Here’s Another New Newspaper Business Model: Close The Daily Tabloid On Monday With No Warning, Fire The 90 Staff, And On Thursday Start Publishing a Free Metro With Most Of Editorial Based Outside Your City

Philip M. Stone February 13, 2008

Here’s how they closed the Halifax Daily News: “I have worked for this paper for 18 years through various owners, and you don’t expect when you are coming in on a Monday morning that there will be strange guys you haven’t seen before with their hands folded and looking very stern and telling you to go into the executive boardroom. Then you know it’s done.”

“It” in columnist  David Rodenhiser’s case meant the closing of the 20,000 circulation Halifax Daily News tabloid, the firing of all staff – about 92 people – and the announcement that starting on Thursday the paid-for newspaper will be replaced by a free Metro in a joint publishing agreement between the owners of the Halifax Daily News, Metro and Torstar Corp.

And already the Daily News’ web site has been rebranded to Metro Halifax.

The Daily News is owned by Transcontinental Media, Canada’s fourth largest print media group, and is a subsidiary of Transcontinental Inc., Canada’s largest printer. It is the majority shareholder in Metro Montreal while Torstar is an equal partner with Metro in Toronto, Edmonton, Calgary, Vancouver and Ottawa.

One person who won’t have to worry about finding a new job is Daily News publisher Greg Lutes who joined the newspaper January 22. He now joins Metro English Canada as publisher of Metro Halifax. Smart staffers in Halifax might have figured there was something amiss when Lutes came on board – after all he launched Metro Toronto.

But it’s basically yet another case of a newspaper not being able to survive in a newspaper world where another newspaper dominates, in this case the family-owned Chronicle-Herald with some 114,000 circulation.

In its coverage of the Daily News closure the Chronicle-Herald interviewed at length Marc-Noel Ouellette, senior vice-president of Transcontinental Media. “It was costing a fortune. I won’t put a figure, but I’ll tell you it’s in the millions,” he said.

And so his description of why a new business model was necessary: “We’re all fighting for the same advertising dollars; we’re all fighting for the same eyeballs. It’s a tough game out there and we’ve decided we’ve had enough of losing the amounts we were losing and decided to put our eggs in what we think is a very, very interesting venture.”

That’s all sweet music to the Chronicle-Herald. “We’re always open for business and would love to have more advertisers and more subscribers, so, we’ll gladly take them (subscribers and advertisers from the Daily News) on board,” said Vice President Sarah Dennis.

David Gollob of the Canadian Newspaper Association neatly summed up what was going on. “Publishers are looking at different business models. Transcontinental publishes free, weekly and dailies. Each has to establish and keep its readership.”

The Canadian Association of Journalists sees it a bit differently. “This is part of a dangerous trend,” said President Mary Agnes Welch. “Halifax is left with an empty shell – a victim of publishers’ current penchant for stripping news outlets of their content and delivering ‘News Lite’”.

What she means by that is that the new Halifax Metro will have its main editorial operations in Toronto, about 787 miles (1,267 kms) away. The Halifax Metro is expected to contain just one or two pages of local news produced by six local reporters. It will be printed locally.

The problem for the Daily News, according to Ouellette, “was that it was built on a traditional newspaper model, with some 100 employees publishing seven days a week. Our efforts within the traditional media model of newspapers, which is to invest in the newsroom, cut costs and so on, were not enough to offset the losses.”

He predicted Metro Halifax, produced by a staff of about 20, will be profitable. It will publish just five days a week and will start with 20 – 24 pages daily instead of the 56 – 60 pages in The Daily News. It will begin with about a 20,000 daily circulation but hopes to boost that up quickly to around 25,000.

Also looking favorably at this new business model must be Metro International. It seems to have a thriving business already in six Canadian cities in ventures with strong partners that give it a daily circulation of some 825,000, and by adding Halifax the paper is available in cities representing nearly half of Canada’s population. That appeals to national advertisers who can make one buy for a national audience.

But south of the border in the US, Metro’s three newspapers – New York, Philadelphia and Boston -- are hemorrhaging money and the company instituted serious cutbacks in January. Only the Boston newspaper has a partner, the New York Times Company with a 49% minority share as it tries a convergence strategy with its Boston Globe.

Overall, Metro, publishing  in more than 100 cities in 21 countries,  just last week posted a 61% fall in Q4 operating profits, putting much of the blame on the US operations. It has already laid-off 27 people in the US and warned, “Further actions to improve the business in the US may be taken.”

Metro Chief Executive Per Jensen explained it’s not just the paid-for newspapers around the world feeling the pinch, there are difficulties for free newspapers, too “Metro International has not been immune from the volatility affecting the global newspaper industry,” he explained for the poor financial results.

Back to Halifax, it will turn out to be a great test market for this new business model – kill the paid-for newspaper with more staff and more pages that published every day of the week, and replace it with a free newspaper with about the same circulation, produced by far less staff with a lesser journalistic product and publishing just five days a week, and see if the freebie can make a profit where the paid-for could not.