Monday Note

In less than five years, major newspapers will be giving away more than 50% of their copies. We call this the hybrid model. It works like this: a paid-for newspaper (one posting a price on its first page) with a vast portion it circulation distributed in selected – that’s the key point — areas for free.
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I started writing this column last Monday in the Copenhagen airport while waiting for my connecting flight to Oslo. I was able to grab a copy of the International Herald Tribune for free in an airline courtesy rack.   All the while, fifty meters away, a newsstand sold the very same paper for 20 Danish Kroner, approximately €2.68 Euros or $3.60 dollars. (Just for context: the New York Times charges $2.80 a week  for weekdays home delivery in Manhattan).
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Where is the catch? Actually, the IHT does just what many other papers already do: selling papers to airlines to reach business travelers. And the higher you go in the air travel social ladder, the more free papers and magazines you get. Business hotels do the same.  But for airlines, the deals are well structured, mostly for logistics reasons: putting the right number of copies in airport gates and on-board is way more complicated than dumping stacks in a Hilton. Numbers are closely held but, usually, airlines buy newspapers for a fraction of the face prices. For the International Herald Tribune, it must be around 10% of the official price while others get around 20% of the same. But, in many cases, cross advertising deals and logistics billing end up offsetting the entire price of the paper. Then, we can safely say that any paper you find while boarding your plane is 100% free from the publisher’s perspective.
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Why are publishers paying such a high price to have paper delivered on airlines? Two reasons: reader attention and demographics. In this context, there are no official studies for daily newspapers or news magazine.  But we can derive a few trends from the in-flight magazines industry. According to a survey made in 2006 by Arbitron (PDF here), 80% of travelers have read an in-flight magazine in the past month. During each flight, the time spent reading is 31 minutes — that’s about the time spent daily by a reader of a national newspaper in Europe. Again, this is for a magazine, nice and glossy, that just happened to be “in the seat pocket in front of you”, but with a rather shallow content. For a newspaper you actually choose to pick-up at the gate, the reading time and emotional engagement is likely to be higher, especially on long-haul flights.  Now the demographics: 72% of such readers have an annual household income higher than $100,000 and 27% higher than $200,000. An attractive target indeed.
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How big is the airline free distribution? That’s a good question. Free or almost free distribution is buried deep into audit circulation data. Let’s have a look at the International Herald Tribune figures. As a Paris-based newspaper, the IHT files its circulation data to the French audit bureau of circulation (OJD) even for its global sales.

Here are the key figures (rounded) for the full year 2007:
-    Total circulation: 242,000 copies
Breakup per zone:
-    Europe: 57%
-    Asia: 38%
-    Middle east:  2.5%
-    Americas: <2%
Breakup by type of circulation
-    Individual sales: 44%
-    Third party paid circulation: 38%
-    Non paid circulation: 18%
Now, the OJD report shows that in the “Third party circulation”, airlines account for 60% and various “hosting” (than includes hotels and corporate sites) for 36%.
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Well, you get it: more than 56% of the circulation of The Herald Tribune is actually free. (That is all third party, 38% + the 18% admittedly non-paid). And if we apply the same calculation to the French press, we get, as a real free circulation:
-    17 % for Le Monde
-    27 % for Le Figaro
-    37 % for Les Échos (France’s main business daily)
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Hence the question, how to implement the idea on a much larger scale? How to reach a bigger chunk of high value audiences using the same technique?  “Than can be summed up in one idea”, says Bruno Patino, former CEO of Le Monde Interactive, who likes to pitch the concept of paid-for-free newspapers: “The audience I do want, as a publisher, gets the paper for free; the rest have to pay for it”. This principle is applied by an increasing number of newspapers such as La Repubblica in Italy, El Pais in Spain, Le Figaro in France and, of course, the Herald Tribune (eventually to be merged with the New York Times as their websites will soon be). These papers currently give away about a third of their circulation.  My prediction is this proportion will reach the 50% mark in three to five years.
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The hybrid model bumps against two limits, though. The first one is the fit of the product to the target audience(s). OK, giving away a business newspaper to a business reader on a flight between London and New York or in Sheratons makes sense.  But for most general news publications, the goal is to cultivate three types of demographics: young, women, and “urbanites” (those who live in big cities and spend well). Problem is: reaching them with mainstream newspapers doesn’t work, even (or especially) free ones.  In France or in Spain, in places such as universities where several newspapers stand side-by-side, the ones who go first are the quality free papers such as 20 minutes, Metro, or Qué, which are designed precisely for young urban people of both genders. (Having said that, it is probably somewhat worrisome that student don’t pick-up newspapers with heavy world affairs or economics coverage, but that discussion is for another day). Fact is: we know that the “one-size-fits-all” doesn’t work in the media sector — especially as audiences become increasingly segmented). At least it won’t fly without a major product adaptation and segmentation.
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The second limit is the social approach of the news business. Giving away a quality paper in affluent universities, trendy places, while, at the same time, asking a young person leaving in a below-average neighborhood to go to the newsstand and pay for the paper, is to say the least, disturbing.  Of course, there is the option of “you do it, but don’t say you do it”. This is even more cynical. Some will retort that free newspapers have been doing audience selection by optimizing their distribution maps for a long time. Right, but it was done for a much wider audience: in the greater Paris area for instance, the free quality daily 20 Minutes reaches 1.57m people, the second free Metro 1.37m,  compared to 0.8m for Le Monde, 0.5m for Le Figaro and 0.3m for the business daily Les Echos). Plus, free papers are mostly read by commuters, so their social penetration is unparalleled.
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There is no argument: newsmedia are not philanthropic institutions. But it is also undisputable they carry out a social function in their community. This function remains more important than ever as media become more interactive, more conversational. And it is part of the monetization process. By making a caricature of the audience selection process, this social function will wither away. –FF
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