It's the 'News' vs. 'Post' again, but with 'new economy' twist

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If you listen between the lines of the New York Post these days, you may hear the sound of sweat dropping. The object of its fear is its West Side rival, the Daily News, which has launched a new rocket into the New York newspaper wars: a free afternoon rag.

"Free! Oh, what a word!" as Stephen Sondheim once wrote. "Free" was the plot device that set off the antics in his Broadway musical "A Funny Thing Happened on the Way to the Forum." It's doing the same thing now, live and in newsprint, off Broadway, where the Daily News Express, a 32 to 44-page evening tab, is landing in the hands of some 90,000 commuters on their way home from work. The Express may be the ticket to revive the News brand. Best of all, the Express has put the master of price warfare, Rupert Murdoch, on the defensive.

Mr. Murdoch honed the skill of pricing pugilistics in the U.K. before using it stateside. Willingly risking short-term losses, he deployed price reductions at The Sun, his racy tabloid, and at his broadsheet, The Times of London, to harm foes, build share and augment his political influence. With the New York Post, he's used the same tactic to inflict damage on the News and, when it was around, the tabloid-that-couldn't, New York Newsday. Although Mr. Murdoch has foregone hope of a profit here, the Post continues to give him sway in politics and in the city's dominant media culture.

For him to fall prey to a price campaign is tasty enough. For it to have been initiated by Mortimer Zuckerman is delicious. Mr. Zuckerman, the News' latest proprietor, is everything Mr. Murdoch isn't. Neurotically attached to Hamptons high life, the builder of a media "empire" that's less Hapsburg than Freedonia, Mr. Zuckerman is a man whose real estate skills haven't heretofore translated into the media business.

At the News, for every smart move--naming Ed Kosner editor in chief, e.g.--he's managed a howler, such as building color plants far enough out in New Jersey that he couldn't get papers into the city on time.

But Mr. Zuckerman recognized a core tenet of the New Economy: A brand doesn't exist unless it exists on multiple platforms at the same time and can catapult customers from one platform to another until they land on the one where profits might be most efficiently extracted from them. Hence the development of free Web sites by otherwise expensive newspapers, (The New York Times and The Wall Street Journal); and the publication of free newspapers by electronic outlets such as Bloomberg and the History Channel.

In the Internet economy, this is sometimes referred to by its negative corollary: "channibalization." If you aren't willing to cannibalize your existing distribution channels by introducing new ones, the doctrine goes, rest assured someone else will.

Mr. Murdoch is keenly aware of these principles, as his stewardship of the Fox brand attests. But in the New York tabloid wars, he operates at a disadvantage. A disproportionate percentage of his readership is price sensitive--the reason a 25¢ daily and a 50¢ Sunday paper could fly off the racks for him. If he moves to free distribution, those readers will stop paying for his Post, not least because so many of them still buy the Post, through most of its history an afternoon paper, as a "P.M." Even Rupert Murdoch's deep pockets can't sustain "free."

Mr. Zuckerman, though, has gambled the evening Daily News Express will attract a new customer not currently reading the morning Daily News. Ergo, little cannibalization and potential new buyers. Local advertisers have long shown a willingness to market through such outlets, as the Village Voice and the New York Press prove.

It also may keep Tribune Co.--the former owner of the Daily News and the new owner of the former owner of the defunct New York Newsday--out of Manhattan, where it needs a presence. Then again, it may entice it to take the Daily News off Mort Zuckerman's hands, re-entering the city it abandoned twice.

If that happens, rest assured it won't be for free.

Copyright September 2000, Crain Communications Inc.

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