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.

CanWest gets back in the free daily business

CanWest, which shut down its youth oriented Dose free daily in May, introduced a new free daily in Ottawa today called RushHour. But instead of entering an already-packed morning market, RushHour is positioning itself as the afternoon commuter paper of choice. Here's a report in the Ottawa Business Journal and the press release from CanWest. CanWest still holds a one-third share of MetroCanada, which means that in Ottawa at least, CanWest will be competing with itself in the free daily market.

SunMedia's 24 Hours is also expected to enter the Ottawa market with two editions: a French-language version for Gatineau, with perhaps 40,000 copies printed; and an English-language version in Ottawa with 80,000.

Toronto to get an evening free daily

Toronto, which already has two morning free dailies (24 hours and Metro), will get an evening free paper called t.o.night starting Sept. 8.

It's not part of a newspaper chain, like nearly all of Canada's free dailies, but instead is the product of web-oriented company in Toronto, FreshDaily, which publishes three city-centric websites (Toronto’s blogTO, Vancouver’s Beyond Robson and Montreal’s Midnight Poutine) covering arts, music, film, fashion, food and local news. Each site has two full-time editors and draws content from a host of local contributors, with advertisers paying the bills, according to local multimedia commentator Neil Sanderson.

T.o.night was announced on blogTO, which said the new paper will be published 5 times a week with an initial circulation of 100,000 copies a day. All copies will be distributed between 3:30 and 6:30 p.m. near subway stops and other transit touch-points in the downtown core.

"As far as local content, t.o.night will put more emphasis on event information, restaurant reviews and other happenings that will allow readers to plan their evenings as they look to unwind after a long day at the office," the company's announcement says.

The announcement also said, "the new daily will also come complete with a full page of local content created by blogTO."

RUSHHOUR'S OVER: Piet Bakker's Newspaper Innovation blog reports that CanWest's RushHour free dailies in Ottawa, Calgary and Edmonton have quietly closed. They launched in 2006 after the youth-oriented free daily Dose came and went. The free daily market in Canada is owned by Metro and 24 hours/heures.

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.

Canadian publisher sells free dailies

CanWest, the largest publisher of newspapers in Canada including the Ottawa Citizen and the Vancouver Sun, is selling its one-third interest in the Metro newspapers in Edmonton, Ottawa and Vancouver to Metro Internationl and Torstar Corp., the publisher of the Toronto Star newspaper. Metro International and Torstar will now be 50-50 partners in the two Metro papers.

As a result, Torstar and Metro International will now own five Metro papers across the country -- including ones in Toronto, Calgary and Edmonton.

CanWest this year rolled out its own free daily, RushHour, in Calgary, Edmonton and Ottawa. As a result, it was essentially competing against itself as long as it held its share in the Metro papers.

“We had come to the conclusion that these two properties are no longer a strategic fit for our publishing group,” Dennis Skulsky, president of CanWest MediaWorks Publications Inc.

Metro Canada executives were happy CanWest was pulling out of the partnership: "With a consistent ownership structure now in place in all five English Metro markets, the Metro newspapers will be managed with a single-minded focus on the development and growth of the Metro brand across English Canada," said Jagoda Pike, president of Star Media Group and chair of the board of directors of the English Canada Metro newspapers.

Metro starts edition in Edmonton

Metro Canada today has launched a 60,000 free daily in Edmonton which will go head-to-head with Sun Media's 24 Hours (24 Heures) and CanWest's RushHour. Metro Canada is a three-way partnership with equal portions owned by Metro International, TorStar and CanWest. Why CanWest is essentially competing with itself is anyone's guess. But now three cities in Canada have three free dailies — Calgary, Ottawa and now Edmonton.

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.