The National has announced that it will spend $10 million its first year to promote and advertise the product, but one newspaper executive finds that number low. "To successfully launch a national newspaper and have it become known you've got to spend between $30 million and $50 million in the first three years." Given Emilio Azcarraga's deep pockets, promotion may be the least of his worries.
If things go according to plan, in two years The National will be in 25 markets. That's 25 bureaus sending copy and photos back to New York. That's New York editing the package and making up the pages to be sent on to 25 print sites, from which the paper will be taken by 25 fleets of trucks -- all in the space of about four hours. That's so many contracts to negotiate, so many suppliers to be relied on, so many snowstorms to endure. "The biggest problem will be the linkage," admits Peter Price. "There are so many individual pieces that have to work together."
Down the hall in another corner office, looking out over a prime block of Fifth Avenue, Frank Deford, smoothing his purple tie, projects none of this angst. Deford, with his graying swept-back hair and pencil mustache, projects a swashbuckling air. He has never been an editor before, never worked for a newspaper. He seems bemused by this role that fate has handed him. "Right now it's a little vague who our readers will be," says Deford. This seems to excite him. He continues the thought, a bit of wonder now rising in his voice: "The product I know will be terrific. The technology seems to work, and we know we can distribute it. But at the end of the food chain, will Mr. Sports Fan reach down into his pocket, put half a buck on the table, and say, 'Give me a National.' . . . ?"
* * *
Research assistance was provided by Leslie Brokaw.
EXECUTIVE SUMMARY
THE COMPANY
The National, New York City
Concept: Publish a national daily sports newspaper
Projections: Losses of about $16 million in first year, break-even in fourth year; 1 million circulation and pretax profit approaching 14% in about five years
Hurdles: Getting people to buy another newspaper; providing competitive coverage with a smaller staff; sustaining up to $100-million loss before break-even
THE FOUNDERS
Emilio Azcarraga, 58
Majority stockholder
The National's deep pockets belong to Mexican media impresario Emilio Azcarraga, a tenaciously secretive man believed to be worth from $1 billion to $10 billion. Azcarraga's Mexico City-based media company, Televisa, has 90% of the Mexican market and exports to the United States, Europe, and Asia. The empire also includes film production, real estate, insurance, hotels, and videocassette manufacturing. Despite his low profile, Azcarraga has contacts at the highest levels of Mexican political life, ensuring him control of a business that in this country would have long ago been busted up by the Federal Communications Commission and the Justice Department.
Peter O. Price, 49
Publisher, president, and co-owner
Publisher Peter Price's edges are less rough, his pockets less deep. A graduate of Princeton and Yale Law School, he is no stranger to publishing ventures. With his wife he started Avenue, an upscale monthly magazine that chronicles trends and lifestyles in the United States. When Rupert Murdoch sold The New York Post recently, Price became its publisher. That complex deal took all of three months to complete. "A lot of very big deals are very compressed and very spontaneous," he explains. Then there is The National, which Price acknowledges is in a different league. "I've been through big deals before, but not on this scale, and not with something so conceptual. We're dealing with pure concept."
FINANCIALS
The National Projected Operating Statement
($ thousands) Year 1 Years 3-4
(Launch) (Break-even)
Number of markets 15 25
Average daily circulation $225,000 $740,000
Number of employees 250 450
Sales
Circulation revenue $35,100 $115,440
Advertising revenue 11,700 49,474
Gross Sales 46,800 164,914
Cost of sales
Circulation/distribution 10,530 34,632
Ad expense 3,276 11,544
Production (paper, printing) 9,828 38,326
Gross Profit 23,166 80,412
Expenses
Salaries & benefits 18,750 36,000
Promotion 10,000 10,000
General & administrative 10,764 34,631
Net Profit (before taxes) (16,348) (219)
*Source: Inc. estimates, based on information from The National and industry sources
PRINTING MONEY
If The National reaches 1 million circulation, its year-five projection, and hits a 65%/35% circulation to ad revenue ratio, each copy would generate $.77.
Paper and printing $.16
Circulation/distribution .15
Salaries and benefits .13
G&A, including rent and depreciation .15
Profit .10
Ad discounts and commissions .05
Promotion .03
Total revenue from one copy sale is $.77
WHAT THE EXPERTS SAY
COMPETITOR
BRIAN TOOLAN
Assistant managing editor, Philadelphia Daily News, a sports-driven tabloid relying mainly on street sales; former sports editor
The National will have to force itself into the customers' hands every day. The only way it can do that is by breaking news, having information other papers don't have, and looking terrific. It's impossible to have compelling, exclusive material six days a week, 52 weeks a year. To sell 1.3 million copies per day they're going to have to average 54,000 sales in each city. In Philadelphia, the fourth-largest newspaper market, USA Today sells between 17,000 and 22,000 papers a day, and that's after eight years and tons of promotion dollars.
