Media: Going for promotion

The uneasy stand-off in the broadsheet newspaper cover price war has firmed into something approaching an armistice. The worst excesses of battle ended on the say-so of the man who started it three years ago, Rupert Murdoch, owner of a whopping 36 per cent of the British national newspaper market.

One door closes, another opens: cover-price hostilities have already been replaced by a war of a different kind - and no less fiercely fought.

The battleground has become promotions and marketing. The weapons of choice are videos, free cars and discount coupons to encourage weekend sales. If it keeps up at this pace, the promotions head-to-head will make the notorious tabloid bingo wars of the Eighties look like a minor skirmish.

This past weekend marked the start of a new round of marketing fisticuffs. The Independent launched its classic film-on-video sale, backed by posters and a television and cinema advertising campaign. The Times and the Telegraph have launched spoiler campaigns, also based on - guess what? - videos.

An even more bruising battle is set to be ignited in the mid-market, as the struggling Express titles prepare for a high-stakes relaunch under new editors. The mighty Daily Mail, which dominates the market, will not sit idly by. A ferocious tit-for-tat marketing battle is a near certainty.

"It does look as if the use of price to sell newspapers has been abandoned," says Steven Palmer, the Guardian's new marketing director. "Now everyone seems to be looking at ways of justifying higher prices - promotions are a part of that." The Guardian, which held back from the price war launched in the broadsheet market in 1993, is to use promotions "selectively", Mr Palmer says.

At the Telegraph, one of Mr Murdoch's major targets in the price war, the sense of relief at the "ceasefire" is palpable. Stephen Grabiner, the group's managing director, is blunt. "Yes, the price war is over," he said earlier this month, as he unveiled the Telegraph's dramatically lower profit figures for 1995. "But it is being replaced by a promotions war."

No one who lived through the price war - including readers - are ever likely to forget it. The effects have been dramatic and are probably going to be long-lived, for they constitute a further stage in a revolution that has transformed Fleet Street out of all recognition.

"What did you do in the newspaper cover price war, Daddy?" you might soon be hearing. And many of us will be able to answer: "We survived." Still publishing is the Independent, the paper many believed would be the first casualty. Indeed, by the time 1996 is at a close, losses at the two titles, the Independent and the Independent on Sunday, will have moderated to an annual level of about pounds 7m, far below the pounds 19m of 1995, the height of the double whammy of the price war and high newsprint prices.

Also bloodied is the Telegraph, with profits that have plunged to risibly low levels toward the end of 1995. The Guardian is losing money, too, and its sister paper, the Observer, is awash with red ink.

Ironically, the only paper actually to succumb so far is the Murdoch mid-market tabloid Today, which was shut last autumn after clocking up horrendous losses of pounds 140m. Pessimists say, however, that the hapless Star, part of the Express stable, cannot be long for this world.

The short history of Today - launched with such high hopes in 1986 - is a microcosm of the radical changes that have transformed national newspaper publishing in the UK. The brash new paper was all about state-of-the-art technology, the end of the stranglehold of the printers, the introduction of colour. Combined with the launch of the Independent in 1986, Today radically altered the cost base and the format of newspapers.

For those with a penchant for instant history, the price war can be seen as having precipitated the final stages of the revolution. Murdoch slashed the price of the Times to 30p from 45p on 6 September 1993, at a time when the industry seemed finally to be poised to reap the first real benefits of cost-cutting and the introduction of new technology. The recession was ending, newsprint was plentiful and not too expensive.

For a time, the rest of Fleet Street attempted to ignore Murdoch's tactics. "No one really believed that newspapers could add readers on price alone, at least not at the quality end of the market," a senior publishing executive now admits. But add readers Murdoch did, as the cut-rate Times and the down-market Sun proved against all odds that sales of newspapers, like any other commodity, were highly sensitive to price.

The Telegraph joined the battle nine months later, matching the Times at 30p on 23 June 1994. The next day, Murdoch retaliated, offering the Times for just 20p. The Independent matched the 20p price for a day, then held out at 35p until August, not counting some experimental pricing in different regions. It then settled at 30p, like the Telegraph.

Other national publishers in the tabloid markets followed suit, forcing even regional newspapers to react. The next 18 months were gruelling for all the publishers concerned.

The job losses began to mount, as title after title announced redundancies. Associated Newspapers, publisher of the Daily Mail, the Mail on Sunday and the London Evening Standard, and United Newspapers both cut their staff in recent months, as has the Independent. The Guardian and the Observer are poised to do so.

The end of the price war was heralded in mid-1995, when even Mr Murdoch understood that few further gains in readership could be achieved and that the losses were mounting alarmingly. The Times went up to 25p on 3 July that year, and then to 30p four months later. The Telegraph and the Independent followed Murdoch's cue, rising in two stages to 40p.

A gleeful Daniel Colson, chief executive of the Telegraph group, said at the time: "This means that even Murdoch isn't impervious to newsprint increases. And it means the price war didn't work."

Murdoch's ploy, which achieved dramatic circulation rises at the Times, may result in human casualties if the rumours circulating at Wapping, headquarters of Murdoch's four national titles, are true. Staff at the Times are bracing themselves for swingeing job cuts - with perhaps as many as 50 journalists being shown the door. The possibility of lay-offs has angered Times hacks, who believe they are being made to suffer for the closure of the sister paper Today.

"We had to take on a lot of their staff," says one insider. "Now it looks like it is Times journalists who are going to be asked to leave."

Redundancies aside, national newspaper publishers can finally look forward to a measure of price stability. Chris Oakley, chief executive of the Midland Independent regional newspaper group, says: "Publishers are likely to be able to push through price increases at least to the level of inflation."

At the same time, newsprint price hikes have levelled out, with January's 9 per cent rise possibly the last in the current cycle.

A bullish Panmure Gordon, the investment bank, predicts fair weather ahead for the industry. "Newsprint prices are reaching a plateau, the cover price war is coming to a conclusion and lower interest rates and tax reductions promise to stimulate advertising markets from the second quarter of 1996," the bank says. "The year 1997 could prove to be a bonanza."

Industry executives are not so sure. Proprietors of the non-Murdoch press heartily wish he had never launched the price war, at the very time when robust profits seemed achievable once more. They are concerned, too, that the ferocious battles fought on price between 1993 and 1995 may even end up costing less than the current wave of promotions, and that higher cover price revenues could be swallowed up in higher marketing spend.

"We have weathered one battle, only to be plunged in the midst of another," laments the editor of a money-losing title.

He'd better get used to it. In the gently declining market for national newspapers, the competition for readers will continue unabated. One title is gone, and several hundred journalists have lost their jobs. But the war goes on. Who knows how many will survive this round?