Murdoch shuts London Paper to quit the freesheet war

Newspaper's losses close to £13m last year

Rupert Murdoch's News Corporation retired from the battlefield (EPA)

The free-newspaper war in Britain's capital was over last night as Rupert Murdoch's News Corporation retired from the battlefield after announcing the closure of its title The London Paper.

In a rare and embarrassing admission of failure by the world's most famous media mogul, his son James Murdoch, News Corp's chairman and chief executive for Europe and Asia, declared the free-newspaper experiment, the subject of intense planning and major investment, had "fallen short of expectations".

The paper, which has a staff of 60, is part of the News Corp subsidiary News International, based in Wapping, east London, and made a pre-tax loss of £12.9m in the year to June 2008.

The decision appeared to surprise executives at the rival Associated Newspapers, publisher of the free evening title London Lite as well as the nationally distributed free morning paper Metro. After a series of meetings yesterday afternoon, Associated would only say: "We are watching developments with interest."

Associated, also the publisher of the Daily Mail, is the former owner of the paid-for London Evening Standard and retains a 24 per cent share of that title, which has seen a sharp fall in sales in the wake of the freesheet war. There is a strong likelihood that London Lite, also a loss-making initiative, will close too, although the Standard, sold by Associated to the Russian media mogul Alexander Lebedev this year, may benefit from the shake-up.

For the past three years, the sight of purple-and-mauve jacketed vendors thrusting free newspapers into the hands of office workers as they headed home from work has been a familiar feature in the capital.

News International launched The London Paper in the autumn of 2006 after market research by its then managing director, Clive Milner (now chief operating officer), and the newspaper's editor, Stefano Hatfield, who had introduced free newspapers into US cities including New York. Geomapping was used to track the footfall of young London office workers, an attractive group to advertisers, and ensure that vendors could be positioned to maximise and properly target circulation.

There was some internal opposition to the plan and Rebekah Wade, who was then editor of The Sun but has recently been appointed as News International's chief executive, is known to have had concerns that the company's support for free newspapers risked undermining the demand for its paid-for titles.

"The strategy at News International over the past 18 months has been to streamline our operations and focus investment on our core titles," said James Murdoch yesterday, in a statement that follows his father's announcement this month of a drastic fall in profits. The company's UK papers suffered a 14 per cent drop in year-end advertising revenue, while profits across the global newspaper division fell from $786m to $466m.

Street battle: London's freesheet fight

Summer 2006 News International (NI) announces plans for a free London evening paper.

30 August 2006 Associated Newspapers hits the street first with rival title London Lite.

4 September 2006 NI's The London Paper debuts with a headline "Croc killer killed by stingray" about the death of Steve Irwin.

April 2007 Associated circulates video showing distributors of The London Paper dumping copies.

August 2007 Associated and NI agree to install rubbish bins across central London amid concerns from Westminster Council about littering.

21 January 2009 Associated announces the sale for £1 of 75 per cent of the paid-for London Evening Standard to the Russian oligarch Alexander Lebedev.

July 2009 Circulation of The London Paper is close to 500,000, with London Lite trailing at 400,000.

20 August 2009 James Murdoch announces that The London Paper has "fallen short of expectations" and will be closed.

18 September 2009 Likely final publication date of The London Paper. Will London Lite also close?