Giving It Away   

Will free circulation experiments pay off for dailies?

IN AN ERA IN WHICH it is becoming increasingly difficult to sell newspapers, a few owners are trying something different: giving them away. Now I'm not about to suggest that this is a trend that will sweep the nation, but it is interesting and worth examining.
The most notable recent example, of course, is the free edition of the Daily News in New York, called the Express, a boiled-down version of the regular paper that is made available in the city's vast transit system. Not only is the Express free, it is also an afternoon paper, which might seem akin to going to bat with two strikes against you.
The Daily News' managers have said that, in pondering opportunities in the market, they perceived a "hole" in the afternoon, because all the city's dailies are morning publications. Of course that hole might be there for a reason--the newspaper graveyard is full of afternoon papers, including one the Daily News launched in the early 1980s.
What really may be at work is the Daily News' desire to keep its paid circulation from slipping below 700,000--it was 704,463 in the last preliminary audit period ending last September, down nearly 5 percent from five years earlier. Once they are exposed to the Express, perhaps people who don't now buy the Daily News will be motivated to plunk down 50 cents for the real thing.
In business, as in so many areas of life, actions can bring about unintended consequences. I suspect a big one for the Daily News was the New York Post's swift decision to cut its 50-cent price in half. Already Post executives are claiming a 50,000 jump in daily circulation (the Post was at 443,951 in the last audit, more than 7 percent higher than five years earlier). To the extent that the Post's new readers were lured away from the Daily News, the Express could turn out to be a huge tactical mistake.
The conventional newspaper wisdom about free newspapers is that they are "throwaways" that do not attract advertising. As is the case with much conventional wisdom, there is at least some truth to this notion. Philadelphia's Metro, the other notable recent launch of a free paper, claims a daily distribution of 125,000 throughout the city's transit system, but it has garnered a disappointing level of advertising--especially from the large local retailers that ordinarily provide the bulk of ad revenue for a successful newspaper.
There seems to be a dichotomy in the attitude of advertisers toward paid and free newspapers: Paid dailies are attractive, but not free ones, and free weeklies are attractive, but not paid ones (at least for major advertisers). That is the fundamental reason there are so few free dailies and so many free weeklies, which prosper mainly in the suburbs, where they can offer advertisers virtually total coverage of generally prosperous households.
Why the difference? I suspect a lot of it has to do with tradition. Daily newspapers in the United States have always charged, and advertisers have always used them on the logical grounds that anybody who pays money for a newspaper is going to read it.
Large free-weekly companies are a fairly recent phenomenon in this country, and they have succeeded in capitalizing on dailies' failure to increase paid circulation at the same rate as the population is growing. The free weeklies offer advertisers cheap rates to reach nearly everybody in a given market segment, and while they tend to be half as profitable as paid dailies--after all, they have no circulation revenue--they do make money.
If free dailies take off in the United States, it is likely to be in small towns rather than large metropolitan areas. Colorado is notable for having three free dailies, two of them in Aspen--the Aspen Daily News (distribution 12,100), founded in 1978, and the Aspen Times (distribution 13,865), founded in 1988. (See "Mountain Shoot-Out".)
Aspen is able to support the papers because it's full of wealthy residents and visitors who frequent the city's many upscale retailers. The same favorable characteristics prevail in Vail, home of the Vail Daily (distribution 19,179), which was founded in 1981.
Another free paper, Palo Alto, California's Daily News, was founded in 1995 after the city's paid daily went under. New Hampshire is home to free dailies in Berlin and Conway, and there may be one or two others around the country that I've missed.
In only one of these small cities with free dailies--Berlin--is there a competing paid daily, the Berlin Reporter. It's a former weekly that went daily after the free paper debuted in 1992.
What lies behind the success of these free papers, in addition to generally prosperous readerships, is the lack of significant competition. You won't find that in New York, Philadelphia or other big cities.