American Newspaper Publishers Are Taking Their Cue From Europe and Starting to Think Seriously About the “T” Word -- Tabloid

Philip M. Stone January 31, 2005

It’s a phenomenon already affecting many European newspapers – how to compete against free tabloids and whether they should switch themselves to tabloid -- but American broadsheet publishers have always maintained they can keep the free tabloids at bay and switching to tabloid was not an option. But now circumstances have the Americans thinking again.

Anthony Ridder

Knight-Ridder newspapers announced it is considering launching free tabloid dailies in some markets, and switching some of its broadsheets to tabloid. Chief Executive Anthony Ridder says the group is studying the two major European trends – free tabloid dailies aimed at the young commuter, and the switch from broadsheet to tabloid.

While the free tabloid daily has seen success in nearly every market it has been tried, the switch from broadsheet to tabloid is not so easy to define. Perhaps the most famous switch to “compact” is the London Times, but its circulation figures have actually decreased a little since it made the switch in October to only tabloid from when it was producing both a tabloid and broadsheet edition. But UK circulation as a whole has dropped alarmingly in the past year and the Times could argue it is doing well to have what it has.

The Times underwent a major advertising promotion and gave away CDs with two of its Saturday editions in November and that saw sales spike up by some 21,000 over September. But as further proof that giveaways don’t really give sustained growth and that additional buyers are there just for the free gift and then disappear, the December numbers finished below September even though the Asian Tsunami coverage gave a big push to what are normally poor December sales over the Christmas holidays.

Two of the largest and most prestigious newspapers in America are going to be on opposite ends of the tabloid question. The New York Times Company has agreed to buy into a free tabloid in Boston, where it owns the Boston Globe, and the Washington Post, which has seen a 15% circulation decline in the past 10 years, is facing a new free tabloid competitor that is also offering home delivery.

The Times Company announced in January it was paying $16.5 million for a 49% stake in Metro Boston. The Times wants to increase the Globe’s circulation and hopes that via web convergence, advertising packages, and promotions it can convince the young Metro reader who now gets news for free to graduate as he/she gets older to the Globe and pay. The unanswered question, of course, is whether once you are used to getting your news for free will you pay later?

The Times says it is still conducting due diligence on Metro Boston. In the meantime the Globe’s competitor, the spicy tabloid Boston Herald, has complained to the Justice Department that the Times is breaking anti-trust laws by buying into Metro. The Justice Department said it is studying the matter.

For the Washington Post, things could really start to get difficult as it finds itself on the receiving end of a new tabloid competitor, the Washington Examiner, a free tabloid that plans a serious tone. But instead of just being handed out for free the Examiner is taking free tabloids into a brand new area – free home delivery. If the editorial product sticks, then the Post, which is trying various different strategies to bring back readers, particularly the young, could have a real problem on its hands.

There is big money behind the Examiner.  Billionaire Philip Anschutz, the largest shareholder in Qwest Communications, funds it. He has part ownership of six US soccer teams and the Los Angles Lakers, control of the Union Pacific Railroad, and ownership of Regal Entertainment Group, the largest movie theater chain in the US that was formed by buying three bankrupt theater companies. And, oh yes, he also invested $40 million in the Oscar-nominated movie, “Ray”.

He is also making his mark in the UK by leasing the Millennium Dome – a financial fiasco the Labor Party built to celebrate the year 2000 – and Anschutz is now transforming it into a 20,000 seat arena for sports and entertainment events.

His first newspaper purchase was the San Francisco Examiner last year. Even his competition there say he has transformed what had once been a proud paper that had fallen into very hard times under its previous owner into one which now again commands respect.

The Washington Examiner is looking for an initial readership base of around 300,000, still well short of the Post’s circulation. Besides 1700 free boxes, the Examiner will be home delivered to homes advertisers crave – the 25 –49 age group, well-educated, homeowners, and with home incomes in excess of $75,000. Its advertising rates will be a fraction of what the Post charges in the hopes of attracting the major retailers.

Philip Anschutz

Editorially, it intends to be more serious than most free tabloids. It has 16 local reporters and editors – still a far cry from the Post’s editorial team – but the question is not whether the Examiner can be as complete as the Post but rather can it be good enough to attract Post readers who today complain there is too much news in the Post and it is too difficult to find what they are looking for.

If the San Francisco and Washington papers can become financial successes over time, then major cities across America can expect an Examiner, too -- Anschutz has registered the name in 68 cities – a new media empire in the making.

That kind of competition is the last thing most US publishers need at the present time. American media companies are finding they are caught in an ever-tighter recessional grip in their newspaper business. When they combine the performance of all their media business they see slight revenue increases, but when newspapers are dissected out and looked at closely, those figures show ever-increasing circulation declines and advertising revenues, particularly national advertising, stagnant or declining.

The Tribune Company, for instance, owners of the Chicago Tribune and Los Angeles Times, plus television stations in major markets, announced a 35.4% fall in quarterly net profit blamed on sluggish newspaper advertising (false circulation scandals at some of its properties haven’t helped relationships with advertisers who pay based on the number of people who buy the paper), lower circulation, and increased costs to pay for the redundancies which had been ordered to decrease costs.

Gannett, the largest US media giant, reported higher earnings, but said the increase was due to a 19% increase in ad revenues in the broadcast group mainly because of the US elections. Its flagship USA Today newspaper, with the country’s largest circulation at 2.67 million, saw advertising income decline in the 4th quarter although circulation rose. Dow Jones said its 4th quarter revenues were down 19.6% at the Wall Street Journal and 1st quarter advertising was forecast to be weak.

Anschutz seems to have had a golden thumb no matter what he touches. With the US newspaper business continuing its decline there is every reason to believe he has correctly identified a niche in the market, and he has the finances to make it work. Publishers in those markets where the Examiner name has been registered had better be planning now how to protect their patch.