“When Will They Learn” – FTM in July Decrying the British Newspaper Marketing Practice of Giving Away DVDs. “ They’ve Got to Learn. That’s Got to Stop” – Rupert Murdoch, November, 2005

Philip M. Stone November 27, 2005

The very British newspaper marketing practice of giving away DVDs to boost circulation has now been damned by the publisher who probably is responsible for giving away more DVDs than any other. To Rupert Murdoch it just doesn’t make sense any more.
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Murdoch, in a wide-ranging interview with the British newspaper trade magazine Press Gazette had bitter words for the DVD craze, And he also spoke out that he thought the cover price of newspapers are too high but there will be no more UK price wars, that he doesn’t know of anyone aged less than 30 who had read a classified ad in a newspaper, and there can be no doubt the future is with the Internet, but newspapers will continue for some time to come.

He saved his most damning criticism for expensive DVD giveaways. “I personally hate this DVD craze. The fact is the sales go up for a day, and are right back to where they were the following day.The most recent example of that is The Sunday Telegraph when they tried to relaunch two weeks ago. And they had a great sale - up 190,000 or 200,000. And the following Sunday they were back exactly where they were two weeks before. People grab it, tear the DVD off and throw away the paper. They've got to learn. That's got to stop."

Regular readers to FTM have read similar thoughts in our stories about the CD/DVD giveaways that are so prominent in the UK, and we have urged the UK newspapers to follow the very successful trend in Europe where DVDs or encyclopedias and the like are sold at a low price with the newspaper. That type of marketing can now make up to 30% of a European newspaper’s revenue.

But to now have the publisher who probably gives away more DVDs in the UK than any other publisher damn the practice may be a signal things are going to change.

The problem is that for the day the DVD is given away, sales do shoot up even though, as Murdoch says, in many cases the paper is bought just for the DVD with the paper being immediately discarded. But for the ABCs the numbers are still recorded.

And he may well have a hard time convincing his own editors the practice should stop. At The Times, for instance, the October ABCs saw its circulation gain 7.16% year-on-year, mainly on the back of two DVD giveaways.

The Times recently gave away the 1972 Liza Minnelli movie classic Cabaret that can still be bought in UK DVD stores for around €20. So how can a newspaper afford to make such a giveaway?

Although you and I pay through the nose for individual DVDs, when a newspaper orders them in the hundreds of thousands the costs can drop to as low as 30 European centimes a copy, even less for the tabloids with circulations more than 1 million.  Still, at 30 centimes and with the Times circulation at 703,000 that’s a marketing investment of more than €200,000 plus all the television marketing that goes with the campaign.

Do that twice or three times a month and even to Rupert Murdoch that is more than petty cash.

Murdoch last April told an editors meeting in Washington that there could be no doubt the Internet was the future. He backed that up a couple of months later by budgeting some $2 billion to buy various Internet sites including the very popular MySpace and IGN Entertainment. That brought comments from the likes of Martin Sorrell, chief executive of WPP, that Murdoch was actually panicking with little reasoning to his purchases.

“There’s no panic, and there’s certainly no overpayment.” Murdoch said in the interview. “It was a very careful strategy to go for the two biggest community sites for people under 30. If you take the number of page views in the US, we are the third biggest presence already.” he said.“Now we're not the most profitable - we have a huge amount of work ahead of us to get that whole thing right. And we're working very, very hard to keep improving."

It was Murdoch 12 years ago who started a newspaper price war in the UK by dropping the price of the Times by 50%. Others followed and while the Times stabilized its dropping circulation and then started to increase readers, the overall effect was a financial bloodbath for UK national newspaper owners who matched the dropping cover price that still has repercussions to this day. It was only two months ago that The Times finally signaled an end to the price war by raising its price to 60 pence daily, matching its main quality competitors.

Murdoch still in his heart of hearts thinks the cover price of UK quality newspapers at around 60 pence daily is far too high, but he says his UK newspaper price war days are over.

What does worry Murdoch a lot is print’s loss of the under 30s. And from the man who once described newspapers classified revenues as “rivers of gold” he now admits, “I don’t know anybody under 30 who has ever looked at a classified advertisement in a newspaper. With broadband they do more and more transactions and job seeking online.”  Sometimes rivers do dry up!

And he blames much of the financial woes for US newspapers – the drop in circulation and the loss of young readers particularly in those cities where there is just one newspaper – to their poor editorial product. “Outside New York it is all monopoly newspapers. Some have good work in them, but it tends to be overwritten, boring and elitist, not a reflection of the general mood of the public.”

He was also very critical of Trinity Mirror, the UKs largest newspaper house which is trying to handle severe circulation declines from its national tabloids, for admitting they were” managing decline.” He believes that was “a terrible admission.”

Murdoch, chairman of News Corp., tends to tell it likes he sees it.  He told a shareholder’s meeting a couple of weeks ago he believed the company’s share price was “rotten.”

Murdoch transformed the UK media scene when he took on the unions some 20 years ago and he later established BSkyB. From humble beginnings in the US some 20 years ago as a publisher of tabloid newspapers, starting in San Antonio, Texas, that earned him no respect from the US newspaper industry, he has grown News Corp into the giant media conglomerate it is today. And at age 74, and with his new huge investments in US online sites, it doesn’t appear he is slowing down. Any!

To paraphrase a famous ad campaign for a Wall Street investment firm many years ago, “When Rupert Murdoch speaks about the media, people should listen!”

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Daily Mail Chief Now Also Says Giveaways Are “Madness” – December 5, 2005

No sooner does Rupert Murdoch say that the giving away of DVDs is too expensive and too ineffective and it has to stop, pointing the finger at the Daily Mail and The Mail on Sunday for starting it all in the first place, than the Daily Mail’s chief executive calls the use of DVD’s by the UK newspaper industry as “collective madness”.

The question that Charles Sinclair basically posed to financial analysts at a meeting last week when the Daily Mail and General Trust (DMGT) annual results were announced, was who is going to be brave enough to go first and stop the madness?

“These vast expenditures on CDs and DVDs, they’re like injections of yippee beans – circulation suddenly goes up only to leave you in a thoroughly depressed state if you can‘t produce as good a CD this week as you did last week,” he complained. “It’s not a very flattering picture of the way newspapers want to promote themselves,” he concluded.

One would think that now News International (NI), and the DMGT have publicly said they believe they are wasting their money on such campaigns, just how much life is left in such marketing?

But if they were to stop and, for instance, the Sunday Telegraph continued could NI and DMGT stomach that? Or would the Sunday Telegraph seize the opportunity to stop, too?

There’s one way to find out!