July 15 (Bloomberg) -- Rupert Murdoch’s News Corp., preparing to start a new Sunday tabloid to replace the News of the World, may have to offer steep advertising discounts or even give the paper away for free to regain readers.
Advertisers such as supermarket chain operator J Sainsbury Plc, Boots chemists, General Motors Co. and Ford Motor Co. withdrew from the News of the World after accusations that employees hacked phones of murder and terror victims and paid police for stories. News Corp. shut down the 168-year-old newspaper after its final edition on July 10.
News Corp. is discussing a Sunday edition of its best-selling U.K. tabloid the Sun, which may be introduced as early as next month, said a person familiar with the matter, asking not to be named because the plan isn’t public and a final decision hasn’t been made. The big brands may be willing to come back to a Murdoch Sunday tabloid for a price, said Marc Mendoza, chief executive officer of Media Planning Group, which places ads for companies such as Air France-KLM Group and Hugo Boss AG.
“Previous News of the World advertisers will be offered large incentives to try the Sun on Sunday for the first few weeks until it proves itself,” said Mendoza, whose company is part of France’s second-biggest advertiser, Havas SA. “They’ll get discounts in the Sun on Sunday and in other titles.”
Advertisers will likely want coverage of the phone-tapping scandal in other media to have died down before they associate their brands with a new Murdoch tabloid, Mendoza said.
(To read about an FBI investigation into possible phone-hacking by News Corp. employees, click here. For a story on Rebekah Brooks resigning, click here.)
Daisy Dunlop, a spokeswoman for News International, News Corp.’s U.K. publishing unit, declined to comment. Quashing speculation News Corp. is discussing the sale of its U.K. newspaper assets, Murdoch told the Wall Street Journal in an interview yesterday that such talk is “pure and total rubbish.”
Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.
The company may even have to offer the newspaper for free initially to build up circulation and maintain a strong association with The Sun to prevent readers from associating it with News of the World, said Doug McCabe, an analyst at media research firm Enders Analysis in London.
Still, the scandal may have soured News Corp. investors on owning newspaper assets altogether, said Alex De Groote, an analyst at Panmure Gordon & Co. in London. The company would have to delay a new publication until next year to allow the scandal to die down enough, he said.
“It would seem somewhat crass to re-launch a Sunday two to three weeks after closing the previous paper, which is now effectively a crime scene,” said De Groote, who estimates that the News of the World generated annual ad sales of about 40 million pounds ($65 million). “Shareholders in News Corp. are not positive on this asset. I don’t think the political, regulatory process in the U.K. is likely to improve in the short term.”
The political backlash to the allegations forced News Corp. to drop a bid for British pay-television operator British Sky Broadcasting Group Plc. At least nine people have been arrested in connection with the scandal.
News Corp. faces at least four investigations over the phone-hacking scandal. Rupert Murdoch, his son James, and former News International CEO Rebekah Brooks have agreed to attend a July 19 parliamentary committee meeting to give evidence. Brooks resigned today.
The Guardian newspaper reported on July 4 that the News of the World hacked into the voice mails of murdered schoolgirl Milly Dowler in 2002 and deleted messages. Advertisers have been pulling out of News of the World since then. The hacking scandal, which had been going on for four years, previously centered on celebrities, politicians and athletes.
News of the World had the highest circulation of any Sunday tabloid in Britain, making it particularly valuable for advertisers. Its circulation reached 2.66 million in May, more than twice its closest competitor in the national Sunday market, the Sunday Mirror, according to media researcher ABC.
Maurice Levy, CEO of the world’s third-biggest advertising company Publicis Groupe SA, said last week that News Corp. may quickly regain advertisers if the company creates “a new News of the World with much more ethical behavior.”
The final edition of the News of the World didn’t carry commercial advertising, devoting the ad space to charities. Still, Mendoza said that News International can’t let the advertising revenue from the closed newspaper remain in limbo and will likely use a Sunday version of The Sun to fill the gap.
“Why do people pay a lot of money to advertise in the newspaper?” Mendoza said. “It reaches a lot of people.”
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