City AM Approaches Giving Away More Copies Daily Than the Financial Times Sells In The UK, Proving A Free Tabloid Financial Newspaper Can Attract Readers After They’ve Taken Public Transport

Philip M. Stone July 6, 2006

When City AM launched last September it had a number of things going against it, not the least being it was going to be distributed at public transport locations at financial centers after workers had ridden in to work. Would they read the newspaper sometime during the day or just toss it away?

The answer appears to be that the paper has a shelf life that does last the day – whether it be read at coffee breaks, lunch, or at one’s desk. Its first audit figure showed a circulation of 69,035 and now the newest figure, for May, shows an increase to 82,459. Management says they are convinced that by the end of the year they will reach a six-figure circulation.

The Financial Times, according to June figures, sold 92,599 full-rate copies in the UK and Ireland, a number that keeps decreasing although its worldwide circulation shows a slight lift. It has an additional 35,000 UK bulk sales.

Both newspapers have different audiences with the FT aimed more at the boardroom while City AM seems more directed at the backroom, but according to City AM’s own research its average reader is 36 and earns around £77,000 which is pretty much whom advertisers want to target.

What has helped circulation enormously is that the company has been able to do deals with such brands as Merrill Lynch to distribute the newspaper directly to staff at their offices.

And while the newspaper hopes to break even within its second year there are still possible pitfalls ahead, not the least being there are plans for perhaps two free PM tabloids to hit London in the coming months. Everyone will be hunting the same advertising money and rates could drop.

Meanwhile at the FT, management is still trying to figure out how to get the UK circulation up. Figuring that too many people were reading the FT via aggregators such as Factiva the FT is instituting, effective September 1, a 24-hour delay on copy filed to such aggregators unless the reader has a digital license from the FT that lets them see the material immediately.

And while new editor Lionel Barber has put his name on just about every brick in the FT editorial offices, announcing major editorial changes on almost a weekly basis, the UK numbers stay stubbornly without increase.

The FT’s position within its parent Pearson is still somewhat tenuous. Financial analysts and some of its institutional shareholders are increasingly pressuring Pearson to sell the FT – it is said to be worth around £600 million -- and get on with its main business as the world’s largest educational publisher. Three weeks ago Deutsche Bank lowered its price target for Pearson and again encouraged management to dump the FT, which the bank believes could be sold at a large premium, especially now that it has started to turn a profit again.

The newspaper is aiming this year for a 15% margin, low by most industry standards, but last year it barely squeaked out a £2 million profit – about a 1% margin. Mind you, that’s better than the two years before when the newspaper lost a combined  £41 million.

Management has long said it doesn’t not consider City AM competition because each newspaper attracts a different level of reader. But where it is having trouble is that general newspapers like the Daily Telegraph, The Times and the Guardian have all greatly improved their own financial print pages, plus their digital offerings, and an FT reader must now ask whether the newspaper really provides financial information that is not available elsewhere.

Its web site grew subscriptions by only 8% last year to 84,000, most of them in the UK, but it has been profitable since 2002.

John Ridding, the new chief executive, said he understood that the media in general was undergoing upheaval and there was increasing competition, not just in print but digital, too. “We must make sure that the FT brand retains the respect it has earned as we extend into new channels and new markets,” he extolled staff.

He said, “There is too much gloom and doom about the prospects for established media companies in this new environment. I don’t buy it. We have plenty of cards to play – demand for quality business news and analysis continues to grow, and we have the best journalists, editors, and commentators to meet that demand.”

But just three weeks after saying all that, there are reports that in order to increase its margin the FT is considering job cuts, perhaps as much as 8% of its editorial staff (40 positions). What could be even more worrying are that analysts and shareholders are taking a look at what Tribune has done in the US – go heavily into debt to buy back its own shares and to pay for that added debt via revenue flow, additional cost savings and asset sales – and they seem to think that could be a good move for Pearson, too.

In such a case the newspaper could then easily go on the block, but if not at the very least it would be expected to come up with even more cost savings to pay off the added debt.

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