Tuesday, January 04, 2005

Making the case for cannibalism

Newspapers are so good at freely giving away valuable content on their web sites that some are further indulging their cannibalistic impulses by publishing give-away tabloids to compete with their own flagship brands. Is this really a good idea?

"It depends," as my friend, the decisively incisive engineer Ken Wright, would say when I blindsided him with a multi-threaded techno hypothetical. And Ken, being incisively decisive, was always right.

Let's cut to it by considering the following:

Scenario I: 'Red' and 'Red' and read all over

For all intents and purposes, the Chicago Tribune got the freebie ball rolling in late 2002, when it introduced the Red Eye, an edgy-looking tab, self-consciously styled as a hip antithesis to the staid mothership. The stated charter of the Red Eye was to capture the minds of the 18- to 24-year-old crowd, as well as the hearts of the advertisers who covet same.

Don't believe it. Red Eye's true mission was to siphon readers from the wounded Sun-Times, the breezy tabloid in the process of being plundered by Conrad Black & Co. Figuring that the best defense would be to shoot itself in the foot, the Bright One played brilliantly into the Trib's hands by launching its own complimentary tab called the Red Streak. In one smooth move, the S-T pillaged its own paid circulation and simultaneously increased its operating expenses.

Was Red Eye a good idea for the Trib? Yes, in that it forces the Sun-Times to play defense and stands as a major obstacle to anyone with designs on teh Windy City market. The Trib now has a nominal pricetag on the tab and says ad lineage has doubled in the last year, but it's likely that ad revenues are merely switched business from the main sheet. A money-maker, it probably isn't. But the Trib can afford it.

Good for the Sun-Times? No. Not only is the Red Streak undoubtedly losing money, but -- to make matters worse -- it is diverting resources from the No. 1 goal of restoring the battered franchise. With Roger Ebert and a crew of street-savvy writers, the Sun-Times itself should be able to attract the very audience it seeks with the Red Streak. It is the newspaper equivalent of Classic Coke and New Coke, and you know what happened to New Coke.

Scenario II: 'It's just business'

The New York Times Co. is paying $16.5 million to buy 49% of the Metro newspaper in Boston, where the Gray Lady coincidentally owns the dominant Boston Globe. This is no passive investment. The Globe is going to help sell classified ads (and maybe more) in the giveaway published by Metro International SA, the global king of free tabs with 14.5 million readers a day in 17 countries.

Although the Globe considered starting its own free tab, its management evidently decided the Metro investment was a cheaper, lower-risk, surer-fire way to jab the Hub's paid tab, the Boston Herald. Assuming no federal officials agree with the Herald that this alliance is anti-competitive (No hard feelings over the John Kerry endorsement, one hopes), then this is a pretty slick hedge.

To the extent the Metro is successful in selling ads, it probably takes more business from the Herald than the Globe. If Metro fails, then the Globe's risk has been limited, it has more of the market to itself and the carcass of the failed venture will prove a powerful disincentive to future potential interlopers. If Metro makes money, then the Globe gets almost half of it.

"Hold your friends near," said the Godfather. "And your enemies nearer." Call this one a win for the Globe -- and keep your back to the corner when dining in Beantown.

Scenario III: Brand Ex vs. Brand Ex

The Washington Post thought it innoculated itself against an incursion by the Metro Group when it launched a tab dubbed The Express about a year and a half ago. So far, so good. But they didn't count on the likes of Denver billionaire Phil Anshutz, who is using the newly acquired Journal suburban newspaper group as the launchpad for a new free tab cast in the image of his flagship property, the San Francisco Examiner.

Anshutz rescued the rode-hard-and-put-up-wet SF Ex early in 2004. After being divested by Hearst in favor of the larger Chronicle, the Ex suffered through a number of incarnations that left it, in the end, a free tabloid with a feeble pulse. Since buying the SF Ex, Phil's Clarity Media Group has pumped money into expanded circulaton, into increased staff and into decidedly nicer digs than the old office over the burlesque house. Making no small plans, Clarity has registered rights to the Examiner name in nearly 70 cities in the US.

Was the Post wise to cover its flank by launching a tab? Although this is not likely to be an out-and-out money maker, it's a lot like chicken soup in that, if properly run, it can't hurt. If the Express bleeds -- or, better still, kills off -- competitors, the Post wins. If it makes money, then that would be even better. What's not to like?

The $64 question is whether the publishers of free-standing freebies can build successful businesses for themselves. It's great that they are low-cost producers, with smaller, lower-paid staffs and none of the costs involved in running a for-pay circulation operation. But businesses are built on sales, not cost savings.

When it comes to selling ads, the upstart freebies frankly have a higher burden of proof than the established papers, which traditionally had enjoyed the comfort of credible audited circulation. Beyond merely representing that they reach a certain number of readers, freebies will have to quantitatively and objectively prove the efficacy of their advertising. Print-only publications are hard-pressed to do that, but Internet and other new media technologies can deliver the measurable response that publishers will need and advertisers will want.

Indie freebies have to think outside the box. They won't succeed as leaner, meaner versions of the traditional metro publishing model, especially when the model itself is being shredded by a host of new information and entertainment media.

Can the indies do it? It depends.






6 Comments:

Blogger brw said...

You mention the "complimentary" newspapers RedEye and RedStreak, but they are no longer complimentary (nor were they, to my knowledge, ever intended to be so after a short introduction period). And you say that they were good for the Tribune, but what is your evidence? Again, to my knowledged, The Tribune has refused to release any circulation numbers and other data on RedEye, which has made its success (or lack there of) impossible to study. It would be interesting to know if these papers are successful at all, but my inclination is that they're probably not. I don't know about the Metro papers in the States, but I have read them in Europe, where they cover real news, but in a condensed, more visual manner. The RedEye papers were filled almost exclusively with celebrity news, which is an insult to the intelligence of the 20-somethings that the paper is trying to attract. Young people are interested in real news, but its just a matter of packaging that material in a way that appeals to them. They're not interested in the detached, dry style of traditional newspapers, but newspapers could use different writing and story-telling techniques to capture younger readers (actually, readers of all ages would be attracted by more compelling, creative story-telling).

12:24 PM  
Blogger brw said...

You mention the "complimentary" newspapers RedEye and RedStreak, but they are no longer complimentary (nor were they, to my knowledge, ever intended to be so after a short introduction period). And you say that they were good for the Tribune, but what is your evidence? Again, to my knowledged, The Tribune has refused to release any circulation numbers and other data on RedEye, which has made its success (or lack there of) impossible to study. It would be interesting to know if these papers are successful at all, but my inclination is that they're probably not. I don't know about the Metro papers in the States, but I have read them in Europe, where they cover real news, but in a condensed, more visual manner. The RedEye papers were filled almost exclusively with celebrity news, which is an insult to the intelligence of the 20-somethings that the paper is trying to attract. Young people are interested in real news, but its just a matter of packaging that material in a way that appeals to them. They're not interested in the detached, dry style of traditional newspapers, but newspapers could use different writing and story-telling techniques to capture younger readers (actually, readers of all ages would be attracted by more compelling, creative story-telling).

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