Rival sues new free daily in North Carolina

The publishers and several staffers at paid papers in two North Carolina cities have quit to start their own free daily -- but now they're being sued by the owner of their former papers.

The new free daily is called The Messenger. It started July 9 and operates five days a week, delivering to homes. The Messenger is based in Mount Airy, N.C., a city of about 8,500 people and the birthplace of Andy Griffith. Many believe the charming small town of Mayberry in his 1960s TV show was based on Mount Airy.

Many of the staffers for the new paper come from the Mount Airy News and The Tribune of Elkin, N.C. Elkin is a town of 4,100 in the rolling foothills of the Blue Ridge Mountains about 20 miles south of Mount Airy near I-77. Both cities are in the same county.

In June, a chain of 32-papers, Connecticut-based Heartland Publications, bought the 9,200-circulation dailiy Mount Airy News and tri-weekly, 6,000-circulation Tribune from Mid-South Management Company.

Soon Heartland began cutting staff, and on June 18 Michael Milligan resigned as publisher of the Mount Airy News and Rebel Good resigned as publisher of the Elkin Tribune after 29 years, according to the Winston-Salem Journal.

Milligan is publisher of the new paper and Good is editor. One report said 14 employees of the two Heartland papers came along with them.

A July 4 story in the Winston-Salem paper said:

Employees at The Mount Airy News say they haven’t paid a lot of attention to what Milligan and Good are up to.

“Whatever they do doesn’t impact the notion or intention that we’re going to put out a great paper,” said Gary Lawrence, the new publisher of The Mount Airy News, who is also the chief-operating officer of Heartland Publications southern division.

Things changed quickly, however, when Heartland sued Milligan and Good, claiming the pair took key employees and information with them to start The Messenger, a July 7 story in the Winston-Salem paper said. The suit alleged that the two were planning the new paper while working at their old jobs, and that they recruited employees and manipulated the emotions of the remaining workers "so that they would walk out en masse" on June 18 in an attempt to undermine the two paid papers.

Heartland asked the court for an order stopping Milligan and Good from publishing the new paper, as well as hiring former employees of the two Heartland papers. Heartland also wanted to stop the new paper from contracting with its customers.

It appears Heartland didn't get very far in its lawsuit. The new paper has been publishing without interruption and a judge July 16 refused the chain's request to speed up the disclosure of documents in its lawsuit, the Winston-Salem Journal reported. The Messenger's attorney said Heartland's allegations are false and just an attempt to derail the new publication. The next hearing in the case is set for Sept. 10.

It's a nasty case for a town many think of as Mayberry. Where is Sheriff Taylor when we need him?

(Both photos are by Kate Lord of the Winson-Salem Journal.)

Who saw this coming? Israel to get Metro

Metro is headed to Israel just days after that country got its second free daily. Soon Israel will have three. This Metro will be printed in Hebrew and distributed between 2 and 5 p.m. It's Hebrew name will be Yediot Aharonot. Metro will be owned by Dudi Weissman, who also controls the Blue Square supermarket giant and the Dor Alon energy firm, and Eli Azur, who owns The Jerusalem Post. Content from Post staffers will appear in Metro. Last Monday saw the launch of Yisrael Hayom, a free daily financed by Sheldon Adelson, the American Jewish casino mogul who is close to Likud chairman Binyamin Netanyahu, The Jerusalem Post reported. Another free daily is due soon from Arnon Mozes, publisher of Yediot Aharonot, Israel's largest daily.

Israel gets a second free daily

"Israeli," that country's first free daily, now has a competitor, "Israel Today," which is owned by one of men who started "Israeli." The new paper launched today with a circulation of 150,000 distributed at bus and train stations. The goal is to reach 300,000. (Jerusalem Post photo.)

Israel Today, or Israel Hayom, is owned by American casino billionaire Sheldon Adelson, who has close ties to former prime minister Binyamin Netanyahu, according to story in The Jerusalem Post, which explored the political aspects of the paper's ownership.

The 73-year-old Adelson (at left), who is No. 3 on Forbes list of richest Americans with a net worth of $20 billion, was partners with Shlomo Ben Tzvi of Hirsch Media in the country's first free daily, Israeli, which launched in January 2006. The partners got into a legal dispute and Adelson was barred from having any control over the operation of the Israeli. He then made an unsuccessful attempt to buy the paid Israeli paper Maariv. When that failed, he moved forward with his plans for Israel Today.

Israel Today won't be the last free daily that will open in that country. Read our July 2 item.

A look at The City Paper in Nashville

Albie Del Favero, publisher of The City Paper in Nashville, was candid when we asked him to discuss his free daily newspaper, saying it has been a struggle so far but that he's now making some progress. Free-Daily.com asked Del Favero the following questions:

Q: Your paper has been around since 2001, a competitor to the Tennessean — How is it going?

Del Favero: It's been a struggle since the very beginning and it's still a struggle, but we're beginning to make some progress. Part of our problem has been that we were started by and are now owned by two different individuals, neither of whom had any experience in the newspaper industry. We have also re-invented ourselves too many times and have never been consistent in the product that we deliver to either readers or advertisers.

Q: What can you tell me about sales in the past year?

Del Favero: We will probably close out 2007 flat or a little down against 2006. But that is more a result of internal problems and changes than it is a reflection on the acceptance of our product in the marketplace or the local economy.

Q: Is City Paper in the black?

Del Favero: No.

Q: How large is your staff? Please break it down by editorial, sales, circulation, production, etc.

Del Favero: Just under 40, counting sports stringers. We have 18 in edit, 5 in production, 3 in classified sales, and 7 in display sales, 1.5 in circulation and four in admin, including IT. We have several open positions in sales.

Q: What is your average daily page count?

Del Favero: We publish 24 pages Monday through Thursday and either 32 or 40 on Friday, which is our big real estate day.

Q: How do you distribute your product (by hand, thrown on driveways, placed in stores, work places, etc.)?

Del Favero: Place-based, primarily in office buildings, retailers and street boxes.

Q: Who is your target audience?

Del Favero: We are a general-interest newspaper, targeted primarily to well-educated adults aged 25-54 in our core county and contiguous suburbs.

Q: Since you started, what surprised you the most?

Del Favero: How little attention large retailers pay us, despite the declining reach and penetration of the Tennessean.

Q: Some critics of free dailies say they don't have the quality journalism you could find in paid dailies. What do you say to that?

Del Favero: I would say that you can't paint free dailies with a broad brush. Ask just about anyone in Nashville, particularly the movers and shakers in the community, and they'll tell you we do an infinitely better job of covering our local community, both in quality and quantity, than the Tennessean does.

Q: For publishers elsewhere in the United States, what have you learned that might help them put out a better or more profitable newspaper?

Del Favero: Since I'm not yet putting out a profitable paper, I'm not sure I'm qualified to dish out advice. But I would say that the key is that every market is different — I'm not sure there's a formula for free dailies, particularly in markets the size of Nashville and smaller, like there is for alt-weeklies or community newspapers. You've got to look for holes in the market, be able to zig when your primary competitors zag.

Here are some other profiles Free-Daily.com has done on start-up dailies:

• July 18, 2007, Editor opens free daily in North Carolina

• May 5, 2007, Youth-oriented "Link" (Norfolk, Va.) growing steadily

• June 20, 2007, Manchester (N.H.) Express turns corner

Some sources aren't reliable

COMMENTARY: One of my purposes with this blog is to relay articles that have been written about the free daily industry. But it's hard to recommend some news sources that repeatedly make mistakes.

Take MediaLifeMagazine.com. Today it has posted an article about the free daily in Bluffton, S.C.

I was excited to read about it. Then, in the third paragraph, my reading was halted by a glaring error: The article said free dailies are popping up in places such as Bluffton and "Eureka, Ore."?

I know of one in Eureka, California — but Oregon? Wait a minute! There is no Eureka, Oregon. But here's a link to a August 13, 2006 San Francisco Chronicle story about a newspaper war Eureka, California between the free Eureka Reporter and the paid Times-Standard.

We all make mistakes. But this is the third big blooper I've seen in MediaLife when it comes to free dailies.

On June 20, 2006, MediaLife made the ludicrous claim that Metro International brought the concept of free dailies to the United States in 2000. More than a dozen free dailies were already in existence when Metro arrived in the U.S. Here's a link to the history.

On June 11, 2007, MediaLife reported that billionaire oilman Phil Anschutz was going to expand his Examiner chain into Los Angeles this fall. Nearly two months later, and there's been no such announcement from the Examiner. In fact, we have learned from our sources that the Examiner is not expanding into any market.

On one hand, I want to post links to the latest news about our industry. On the other, I don't want to spread incorrect information. I encourage MediaLife to check its facts more carefully in the future.

UPDATE (AUGUST 12) MediaLife has corrected its article on small town free dailies, changing the word Oregon to California in two instances.

Danish TV executive named Metro CEO

Metro International, publisher of 70 free dailies worldwide, has hired as its new chief executive Per Mikael Jensen, who currently heads Denmark's government-owned broadcasting service, a $355-million-a-year-enterprise. Perhaps more significantly, Jensen was previously Metro's Global Editor-in-Chief. (Jensen is pictured here, screen shot from Denmark's TV2.)

"I am thrilled to re-join Metro International, which I believe is one of the most interesting media companies there is," Jensen says in a press release. "Metro is a young company, with many young and talented employees and strong positions in a number of large advertising markets. It has significant potential to further develop its position."

He replaces Pelle Törnberg, who is scheduled to leave Metro on July 31. Metro International's Chief Operating Officer Chris Spalding will act as interim CEO and Dennis Malamatinas will assume the role of Executive Chairman until Jensen takes over on Nov. 1. The reason for the delay in the transition wasn't immediately known.

Metro International loses ground

Metro International, publisher of 70 free dailies worldwide, is in a nosedive as it looks for a new CEO to replace Pelle Törnberg (left), who announced Feb. 13 that he would be stepping down. Word is that a new CEO will be named within days. Good thing, too, since Metro's second-quarter financials (released today) are a disaster.

• Metro reported a profit of $900,000 in the second quarter, compared to $4.6 million in the same quarter last year. Sales rose, but expenses are growing much faster.

• The company's three U.S. papers still haven't made money. In fact, they're headed in the opposite direction. In the second quarter, Metro U.S. lost $2.07 million, up 92 percent from the $1.08 million loss reported in the same period last year. U.S. revenues grew by 12.6 percent, from $8.6 million in Q2 2006 to $9.7 in Q2 2007. But that 12.6 percent increase, while good compared to the rest of the U.S. newspaper industry, is not nearly enough to cover soaring costs. None of these papers are start-ups in their early fledgling years. Philadelphia is seven years old, Boston six and New York three. They should be making money by now. Since they're not, management should either shut them down or make radical changes.

• Even in Sweden, where Metro started, profits are down — from $5.5 million in Q2 2006 to $3.9 million in Q2 2007.

• In Spain and France, where other free dailies have taken off, Metro is getting pounded to the point that margins are at 3 percent.

• How much money can Metro lose? On page 12 of today's report management reveals that they used another $10 million on the company's $90 million line of credit from Sweden's Nordea Bank. The total draw is now $57 million.

Whether the rest of the free daily industry likes it or not, Metro International is the leader in our sector. So it's disappointing to see these results. They create a ripple effect -- ripples that turn into waves for others.

We can just imagine what the guys at Dagsbrun, the Icelandic phone company, are saying to themselves. They're the guys funding the Russel Pergament's BostonNOW. Pergament wants to launch similar NOWs in other U.S. cities with their money. They're probably saying, "Wow! $57 million? What are we getting ourselves into?"

Billionaire oilman Phil Anschutz may have figured out the same thing awhile back. He was supposed to fund 70 free dailies across the country (if you believed the hype), yet he stopped at No. 3 in Baltimore in early 2006. Anschutz has money to burn ($7 billion at last count), but he's nobody's fool.

We're bullish on the future of free dailies but the future probably isn't these corporate, top-down, one-size-fits-all papers. Pergament has a good feel for Boston, where he has worked for many years, but would he give Fort Worth, Texas, or Columbus, Ohio, a paper residents would embrace? That's what's tricky about this business. It's a local business.

And that's good. The cost of starting a daily newspaper has never been cheaper. Yes, it takes millions, but not hundreds of millions. This would open the door for some truly local players to get into the newspaper business and start eating away at ad dollars now going to paid dailies.

As for Metro, a lot depends on who will become its next CEO. The tone he or she strikes from the first day will be crucial.

Editor opens free daily in N. Carolina

Fayetteville, N.C. is home to the nation's newest free daily, SmartNews. The editor and publisher of this new daily is Randy Foster, a newsman with more than 20 years of experience including six years at Fayetteville's paid daily, the Observer, where he was metro editor for a year and news editor for five years.

SmartNews has been printing four days a week for six weeks now with a daily press run of 8,000. Foster says the paper has about 200 delivery points, including more than 100 rack locations. "We have another 140 racks still in the box that we are finding locations for," he says.

Free-Daily.com asked Foster the following questions:

Q: Why did you leave the Fayetteville Observer?

Foster: I had grown frustrated working for other owners in environments that claimed to nurture and encourage innovation and initiative but really placed roadblocks at every turn. I'd worked for corporate-owned papers and privately owned papers, and found they are all basically the same. I am 47 and have held every job at newspapers but one: publisher. I've also consulted for other papers to help them look better, read better and be more efficient. Almost every paper I have worked for or with became General Excellence papers. Papers where I was the senior editor have all grown in circulation. I thought it was time that I put what I know to work for myself.

Q: SmartNews has been operating for [more than] a month now -- how is it going?

Foster: It has been an exciting experience. A day does not go by where we cannot observe significant, measurable growth. That's easy to say since we started from nothing. It started with just me and a friend I hired to help me establish the distribution infrastructure. Today we have 11 people working full-time, a paid intern and another 12 distributors working as independent contractors. We distribute 8,000 copies — hawked, home-delivered in different neighborhoods each day, and racks — four days a week.

On our first day, we had six people (friends, relatives and employees) and four of our five sons out trying to deliver 15,000
copies. Another six people we hired for distribution didn't show up (getting distributors to show up for the job has been surprisingly hard). We scaled back on distribution to better reflect our resources, and 8,000 copies, four days a week, has become a comfortable zone. My goal is to get back to 15,000 a day and add a Saturday edition sometime in the next six months, as we continue to grow our advertising base and our distribution force.

The paper is 16 full-color pages, tabloid. Content is a combination of staff and contributed local information and Associated Press.

Q: Who owns SmartNews (and please name names) and identify any other media outlets they may own?

Foster: Sarah and Randy Foster own SmartNews. Sarah has no newspaper experience but has written for a magazine as a technology columnist. She has a psychology degree from UNC Chapel Hill and was most recently a special education teacher. All of that is surprisingly helpful. She runs the business and advertising sides of the newspaper. I run the news, Web site and distribution sides.

Q: What has been the response from advertisers?

Foster: The first day I went out to pre-sell advertising, I sold ads to three of the first four places I visited. I figured that was a good sign. The going was harder after that, especially since I had to turn my attention to making all the other arrangements necessary to starting a newspaper from scratch (and believe me, there are was a lot to do).

We went into a dry spell the first few weeks of publication, although advertisers welcomed us and said they were happy to have an alternative. But summer is a bad time to start a paper in some ways. A lot of decision makers are out of the office, and budgets have been written in stone. A lot of our advertisers are spending unbudgeted money to be in our paper.

The bright side is that things are improving by the day and will continue to improve as we head into the holiday season.

Q: How large is your staff? Please break it down by editorial, sales, circ, etc.

Foster:

• Editorial: 2 editors (plus two correspondents, a paid intern and three stringers)

• Sales: 4

• Circulation: 2 (plus 16 independent distributors)

Q: In the month since you started, what has surprised you the most?

Foster: 1. How hard it is to get people to do what they say they're going to do. We have had about 20 people who we hired for distributor jobs who never showed up, for example. We have a verbal commitment for a weekly full-page ad but have not been able to meet up to sign the contract and get the check. It seems every step of the way there have been dropped balls. It took me weeks just to find someone to bid on our printing, and then another two weeks to get the bids.

2. How thirsty people are for an interesting newspaper. I've been in the business a long time and have read about and written about the gloom and doom predictions for the newspaper industry. And working for dailies, I could see why people wouldn't want to pay for them. As an editor, most of the stories I read I only did so because I was paid for it. They're dull, irrelevant, arrogant, inaccessible — even among papers that say they are trying to change all that. The mantra these days is "local, local, local", but I think "interesting, interesting, interesting" is even better. We're aiming for interesting and local. And it is working. SmartNews is an easy sell. People who have read us come back for more — eagerly. So what surprises me is that newsprint is not dead; dull newspapers are.

Q: A lot of journalists reading this probably want to start their own free dailies, but haven't summoned the courage to do so. What would you tell them?

Foster: 1. It's expensive. Even with a small staff, our expenses are running at about $12,000 a week, and that's without paying ourselves. So you need to make sure you have your finances ready. We're fortunate because our expenses could have been a lot higher. I didn't need to hire a design editor, or a copy editor, or a wire editor, or a photographer or even a reporter, because I could do it all myself as we get ourselves established.

2. Listen to advice, but go with your gut. No one person has all the answers, so get ideas from a lot of sources. But you're the one who has to sort it out and make the decisions.

3. Smile at the nay-sayers. No one is more resistant to innovation and entrepreneurism than your colleagues in the newsroom. Think of them all as devils advocates. Take their advice seriously, except when they say it will never work.

4. Associated Press has a lot of really good stuff. It's a great way to affordably jumpstart the content of your paper. You just have to be selective.

Q: Some critics of free dailies say they don't have the quality journalism you could find in paid dailies. What do you say to that?

Foster: My paper has less quantity, but more quality. We've scooped the paid daily and the alt weekly a few times already. In two cases, they're stories the big daily wouldn't touch because of its own baggage. A university chancellor resigned and we interviewed her; the paid daily never even tried. A TV series was based on a book by a former local reporter and we interviewed her; the paid daily never tried.

"Quality not quantity" is reflected in how I staff the paper. I pay premium wages, and I mean premium. I'd rather have a few great people than a roomful of people who don't know how to excel.

Here are some other profiles Free-Daily.com has done on start-up dailies:

• May 5, 2007, Youth-oriented "Link" (Norfolk, Va.) growing steadily

• June 20, 2007, Manchester (N.H.) Express turns corner

Publisher replaced at amNewYork

Christopher Barnes is out as publisher of Tribune Co.'s amNewYork after 11 months on the job, and the company isn't commenting on his departure. A spokeswoman quoted in Newsday, a sister paper, said it was unclear whether Barnes would remain with the company. Replacing him is Terry Jimenez, Newsday's chief financial officer. Jimenez will keep the CFO position while assmuing the mantle of amNewYork. Before joining Newsday in 2005, Jimenez held positions at the Chicago Tribune and the McDonald's Corp. The changes were made Monday. Barnes replaced Russel Pergament, who has since returned to his old stomping grounds in Boston to form BostonNOW. (Photo from journalism.co.uk.)

Many large media markets lack free dailies

Four of the nation's top 10 metropolitan areas don't have a free daily. Yet New York and Boston each have two. And San Francisco and Washington each have three.

The growth of free dailies in the United States hasn't been predictable or logical. At least that's what we found when we took a list of the country's top 50 metro areas and looked at which ones have free dailies. Here's what we found.

1. New York has two, Tribune Co.'s amNewYork and Metro New York. It's believed that am makes money, Metro doesn't. (This analysis doesn't include Spanish-language dailies or trade publication dailies, like Daily Variety or Women's Wear Daily.)

2. Los Angeles has zero. The suburb of Santa Monica has one. The Orange County Register has launched a tabloid paper called the OC Post, but it's paid. Some have suggested the OC Post would thrive if it were free. Rumors that billionaire oilman Phil Anschutz would expand his Examiner chain to L.A. appear to be wrong (see separate item).

3. Chicago has one, the RedEye (one word), owned by the Chicago Tribune. It's profitable and just launched a weekend home-delivered edition. The RedEye appears to be picking up the young readers the Chicago Tribune has lost. And it seems to be an effective way of reducing the circulation of the rival Sun-Times, a paid tabloid that often is sold side-by-side the free RedEye.

4. Philadelphia has one, Metro. This appears to be the most successful of the three Metros in the U.S. (Boston and NY being the other two locations) and it is said to be close to making a profit. When Metro started in 2000, it obtained an exclusive contract to distribute on train station platforms with a local transit agency. Both the Philadelphia Inquirer and New York Times sued, saying a government agency can't sell distribution rights on its property. Metro won, but it was a hollow victory. Metro soon discovered that the people riding public transit weren't the desirable demographics ad agencies wanted to reach. When the contract expired, Metro did not want to renew, and nobody else took their place.

5. Dallas-Fort Worth -- one free daily, Quick, owned by the Dallas Morning News. The Belo-owned Morning News used Quick to fight off a startup called the American Journal, which disappeared less than a year after it started. Quick has blossomed since then into daily that, like RedEye, is catching younger readers who aren't reading traditional paid papers.

6. Miami-Fort Lauderdale -- none. Maybe one reason is that Miami and Dade County have become increasingly Spanish speaking, but Broward County (Ft. Lauderdale) certainly has enough English-speaking potential readers.

7. Washington -- three. The newest is The Politico, which was launched earlier this year by the Albritton family, owner of the town's ABC affiliate and the defunct Washington Star. Anschutz has an Examiner there, with a number of conservative commentators, who apparently are trying to compete with the paid Washington Times for that segment of the market. Washington's biggest and most successful free daily is the Express, which was launched by the Washington Post out of fears that Metro would be coming to town.

8. Houston -- nada.

9. Atlanta -- nope.

10. Detroit -- zip.

11. Boston -- two. Metro and the new BostonNOW, owned by an Icelandic phone company that plans to launch 10-12 free dailies across the U.S.

12. San Francisco -- three. The Examiner, the San Francisco Daily and The City Star. This could be the most saturated media market in the country. It's also home to three alternative weeklies, several community weeklies, a handful of glossy city magazines and Web sites of every stripe. Six more free dailies operate in the suburbs, giving the Bay Area a total of nine — the most of any market in the country and maybe the world.

No free dailies in markets 13 (Riverside-San Bernaardino-Ontario, CA), 14 (Phoenix), 15 (Seattle), 16 (Minneapolis-St. Paul), 17 (San Diego) or 18 (St. Louis).

19. Baltimore — one. An Anschutz Examiner. Rumors that the incumbent Baltimore Sun is planning one too.

20. Tampa-St. Petersburg — one, the "tbt*" which is owned by the St. Petersburg Times (which, in turn, is owned by the Poynter Institute) and is targeting the 18-34 audience. It may also have an impact on the rival Tampa Tribune (owned by Media General) like the Chicago RedEye has had on the Sun-Times.

21. Pittsburgh -- one. A suburban paper, the Greensburg Tribune-Review, is delivering a free afternoon daily (called Trib p.m.) to selected Zip codes in steeltown. (See our May 13 item on this paper.

22. Denver -- one, the Denver Daily News, an independent.

No free dailies in markets 23 (Cleveland), 24 (CIncinnati), 25 (Portland), 26 (Sacramento), 27 (Kansas City), 28 (San Antonio), 29 (Orlando), 30 (San Jose, CA), 21 (Columbus, OH)

32. Virginia Beach-Norfolk-Newport News, VA -- one, Link, a youth oriented free daily owned by The Virginian-Pilot in Norfolk last year (See our May 5 item on Link.

No free dailies in markets 33 (Providence, RI), 34 (Indianapolis), 35 (Las Vegas), 36 (Milwaukee), 37 (Charlotte, NC) or 38 (Austin, TX), 39.

39. Nashville -- one, The City Paper, independent.

No free dailies in market No. 40 (New Orleans), 41 (Memphis), 42 (Jacksonville), 43 (Louisville), 44 (Hartford), 45 (Buffalo, NY), 46 (Richmond, VA), 47 (Oklahoma City), 48 (Birmingham, AL), 49 (Rochester, NY) or 50 (Salt Lake City).

While some markets probably have too many free dailies (San Francisco, Washington, Boston) most of the Top 50 cities don't have any. As paid papers crumble, the opportunities in these unserved markets look more attractive.

(If you see any errors in this report, please e-mail me at free-daily@hotmail.com.)

Examiner chain has no expansion plans

When billionaire oilman Phil Anschutz bought the struggling San Francisco Examiner in 2004, his people let it be known that he was going into the free daily business in a big way. They let it leak that Anschutz's Clarity Media had registered the name "Examiner" in some 70 markets, prompting speculation that he would start free tabloids in those cities. A year later he started the Washington Examiner and in early 2006 launched the Baltimore Examiner.

Since then the Anschutz team has said little about expansion into other markets. But the story behind-the-scenes is that Anschutz put the rollout of new dailies on hold while he extricated himself from a legal morass involving a Denver telephone company he founded, Qwest.

The reprieve gave Clarity's management time to show that their concept of a free daily could make money. But now that Anschutz is out of the woods on the Qwest front, his newspapers are still losing money. As a result, we're told that no expansions are planned in Los Angeles (contrary to a June 11 report by the Web site MediaLife) or any other markets.

Apparently things aren't so bad that he's ready to pull the plug, but we're told "the clock is ticking." Anschutz isn't afraid to cut his losses. Ever hear the story about Anschutz's son-in-law who used the billionaire's money to fund a business-news radio station in Denver? The station never made money. One day Anschutz had enough of the losses. He walked into the station in the middle of the day, ordered that the power be cut, and then final paychecks were handed out to the staff as they filed out of the darkened building.

Israel will soon have four free dailies

After years of declining readership and closures, it appears the newspaper business in Israel is changing. Haaretz.com's Sami Peretz says four free dailies will soon be operating in Israel — there's the "Israeli," owned by Shlomo Ben-Tzvi's and American billionaire Sheldon Adelson. It is circulated at gas stations and train depots. The two partners have had a falling out, and Adelson is starting a second free daily, called "Israel Today" or "Yisrael Hayom," which will go to mail boxes. And there will soon be two new papers from Arnon Mozes and the David Weissman-Eli Azur team that will be passed out at various point of sale, such as supermarkets.

Peretz writes:

For journalists, this is wonderful. After years of cutbacks, we finally are receiving offers, and alternative employment opportunities are popping up - and that is good.

As for publishers, this is all a big headache. They will now be exposed to serious salary demands, and will be forced to invest resources in improving and upgrading their products in order to adapt to the changing market.

But all this is only in the short run.

In the long run, there are still a lot of questions hovering around the newspaper business. It is hard to imagine that today's newspapers will keep their readership while the new freebies manage to flourish.

The significance is that after a bloody one- to three-year fight, we will once again see the newspaper business shrink - in terms of both the number of papers and jobs for journalists.

Only the best and the brightest - and the strong - will survive, because that is how it is in free-market capitalism. There may be free papers, but there are no free lunches.

Newspaper will pay bloggers per page view

A current fad in the newspaper business is outreach to bloggers. Many papers, both free and paid, host blogs on their websites. Some are written by the paper's staff while others are produced by readers. Sweden's Metro newspaper has upped the ante and is now paying bloggers who attract at least 5,000 page views per month. In return, bloggers give Metro permission to use their material in the print edition. The idea was so popular that more than 2,300 bloggers signed up in just three days and Metro had to close the service to new sign-ups until it could expand its capacity, according to the website Media Culpa.

Another UK 'freesheet' in the works

The war among commuter dailies in England will soon be heating up. Network Rail, the nonprofit that runs that country's railway system, has invited publishers to make proposals to launch a new free afternoon newspaper that would be distributed at Manchester Piccadilly station (pictured), according to the media website How do. Another "freesheet," as they are called in England, is likely to stoke the already furious free daily battle between Rupert Murdoch's TheLondonPaper (all one word) and Viscount Rothermere's London Lite and Metro. Metro has the rights to distribute in the station in the morning, so this new paper would be circulated from 3 p.m. to 6 p.m.

Meanwhile, the buzz in England is that both TheLondonPaper and London Light are planning to distribute nationwide.

Examiner editor off the hook on gun charge

In a 10-paragraph story, the Baltimore Examiner announced today (June 26) that prosecutors are dropping charges against the paper's executive editor, Frank Keegan (pictured), who was accused of pointing a shotgun at a neighbor who complained about his cigarette smoking. The neighbor was holding his 3-year-old daughter when confronted by the gun-toting editor May 23, according to police reports. Keegan, 58, had been charged with with three counts of second-degree assault and two gun violations, and spent a day in jail after his arrest. Prosecutors decided not to go forward with the case following a meeting with the alleged victim and his attorney, the Examiner reported. Keegan came to the Examiner in January 2006 after he had been fired by the Connecticut Post in Bridgeport, Conn., where he had worked for three years.

Told you so! Israel to get 2nd free daily

Las Vegas billionaire Sheldon Adelson (pictured) has broken off talks to buy Israel's Ma'ariv, a Hebrew paid daily, and plans to open that country's second free daily, Israel Today, in two weeks.

Adelson's new paper is now hiring. Amos Regev will be the editor and Asher Baharav will manage it. Both men held the equivalent positions at the country's first free daily, Israeli, which was jointly owned by Adelson and Shlomo Ben-Tzvi. That partnership is now in the courts — with Adelson being locked out of the paper's management. "Israeli" continues to publish.

This blog, free-daily.com, reported back on April 11 that Adelson was looking to start his own free daily after the "Israeli" partnership dispute shut him out of any control of that paper.

According to Forbes Magazine, Adelson is the 14th richest person in the world and the third richest in the United States with a net worth estimated at $20.5 billion. He is a real estate developer and heads Las Vegas Sands Corp., which operates casinos.

Reporter Yael Gaoni of Israel's Globes Online, a business publication, reported today that talks broke off between Adelson and Ma'ariv owner Ofer Nimrodi. Adelson offered $125 million for "Ma'ariv" and Nimrodi wanted $180 million, according to Gaoni.

Four hours later, Haaretz.com posted a report by reporter Yael Walzer that quoted Adelson's spokesman as saying the Vegas billionaire never offered to buy Ma'ariv for $250 million. Walzer's report suggested Adelson's bid, after looking at Ma'ariv's books, was $105 million, and that Nimrodi's final demand was $170 million.

Manchester (N.H.) Express turns corner

The 8,000-circulation Manchester (New Hampshire) Daily Express has been operating for about a year now and is close to getting into the black. In our series profiling free dailies, we caught up with Publisher Jody Reese and asked him the following questions about the Express.

Q: The Manchester Daily Express has been around for a year now -- How is it going?

Reese: Great. We've grown in circulation from 3,000 to 8,000 a day (Monday through Friday) and have expanded our local news coverage.

Q: Who owns the paper (please name names) and what other publications/media outlets do they own?

Reese: The Express is owned by HippoPress LLC. That in turn is owned by myself (Jody Reese), Jeff Rapsis and Dan Szczesny. The three of us started a weekly in 2001 called Hippo. That weekly has been quite successful. It's the largest weekly in the state and the most read paper in the greater Manchester (the state's largest city) area, beating out all the paid dailies. All three of us work at the papers.

Q: What can you tell me about sales in the seven months?

Reese: It was tougher than we thought it would be. For the first six month, it was a grind, but we turned a corner around Christmas. Our biggest challenge is convincing people that newspapers aren't dead. In an odd way, we've become champions of newsprint. I now keep a list of the five reasons why print is alive and well -- the Express is number one.

Q: Is the Manchester Daily Express in the black yet? Please separate out from your weekly, if possible. If your daily isn't profitable, when do you expect it will happen?

Reese: Cash flow is still negative for the daily, but we're getting close to the breakeven point. We expect that to happen in the next six to nine months.

Q: How large is your staff? Please break it down by editorial, sales, circulation, etc.

Reese:

• Editorial: 4
• Sales: 2 (shared between 10 sales people who sell our other products)
• Circulation: 1 (shared between three staffers who also distribute other products)

Q: How do you distribute your product (by hand, thrown on driveways, stores, work places, etc.)?

Reese: Bulk drops at our street boxes, convenience stores, work places, old-age homes, community centers, cafes and other public gathering areas.

Q: Since you started, what surprised you the most?

Reese: The misperception that newspapers are dead. Advertisers view our weekly as a magazine even though its printed on newsprint -- so we didn't run into that problem. With the free daily we ran straight into the print-is-dead wall. Every five-and-dime store owner thinks he's cracked the advertising world open by declaring no one reads newspapers any more. The worst offenders in this perception battle have been the paid dailies, running numerous stories about their decline in circulation and classified advertising. Almost all of these stories have failed to distinguish between paid and free dailies and weekly newspapers -- where the growth is. There also has been very little business reporting on strong college newspapers. Our challenge now is to tell a different story about the growth of free dailies in Europe and the success of free dailies in norther New Hampshire (the Sun newspapers).

Q: Some critics of free dailies say they don't have the quality journalism you could find in paid dailies. What do you say to that?

Reese: Bull. We break more stories than our paid daily competitor. However, we don't aspire to be the New York Times, and really who does. Our stories tend to average 400 to 500 words, but it's not dumbed down in any way. Our reporters write between two and three stories a day, so there isn't a lot of time for longer magazine-type articles. The Express doesn't have a Sunday or weekend component. Our weekly (Hippo) handles more of enterprise type stories. It fundamentally bothers me that people think the 50 cents they pay for a paid daily means that it's better than a free paper. Does 50 cents really buy you that much better journalism? Of course not. Most of the local paid daily newspapers I come across have one or two local stories on the front page and that's about it. The rest is Associated Press wire copy. Unfortunately, I just don't see much quality journalism in the vast majority of paid dailies.

Q: For publishers elsewhere in the United States, what have you learned that might help them put out a better or more profitable newspaper?

Reese: Spend less time on making your paper look flashy and more time reporting on local news that isn't available anywhere else. I don't find any value in a Metro-type free daily. Content is key.

Q: What is your average daily page count?

Reese: We're 16 pages rain or shine. Ten to 12 of that is local and the rest is wire copy. We're running about 20 percent advertising.

This isn't a pretty picture for publishers

Publishers of free dailies beware. If you're not careful about controlling your circulation, environmental protesters might pick up papers the public has discarded (or not picked up at all) and do a photo op like this.

In May we interviewed Justin Canning, who organized Operation Freesheet in London. His group did a "walkabout" in London on Wednesday, June 13, and collected 1,500 papers. He provided us with this picture that shows some of the papers he and other volunteers found.

"And really we could have picked up many more," Canning told free-daily.com. "But we ran out of bags, and they were getting too heavy for us anyway. The papers were picked off the street, the bins, the tube (the subway system) -- just everywhere! Really, London between the hours of 4 and 7 is awash with free papers."

Editorial: Even if you don't sympathize with environmentalists, wasting papers is bad for business. It's expensive, it undermines advertiser confidence and it leaves us open to bad publicity. Most newspapers are sophisticated enough to monitor how many papers are picked up at each location to ensure there is no waste. Sometimes new papers have trouble determining how many to leave, and where to leave them. We all need to do a better job reducing waste in order to avoid more pictures like this in future.

Chicago RedEye launches Saturday edition

Chicago's RedEye, arguably the nation's most successful big-city free daily, is adding a Saturday edition starting this week that will be delivered to homes free of charge. The home delivered RedEyes will contain preprints, an option not available in the weekday editions because they would fall out of the paper at distribution points and create a litter problem.

The Chicago metro area has 9.5 million residents. So instead of delivering a Saturday edition to every one of them, RedEye is launching a consumer awareness campaign to promote the opportunity to receive the free home-delivered weekend edition by registering online at redeyeweekend.com or by calling a toll-free number. RedEye also will be delivering samples of the issue to encourage registration in selected zip codes.

RedEye currently distributes approximately 150,000 copies of each weekday edition throughout Chicago through more than 3,000 outlets, including newspaper boxes, train stations and select retail outlets. RedEye's weekly readership reached 685,500 in 2006, up nearly 20 percent from 2005. It is expected to deliver up to 100,000 copies of the new weekend edition.

RedEye is owned by the Tribune Company, which announced in 2006 that the free daily was profitable. RedEye started in 2002 as a paper designed to capture younger readers. Quickly, the rival Chicago Sun-Times launched a copycat called the Red Streak. The Sun-Times pulled the plug on the Streak in December 2005. The Sun-Times is a tabloid and is often sold in stores next to the RedEye. Obviously some readers have decided to pick up the free daily rather than pay for the Sun-Times and Sun-Times Publisher John Cruickshank admitted last fall that sales of papers bought from news racks or stores "has been really hit by RedEye."

COMMENTARY: Here's an argument for why RedEye should be considered the nation's most successful free big-city daily.

By the way, there should be a distinction between free "big-city" dailies and those serving small or mid-sized towns. There are many successful and profitable free dailies serving small and mid-size towns. But in big cities -- New York, Chicago, San Francisco, Philadelphia, Boston, Washington, Baltimore -- RedEye was the first to make money.

In fact, of the 12 English-language free dailies in those seven cities, the only other one to reveal it was in the black was amNewYork, which is a Tribune property like RedEye. The others seem to be struggling.

A columnist at the San Francisco Examiner wrote last week that his free daily was "new and experimental." But Anschutz bought the Examiner three years ago and launched its current format soon thereafter. How many years does it take to know if an experiment worked? Guess they wouldn't be calling it "experimental" if it was profitable. How long will owner Phil Anschutz, a billionaire oilman, keep experimenting?

Metro International, with editions in Boston, New York and Philadelphia, admitted that it lost $3 million in its U.S. operations in the first quarter, up significantly from the $2.4 million loss in the same quarter in 2006. At one time, Metro had ambitions to launch editions in every big city in the U.S. — kind of like talk we're hearing from the backer of the new BostonNOW free daily, the Icelandic phone company Dagsbrun, which wants to open "Now" papers in eight to 10 U.S. cities. Let's see if they make any money in Boston first.

Meanwhile, RedEye is not only making money, it is growing by printing more papers and adding distribution points. Now this new Saturday edition which will allow it to expand its advertising base by enabling it to offer preprints. We don't know of another more successful metro free daily in the U.S. than RedEye.

Report: Examiner will launch in LA

You read it here first. On May 8, we noted that an ad the Examiner chain placed for a National Sales Manager said the job could be based in San Francisco (where there is an Examiner), Denver (where owner Phil Anschutz is based) or Los Angeles. Why L.A.? We speculated that it could be the next city to get one of Anschutz's Examiners. Today, the website MediaLife quotes an unnamed source as saying an Examiner will launch in Los Angeles by the end of the year. The story quotes ad buyers as welcoming the new competition (of course they would -- competition means lower prices and more convenience for them). The story also says that a reason Anschutz might go into LA "is to get in ahead of other free chains that may be eyeing the city" — a nod to Metro International and the Icelandic phone company Dagsbrun, which has funded BostonNow. It will also be interesting to see how the Republican Examiner fares in a liberal city like L.A. And given the race consciousness, it will be interesting to see how civil rights leaders react to the Examiner cherry picking upscale enclaves for distribution. Those neighborhoods the Examiner will want to reach are white and English-speaking, yet a paper that only distributes to them will probably come under fire for such a practice. That's an issue Anschutz hasn't had to deal with in his other markets.

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.]

A big test for a free daily in Chicago

Chicago's two paid dailies — the Tribune (a broadsheet) and Sun-Times (tabloid) — have been in a war for decades. A few years ago, the Sun-Times stumbled badly when it submitted inflated circulation numbers to the Audit Bureau of Circulations. The fraud was discovered in 2004 and ABC stopped releasing circulation reports on the Sun-Times at that point until the mess could be untangled.

So observers haven't been able to see whether the Tribune's free tabloid daily, RedEye, has been hurting Sun-Times. For its first three years, RedEye was being sold for 25 cents, but switched to free in September 2005.

Last fall, Sun-Times Publisher John Cruickshank admitted that "single-copy" sales (papers bought from news racks or stores) "as been really hit by RedEye," but no figures were available to show the impact.

On Friday, ABC issued its first post-scandal circulation report on the Sun-Times, as the Tribune reports. This report was for the October 2004-March 2005 period, before the RedEye switch from paid to free. Later this year, ABC is expected to release reports for the April-September 2005 and October-March 2006 periods, which will show how the Sun-Times has done in the face of free competition.

Free dailies account for 8% of all circulation

Free dailies now account for 8 percent of the world's combined newspaper circulation of 556 million, and for 31 percent in Europe, according to new figures from the World Association of Newspapers.

"Far from being an industry in decline, as the ill-informed and short-sighted continue to contend, newspapers are alive and well and exhibiting enormous innovation and energy to maintain their place as the news media of preference for hundreds of millions of people daily," said Timothy Balding, chief executive of the association.

The figures show the newspaper industry is growing, and that free dailies are a big part of that growth. The association found:

• Global newspaper sales were up 2.3 percent over the year, and had increased 9.48 percent over the past five years. Newspaper sales increased year-on-year in Asia, Europe, Africa, South America, with North America the sole continent to register a decline.

• When free dailies are added to the paid newspaper circulation, global circulation increased 4.61 percent last year, and 14.76 percent over the past five years.

• The five largest markets for newspapers are: China, with 98.7 million copies sold daily; India, with 88.9 million copies daily; Japan, with 69.1 million copies daily; the United States, with 52.3 million; and Germany, 21.1 million.

• Newspapers share of the world ad market held relatively steady with 29.6 percent, marginally down from 29.8 percent in 2005. Newspapers remain the world's second largest advertising medium, after television, with more revenue that radio, cinema, outdoor, magazines and the internet combined.

• In India, newspaper advertising revenues increased 23.18 percent over one year and 85 percent over the last five. South Africa also saw remarkable gains -- 20.71 percent over one year and 141 percent over five years.

I'm slow at passing out papers, so I'll sue

Every newspaper gets hit with nuisance lawsuits. The more successful the newspaper, the more suits. Metro New York claims its competitor, amNew York, isn't paying the minimum wage. At least not to distributors who are slow. Plaintiff James Allen, 52, of Brooklyn, claims he wasn't able to pass out his stack of amNewYorks in the time for which he was paid, and feels a class action lawsuit is warranted. Surprisingly (cough, cough), plaintiff Allen is going to work for Metro New York. Wonder how much Metro is paying Allen? Wonder if Metro reporter Amy Zimmer understands that a lawsuit doesn't become a "class action" until it is certified as such by a court? At this point, it's just one disgruntled guy suing his former employer. But, hey, it's a headline that demonizes a competitor! In a perfect world, newspapers wouldn't pull stunts like this on each other.