Now, a One-Currency Newspaper--Free

Metro's freebies have Europe's dailies en garde

Swedish newspaper publisher Pelle Törnberg knew better than to expect a warm welcome when he launched two tabloids in France on Feb. 18. But the chief executive of Metro International never bargained on a portion of his papers' print run ending up in the Seine. That's what happened when enraged union workers from rival dailies broke into Metro's distribution center in the east of Paris and made off with thousands of copies. Unions in Marseilles absconded with much of the first day's run, too. "There was a bit of turbulence, to put it diplomatically," says Törnberg.

Metro makes waves wherever it goes. Born in 1995, the chain of free newspapers now spans 14 countries and 21 cities from Stockholm to Santiago de Chile, with a combined circulation of 3.6 million. Metro's tabloids--most of which are named Metro--have managed to poach readers away from established competitors. The price is right. And so is the breezy style of the papers, which follow a cookie-cutter pattern: international news briefs, cultural features, and a rundown of local events. No weighty editorials on the future of the welfare state, thank you. For that, you can go to Le Monde.

Törnberg likes to brag that Metro's news section can be digested in just 19 minutes, 30 seconds. That's perfect for commuters, especially those reared on the short info-bursts provided by TV. Almost 40% of Metro's readers are under 30 and half are female, a demographic that attracts such advertisers as Coca-Cola Co. and hip apparel retailer H&M Hennes & Mauritz. To hold down costs, Metro maintains a skeleton editorial staff and outsources printing. As a result, the Stockholm edition boasts operating margins of 40%. Metro's ad sales, including classifieds, jumped 28% last year, to $109.9 million.

It's an intriguing formula. Yet Metro burns money as fast as any dot-com. Huge startup costs around the world have produced oceans of red ink. On Feb. 19, Metro announced it lost $86.8 million in 2001 after launching five new papers. The stock, traded on Stockholm's O-List and on the Nasdaq, is down to $1.70 from its $12 August, 2000, debut.

The big question is whether this money-losing media machine can handle a bruising battle for readership in France. In countries where Metro papers have been launched, rival dailies often suffer a circulation drop of 5% to 7%. That terrifies the owners of France's national dailies, which are already reeling from a 4% slump in ad revenues in 2001.

With several French newspapers on the brink of bankruptcy because of dwindling readership, France's press has closed ranks. "The equilibrium of the entire sector is threatened," warned Le Monde in a Feb. 19 editorial. Egged on by management, France's militant press union FILPAC-CGT insists Metro play the game the French way. "We want them to meet the same production conditions as the paid press," says Michel Muller, FILPAC-CGT secretary general, meaning that he wants Metro to be printed and distributed by union-staffed operations.

Analysts are betting Törnberg will stay the course. "They've always found a solution to everything," says Henrik Persson, Nordic media analyst at HSBC Holdings PLC in Stockholm, who believes Metro could move into the black by next year. Much depends on whether Törnberg, a 46-year-old former journalist, can adhere to his own strict business plan. Each paper must produce a profit within three years or face the ax. The first four have already made the cut. However, Metro pulled the plug on the two-year-old Zurich edition in February, while its Buenos Aires paper is permanently on hold. The battle for Paris will become even more pitched when Norway's Schibsted launches its own freebie paper this month. Watch out, Gauls, those Vikings just keep coming.

By Christina White in Paris

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