Media&Marketing:The biggest innovation in the newspaper industry in the last decade has been the expansion of free newspapers. In the internet era, when consumers have come to expect free content online, some Swedish entrepreneurs had the idea of giving away daily tabloids to commuters who were shunning traditional paid-for titles.
The Metro concept launched in Sweden in 1997 and the business has since gone global. However, in the past year Metro International has plunged into big losses, with problems in some markets dragging down the success of the title elsewhere.
Metro International SA, a public company domiciled in Luxembourg, publishes itself or by licence free-of-charge newspapers in 21 countries. The reach extends through most major cities in Europe and Canada, as well as as Boston, Mexico City, New York, Philadelphia, Santiago, São Paulo and Seoul.
The company accounts for its trading in US dollars and last year group sales amounted to $453 million (€310.90 million) a 9 per cent increase on 2006.
However, the operating loss for the year was $21 million, compared with a surplus of $17 million the year before. After finance charges and tax, the net loss was $28 million.
Metro International is a success in many of the territories where it operates. Per Mikael Jensen, who was installed as new chief executive last year, reported that operating profits were delivered in nine of the 14 owned operations. However, Metro has not been doing well in Spain, Poland, the US and the Czech Republic. In addition, one of the biggest drags on Metro's bottom line for 2007 was a $10 million bill imposed by tax authorities in Sweden, a levy that Jensen is disputing.
Says Jensen: "Metro International has not been immune from the volatility affecting the global newspaper industry, which has been reflected in the latest results of the company.
"While the loss for the full year 2007 is a disappointment, Metro International remains committed to reversing losses in markets that are underperforming, and to focus investment in areas of strong potential growth, including online."
This last comment may be ringing alarm bells with investors. Jensen says he is committed to launching Metro websites in France, Spain and Holland, "to provide advertisers with a cost-effective route to our unique demographics". To some observers that must seem like the print alternative to the internet running up the white flag.
Despite Metro International's woes, free newspapers are here to stay. A recent survey estimated that among the 39 million highest income earners in western Europe, Metro is the most widely read print publication.
In Dublin, Metro's average daily circulation is 75,200 copies while rival title Herald AM is picked up by 80,000 people every day. The Dublin Metro is a joint venture between The Irish Times (45 per cent), Associated Newspapers (45 per cent) and Metro International (10 per cent). In the period from launch in August 2005 to December 2006, the shareholders invested over €9 million in the title.
The Dublin Metro does reach the parts that other newspapers do not. The title claims 135,000 readers, of whom three-quarters are aged 18 to 44.
Two-thirds of Metro readers are ABC1 and of course they are all in the capital.
According to Lee Thompson, chief executive of Metro in Ireland: "Metro readers make regular, well above average trips to bars, restaurants and the cinema. Research shows that this group has a much larger proportion of 'early adopters' within it, making urbanites leaders in fashion, techno and travel trends.
"Urbanites are hard-working, time-starved individuals who choose to fit their media around their busy daily lives rather than vice-versa.
"This makes them extremely difficult to reach through traditional media channels, yet highly prized by product and brand advertisers."
Advertisers seem to like this pitch, with Metro garnering lots of advertising that never gets into The Irish Times or Irish Daily Mail. But without circulation revenues, can Metro ever pay its way?
Maybe, but judging by the Metro International experience, the margins will always be slim.
