So who will buy The National? The company has done scant market research, but Peter Price nonetheless has a vision of his archetypal reader. That person is likely a man, an avid and learned follower of the sporting scene, a connoisseur of sorts. (The National's radio spots have run, among other places, on classical music stations.) Conversely, Price asserts: "The hard-core sports fan is not our audience. The fan is a junkie. The fan buys USA Today for the stats because he must have them. He eats them for breakfast."
Price hopes for a daily audience of some 1 million readers within about four years. "At that level we're making money," he says. "And we're also the fourth-largest daily newspaper in the United States of the some 1,800 out there."
But how exactly does Price intend to make this leap of more than faith? In projecting readership, says Price, "we've tried to be very conservative." In its first year The National expects daily circulation of about 200,000 in its three markets (100,000 in New York, 50,000 in Chicago, and 50,000 in Los Angeles). Those three markets comprise about 15% of the national market. Thus, extrapolating from that, once The National goes truly national it will be read by about 6.6 times more readers, or some 1.3 million.
What's the logic behind those numbers? Price bases his conservatism on the New York metro market, where 5 million papers are sold daily, and The National need capture only a 2% share. Some of these 100,000 readers will replace their daily paper with The National. Most will buy it in addition to their daily paper.
But is the typical National reader really a diehard, a six-days-a-week, 52-weeks-a-year buyer? No, says Diane Morgenthaler, the paper's circulation director.
How often then?
"I don't know, but the less frequent buyer, the guy who reads us two or three times a week, will make or break us."
So how many of those readers are there?
"I don't know. That's a multimillion-dollar question."
The National's conservative numbers begin to look less so when the scene shifts to Los Angeles, where people commute by car and the old-fashioned newsstand is as rare as snow. Add to that the substantially lower circulation base of daily papers than New York's (2 million versus 5 million), high ratio of home delivery versus single-copy sales, and the Sunbelt fact of life that people have less time for the newspaper and more for TV.
Frank Herrera, vice-president of Hearst Magazines, considers The National's circulation figures "wildly optimistic." He points out that there are 3,000 magazine titles muscling one another for space on the nation's newsstands. Of those, only 40 circulate more than 1 million copies. Most of these titles have built readership slowly over the years and are backed by huge promotion budgets. Herrera also notes that pro football, for example, has a huge TV audience -- and no widely circulating publication to match.
Another skeptic is Glenn Guzzo, former executive sports editor of The Philadelphia Inquirer, now assistant to the vice-presidents for news at Knight-Ridder Inc., the Inquirer's parent company. He says that for The National to reach its projected circulation figures in cities like Los Angeles it may have to go to home delivery. "That's extremely expensive and a tremendous administrative burden. If the demand [on the street] in Los Angeles is 20,000, would that encourage them to take on the cost of home delivery [to sell the additional 30,000 copies]? That's a decision a lot of big corporations wouldn't want to have to make."
The National's strategy is to invest heavily in talent and technology in an effort to add as much value as it can to a commodity product -- sports information. In addition to paying top dollar for marquee names, The National has poured a lot of money into a state-of-the-art electronic publishing system. This is a system that beams copy via satellite to the paper's hub in New York, where stories are edited and pages made up. That information is then beamed back to print sites around the country.
The National also seeks to outsource as much of the labor and headache of running a paper as possible. Unlike USA Today, which owns two-thirds of its printing sites and fleets of trucks, The National owns none. It will contract for printing and delivery in each market. "We don't want to get into the trucking or printing business," says Tim Lasker, The National's assistant publisher. "Our philosophy is to run a lean, clean machine."
The National also has no national distribution network. It has instead entered into a service contract with Dow Jones & Co. to distribute the paper and process the paperwork. (A distributor does not physically distribute the paper. It acts as an adjunct marketing force, ensuring the paper is reaching the right retail locations in the right quantities and then seeing that returns and payments are handled smoothly.)
In its first year The National expects each copy of the paper to generate roughly 67¢ of revenue (50¢ from circulation, nearly 17¢ from advertising). About 14¢ of that total will be consumed by production (paper, ink, press time), another 20¢ by circulation, distribution, and commission. The National will thus take in about 33¢ per paper. With a projected daily circulation of around 225,000 the first year, that amounts to about $23.2 million. That sum will be more than consumed by salaries and benefits (almost $19 million) and promotion ($10 million). From there The National goes deeper into the red.
