World War Free
The global newspaper warthe biggest conflagration you never heard of has finally reached New York city. You can blame the Swedes for it.
Typical of its inability to solve a decades-long circulation slide, the New York Daily News tried to throw the first punch by announcing late last month that it would launch a free afternoon version on September 12. Rupert Murdoch immediately threw a counter-punch: a 50 percent slash in the price of his New York Post in Manhattan before rival Mort Zuckerman's Daily News Express even began.
As News honcho Les Goodstein hinted to the Voice last week and confirmed in an interview in Monday's New York Times, the handout of 75,000 Daily News Express copies five days a week was itself a preemptive strike to try to keep Swedish media mogul Jan Stenbeck from launching a New York City version of his worldwide Metro freebie.
Only a global golem like Murdoch is assured of surviving a New York City newspaper war. Stenbeck, however, has already been dubbed "the Swedish Rupert Murdoch," and for good reason: He forced commercial television into Scandinavia and now has a worldwide empire of satellite and cable systems. And he lives in New York.
It's not just the Swedes' presence that makes this war global, however. And the war is not just about newspapers.
Murdoch owns some of the most well-known entertainment commodities on the planetlike The Simpsonsand his vision is starting to resemble that of his cartoon character C. Montgomery Burns, the evil mogul who tries to stretch his tentacles into every aspect of the lives of Homer Simpsons everywhere.
"Our reach is unmatched around the world," Murdoch crowed in his Chief Executive's Review in the News Corporation's 1999 Annual Report.
"We're reaching people from the moment they wake up until they fall asleep," he wrote. "We give them their morning weather and traffic reports through our television outlets around the world. We enlighten and entertain them with such newspapers as the New York Post and The Times [of London] as they have breakfast, or take the train to work.
"We update their stock prices and give them the world's biggest news stories every day through such news channels as FOX or Sky News. When they shop for groceries after work, they use our SmartSource coupons to cut their family's food bill.
"And when they get home in the evening, we're there to entertain them with compelling first-run entertainment on FOX. . . . Before going to bed, we give them the latest news, and then they can crawl into bed with one of our best-selling novels from HarperCollins."
This real-life Mr. Burns went on to tell his shareholders and investors that "achieving more meaningful relationships with our customers is so important to the company" that News Corp. has created "a new structure called E-Direct."
And this is the scary future, at least for people concerned about privacy in the newly interconnected world. E-Direct, he wrote, "is responsible for developing one of the most sophisticated databases of customer information ever assembled by a corporation, telling us not only who our customers are, but what they buy, what they watch, what they read and what they want. The e-commerce opportunities in book, video and merchandise sales already flowing from this knowledge are just a trickle of what they will be a year or two from now. Such is the potential from fully activating our media and leveraging our potent brands in the new media world."
All of that makes Zuckerman's real estate empire seem like just a fiefdom. On a recent list of zillionaires, Murdoch ranked 36th and Zuckerman ranked 456th. So how can Zuckerman survive a battle with the likes of Murdoch and Stenbeck?
Don't feel sorry for Zuckerman. Even if you don't read the Daily News, you may be helping to prop up his money-losing paper. Only four months ago, State Comptroller H. Carl McCall agreed to pour $270 million of public employees' pension funds into Zuckerman's real estate investment trust, Boston Properties Inc. The first phase of the deal called for Boston Properties, the moneymaking center of Zuckerman's life, to receive $47 million in cash and for the New York State Common Retirement Fund, of which McCall is the sole trustee, to assume $126 million of debt. If you're one of the 880,000 state and local public employees with money tied up in the $127 billion pension fund, you now are invested in Zuckerman's development plans. Good thing the real estate market is booming.
Zuckerman has personally spent millions on the Daily News to keep it afloat. But even with the help of millions of dollars from Joe and Jane Average's pension funds, he doesn't have Rupert Murdoch's money.
Did the News think Murdoch would do nothing when it announced the afternoon freebie?
"We knew there would be some reaction from that camp," Goodstein, the Daily News president and chief operating officer, told the Voice last week. "We didn't know what it would be. What it was surprised us somewhat."
Looks like some News executives haven't been keeping up on their reading. In 1993, Murdoch started a price war in England, slashing prices on his London papers and pounding the opposition into submission. All observers say that Murdoch will spend as much money to keep the Post going as he needs to.
"It's ego over purse," says one person who rubs elbows with the likes of Murdoch and Zuckerman. And that thrill of owning a New York City newspaper goes for both of them, the observer says.
If anyone has to blink, however, it would be Zuckerman. If Mort were to try another move, like a renewed search for new readers in Queens and Brooklyn, the high-level observer says, Murdoch could always slash the price of the Post in those boroughs as well. Another onlooker, a former Manhattan newspaper executive who wants to see the Daily News Express succeed, has a concise prediction: "It's doomed."
That exec recalled the last time the News tried to enter the afternoon market. It was during the 1980s, when the paper launched Daily News Tonight. "It cost $20 million and lasted 12 months," the exec said, giving a rough tally of the damage. "And afterward, the Daily News lost 250,000 in circulation."
Goodstein said there's little comparison between that ill-fated venturewhich occurred in the days when no daily newspaper publisher would have dared issue a free paperand this one.
"The problem then was selling enough papers," he said. Not a problem if you're giving them away. "It's a different business today," he added. "We've done the numbers."
Asked whether the News' announcement simply woke the sleeping giant Murdoch, Goodstein insisted, "It wasn't a case of waking a sleeping giant. We didn't do it to go after the Post. We did it to fill what was a desperate void in the afternoon."
But who's being desperate here? Veteran industry analyst John Morton said of the Daily News Express, "I'm not terribly optimistic. The potential gains are not very big. They tried it in the '80s and it was a calamity. If Murdoch's strategy [of slashing the price] is as successful in New York as it was in London, it could be a big problem for the Daily News."
No, said Goodstein, "the analysts don't understand. Tonight was the same paper as the Daily News, only with a different front page [and] a different wrapper around it." The Express, he said, will be 40 to 48 pages, aimed specifically at the Internet generation, with 3000 to 4000 words per story, "more like USA Today."
And an awful lot like what people can get online. Goodstein said CBS MarketWatch would provide 90 percent of the content of the Express's business coverage.
The aim, he said, is to reach new readers, people who don't now rely on newspapers. "The Daily News is the main product," he said. "It's like the Daily News in the morning is the novel, and the Daily News Express is the short story. It's for the younger readerit's more like a Web site viewer, with short bites. Yes, we want to lure people to the Daily News."
Sounding like a typical Internet corporate dweeb, Goodstein said, "What we feel is that all of this helps promote our brand."
But analysts like Morton know the paper's history of losing circulation.
"The Daily News' lifeblood was the five boroughs," he said. "But the middle class started fleeing to the suburbs."
Going to the suburbs to recapture them is out of the question. To the east is Newsday, a profitable paper just swallowed up by the Tribune Co. multimedia conglomerate. To the north is Gannett, the nation's McPaper chain. To the west are scads of Jersey papers.
And on the far western horizon, almost as scary as Murdoch, are the Vikings.
Rupert Murdoch has his trusted lieutenant, Peter Chernin. And Jan Stenbeck has his: a fellow named Pelle Tornberg. The Swedes have already landed in Philadelphia with a free newspaper called Metro, distributed in Philly's subways. They're doing the same thing in Toronto. The cookie-cutter Metro freebie is spreading around the world. What kind of paper is it? For depth, Metro makes USA Today seem like The Wall Street Journal. And the head of the Swedes' newspaper operations in North America is Jan Sjowall, who was once the king of infomercial production in Europe.
Groan, but don't laugh. Stenbeck, educated at Harvard and at Morgan Stanley, has already conquered Stockholm, Budapest, and Amsterdam, forever shaking up the newspaper markets in those cities. His Modern Times Group, which, in just the past year, also has moved into Rome and Santiago, Chile, has targeted 60 other cities around the globe.
And these Swedes can be just as pushy as anyone else. The Swedish press claims that one of their countrymen invented New York's skyscraper elevators, another one had the Bronx named after him (that "fact" is in dispute), and yet another Swedish immigrant turned out to be Donald Trump's grandfather.
Stenbeck himself, now 57, is not just off the boat. He lives on Sutton Place and on a farm in Locust Valley, Long Island.
He's enough of a New Yorker that the Swedish press calls him an expatriate. And he's enough of a rich New Yorker that the housekeeper who answered his phone on Long Island last week said he was unavailable because he was in either Sweden or Luxembourg, where he owns a castle.
Les Goodstein knows who these freebie-newspaper Swedes are. So do the other biggies. The New York Times and Gannett both went to court in Philly to fight the distribution of Metro by that city's transit authority. The Americans lost.
In London, publishers tried a preemptive strike against Metro by launching their own freebies and price cuts. Asked if the Daily News Express was a similar move, Goodstein somewhat confirmed it, saying, "Whatever new endeavor you do, you want to be first." In a September 11 New York Times story about the debut of the Daily News Express, Goodstein acknowledged that the threat from the Swedes prompted his company to act. But the Times story neglected to point out its own company's attempt to keep the Swedes out of Philly's subways.
Papers in Toronto tried to preempt the Swedes earlier this year, and the newspaper war there is literally ablazeso many freebies are winding up in the Toronto subway tunnels that traffic-crippling fires have broken out.
It's no comfort to New York's other publishers that Metro's North American operations are headquartered in Manhattan. But the Swedes' point man, Floyd Weintraub, is playing it close to the vestwhile keeping an eye on the dustup between the News and Post.
"We're watching it," said Weintraub, Metro's North American vice president."We're sometimes amazed, but we're never surprised."
So when's the launch date for a New York City version of Metro? The Swedes have been known to blitz a city, without warning, with 200,000 copies of a new free paper. "We really don't want to speculate," said Weintraub. "There's no benefit to us to speculate."
For now, he noted, Metro has 6 million readers in 11 countries. What they get, he said, is a "very conservative" approach. "We're nonpartisan: We give a summary of the news," he added. "We're very conservative. Just the facts. Like the all-news radio stations."
The Swedes change the way newspapers are produced wherever they go. And they're going.
"We'll continue to expand," promised Weintraub. "But when we are ready to do it, we do it."
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