Bold business model changes propel Lebedev newspapers in London


What if you could add 675,000 print newspapers to your distribution at a time when other media companies are shedding print? That is the situation with Lebedev Holdings, the Russian owners of The Independent and the Evening Standard in London.

If you cut across case studies worldwide, you find that ownership/capital structure is a key differentiator in performance, innovation, and entrepreneurialism of news companies. Two struggling brands got plenty of rope to innovate when the Lebedevs bought The Independent from Independent News & Media and the Evening Standard from Daily Mail & General Trust.

I spent time recently with key executives inside The Independent and Evening Standard, as well as those who carefully watch their progress.

Bottom-line: Lebedev Holdings took on two money-losing newspapers from two different companies with the aim of returning them to profitability as well as establishing its position in London. To do so, the new Russian owners had to tinker with business models and rules of publishing — nothing new in the chaotic British market:

  • With The Independent, that meant launching a new brand (“i”) with the parent newspaper’s content condensed at a small fraction of the parent’s cover price.

  • With the Evening Standard, that meant converting London’s only regional daily from paid circulation to free distribution.

In both cases, it meant larger audiences and more value for advertisers.

The Independent has always been the quirky outlier among U.K. national dailies. The 25-year-old newspaper is perpetually creative, its front pages are stunning, it was a first-mover in terms of quality dailies converting from broadsheet to tabloid, and it positions itself as a “viewspaper.” It also is in 11th place among the United Kingdom’s 11 national dailies and, like its peers, it continues to shed circulation — constantly struggling for a unique identification and differentiating quality in a crowded market.

The management team may have found new value by taking The Independent’s core content and repackaging it with a new young brand aimed at time-pressed commuters, value-for-money seekers, and those who fell out of love with newspapers.

“I” is a daily repackaging of The Independent content at a price 20% of their parent’s £1 cover, heavy on short stories and matrixes. It is a creative repackaged extension of The Independent — condensed editorial and duplicated advertising. It purposefully does not have a Web site, yet has an impressive social media presence, a reader panel, and a feeling of interactivity.

An extensive marketing campaign and an intense introduction for news agents has pushed paid circulation of “i” to 175,000 — eclipsing The Independent’s non-bulk circulation at a pace approaching 2-to-1. Insiders say “i” has cannibalised The Independent circulation by only 3,000 to 5,000 copies per day and has carved out a new niche in the complex U.K. media landscape. I’m not sure how much the audience they cobbled together is their original target or how much is the audience that simply emerged, but it is not a number or demographic to ignore.

Nobody seemed to grab hold of my observation that “i” is a light newspaper to The Independent like Standard Lite was to the Evening Standard from 2004 to 2009. Like Standard Lite, “i” carries The Independent advertisements and doubles the audience for those ads in the process.

A common theme heard over and over about “i” was that it would either be a “flavour of the month” concept or it could displace The Independent itself. Executives are devouring research to better understand the nuances behind the numbers and reader engagement.

While executives are still getting their heads around the ramifications of “i” to The Independent, the bolder move in the Lebedev stable came with the 182-year-old Evening Standard, which was bought for a mere £1 less than two years ago.

The Evening Standard turnaround began with an apology, yet turned on a market opportunity they seized with gusto.

Shortly after the Lebedevs bought the Evening Standard in 2009, a McCann Erickson-designed campaign to create a solid break with the past prominently featured poster advertisements with the word “Sorry” on the newspaper’s masthead font — sorry for past editorial approaches and even “Sorry for losing touch.”

Yet the controversial new start didn’t mean big circulation gains, either — until a market opportunity struck.

Less than 18 months ago, News International’s London Paper competed with the Evening Standard and its former brand extension, London Lite. Yet at the depth of the recession and at the time Rupert Murdoch was getting serious about paid content, News International pulled the plug on the free London Paper and A&N Media killed the free London Lite, leaving an open field in the afternoon newspaper market in London. The perpetually struggling Evening Standard converted from paid to free, kept a high editorial standard despite bruising newsroom cutbacks, and in the process raised its distribution from 200,000 to 700,000. The newspaper is expected to return to profitability by 2012.

The U.K. newspapers are notoriously competitive. There are at least five dailies in Northcliffe House where the Lebedev and A&N Media titles reside, and competitors rarely speak to each other. Yet the many executives I spoke with seemed to be genuinely pulling for the Evening Standard as an old friend with new life, while they debated the ramifications of “I’s” rise in importance and The Independent’s future.

Publishers worldwide need only look to the Evening Standard and The Independent to find new business models and innovative re-imaginations of the print platform. Amazing what a capital infusion can unleash.

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