Making print media more affordable: Are low-priced newspapers the key to success in Mexico and the US?
“El Gráfico!” “Metro Reforma!!” “Milenio Diario!!” On subway cars and busses in Mexico City newspaper salespeople call out the names of low-priced dailies in the hopes of enticing commuters. Four million of Mexico City's 20 million residents use public transportation, and newspaper publishers are beginning to tap this under-targeted market whose youth and expected increase in purchasing power make them very desirable to advertisers.
Through distribution on public transportation, El Universal Compañía Periodística Nacional, the publisher of El Universal, increased the circulation of El Gráfico from 100,000 to 150,000 in less than a year. For 81 years, El Gráfico was published as a national morning daily. In early 2003, it became an afternoon paper, maintaining its tabloid format, and made the Sistema de Transporte Público (subways and buses) its main means of distribution. El Grafico sells for 2 Mexican pesos (US $0.2), compared to the 7 pesos per issue (US $0.7) charged by most Mexico City dailies. Through the use of an aggressive sales force, El Gráfico has achieved substantial success, positioning itself as one of the most popular papers among Mexico City commuters. In addition,
El Gráfico charges one of the lowest advertising rates. A full page in color costs 13,500 pesos (US $1,350, CPMs of approximately US $10).
Grupo Reforma has also jumped on the public transit bandwagon. Metro Reforma has a daily circulation of 45,000 copies and a retail price of 3 Mexican pesos (US $0.3). For the most part, it does not include news articles from its sister publication Reforma (circulation – 126,000 copies). Metro Reforma's main editorial emphasis is on entertainment, sex, sports and local city news. The editors of Metro Reforma deem these issues most interesting to the daily commuter. A full page advertisement costs 26,000 pesos (CPM US $58).
The relatively unsuccessful performance of newspaper Milenio Diario shows that price and an editorial focus are crucial to success with Mexico City commuters. Milenio Diario charges a price of 7 Mexican pesos (US $0.70), the same as the large Mexico City dailies (Reforma, El Universal, Excelsior, Unomásuno, etc.). Unlike Reforma with its commuter edition Metro Reforma, Milenio>Diario does not publish a differentiated edition for commuters. Milenio Diario has a circulation of 42,000 and charges 60,000 Mexican pesos for a full page advertisement (CPM US $142.80). El Gráfico, Metro Reforma and Milenio Diario can also be purchased at restaurants, newsstands and large retailers. A fourth daily, El Metro, is also aimed at Mexico City's commuters. It is distributed for free.
Mexico City's blossoming low cost/free daily market is indicative of the large potential this distribution form has in the Latin American and US-Hispanic markets. The biggest chunk of single copy buyers are young people. Even in the US, young adults are more likely to be single copy buyers than adults in older age groups. According to a study of media usage conducted by the Newspaper Association of America in 2000, 40% of adult single copy buyers are between the ages of 18 and 34.
In an article published by the Newspaper Association of America, Ed Baron, a newspaper and advertising consultant notes that the “popular” format of newspapers has emerged in recent years, especially in Latin America. “They are sold, but usually carry cover prices around half that of major papers. These tabloids have limited page counts, heavy color and graphics,” said Baron. Other newspapers in South America reflect this trend. For instance, Bogotá's El Tiempo focuses on good news, while Lima's Ojo has headlines that connect with the reader by using language that is more akin to talking or thinking.
Free pubs for Hispanics
In the US, free weeklies have been popular among Hispanic readers for a long time. In 1996, The San Jose Mercury News (Knight Ridder) launched the Spanish language weekly Nuevo Mundo, to serve San Francisco's Bay area – the country's fourth largest Hispanic market. Nuevo Mundo has a circulation of 60,000, of which only 6,000 are home delivered. The other 54,000 have single copy distribution via 1,200 high traffic distribution points, including newsstands, racks and convenience stores. Immediately after Nuevo Mundo was launched, along with a Vietnamese free weekly, The San Jose Mercury News gained five percentage points in readership and market share. The free, twice weekly paper La Estrella – a spin-off of The Dallas-Fort Worth Star-Telegram (Knight Ridder) – is another example of a profitable free publication in the US Hispanic market.
In Boston and Philadelphia free daily newspapers target a more general audience. Jim McDonald, publisher of Metro Philadelphia, owned by Swedish company Metro International, tells Portadatm that approximately 5% of Metro Philadelphia's readers are Hispanic. “In general, the ethnic make-up of our readers mirrors the overall makeup of Philadelphia,” he notes. Regarding the purchasing power of Metro-Philadelphia's readers, McDonald says that it is very diverse – 40% of the paper's circulation of 336,000 is distributed through the public transit system, the other 60% is distributed in office-buildings, hospitals and colleges.
Sergio Rego Monteiro, president of the International Newspaper Marketing Association (INMA), stated in a memo to INMA's 2003 annual Congress in Vancouver that in Latin America, a one-month subscription to a daily newspaper consumes 10 percent of the monthly minimum wage. “In developed countries, this ratio is a lot lower, but it still does not work as leverage for increasing the circulation of dailies,” said Monteiro.
Partly because of the relatively high cost of newspapers, most Latin Americans are single copy newspaper buyers as opposed to subscription buyers. According to the World Association of Newspapers, only 19.1% of the newspapers sold daily in the US are single copy sales. In the Americas, this figure shoots up to 37.7% due to the high proportion of single copy sales in countries such as Costa Rica (75%) or Argentina (40%). Spain also has a high percentage of single copy sales – 92%.
“This picture makes me think that the free newspaper model still has a long way to go in terms of growth,” comments Sergio Rego Monteiro, adding that “newspapers –and here I mention free newspapers again– will have a huge responsibility in the southern hemisphere.”
Swedes publishing Latin American newspapers
Are any of the international free daily chains preparing to enter the Latin American market? Two Scandinavian companies publish free dailies on a multinational scale. They are Sweden's Metro International and Norway's Schibsted. Schibsted publishes its version of the free daily 20 Minutes in Switzerland (Bern, Basle, Zurich), Spain (Madrid, Barcelona) and, until recently, in Germany (Cologne). Mathew Hooper, Metro International's director of investor relations, tells Portadatm that, for the time being, Metro has “no plans to launch new editions.” Metro expanded rapidly into 25 editions – all free dailies – in 16 different countries. Its main focus now is to bring existing operations into profit and reduce its level of net debt.
Swedish newspaper group Metro International launched a free daily in Buenos Aires at the end of 2000, but had to stop publishing at the beginning of 2002 due to the worsening economic situation. In November 2001, the Buenos Aires daily had a circulation of 180,000 and a readership of 680,000 (Gallup audited). Metro's track record in Latin America is by no means bad. Its Santiago de Chile newspaper, launched in January 2000 (circulation 110,000, readership 454,000), has reached annual profitability well before its three year target. This, even after the Supreme Court of Chile banned newspaper distribution on subways, forcing Metro to cancel a distribution contract with the public transportation company. Metro is still distributed exclusively by-hand outside of subway and other local transportation stations, and in high-traffic commuter zones.
Metro International also publishes free dailies in the Spanish cities of Madrid and Barcelona, which, according to sources at Metro, have moved to monthly profitability.
Publishing free dailies in a number of the world's biggest cities means that publishers can offer global buys to advertisers (see Portadatm No. 2, March/April 2003, page 11 “The challenge of selling Latin American ad-space in Spain”). If Metro's European editions are taken together, Metro is Europe's most read international newspaper, with three million copies distributed each day to readers on commuter transport routes, in offices, cafes and other key locations in 11 European cities.. If one company were to publish free dailies in a number of large Latin American cities, it could offer advertisers a similar reach.
Levi Strauss recently struck a US $1.5 million dollar deal with Metro for the launch of its latest clothing line in Europe. Full back page advertisements are currently being run in 11 of Metro's European editions. Ads for the new Dockers® line of liquid repellent pants will run through April, and have visibility in major cities in France, Italy, the Netherlands and Sweden.
Between 2001 and 2002, Metro International doubled the number of companies who advertise in two or more of its publications. Currently, Metro has 150 different clients who buy advertising in at least two of its publications.
Media buyers are often interested in reaching the young, up-and-coming demographic that free dailies target. However, despite their wide reach, free or low priced dailies do have a disadvantage for advertisers. The paying subscriber or newsstand buyer of a more expensive publication is worth more than the buyer of a free or low priced publication. This is reflected in the lower CPMs charged by these publications.