• by Michael Shields , October 13, 2004

As the newspaper business endures circulation scandals, an aging and declining readership, and a sporadic ad recovery, a small pocket of the business is demonstrating surprising success.

Free daily newspapers have popped up all over the place, and what has been an experimental business model appears to be gradually gaining traction. While advertisers remain intrigued yet cautious in their approach, readers are gobbling up this new copy.

The Chicago Tribune's Red Eye is close to celebrating its two year anniversary, and is moving some 80,000 copies a day. Metro New York and AM New York have been engaged in a spirited battle since last fall, and are now distributing over 500,000 copies collectively each day. And Philadelphia and Boston readers have been enjoying versions of Metro papers going on four years.

Generally, these short-form newspapers launch in large metropolitan areas with centralized mass transit hubs. Their target is younger readers, or light newspaper readers, producing a just-the-basic-facts product that can be consumed, and tossed out, in the course of a morning commute.

This trend is being led by both insiders and outsiders. In many cases the dominant paper in a market has developed a scaled-down companion product, as is the case in Chicago and in Washington, D.C. (the Washington Post's Express). On the other end of the spectrum is European import Metro International, which started handing out free papers in Stockholm back in 1995 and now publishes the dominant paper in Sweden and the Netherlands.

Most believe that this mini-medium is here to stay. Take the Toronto market, which many consider to serve as a solid case study for this model.

Currently, the Toronto Star, in partnership with Metro International, is in a dogfight for readers with a similar publication from the Toronto Sun.

"There is hardly a doubt that there is a place in the market for these publications," said Sandy MacLeod, vice president of circulation at the Toronto Star. However, he added: "I don't think there is room for more than one per market."

MacLeod says that the presence of these two papers has affected their parents' circulation and advertising dollars, for the most part positively. "You can't put a half a million papers in a market and not have an impact," he said, acknowledging that the Toronto Star lost some light, casual readers. "We've lost maybe 5,000 single-copy readers," he said. "But it has had no impact on home delivery. And we've had quite a bit of success in driving weekend subscriptions."

According to MacLeod, while profits have been tough to come by, neither paper is willing to cede the market, which speaks to its long-term importance.

As for whether major advertisers will flock to these titles, opinions are mixed.

"There is very good buzz in the marketplace about them," said Jason E. Klein, president and CEO of the Newspaper National Network. "Advertisers are waiting to see if the category solidifies."

Conversely, Newspaper Services of America Chairman and CEO Scott Harding reported little interest in the category among his clients.

The Toronto Star's MacLeod reports that local advertising has increased as a result. "There are some advertisers who might run with [the Star] less frequently," he said. "But there are a whole bunch of ads we would never get."

The Chicago Tribune's Red Eye boasts adding 400 advertisers who had never run in the main paper over the last two years.

According to Henry Scott, president of Metro NY, his product has actually done quite well with national advertisers, such as H&M and British Airways. "We have been most successful with national brands," he said. "Agencies know us. They buy them in Europe."

"It's an education process," commented AM New York's Senior Vice President Floyd Weintraub, on working with advertisers. "But the people who have tried us like us."

As these papers solidify their foothold, one question that they face long-term is, can free papers make it in cities that lack centralized mass transit?

The Toronto Star's MacLeod sees cost as being a barrier. "We can give out 1,000 papers at one location," he said. "If you start getting into distributing 20-30 at a time, you have a problem."

Metro says they are exploring a launch in Los Angeles, which should prove to be a tricky endeavor, given its reliance on driving, its decentralized nature, and its multi-ethnic makeup.

Meanwhile, Dallas, which is not known for its subways, is supporting two such papers at the moment, the Dallas Morning News' Quick and the recently revived AM Journal Express.

Beyond expansion, as these papers mature in their current markets, what is their business future?

Some speculate that they will begin charging readers. The Tribune's Red Eye already charges $.25 for roughly 15 percent of its copies.

Yet most believe that the free model will endure. For now, the collective hope is that free paper readers become lifelong newspaper readers.