Investor woes shut down BostonNow
BostonNow, a daily newspaper circulated free to area commuters for the past year, abruptly ceased publication yesterday.
The shutdown will idle about 50 full-time employees and 100 part-time street hawkers who distributed the tabloid at subway and rail stations across the region on weekdays.
Russel Pergament, chief executive of BostonNow, blamed its closing on financial problems in Iceland, home to the company's largest investors, not on the troubled US newspaper industry. As recently as Thursday, Pergament said there were no plans to cease publishing.
"Economic conditions in Iceland have become catastrophic," he said yesterday. "This paper is on track and looks good. We're proud of what we've done, but you need more money to run a newspaper."
Pergament, an entrepreneur who has started several newspapers, launched BostonNow on April 17 of last year with much fanfare - and in a highly competitive media market. In an interview with the Globe last year, Pergament said his new paper would reinvigorate local coverage: "We are going to break some news. It is not going to be just watered-down wire copy."
Pergament said he was notified earlier this month that his financial backers in BostonNow, led by Icelandic investment firm Baugur Group, wanted to modify their agreement and wanted him to seek new investors. But last week, Baugur pulled the plug on its media holdings, agreeing to sell them and its telecommunications investments to a group of companies in Iceland and Denmark so it could focus on its retail business. While other investors expressed some interest, Pergament said, he didn't have the time to put a deal together.
Pergament said he was organizing job fairs with media companies for BostonNow employees.
BostonNow listed its most recent circulation as 119,000. The paper ran a mix of stories by local correspondents, wire services, and bloggers. BostonNow entered a market dominated by two dailies, The Boston Globe and the Boston Herald, and several free papers, including commuter paper Metro Boston which Pergament helped launch. (The New York Times Co., the parent of the Globe, holds a 49 percent stake in Metro Boston, which had an audited circulation of 170,514 at the end of 2007.)
A veteran newspaper entrepreneur, Pergament is best known for cofounding the Tab group of suburban weeklies in 1979 and selling them to Fidelity Investments in 1993. He later helped launch Metro Boston and amNewYork, another free daily paper.
Free commuter newspapers, once seen as an attractive business model, have become a tougher sell to readers living in an era of ubiquitous news and advertisers more inclined to shift dollars to digital media, suggested Ken Doctor, media analyst for research firm Outsell Inc. in San Jose, Calif. "It's not as easy these days to just put some papers by a train and have people pick them up," Doctor said.
A statement released by BostonNow focused on the deterioration of the Icelandic economy. It cited recent interest rates of 15.5 percent, an inflation rate of 8.7 percent, and a 20 percent decline of the nation's currency, the krona, against the US dollar.
In the statement, publisher Mike Schroeder said BostonNow was on track to be profitable in its third year, just as its business plan called for. "So this decision by our overseas investors, while perhaps understandable, is deeply troubling," he said.
Stephen Burgard, director of the journalism school at Northeastern University, said BostonNow had been innovative in community journalism by including content from bloggers. He said the paper initially had discounted its advertising rates in an effort to attract larger advertisers from more established area newspapers.
"They've been competing in a difficult landscape with the dailies and Metro Boston for the same advertising dollars," Burgard said.
While free papers have proliferated in US cities in recent years, it usually takes years for them to become profitable, said Barry Parr, media analyst at Jupiter Research in San Francisco.
"You're seeing more experimentation with different formats, different pricing, and different distribution models, and some of them are going to fail," Parr said. "This isn't such a hot time to be launching an advertising-supported publication in the US."
Robert Weisman can be reached at weisman@globe.com. 