All Mega Rubbish or a Mega Chance?

June 17, 2008 • Media Economics • by

Publizistik No.2, June 2008

Scruples and Unscrupulousness in the Free-sheet Market
All over the world, free sheets are turning national print markets upside down, whipping publishers and editorial staffs into a frenzy of fear, euphoria and belligerence, stuffing commuters with unprecedented amounts of information fast food, while chopping down whole forests on the way.

Globally, 570 trees are felled each day to meet the demand for free sheets alone, and nowhere in Europe is their per capita circulation higher than in Switzerland, but to what end? Is it all mega-rubbish or a mega-chance? An overview of the greatest temptations, scruples, and lacks thereof.

Mouth-watering market data

There is a gold rush in the air: free sheets are published in 26 European countries, and worldwide their number stands at 170 different titles. According to the World Association of Newspapers, they have doubled their circulation within five years up to 27 million printed copies, which in 2006 represented one third of the European and 8% of the global press market. Those free sheets, aimed primarily at commuters, seem like huge gold nuggets, buried in the deep, and not so deep, layers of rock that form the basis of the print industry.

Take Switzerland, for example. In this country, the three oldest free sheets alone generated an additional 1.2 million contacts between readers and advertisers in the first quarter 2008, according to statistical data provided by WEMF (Arbeitsgemeinschaft für Werbemedienforschung), an institute specialising in advertising media research. If you add the two titles launched in 2006, the total market share of free sheets is currently estimated at 45%, and two publishers have already announced their plans for new free sheet projects. Today, nowhere in Europe is the number of free sheets printed larger than in German-speaking Switzerland: for nearly every second inhabitant over 14 years, one free sheet appears per day, according to Swiss publishing group Tamedia, which presented this number during its annual press meeting. Western Switzerland comes in second, followed by Denmark (around 33%), Sweden, the Netherlands and Spain.

In Switzerland, this free sheet mania began with 20 Minuten. The Norwegian Schibsted Group launched the title in 1999 and it went on to become a most profitable claim which was sold to Tamedia in 2003. Today, 20 Minuten appears daily in seven cities and has been the country’s number one in circulation (1.2 million) since 2004, when it dethroned Tamedia’s own flagship publication, daily newspaper Tages-Anzeiger. It is the group’s undisputed cash cow which, in 2005 alone, generated earnings in the amount of €12 million. Of course, numbers like these are bound to attract imitators.

Others, however, feel prompted to look for defence strategies. While at first, the launch of free sheets in Germany progressed along similar lines, ultimately it led to what has been dubbed a genuine “newspaper war”. In 1999, Schibsted launched 20 Minuten in Cologne – but was greeted with fierce opposition organised by German publishing powerhouses Du Mont and Springer, which both jumped into the fray by publishing their own free sheets, and by sending their lawyers, who were intent on establishing a case of unfair competition. The Higher Regional Court of Cologne, however, ruled that free sheets have a right to exist – but only as long as they don’t pose a serious threat to the existing press. In Cologne, the situation never was that serious: while traditional publishers hardly saw any decrease in circulation, it was mainly their pride which was hurt. In any case, the battle ended in 2001, when Schibstedt took its free sheet – quite surprisingly – from the market. Two days later, the two “defence titles” disappeared as well.

To this day, no other free sheet has established itself in Germany – but the publishing sector is expecting one to do so almost daily, and is gearing up for it. Some of its proponents show fighting spirit: “We are ready to launch our own free sheet within days”, is how a spokesperson for media group Springer was quoted in German business paper Handelsblatt. This was in autumn 2007, when Klaus Zumwinkel, then CEO of Deutsche Post AG, offered his assistance to any publisher planning to launch a free, national daily paper. What about the others? Not much is known. Names have been mentioned (Burda?, Frankfurter Allgemeine Zeitung?), ideas (a free sheet specialising in automotive journalism? or computers?), denials have been made, but no final decisions. Not yet, at least. Last May, it was announced that the National Association of German Publishers and Deutsche Post had agreed upon entering into a “close cooperation”. In plain English, this means that for the time being the Post is going to refrain from launching its own specialised free sheet – like Online aktuell, which was planned as a free paper specialising in computer topics. Prior to this arrangement, German publishers had already announced their fierce opposition to any such project, even threatening to lodge a complaint before the European Court of Justice, and to set up a mail delivery service of their own.

In Switzerland, too, it’s time to play hardball. Who will win? Which publisher will let its competitors bleed dry? Michael Ringier is currently busy preventing the further decline of his tabloid flagship Blick. He plans to push the brand by launching a free version this summer, and to remove the only modestly successful afternoon free sheet Heute from the group’s portfolio. Three newspaper publishers – Basler Zeitung, Berner Zeitung and Tamedia – have joined forces and launched News, the latest commuter free sheet, which is available in the large conurbations of Zurich, Basel, Bern and Argovia. Peter Wanner, publisher of Mittelland Zeitung and Aargauer Zeitung, obviously feels threatened by this initiative and has announced his own free sheet project for autumn 2008. And Tamedia, still the owner of 20 Minuten, even seems to be cannibalising itself by acting as co-publisher of News or is this just a ploy to drive Basler Zeitung – in parallel to what has happened with Berner Zeitung – into its arms? The fog hasn’t lifted yet. Peter Wanner, on his part, has made the somewhat ominous prophecy that in the publishing sector the methods will be getting more and more “unscrupulous”.

All that glitters is not gold, however. Metro Group, the Swedish pioneer in the field of free sheets, launched the very first one in 1995, today is publishing 70 editions in 23 countries, but so far is not doing much more than cutting its losses – from the two-digit to the one-digit million range. Meanwhile, media tycoon Rupert Murdoch has invested an extra £17 million to keep the free sheet afloat which he has recently launched in London. In April 2008, Icelandic publisher Dagsbrún announced its withdrawal, after two years, from the free sheet markets of Denmark and the US. And this despite the fact that The Economist has praised Dagsbrún’s Boston Now as one of the best free sheets in the entire USA. Its editorial quality, however, didn’t offset its financial losses: the steep decline in advertising income, the current downswing at the world’s stock exchanges, and the dramatic devaluation of the dollar have hit conglomerate Baugur Group, owner of Dagsbrún, very hard. All this gives rise to the concerned question: how risky are such editorial adventures, really?

Auspicious advertising outlooks

Ideally, free sheets quickly reach the break-even point by generating advertising income, and in the best of cases they may even serve to prop up other print products produced by their parent company. In all, such a scenario looks attractive indeed. Especially when experts predict two-digit growth rates – in times when the loss of advertising income caused by the Internet has become publishers’ most pressing concern by far. What is true is that free sheets return to publishers some of the clout they have lost on the advertising market. However, they also increase their heavy dependence on the whims and vagaries of the advertising sector as a whole – and on the goodwill of media planners who, in reality, are often rather cautious when buying their advertising space. In Switzerland, the failed attempt of yet another free sheet, .ch, to establish itself on the market further increases this caution. Another case in point: free sheet Heute (published by Ringier). While some planners consider it a well-established title and hence are ready to place their ads, others are still hesitant, while still others are attracted by the advertising combo package linking Heute and Blick. Tamedia, on its part, accepts only bookings for News (Zurich edition) if they are also to appear on the pages of its flagship publication Tages-Anzeiger – unlike in the case of the Basel, Bern and Swiss Midland editions, for which single bookings are available.

For free sheets, advertising might prove beneficial in another way. Heute, an Austrian namesake of the Swiss free sheet, has recently published – quite unscrupulously – details from private consultations between Natascha Kampusch and her physician. While the reporter responsible for this disclosure defended himself by claiming that the truth was never unethical, the advertising clients whose products and services are being promoted on the pages of such a publication definitely are in a position to push the “ethics button”, as it were. For what respectable company could ever be interested in an advertising context where sensationalist journalism of the lowest kind is setting the tone? (So low, by the way, that Kampusch’s lawyer has lodged a formal complaint against the paper.) Hence the question “to book or not to book” can actually have an ethical dimension as well, and may help uphold editorial standards.

Mixed Messages from the Readers

Free sheets are just there, they don’t cost a thing, and they come in the handy compact or tabloid format. Plus they let the 20 minutes which an average commuter spends on trains, busses or tramways go by in a flash. Some of them even offer unexpected quality: all five Swiss free sheets present themselves as well-made examples of their kind, with each one trying to give itself a unique profile – 20 Minuten by boasting a marked online presence, News by offering editorials, .ch by regularly undergoing critical scrutiny from external authors. More often than not, readers will even find original stories, investigated by those free sheets’ own teams of reporters.

For publishers, free sheets hold yet another promise: the relief from the other great scourge of today’s print market – the loss of young readers. Half of the readers of free sheets, the statistics tell us, are under 30 – a number, however, which should be taken with a pinch of salt. For the relationship between the Internet generation and those born before the Online Age (the “readers and writers”, if you wish) will forever remain a troubled one, at least according to Philipp Ikrath, researcher at the German-Austrian youth marketing agency TFaktory. Which is why he doesn’t share the hope of publishers that today’s readers of free sheets might become tomorrow’s buyers of traditional newspapers, once they have settled down and started their own families. “For many young, reading the paper is no longer a respectable pastime, but rather an embarrassing one.” They pick up the free sheets simply to kill time, and because they are there.

We all tend to do it. For a traditional newspaper, you have to put in some effort: you go to the news-stand, you make your choice, you pay for it, and then you start to read. For a free sheet, on the other hand, your effort is zero: you simply pick it up, only bothering with choice when there is actually more than one up for grabs, you read it while on public transport – out of interest or boredom – and simply leave it behind when getting off. The makers of free sheet .ch wanted to beat the system, as it were, and placed newspaper boxes close to house entrances – as a way of reaching commuters before any of their competitors could, even addressing car drivers as well. The outcome was not the one they had hoped for, however, as many people felt annoyed at that intrusion, and some even overturned the boxes. In Denmark, the parliament is currently debating the citizenry’s growing anger about this heavy diet of free information fast food. Also, on an increasing number of letter boxes you will find a sign saying “No free sheets, please!”.

In this epic battle between publishing houses, the readers are often turned into cannon fodder, and whole cities into battlegrounds swamped with wastepaper. Some communities are charging publishers with a waste fee to cover the additional cleaning costs, the local authorities of Sitten (Switzerland) demand an annual fee of CHF 500 from all private persons who decide to place a newspaper box on their premises. In London, some publishers have been sentenced to paying extra disposal charges, and one citizens’ initiative launches regular protests against the three tons of extra waste produced every day. In California, on the other hand, collecting those scattered free sheets and selling them as wastepaper proved so lucrative for some, that everyone who tries to sell more than 25 copies at a time is now facing a prison sentence.

This trend towards free newspapers leads to the felling of whole forests. The combined circulation of free sheets in German-speaking Switzerland alone reaches 1.6 million – roughly the same as in London, which has as many inhabitants as the whole country of Switzerland. Translating the amount of paper into the wood needed for their production, you will find that for German-speaking Switzerland, 36 trees are felled each day.

Promising Predictions from Researchers

If a paper is well done – free sheet or not – it will stay: this is the prophecy of Michael Haller, journalism professor in Leipzig (Germany). Free sheets are not to blame for the dramatic losses sustained by traditional newspapers. Rather, this development is driven by a general trend – and also by the low quality offered by some traditional titles. Commissioned by the Foundation Presse-Grosso, Haller has analysed the free sheet market in Europe and arrives at a clear diagnosis: traditional newspapers are quickly loosing ground everywhere – both in countries with a diverse free sheet segment (France, Sweden and Denmark) and those without one so far (Germany). In terms of quality, Haller considers the free sheets produced in Scandinavia and in Switzerland to be the best, and the ones in Eastern Europe to be the worst. For him, there is no clear-cut opposition between free sheets and traditional papers: if it is well done, a free sheet promotes the cultural skill of reading; if it is poorly done, it simply damages the image of all newspapers, free or not. Furthermore, Haller predicts a press market in which segmentation will be the rule. One the one hand, there will be quality papers for those who demand a bit more; on the other, there will be free sheets that are well made, highly visible on the Internet – and which could even turn into cross-media spearheads. Any form of zero-cost (aka cheap) journalism that lies between those two poles will stand no chance of survival, Haller says.

In all, this sounds promising indeed. However, we have to go a step further. For such predictions can only become reality if publishers and editorial staffs are no longer downright panicked by all forms of change. Online media and e-papers could help preserve natural resources, while at the same time being more successful at addressing the younger generations. Professional journalism can actually embrace this change – without becoming unprofessional. Publishing houses should be confident enough to invest in the quality of their own products, and refrain from risky adventures that could cost them dearly indeed. (For if the current decline of the traditional press cannot be blamed on free sheets alone then, on the flip-side of it, those free sheets cannot be the universal cure for all its ailments, either.) Then, and only then, could we actually look forward to this dawning of a new era, and welcome it as the mega-chance that it could be. Without any scruples.

Editor’s note: on 5 June 2008, Kleinreport, the media service of the Swiss communication sector, circulated the breaking news that publisher Peter Wanner no longer intended to launch his own free sheet. Instead, the report went on, Wanner preferred investing in the quality of his existing products.

Translation: Oliver Heinemann

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