Will most newspapers and magazines be free?

Newspapers and magazines have been rocked by collapsing advertising revenues. Hard copy is, quite simply, losing much of its consumer advertising power in the face of falling circulations and digital competition. Such lost revenues frequently turn publishing profits into losses. The economic model is (mostly) broken, and the race is on for traditional publishers trying to build a new one.

It may mean cataclysmic change for many of the companies which have dominated newspapers and magazines for decades.

All the signs are that a large number of publications in many countries will eventually be free of charge to readers.

The UK provides some clear clues to the future. The star of  ‘freemium’ magazines is Mike Soutar (ex of EMAP and IPC) whose two weeklies ShortList (for men) and Stylist (for women) have an aggregate circulation of 950,000. ShortList Media is now soundly profitable, with better margins better than most of its traditional competitors. Advertisers love these good-enough-to-buy free magazines as much as readers. And the five-year-old company (growing fast in a shrinking magazine market) keeps winning industry awards from its envious peers.

The free weekly Sport has had a more chequered history since its launch in 2006 as a spin-off from France.  The lively 300,000 circulation magazine is now published by Talksport radio (owned by UTV) and plans to launch licensed editions in Asia, South America and across Europe.

In newspapers, the seven-year-old London financial daily City AM is showing how effectively a free publication can prosper even in the shadow of a strong paid-for (hard copy and digital) leader like the Financial Times. The five-day tabloid became profitable in 2010, and is now planning to extend its circulation to other UK cities. Like many freebies, City AM wins by providing smart bite-sized reading – not by competing with the depth, breadth and volume of paid-for titles. The Twitter generation is making its choice.

The London Evening Standard provides another variation of free publishing success: as  a high-rated, formerly paid-for newspaper, it was a longtime lossmaker despite (mostly) having a city monopoly. In 2009, new owner Eugeny Lebedev ditched the 120,000 paid-for circulation. It now pumps out 700,000 free copies daily – and is profitable. For content, the Standard may be one of the world’s best free newspapers. It is succeeding commercially because of its appeal to to advertisers as well readers – and has profited from the elimination of loss-leading readership promotion and unsold (wasted) copies. Higher advertising yields and promotional savings have more than compensated for the loss of circulation revenue.

The Daily Mail group which formerly owned (and retains a 24.9% share in) the Evening Standard is itself scoring well from free newspapers. Its profitable Metro daily tabloid has a free circulation of more than 1million, through 15 regional editions read by commuters across the UK. The Mail reported recently that Metro‘s advertising revenue was “growing strongly” some 13 years since launch – by sharp contrast with its own paid-for newspapers. The 13-year-old free paper is a star performer.

This week, London’s listings magazine Time Out announced it is going free. The 44-year-old magazine (whose paid circulation has fallen to 50,000 – less than half its peak) will have a free circulation of 300,000 – exactly one year after Flashes & Flames predicted it here. The move should not have been a surprise, given the 2011 arrival of entrepreneur Peter Dubens as a 50% shareholder, with declarations of digital intent. Even though Time Out has not so far been any kind of digital pioneer, the magazine has long been earning some ecommerce revenues from movie and theatre ticket sales. Dubens is ambitious to turn the model on its head and use a great magazine brand to drive the development of online retailing. More will follow.

And that is the point.

Free circulation, guaranteed by high-quality distribution, will strengthen the advertising sales proposition for newspapers and magazines at a time when paid-for publications are struggling. As Wired magazine asserts: ““From the consumer’s perspective there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you’re already in an entirely different business.” Arguably, it’s the same for print as digital. The truth is, of course, that the continually rising price of print, paper, postage and promotion is increasing the cost of acquiring and maintaining paid circulation – at a time of  falling advertising yields. And, as ShortList, Metro and City AM clearly illustrate, advertisers will support well-produced, targeted free magazines and newspapers. This is likely to hasten the day when readers will only pay for the best and most innovative content – and the biggest brands: everything else will have to be free.

Free distribution may prove to be the key to ecommerce for newspapers and magazines.  Many publishers are flirting with online retailing, knowing that they have to find ways of delivering real sales for advertisers in an era when digitalisation can make it happen. Such ecommerce will range across the spectrum of  publication-branded services to ‘click through’ sales via advertiser sites. Large targeted audiences will be able to deliver substantial revenues for publisher and supplier alike.  ShortList Media’s sparky Emerald Street email newsletter (with more than 100,000 London readers/ users) is already edging into ecommerce. Publishers will, though, increasingly have to compete with powerful retailers like ASOS and John Lewis (which already produce their own magazines), coming at them from the other end of the tunnel. (Media= Retail,  Retail=Media).

All the signs are that there will be an explosion of free newspapers and magazines from all corners – some digitally-connected and others simply filling gaps left by high-cost, traditional operators which have run out of road.

The clamour for change may now start to come from within existing paid-for publishers. They are having to spend increasingly on promotions, discounting and advertising simply to staunch the flow of departing readers – in order to mitigate the loss of advertising revenue. Many will (like the Evening Standard and Time Out) discover that the cost of winning and retaining paid-up readers now often outweighs the benefit – and that advertisers will support guaranteed, targeted circulations.

UK newspaper readers might reasonably expect to find many old favourites going free, perhaps including the Daily Express, the Daily Mirror, and metro dailies from major regional groups. Some dailies may be tempted to retain their profitable, paid-for weekend editions and go free on weekdays. Presumably, the Standard owner Lebedev now knows how to turn a profit from his smart but struggling paid-for dailies The Independent and i. Will they be the next to go free? You should expect a stream of free fashion, beauty and celebrity weeklies. Some should come from traditional publishers, one of which might be expected to acquire Soutar’s impressive business in order to hasten reinvention. And, stand by for more free magazines and even newspapers from retailers which understand very well how hard copy and digital can mesh into online sales.

The free publishing revolution has begun.

HAVE YOU READ? “StylistShortlist, and Sport are examples of a new wave of magazines. They are strong brands with high-quality content, relatively low-cost production and (mostly) very effective free distribution. Conventional paid-for magazine publishers will ignore this exciting seam at their peril. Expect London’s legendary Time Out to follow suit at some point.”    http://flashesandflames.com/2011/07/14/

http://www.adweek.com/news/press/can-time-out-s-tony-elliott-weather-storm-132910

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