Don't write off the 'Lite' just because its rival has folded

Lord Rothermere eyes his options as Rupert Murdoch bows out, writes Joy Lo Dico
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The Independent Online

When an item appeared in the latest Private Eye saying thelondonpaper was going to close, some of the team went to the pub to mull it over. Surely, after three years of investment, Rupert Murdoch's News International (NI) wouldn't give up its bold experiment of a free-sheet so easily? Then, on Thursday afternoon, NI's chief operating officer, Clive Milner, told staff the paper would be closing on 18 September. One journalist asked why thelondonpaper was being shut when the Times, another Murdoch paper, was making three times the losses.

Theories abound as to why thelondonpaper gave up. One is that Rebekah Brooks (née Wade), the Sun editor who takes up her new post as chief executive of NI in two weeks, entered into talks with Associated Newspapers, owner of the rival London Lite, to call a truce. Another is that Murdoch's motivation for starting thelondonpaper was to make Associated boss Lord Rothermere blink but Murdoch lost interest once the Evening Standard was sold to Alexander Lebedev eight months ago. Yet the answer may be more simple. As John Maynard Keynes said when accused of changing his mind: "When the facts change, I change my mind. What do you do, sir?"

The facts certainly have changed. Three years ago, the advertising market was doing nicely, News Corporation profits for the year 2006-07 were $3.4bn, and it looked as if Murdoch's free-sheet might dominate the London evening market. Since then, however, advertisers have battened down the hatches, News Corp's figures, released a fortnight ago, showed a loss of, coincidentally, $3.4bn (£2bn) and, after years of battles with the Standard's spoiler, London Lite, neither has picked up the spoils of the market, only the heavy losses.

Thelondonpaper lost £12.9m in the year to June 2008. Losing a rival in the evening market will be a filip to the paid-for Standard. But what of London Lite? Still sitting in the Standard's offices is the small contingent of journalists and subs who put London Lite together. Was that next to be closed? London Lite's office-share is a hangover from August 2006, when the Standard, then owned by Associated, launched the paper as a spoiler to Murdoch's ambitions – an echo of the London newspaper battles 20 years ago, when Robert Maxwell launched the London Daily News as a cheaper rival to the Standard, only for Associated to undercut him by reviving the Evening News, with a humble 5p cover price. Once Maxwell, outflanked, folded, so too did the Evening News.

The situation today is more complicated. When Lebedev bought a 75.1 per cent stake in the Standard in January, London Lite stayed with Associated. But the paper continues to use its content in return for a fee, thought to be around £800,000 a year on a three-month rolling contract.

Rothermere's Associated had been under pressure to move the loss-making Standard out of its fold, but retained a 24.9 per cent stake. He conducted the sale, according to his associates, with a deep reluctance – more like a father marrying off a favoured daughter, than ridding himself of a spendthrift son. However, while Rothermere's affection for the Standard is strong, and the paper may be hoping he'll close the spoiler down, Associated too may wish to heed Keynes's words. The facts for London Lite have changed, too.

Standing alone in the evening free-sheet market it can expect greater circulation and advertising revenues. It's a lean operation with a much smaller staff than thelondonpaper, and even if the Standard were to pull its content, Associated may choose to furnish it with deals from its others papers, the Daily Mail or the morning free-sheet Metro. Associated always maintained that London Lite was part of its "long-term strategy". It may hold almost 25 per cent of the Standard, but it holds 100 per cent of London Lite. Aften 10 years of plugging away, Metro achieved profitability. Perhaps London Lite could also be profitable?

But there is another option. What Murdoch and Rothermere have shown is that Londoners like reading newspapers on the way home. London Lite and thelondonpaper hold a combined circulation of 1 million copies, far more than the Standard's average of 250,000. But, with 2 million eyes having nothing to read on the Tube, is it possible the Standard might merge with London Lite, shed its cover price and really seize the London market? After all, Lebedev and Rothermere are on good terms, and such a deal might see off any competition indefinitely. There would be a lot of resistance. The Standard sees itself as a quality product for which people should pay. But in this market, nothing can be ruled out.