James Murdoch (CEO of News International Europe and Asia) talked about "streamlining operations" and "focusing on core titles" which some commentators have taken to mean it was losing too much money (£12.9m in the year to the end of June).
But the closure is part of a bigger shift in the news business. When it launched in 2006, thelondonpaper was one element of a complicated strategy to take on competitors: the Evening Standard and Metro. Both made money in a market which News International had no presence. Phase 1 of the strategy was successful: profits at Metro have slipped and ES has been sold.
But phase 2, making money out of this sector, has been abandoned. The problem with free news is you rely on ad revenue and (for those of you with your heads down a hole in the last year) ad revenue has all but dried up.
Readers must pay but there is an oversupply of information
It is no coincidence that the free paper's closure comes only weeks (NYT reports) after James's dad Rupert Murdoch announced he was going to make readers pay for web news. At one level, it makes no sense to argue that readers should pay for news online while you are giving it away in print.
But I suspect a more complex strategy. The new business model is that readers rather than (or more accurately -- as well as) advertisers must pay, but there is an oversupply of information. The preface to Murdoch's scheme must be the elimination of as many sources of free news as possible.
The easy part is removing the free news that News International controls: shut down thelondonpaper, put the Sunday Times behind a pay wall. Next we can expect:
- Deals with other publishers (many of whom also hope to make readers pay)
- Tactical moves to weaken or eliminate free competitors
- Lobbying the government to put limits on what the BBC website provides for free