentage of a publisher’s overhead was absorbed in getting copies to newsstands or funding delivery to and collecting monies from home subscribers.

A maverick with a reputation as a hard taskmaster, Tornberg created newspapers that were closer to TV or radio stations, by targeting particular audiences, who were usually young, and available at specific times of the day such as the morning commute, and in specific areas such as rail stations, or bus depots. Like other supposedly free media, such as commercial TV or radio, free publishing would work not because costs had disappeared, but because advertisers, rather than consumers, would bear the brunt.

Despite the rise of specialist supplements and dedicated sections within newspapers over the last two decades, Tornberg would argue that most nationals do not deliver comparable niche targeting in this way (business, ethnic or sports newspapers, it could be argued, are exceptions).

Further, as it has developed its model to encompass 40 editions and an estimated 13m readers worldwide, (though still lacking either a German or UK title), Metro International has adapted its distribution method. “Less than 30 per cent of our products worldwide are distributed on transport,” says Tornberg. “If an advertiser wants to target mothers we can distribute outside a kindergarten. Paid-for titles have to live with having their audiences selected for them; we can select them ourselves.”

In search of niche audiences, it has launched Metro House and Home, a free weekly in Sweden for real estate ads, and Metro Stadio, targeting football crowds, in Italy.

The scale and pace of Metro International’s roll-out certainly tested the free business model, and the patience of the group’s shareholders. After several years of heavy losses, however, Metro International reported its first quarterly net profit last month. On the Swedish stock exchange, the group’s shares have risen by a staggering 427 per cent in the year to March 5, because of growing confidence that the model is now established. Similarly, Associated’s Metro, boosted by its ability to sell national advertising across its six - soon to be eight - editions traded profitably nationwide in 2003.

Free publishers say they have tapped into changing consumer lifestyles. The bite-sized, apolitical (and not particularly original) take on the news such titles offer is in line with dwindling average reading time.

It is a trend which is more pronounced in metropolitan centres where the readers most prized by advertisers tend to live, and where circulation can be controlled to the right time of day to secure the targeted audience. Metro UK’s MD Steve Auckland says: “It’s a three-to-four-hour product. We don’t want grannies picking it up on the bus at 11am.”

London media buyers praise Associated’s ability to lure an attractive audience through Metro. And of Metro International, Jim Chisholm, strategy adviser for the World Association of Newspapers, says: “Does the quality of the product attract a readership you can pour ads into? The answer is yes.”

The acceptance of the free model in London should also be good news for Richard Desmond, currently fighting Associated’s deal with London Underground through the Office of Fair Trading. Plans for Desmond’s own evening free daily are ongoing, awaiting an imminent OFT verdict.

The prospect that the free publishing market is not only proving itself, but about to expand, will fill some news groups with anxiety. For its “news lite” rationale goes against the grain of traditional newspaper publishers, most of which continue to add more pages as “value-adds” to win over or retain readers.

And there is still no clear, long-term evidence on whether free newspapers affect paid-for titles in one of three ways: by persuading existing paid-for readers to switch; luring away people who would or might otherwise buy a newspaper; or by convincing advertisers away from paid-for publications.

Tim McCloskey, managing partner at UK media buying agency OMD, is pessimistic: “The free model devalues the potential of newspapers, and we will have a less vibrant market if papers become more and more reliant on ads. The ad market can’t sustain the entire press industry.”

He cites the success of Express Group’s Daily Star, which has lured in younger readers while keeping its cover price. “The most successful media is when an active decision to purchase is made,” he says. Hugo Drayton, MD of the Telegraph, adds: “Most consumers understand that if they want quality in anything they have to pay for it.”

Further, the launch of compact editions by The Independent and The Times has shown publishers can reverse seemingly permanent circulation declines by other routes.

In the US, and among regional UK publishers, there is evidence that free and paid-for titles can co-exist within the same portfolio, provided publishers keep them sufficiently separate in tone, approach and distribution. Indeed, at the Evening Standard, there are signs that the competition is coming not from its sister free, Metro, but from the compacts as London readers keep their morning papers and read them on the way home.

Mike Anderson the Evening Standard’s MD says that Metro readers will in time migrate to paid-for publications, as they get older and want more in-depth news. But Chisholm has witnessed a different dynamic in the US, where paid-for titles in Virginia and San Francisco have gone free in a bid to win readers - though, again, this is too marginal to count as a trend.

Ever the contrarian, Tornberg says that there is a case for week-day paid-for papers to relaunch as frees, and charge for quality premium content at the weekend. Metro International did once launch

a paid-for Metro weekend edition in Sweden, but it was later withdrawn as the government decided it did not qualify for a distribution subsidy.

The group is now the biggest international newspaper brand, if one totals the cumulative audience of all its titles, yet it still remains outside the newspaper mainstream. But although the industry is far from ready to embrace Tornberg’s ideas or even the free publishing model, change - as the compacts have shown - is already here.


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