Evening frees are in for the long haul

For more than 18 months, two free newspapers have been vying for the attention of the capital's home-bound commuters. John Reynolds finds out how long they can sustain financial losses.

The news that free afternoon title thelondonpaper lost nearly £17m in the first 10 months since it hit the capital's streets has raised questions over the rationale of owner News International's launch of a free paper for young urbanites

The media giant says it has budgeted for these early losses, but it seems likely that advisers Boston Consulting Group (BCG), which is looking at efficiencies across the group, will be quizzing News International bosses on how and when it intends to get the paper to break even.
Some media observers question whether the free paper can substantially reduce its losses while it has to compete aggressively with Associated's London Lite, when there is only a viable ad market for one paper. Others say it would be folly to query News International's ability to drive thelondonpaper into the black.
Difficult market
Douglas McCabe, media analyst at Enders, is firmly in the latter camp, but questions the profitability of the London free market.
"When you launch, you don't expect to make a profit, particularly as there is no cover price. News International will not see this figure as extraordinary and it can break even further down the line," says McCabe. "But this is a difficult market to crack and some advertisers are reluctant to use the title because they do not know who is reading it."
As with any newspaper launch, thelondonpaper has been hit by hefty start-up costs, and News International can argue its £3.1m advertising and promotions spend has helped establish a firm foothold in the market.
Associated's parent company, Daily Mail & General Trust, does not break out financial figures for the London Lite, but Steve Auckland, managing director of London Lite and Metro, claims the losses are "significantly less" than its rival, having benefited from the experience of launching sibling free morning paper Metro and opting for a more controlled distribution than its rival - March ABC distribution figures were 500,792 for thelondonpaper and 395,633 for London Lite.
However, Associated's bottom line has been stung by the impact the two papers have had on its paid-for title, the Evening Standard, sales of which have fallen by around 30,000 copies to just under 285,000 since their launch. This is despite the paper doubling its bulk giveaways over the period to around 100,000.
Auckland says London Lite should break even in four years, while Ian Clark, the general manager of thelondonpaper, is no less optimistic.
"If anyone thinks News Corporation backed this venture other than to make a profit, then they do not know News Corporation," adds Clark. How it will achieve this is open to debate.
Thelondonpaper has won exclusive distribution contracts in Canary Wharf and on Network Rail, which Clark claims will allow it to save costs by reducing the number of street merchandisers it uses.
Advertisers are also likely to be less reluctant to throw their marketing spend on the title, as it becomes more established by industry data showing that it's reaching its target audience.
Clark claims that by the end of 2007, the paper had doubled its ad revenues compared to its start-up period.

Growth limit
Media buyers say both titles have been a welcome addition to advertising schedules, but some question whether, in the long term, they will lure in fresh advertisers.
Vanessa Doyle, acting head of press at Initiative, says: "There is a market out there. But it is the sort of market that is not going to grow as advertisers who will use them are already using them."
What seems certain is that the two titles are in it for the long haul. Some observers believe News International will launch a new morning title should it win the lucrative London Underground contract, which comes up for renewal in 2010.
With London host to an increasing number of other free titles, and with neither publisher wanting to blink in front of the other, it seems the London Lite and thelondonpaper battle is set to continue

READERSHIP COMPARISONS- The latest National Readership Survey (NRS) shows readership figures for thelondonpaper hitting 914,000, ahead of the London Lite with 899,000, in the period between July and December 2007
- The London Lite, however, held a lead over thelondonpaper in terms of the much-prized ABC1 demographic, with a readership of 708,000, or 79% of the total, compared to thelondonpaper with 691,000 or 76%
- Thelondonpaper is slightly more male-biased with 54% male readers, compared to the London Lite's 52%
- Thelondonpaper has 642,000 readers aged between 15 and 34 or 70% of its readership. The London Lite has 536,000 15-34s or 60% of its readership.

John Reynolds
Media Week
29th April