LONDON — The British newspaper industry is engaged in a brutal price war that most observers believe will result in the death of one or more of the country's national newspapers.
Both the British "quality" papers and the racier tabloids have been trying out price-cutting, some of it temporary and some seemingly permanent, for the past year. The publishing war has boosted circulation for those papers that reduced newsstand prices--while decreasing sales for those that have not matched the cuts.
Observers believe that a final shakeout is imminent and that the major loser will be the respected Independent. Former Deputy Editor Stephen Glover said the circulation war could "lead to the death of the Independent and the grievous wounding of the Daily Telegraph." The conflict began last July, when the Sun, the best-selling tabloid owned by press baron Rupert Murdoch, who is now based in Los Angeles, slashed its cover price from 25 pence (39 cents) to 20 pence (31 cents). Competing tabloids responded in kind.
In September, the Times--Britain's Establishment paper until it was taken over by Murdoch 13 years ago--shocked the industry by cutting its price by the equivalent of 23 cents.
Most observers believe that Murdoch's price-cutting strategy has several objectives.
The first is to deal a possibly fatal blow to the respected but financially ailing Independent, thereby picking up circulation and advertising for the Times; second, to cut into the 1-million circulation of the competing Daily Telegraph, traditionally the highest-selling "quality" daily; and third, to have the Sun mop up its lowbrow rivals.
The Murdoch publications are thought to be losing money in the short term with their lower prices, but precise figures are unavailable because most British papers are part of larger companies that do not break out profit-and-loss statements for individual units.
The Murdoch ploy seems to have unsettled the Daily Telegraph, which has watched the Times' circulation soar over the half-million mark for the first time in its history--more than 40% over the previous year--as the Daily Telegraph dropped below 1 million daily.
Last month, Conrad Black, the Canadian proprietor of the Daily Telegraph, announced that he was cutting the price of that paper from 48 pence (74 cents) to 30 pence (47 cents).
At the announcement, the value of stock market shares of the Daily Telegraph dropped more than a third in two days of trading.
Black was further embarrassed by the revelation that his holding company had sold about 10% of its shares in the Daily Telegraph group at top market price the previous month--triggering accusations of insider trading.
Black, however, insisted the shares were sold before the decision was made to lower the Daily Telegraph's price--and this view was accepted by the watchdog Stock Exchange Committee.
But the Daily Telegraph issued a formal apology to its employees, many of whom own its stock, for the massive and "unforeseen" price drop.
And Black declared: "Rupert is opening his arteries here. He is trying to kill us. He doesn't give a damn about the Independent, he's going for the market leader."
As the Daily Telegraph struggled with the price-cut decision, the Times quickly lowered its price even further.
Most experts suggest that the Times is now losing several cents on every paper sold. But Murdoch can absorb such loses in the expectation of eventual gains.
The Independent's founding editor, Andreas Whittam Smith, said: "What we are witnessing is a return to the industry's ugly past, dominated by proprietors inebriated with the power that newspaper ownership is thought to bring."