Are free papers worth it?

Associated's 'Metro' is on a roll. 'City A.M.' is causing a splash. Rupert Murdoch and Richard Desmond are poised to enter the fray. In an age of giveaway papers and free news, are the established papers under threat? Tim Luckhurst reports

The free newspaper revolution that some say threatens the revenues and circulations of traditional newspapers began in Stockholm in 1995 when the Swedish company Metro International launched its Metro title for commuters. Today Metro International publishes 59 editions in 83 cities. You can read it in New York, Hong Kong and St Petersburg, but not in Britain. The Metro distributed at London Underground stations and in regional editions throughout the UK belongs to Associated Newspapers, owners of the Daily Mail. Associated launched its own freesheet in 1999 before the Swedish pioneers could copyright the Metro name in the UK.

But it is the Scandinavian model that has proved the potential of free distribution. Metro International enjoys a global readership of 15 million. Its titles have a combined circulation of 5.1m in Europe, dwarfing the 3.7m copies Germany's Bild am Sontag sells, and the 3.2m sold by The Sun. Poland, where the free newspaper market is thriving, has seen readership of traditional titles decline sharply. Similar trends are observable throughout Europe.

Inevitably, given Britain's unique love affair with print, speculation about when the great free-for-all newspaper war will begin in earnest here has been intensifying. Initial scepticism about freesheets soon turned to jealousy as Associated's Metro achieved a circulation of 900,000 in the London region and launched in 15 cities, including Manchester, Glasgow, Birmingham, Liverpool and Cardiff.

Last week attention was focused on Manchester, where the Manchester Evening News, Britain's second biggest-selling regional daily, launched a free City Edition with a daily print run of 55,000 copies, in a bid to prop up falling circulation of the core title. But in the London market potential rivals to Metro have balked at one obstruction.

Associated's exclusive deal with Transport for London provides sole access to distribution boxes known as "dump bins" at the 240 stations on the Tube network. For years, competitors led by Daily Express owner Richard Desmond have concentrated on demanding an end to the monopoly instead of attempting a different distribution arrangement. That pressure led to an Office of Fair Trading ruling that the Underground must permit competition.

Last month Transport for London invited tenders for rights to distribute a free afternoon title. Associated will continue to publish Metro, and could bid for the new slot to protect its paid-for title, the Evening Standard. Other publishers expressing interest include Richard Desmond's Northern & Shell, News International and Guardian Media Group. But while these big players contemplate Tube distribution, a cheeky minnow has proved there is another way.

Last autumn, London financial freesheet City A.M. achieved a successful launch and a daily readership of 100,000. The brainchild of executives Lawson Muncaster and Jens Torpe, who learned the free newspaper trade with Metro International, City A.M. is distributed by hand at commuter locations in the City and Canary Wharf. "City A.M. has proved you do not need dump bins to succeed and that is fundamental," says Paul Thomas, Investment Director of the media agency Mindshare.

The result has been a readership of prosperous young urban professionals of the type advertisers love to reach. And, like Metro before it, City A.M. has achieved the Holy Grail of free newspaper production by attracting a readership that does not buy conventional titles. "Research shows that 80 per cent of its readers do not read the Financial Times and over 50 per cent do not read a quality national at all," says Jim Bilton of the Wessenden Marketing consultancy. "Research from other free publishers, such as Metro, points in the same direction. Free distribution is no longer the poor relation of paid-for circulation. It is a viable alternative."

Industry is divided about how much damage free papers can do to the paid-for market. Last week Bert Hardy, veteran managing director of the Evening Standard, questioned the worth of the new afternoon franchise, telling Press Gazette: "There's going to be no cover price revenue at all - and advertising is having the worst time that it's had for a long time... So you are going to launch something for which there is no cover price revenue... in the worst market... producing an afternoon newspaper, which are in decline around the world. I wouldn't like to take that to the bank frankly."

Ken Livingstone, the mayor of London, has suggested charging £10m for the new franchise. He may not get it. "I am not certain that a general newspaper like Metro will work in the afternoon," says Paul Thomas. Metro readers pick up the vast number of copies at City hubs. It is not clear those travelling home will prove as receptive.

This has prompted suggestions that rivals, such as News International, may consider a bid for the City A.M. title. Paul Thomas, of City A.M., says: "[It] has succeeded by appealing to a specific group of individuals with very high net worth." Such precise targeting has worked in the local newspaper industry where intensely local freesheets have provided a welcome advertising platform for small retailers.

The ABC Bulk Distribution Report, which tracks free newspapers, confirms that the commercial appeal applies on larger platforms, too. The Metro group is distributing more than one million copies, the Evening Standard's free mid-morning edition, Standard Lite, has proved a hit and the late afternoon lite edition of the Manchester Evening News has done equally well.Giveaway proprietors including Associated Newspapers (Standard) and Guardian Media Groupclaimthe trick has been achieved without harming sales of their paid-for editions.

Murray Chick, chief executive of the Brand Aid consultancy, believes: "They are the journalistic equivalent of fast food. People grab them on the run and have a quick munch."

That alarms Professor Steven Barnett of Westminster University. "Most existing freebies are local and predominantly advertising based. They are designed to carry very little editorial content." He fears that the advertising model on which free newspapers are based renders them hostile to quality journalism.

Barnett warns that increasing free circulation could squeeze the paid-for revenues from both sides. Their cover price may be hit and their advertising revenue may migrate. So they will cut editorial costs. Journalists will be forced to produce more stories a day and "may just cut-and-paste press releases".

But other analysts say that the British market's unique range of high-quality national newspapers with traditionally loyal readers makes UK titles less vulnerable to free newspapers than their continental counterparts. "We have invested in journalism and in new design," says David Benjamin, chief executive officer of Guardian Regional Newspapers, owners of the Manchester Evening News. "All newspapers have got problems these days. Everyone is responding in some way. Free distribution gets to a new audience."

Some editors and analysts predict a future in which quality titles concentrate on high-value commentary and analysis. Others express deep concern that freesheets are creating a generation that believes news is free.

Will journalism ever be the same? Rupert Murdoch is looking to launch a free title, whether News International wins the Underground tender or not. You can see why. Metro is making a lot of money; freesheets don't seem to threaten paid-fors. If - and it's a big if - they can follow the Metro model, everyone's a winner.

MEDIA DIARY

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