Swedish Publication Is World's 5th Largest Newspaper Brand

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LONDON (AdAge.com) -- Swedish newspaper publisher Metro International plans to span the globe with its high-quality free dailies, and after
Metro now has editions on three continents.
only six years it's set up shop on three continents. But traditional newspapers aren't sitting still for the intrusion.

In response to Metro International, traditional publishers are launching their own free papers, challenging Metro's distribution rights in subway stations and, in the U.K., even stealing Metro's own name.

Metro has become a hit among young urban, mobile commuters -- a segment of the population that traditional newspapers had largely lost to the Internet and TV. Metro International now has 30 city editions -- including 12 in the Netherlands alone -- in 14 countries in Europe, North America and South America. With a combined daily circulation topping 3 million and estimated readership of 6.6 million, according to Stockholm-based international investment group Carnegie, Metro is the world's fifth most-read newspaper brand.

Global newspaper war
Metro International's expansion plans for 2001 include entering the Asia-Pacific, plus more U.S. and European cities. The company was expected to debut a Boston edition this week and has announced it will soon expand its Hungarian circulation beyond Budapest to 14 other towns, though it has had no comment about rising speculation that Metro will enter Austria via a Vienna edition later

Metro CEO Jens Torpe is hoping to land a global advertiser.
this spring. With such ambitions, Metro International is setting the stage for what could be the world's first global free-newspaper platform.

"Our first global advertiser could be just around the corner," said Jens Torpe, chief operating officer in Metro International's international headquarters in London. "We're making a number of presentations to international ad agencies."

Metro says more than 40% of its readers are between 13 and 29 and half are women. With those demographics, Metro International executives say they've identified a desirable captive audience of morning commuters on public transport internationally.

Mainardo de Nardis, CEO worldwide at media specialist CIA Group, London, recommends Metro to his clients. "At first, Metro was given a hard time by the agencies," he said. "They thought that if it

Mainardo de Nardis of CIA Group recommends Metro to clients.
isn't paid for, it has less appeal -- and was not read by choice. All that has proved to be totally untrue."

Free papers a hit
Also, the concept of placing the papers free on Metro-branded racks in subways and other busy commuter points, such as nearby retail outlets and fast-food restaurants, is proving a hit with advertisers.

Mr. de Nardis said CIA believed in the format "from day one, even though there were no available data" and other agencies were skeptical. Metro is ideal, for example, for direct response advertising because its active audience responds readily, he said.

"For insurance groups, financial products and travel companies, it's a brilliant medium," he said. "But not so much for branding advertising."

In Sweden, where the first Metro was launched in Stockholm in 1995, the paper is profitable from its three city editions in the capital, Malmo and Gothenburg. Sakari Pitkanen, Metro Sweden's editor

Metro wants to be the 'Big Mac' of newspapers.
in chief, said Stockholm retailers, including big names such as Hennes & Mauritz, were among the first loyal advertisers.

'Snobbish and too expensive'
"They were unhappy with the established papers, which were thought snobbish and too expensive," he contended.

Metro International says it wants to be the "Big Mac of newspapers," a reference to McDonald's Corp.'s global reach with accessible quick-to-consumer products. Costs are reined in by outsourcing printing, distributing via public transportation systems and paying those systems a fee and a share of ad sales, and by using wire services for news.

As for traditional newspapers, "I don't think [Metro will] affect the paid-for papers; the original scare that it would have done so has gone," said CIA's Mr. de Nardis. "But in 90% of [Metro] cities, it has created a new readership for newspapers, attracting whole new sections of the population -- urban, younger and dynamic -- who never read newspapers before."

Established dailies fight back
The established dailies aren't so sanguine about Metro. In the Netherlands, Metro launched three months early, in June 1999, because the country's biggest newspaper publisher, De Telegraaf Group, brought out a free competitor called Spits to defend its paid-for paper De Telegraaf against Metro.

In Italy, Gruppo Caltagirone Editore, owner of a leading national daily, Il Messagero, in March launched its own free daily, Leggo, in Rome to fight Metro. The company also threatened to take legal action in Milan if the subway distribution contract were awarded to Metro without public bidding. Metro lost the bid to a Swiss-based consortium called 20 Minutes. Metro's Mr. Torpe says that an Italian court has nixed 20 Minutes' victory because the consortium is based in a non-European Union country. Metro, now distributed by hand outside Milan's train stations, plans to reapply for the distribution contract.

In Toronto, Metro has the coveted subway distribution rights, but rivals Today and FYI, created as Metro-fighters by Toronto Star parent Torstar Corp. and the Toronto Sun, respectively, lurk outside the stations and at bus stops. Metro is going to merge with Today and will be relaunched in May as Metro Today. Mr. Torpe admits the Toronto merger was influenced by federal legislation requiring foreign media companies to have a local partner.

First French Canadian edition
In Montreal, Metro's first French-language edition is a joint venture with local Transcontinental Media and has a 10-year exclusive distribution contract with the Montreal Urban Community Transit Corp. But in March, Sun Media Corp. launched a rival called Montreal Metropolitain and is suing the transit operation for the right to distribute in the subway system.

Metro International's biggest missed opportunity may be in that bastion of feisty newspapering, the U.K., where local media group Associated Newspapers beat Metro to the draw and cheekily launched its own free newspaper in March 1999. The name of Associated's Metro-fighter paper: Metro.

Linda Grant, marketing director of Associated's Metro, described the U.K. venture as the country's "first urban newspaper." With 800,000 copies distributed in five cities, Metro is the U.K.'s sixth-largest newspaper, according to the Audit Bureau of Circulations. It's also spinning off other ventures such as an online wine club called Metro Wines. The London edition is already profitable.

Associated plans to take Metro into other key U.K. cities including Newcastle, which Metro International tried unsuccessfully to enter in January 2000, eventually selling its edition there to U.K. media group Trinity Mirror.

Huge competition in U.K.
There is huge competition for commuter readers in the U.K. In other big cities outside London, Associated competes with Trinity and Guardian Media Group; in the region of Yorkshire, The Yorkshire Metro is joint venture between Associated and Regional Independent Media.

Mr. Torpe claimed his company will grab a share of the U.K. market yet. Until then, he's focusing on ways to generate more income from existing operations. The company isn't worried about the expected downturn in ad spending, Mr. Torpe said, because it aims for 5% to 6% of the local market share to break even. Effectively, he said, this means Metro International's cost would be manageable during a slowdown. Had the company owned more than 40%, he argued, then it could expect to be hit hard.

But bringing in revenue is nevertheless important since Metro International is a publicly quoted subsidiary of Swedish media company Modern Times Group. In 2000, Metro's losses soared to $63.7 million from $15.4 million in 1999, even as sales rose 47% to $91.9 million. Mr. Torpe attributed the heavy losses to the investment that global growth requires.

He sees more revenue coming from multimarket advertisers, in addition to the existing local-language marketers. For example, Mr. Torpe plans to offer online and fax-on-demand versions of Metro, especially for expatriates. For instance, an Italian living in Philadelphia could access Metro in Italian on his computer, but with Philadelphia ads.

"In this virtual landscape," Mr. Torpe said, "you could have thousands of different editions."

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