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This is a story about a daily newspaper that dared to challenge the veteran and established national newspapers by introducing itself to readers free-of-pay. Furthermore, the newcomer broke the line from the incumbents in its way of reporting and commentating on current political issues and events. Taking the two developments together, it seems to have driven the greatly upset publishers out of their minds.

It is a conflict complicated by entangling business with politics: rather than having a discussion on pricing and distribution as factors of competition, one is drawn into argument about political differences. Any debate on the quality of news information has become subject to differences in political position. Thus, the competitive struggle is too often diverted from business considerations to political concerns. Consequently, the news-media industry has become ever more politicized and tensions between the competitors reach new heights.

The free newspaper “Israel HaYom” (“Israel Today”) was founded by the American-Jewish billionaire Sheldon Adelson in mid-2007. From its inception, the newsmedia, mostly leaning from centre to the left, attacked the newspaper for its backing of then opposition leader Benjamin Netanyahu head of the Likud party, giving him a stage to voice his opinions and creating good publicity for him in the run-up to the next election (February 2009). Israel HaYom as well as advocates for Netanyahu denied that Adelson was acting on behalf of the Likud’s leader, yet they claimed that a different approach was needed to counter the unfair treatment and continuous bashing of Netanyahu in news reports. But beyond that, Israel HaYom pertains to provide news readers a different perspective on current affairs in Israel and worldwide, and “to be fair and balanced” as proclaimed in one of their five guiding principles.

Following the 2009 election Netanyahu became Prime Minister (PM), and yet the free newspaper of Israel HaYom continued to be published and even thrive — during 2009 and 2010 reader exposure to the newspaper nearly doubled (from a little above 20% to almost 40% on weekdays [*]). It became so popular that in the end of 2009 it also started to publish a weekend issue. The fact that Israel HaYom maintained its course after the election weakened somewhat the arguments of its opponents and gave rise to other explanations, mainly that Adelson aims to establish a different kind of newspaper in the country and thereof change the nature of competition in the newsmedia market. There could be genuine marketing reasons to justify the introduction of a free newspaper at that time: (a) eliminating the monetary cost of the newspaper to consumers was essential to invade the solid national market as quickly as possible while grabbing a notable penetration share of readers to set-in its roots , and (b) when news are abundant free of charge on the Web readers have much less motivation to give a chance to another paid newspaper. Especially to win the younger readers it was necessary to take the Internet playground into consideration. Israel HaYom’s income model relies on advertising, but as this source is suspected not to be sufficient, it also needs funding from the owner. Hereby, the newspaper has an essential resource, particularly for late entrants into a market: the financial backing of Adelson.

  • About 45% of the area in a weekday issue of Israel Hayom is occupied by commercial ads + 10%  dedicated to public announcements and classified ads.

Needless to say that the prevalence of Israel HaYom was much to the dismay of the veteran newspapers that intensified their fight. Generally, they have tried to raise as many doubts as possible about the motives of Adelson and Israel HaYom so as to delegitimize the newspaper:  it serves as a newspaper of the government and of the PM in particular which manipulates news stories; it cannot survive as a serious newspaper only on advertising; and funding a losing newspaper by Adelson proves that he has political rather than business objectives. They claimed as well as that its business practices are unfair. On the opposite side, Israel HaYom can make the valid argument that its competitors are raising political claims because their actions in the marketplace are failing to defeat it, that they need to conceal their lack of a competitive edge. The free newspaper also has a true case that publishers of at least two of its adversaries, Yediot Aharonot and HaAretz, have strong connections and influence in business and political circles alike and are using their media vehicles to advance their interests.

  • The main confrontation is with centre-left leaning Yediot Aharonot (YA) whose position as the leading (most ubiquitous) newspaper for three decades is being threatened by Israel HaYom — according to TGI surveys of media exposure Israel HaYom surpassed YA on weekdays two years ago and in the second half of 2012 was leading by a small margin: 39.9% versus 37.3%, respectively (on weekends YA [41.7%] still has a clear lead over Israel HaYom [32.8%]). YA is the most vigorous opponent of the free newspaper and champion of the campaign against it, particularly the political-oriented one.
  • The newspaper that had most to lose, however, was Ma’ariv because the free newspaper was aiming at its position in the centre-right. Nevertheless, Ma’ariv has had troubles long time before Israel HaYom arrived, and although it tried to put much of the blame for its fall on the newcomer, the latter’s arrival just accelerated the decline of an already weak newspaper. Ma’ariv, at a level of 10% exposure and after a repeated turbulence, is now under new ownership and leaning more to the right.
  • HaAretz is a clear left-wing newspaper, associated with the New-York Times and the Guardian (UK). It is a high-profile newspaper even though its exposure rate is just about 6-7%. HaAretz has been relatively less vocal, supposedly because it provides printing services to Israel HaYom.

But now comes a time to re-assess the efficacy of the free-of-pay model for Israel HaYom. After the recent election in January the newspaper is way past its challenge to gain the acceptance and approval of large stakes of the public — it has already proven that it has a place in the Israel newsmedia arena. It will be more difficult now to defend itself from suspicions and doubts about its income model and funding from Adelson, which may be legal but not reasonable in the public eye for the longer term. Furthermore, the newspaper has to consider the negative effect that an absence of price may have on its  brand image.

Israel HaYom has characteristics that are not typical of free newspapers. While most of the free newspapers worldwide are local-urban, this one is national. Israel HaYom gives extensive coverage of political events and current issues (e.g., security, economics and business, social affairs, crime) as well as international affairs, topics that free newspapers regularly report only briefly. It includes news items, commentaries, and opinion columns from prominent journalists as well as guest experts and ex-politicians. If fact, the newspaper recruited from the veteran newspapers some of their leading senior journalists. This profile makes it resemble more a traditional paid newspaper rather than a free newspaper. Furthermore, free newspapers are normally intended for light and brief reading that can be completed while commuting on public transport within 15-20 minutes —  a description that does not agree well with Israel HaYom.

On the one hand, consumers who are pleased with the approach and style of Israel HaYom will find it hard to refuse a free offer. On the other hand, questions are bound to pop-up in consumers’ minds over time, namely: How is it possible to produce a newspaper like Israel HaYom without revenue from consumers? How is it actually financed (advertising, Adelson)? And how long this operation can go on like that? What consumers would be specifically concerned about is whether they should trust the reliability and accuracy of news stories it reports.

Israel HaYom should be able to answer two questions:

  • First, do news consumers prefer reading Israel HaYom because they approve and like what the newspaper essentially provides — the way it reports news, its analyses, format and style — or is it only because they don’t have to pay for it (i.e., the formal budget constraint is waived)? If it is found that consumers do not have substantial preference for the newspaper, then the publisher better continue the free model, but it will probably not enjoy a long future. If however the preference for the newspaper is real and well-founded, then the free model should be re-considered because it is not appropriate for supporting and establishing its stature in the long run.
  • The second question is henceforth, what price should Israel HaYom charge from consumers? The price should be low enough to keep the offering appealing against the competition but not too low for consumers might dismiss it as of dubious quality (in that sense, no charge is qualitatively better than a too low price). It should be a price that positions the newspaper as popular yet valuable. If consumers are asked directly about their lowest price limit, they would probably set it at zero because they have been taught that lots of news can be accessed free online. But consumers may have a misconception that the cost of a newspaper is mainly the paper and print and ignore the cost of creating the news stories and articles — this issue is already debated in the last two years regarding the Internet.

The free model also has distribution implications. Israel HaYom is handed-0ut in many public places like train and central bus stations, large institutes like hospitals, shopping centres and on main street; it is also available in coffee shops. There is also a limited service of delivery at home at minimum charge. However, as the newspaper becomes more accepted and desirable, especially the weekend edition on Friday mornings, the inability to obtain it even at a price in points-of-sale can be annoying to consumers. A strong popular brand requires as wide availability as possible, not exclusivity or hard-to-reach stance. The distribution method of the free newspaper, particularly on weekends, may curtail its potential of reader exposure (e.g., versus Yediot Aharonot). But a lower performance on weekends may also occur because Israelis expect more in reliability and depth from their weekend newspaper and a free newspaper seems less adequate to that end.

  • Israel HaYom distributes 275,000 copies on weekdays and 325,000-375,000 copies on weekends that have to serve readers at public venues or for taking away.

Israel HaYom may start addressing the future of their model of free newspaper by distinguishing weekends from weekdays. On weekdays it may indeed not justify confronting the price question because the range for manoeuvering is relatively narrow (i.e., zero to 5 shekels = 1 euro) and the current income model may suffice. Discriminating price points in the range is likely to remain ambiguous (e.g., YA distributes promotional weekday issues for 2 shekels on the street). The weekend edition is another matter because it is perceived as a different product, a more comprehensive source of news information to summarise and digest the week’s events, and paid newspapers charge more than twice the weekday price. Moreover, Israel HaYom provides two supplements on the weekend. A price assigns an overt value to the newspaper and endows it with greater legitimacy as an economic product, especially when it relates to information. A price on weekends can also reflect positively on the newspaper’s image on weekdays.

News organizations are re-considering their policy of publishing news free of charge on the Internet. Income from online advertising is declining and print advertising remains after all more lucrative. Consequently, publishing free news online is getting less economic while continuing to diminish the perceived value of news information they provide on the Internet. Leading news publishers like Financial Times, The Times of London, Wall Street Journal and New-York Times have launched in recent months a model of paywall — view a number of articles free (e.g., 5 to 15 a month) but beyond that one has to make a paid subscription to read more content. It is going to be a long process of change but is important to follow: it may increase the attractiveness of the free Israel HaYom but it may also further hurt its credence as a source of news information. Nevertheless, a website with a paywall may serve Israel HaYom well as a future source of income and to establish itself as an invested and sound news source.

Ron Ventura, Ph.D. (Marketing)

(*) Statistics on reader exposure to media are based on Target Group Index (TGI) semiannual surveys.

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