Canadian chain shows impressive growth

Perhaps one of the most exciting stories about the growth of free dailies is unfolding in Canada. The percentage of Canadians reading newspapers has been steady in recent years because those who have abandoned paid papers are now picking up free dailies.

Three free-daily chains have spread out across the broad expanse of Canada, publishing in most markets. They are:

• Metro Canada, a joint venture of Metro International and TorStar Corp., publisher of the Toronto Star

• CanWest (headed by Leonard Asper) which publishes RushHour

• Quebecor Media, publisher of the 24 hours or 24 heures papers. And, yes, the "h" is lowercase.

Quebecor Media (Toronto Stock Exchange symbols QBR.A and QBR.B) is a huge diversified company with broadcasting, cable, telephone, wireless and phone book businesses. So the results of its smaller free daily division are often overlooked. But five days ago Quebecor Media reported its third-quarter results and they showed that revenue at the company's 24 hours/heures papers saw a 69.1 percent jump in revenues compared to the same quarter last year (See page 23 of the company's Management Discussion and Analysis for the third quarter). Dollar figures weren't given.

The third quarter must have been the best quarter for the 24 hours/heures chain because for the first nine months of the year, revenues of the free dailies grew by 58.0 percent compared to the same period last year.

One reason for the revenue jump is that Quebecor Media in the past year has added Ottawa, Gatineau, Calgary and Edmonton to its network of free daiiles that started with Montreal, Toronto and Vancouver. Again while not providing dollar figures, the company reported an 87.2 percent reduction in operating losses at its free dailies in Montreal, Toronto and Vancouver compared to the same quarter a year earlier. In other words, Quebecor Media's free dailies are still losing money, but not as much as before.

CanWest MediaWorks did not report any information about its RushHour chain in the documents it provided to shareholders.

As for Metro Canada, its 50 percent shareholder, TorStar Corp. (Toronto Stock Exchange symbol TS.B), didn't provide much information in its most recent quarterly report. But it did say, "Newspapers and Digital revenue grew $6.1 million to $253.5 million with growth at Metroland Media Group, Metro and the Digital properties." Since its 50 percent share of Metro Canada was lumped in with other assets, it is impossible to know how its five free dailies (Toronto, Ottawa, Vancouver, Edmonton and Calgary) performed. The same type of information was given for net income.

But later in the report, TorStar Corp. provides a clue: "Higher revenues at Metro and the Digital properties offset lower advertising revenue at the Toronto Star both in the quarter and year to date. ... Advertising revenue was down 7.1 percent at the Toronto Star in the third quarter ... Metro continued to have strong revenue growth through the third quarter in both the Toronto market as well as the expansion markets." Under the heading "Outlook," TorStar Corporation's managers said, "{T]he revenue outlook is mixed with advertising trends continuing to be challenging for the Toronto Star but stronger for Metro, Sing Tao and the digital properties."

A couple of observations:

• It's unclear whether any of Canada's free dailies are making money, but with revenue increasing, many will in the next few years.

• In the United States, free dailies are owned by a wide variety of owners with a lot of independents in the fray. In Canada, the free daily industry is dominated by three chains, which have expanded into every major market.

Success of '24 Hours' raises questions

In Toronto, Canada, the city's paid-circulation daily, the Sun, is losing readership while the city's 4-year-old free daily 24 Hours is growing. And that's raising questions for Quebecor Inc., the company that owns both papers. A story by the Sun's Grant Robertson says that when Quebecor chief executive Pierre Karl Péladeau visited the Sun's newsroom, journalists wanted to know where the Sun fits into the company's plans.

For the record, Quebecor officials say they have no intention of turning the Sun into a free paper.

Speculation that the Sun might go free was fueled by Péladeau's decision to increase the page size of 24 Hours so that it is the same as the Sun. And with that change, the two papers are printing many of the same pages each day. 24 Hours in Ottawa, Montreal, Calgary and Edmonton have also gone to this longer tab format.

Quebecor officials say the company can get away with duplicating pages between the two papers because their markets are different. 24 Hours draws women, while the Sun attracts men with more sports and its daily girly photo.

WINNEPEG BOMB: The Sun story notes that if Quebecor starts a free daily in Winnepeg, that town's traditional daily newspaper, the Free Press, has developed plans to print its own free daily. The project to develop the free daily is called Eclipse. "We call it Project Eclipse because it's a Sun killer," Free Press publisher Andy Ritchie said. The plan, estimated at about $150 million (Canadian), is "like having a nuclear bomb -- you only use it if you have to."

Vancouver 24 hours becomes a full-size tab

Things are looking up for Vancouver 24 hours. When it started two years ago, it was one of three free dailies battling for the hearts and minds of the 2 million people who live in British Columbia's largest city — a city long served by two paid dailies.

Last year, one of the three — Dose — stopped printing. Since then, 24 hours has gained the upperhand on Metro Vancouver, the other free daily, by simply printing more papers every day and getting more local news scoops. Also, rumor has it that Vancouver 24 hours is in the black.

On Monday, 24 hours will increase its page size (the image area will go from 8 1/2 x 10 5/8 inches to 9 3/4 x 12 1/4 inches) to that of a standard tabloid. That will allow it to run ads and news pages from other Sun Media papers. Vancouver 24 hours is owned 50-50 by the direct-mail firm The Jim Patterson Group and Quebecor's Sun Media Corp., which also publishes six other "24 hours" in Canada and traditional paid papers such as The Ottawa Sun, The Toronto Sun, Le Journal de Montréal and Le Journal de Québec. (BTW, the lowercase "h" in "24 hours" is correct.)

The larger Vancouver 24 hours will still be printed on a heat set press (which all but eliminates ink rub-off), but it will go from glossy to white paper as part of Monday's switch. The change will allow 24 hours to run more pages. And every page will still have color. Pages will now be bound together with staples in the middle instead of glue.

In addition to the size change, Vancouver 24 hours will get a redesign. (The page above is of the old design.) Sun Media president and CEO Pierre Francoeur said Vancouver 24 hours will feature his company's full range of local, national and special-interest content that includes Health & Fitness, Trends, Discovery, Eat, Sex Files, Gadgets, DIY, Green Planet and Entertainment section, covering the latest movies, DVDs, CDs, Video Games, TV and celebrity gossip.

Publisher Amber Ogilvie says Vancouver 24 hours has developed successful distribution strategies to reach readers in both traditional and unconventional locations, including the University of B.C. campus, the B.C. Institute of Technology, restaurants and coffee shops.

"Our distribution system blankets the urban core, the heart of the business sector, and the entire urban area including the thousands of daily users of the Greater Vancouver Transit Authority Sky Train, bus and marine services," she said. [Here's a link to the press release detailing the changes.]

Free dailies race to be first in Calgary, Edmonton

There must be vast parts of Canada that are utterly unremarkable. Calgary and Edmonton must be among those areas -- at least if you're a newspaper publisher. From what we can tell, Calgary and Edmonton were cities in Canada for 100 years or more, but it was only in Feburary that the free newspaper industry discovered them. One company, Sun Media Corp. (Quebecor), said, "Hey, don't you know that there are cities in the province of Alberta called Edmonton and Calgary." So they raced to launch editions of their "24 Hours" in those cities. Both cities are in the Alberta province, which the CP (a frequent source of news for Canada's free dailies) says is "growing rapidly and attracting workers from other parts of the country. The advertising market is strong because the retail, construction and housing sectors are all booming." OK. So when is Metro International arriving? According to Media In Canada, March 5 in Calgary and in April 2 in Edmonton with 60,000 copies in each of the two markets (a total of 120,000 in Alberta).

Commentary: For years we've been reading about how the traditional printed newspaper is history and that the Web is the future. Yet it's funny that, in order to be seen in these new Alberta markets, you've got to print a helluva lot of newspapers -- like 120,000 a day in Alberta, or 2.5 million in a month. Imagine that it costs 10 cents (U.S.) to print each copy of these papers, a number we know varies based on page count, paper supplier and other factors. Still, that's $3 million a year. Is there that much advertising in, where, Alberta? Oh well, let's watch these titans of free dailies duke it out.

Three free dailies battle in Alberta, Canada

Three free dailies -- Metro, 24 Hours and RushHour -- have descended on the cities of Calgary and Edmonton in the Canadian province of Alberta. The question is whether the 1988 Olympic city of Calgary (population 1 million) and the oil town of Edmonton (730,000) can support three free dailies along with their traditional paid papers.

"The free dailies can really thrive in Toronto, very simply, because of the transit system here," Account Director Scott Stewart of Genesis Media tells Media in Canada. "When you look at newer or emerging markets, you still don't have the overdeveloped transit systems like you do in Toronto. Three free dailies in that market takes a Toronto-centric view that maybe that market can't bear. They'll face challenges."

Circulation: Quebecor-owned Sun Media's 24 Hours, 50,000 in each city; RushHour, 5,000 in Edmonton, 10,000 in Calgary; Metro, 60,000 in each city. These are initial numbers -- all figures will likely increase.

History: Until last year, Vancouver had three free dailies battling for readers from April 2005 to May 2006 -- 24 Hours, Metro and Dose. It was the only market in Canada with three free dailies at the time. Dose's owner, Can West, pulled the plug, because the publication was burning more cash than expected. From what we hear, the two remaining papers in Vancouver still aren't making any money, though 24 Hours is closer to success than Metro.

Expansion of free dailies slows

By three measures, the growth of the free daily newspaper industry slowed in 2007.

1. The University of Amsterdam's Piet Bakker, an expert on the industry, reports that the combined worldwide circulation of free dailies increased by only 13 percent — the slowest percentage increase since 2003.

2. Bakker also says more free dailies have closed in 2007 than in previous years (though there were still more launches in 2007 than closures).

3. The third measure comes from MediaLife Magazine, which found that U.S. media buyers were less interested in free dailies this year than in 2006.

Asked "What is the most interesting issue or trend in newspapers right now?" only 11 percent said "free dailies," down from 16 percent a year earlier. No. 1 was "circulation woes," a paid newspaper phenomenon. MediaLIfe goes on to say:

A good share of readers are still undecided about the impact of the free papers, nearly two thirds, or 63 percent, in the recent survey. That's down from 79 percent in July 2006.

Interestingly, the remainder are more sharply divided on how well free papers will fare. This time around, 18 percent dismissed freebies as a passing trend, versus 12 percent 18 months ago.



But this time 18 percent also saw the free papers as very promising, versus 10 percent in the earlier survey.

(We have a slight difference of opinion with Bakker about the number of free dailies to open and close in the U.S. He says the U.S. gained one free daily in Boston and lost a Spanish language paper in Dallas-Ft. Worth. That's correct, but his numbers didn't include the switch of a suburban Phoenix daily (East Valley Tribune) from paid to free. So instead of the U.S. gaining one free daily and losing one, the actual ratio is three new papers to one closure. Not included is the The Messenger in Mount Airy, N.C., which distributes to homes for free but costs 50 cents in racks. It is arguable whether The Messenger fits into the category of free dailies.)

Mathematics aside, Bakker's point is still valid -- the free daily frenzy has slowed in the United States. The industry is growing, but not by the astronomical rates of years' past.

On the other hand, free dailies are on fire in Canada with six launches this year. Most major Canadian cities have three of them. The chains are Metro Canada (owned by Toronto Star and Metro), 24 hours (Quebecor Media) and RushHour (CanWest).

As a result, overall newspaper readership (free + paid) is stable in Canada, according to the industry group Newspaper Audience Databank. The Toronto Star, reporting NAD's 2006 results, wrote:

While free daily newspapers and online editions of newspapers continue to grow and attract readers, the survey, considered the key benchmark for newspaper readership, indicates they have not cannibalized existing newspaper readership as much as has been feared.

Paid chain feels heat from free papers

In Canada, the parent company of five paid tabloid dailies, Quebecor Inc., has announced that it will cut 120 editorial jobs in an effort to save $4.6 milllion (Canadian) due to competition from free dailies. "The company has lost readership amid the rise of free commuter papers in several cities, including a significant erosion at its flagship daily, the Toronto Sun," the Globe and Mail says in this story.

Canada's free daily 'Dose' shuts down

CanWest has shut down its sassy youth-oriented national free daily, Dose, after a year of publication. The Toronto Star writes: "Launched in April 2005, Dose was a free newspaper that took careful aim at the 18-to-34 demographic. Distributed weekdays in Toronto, Vancouver, Calgary, Edmonton and Ottawa, Dose served up eye-catching front pages, one of which has a Best Cover nomination at the upcoming National Magazine Awards. Some of Dose's Toronto team had already started work yesterday when they learned they were out of a job. Others never made it into the office."

A Toronto financial analyst quoted by the National Post said, "[Dose] was burning a lot more money than they thought, because of [competition for readers and advertisers from] all the free dailies ... And there was no [strategic] need for it because CanWest has a joint venture in Metro," a free general interest daily distributed in Vancouver and Ottawa.

In Canada, several rivals compete in the free daily market. "Metro" papers are published under a three-way venture between CanWest Global, Torstar Corp. and Metro International SA. The commuter daily "24 Hours" is produced by Quebecor's Sun Media.

• Canada National Post: Closing Dose is good news for CanWest
• Toronto Star's take on Dose's demise -- it will be a loss to the art and design community
• Ottawa Business Journal: Dose of reality: CanWest kills free daily commuter paper
• Straight.com discusses Metro's role in Dose's demise