While running a group of Swedish television stations in the early 1990s, Pelle Tornberg considered investing in newspapers. After a little market research, however, he dropped the idea. "Newspaper readership had been declining for many years, and the typical reader was more than 50 years old. The advertising demographics were terrible," he recalls.
But Tornberg, 48, kept mulling the problem: What kind of newspaper would attract affluent young readers coveted by advertisers? In 1995, with backing from his bosses at the Swedish media holding company AB Kinnevik he launched what may be the answer -- Metro International (MTXBF ), a chain of free tabloids distributed weekdays on city street corners and at subway stations.
From a single newspaper in Stockholm, Metro has grown to 36 editions in 15 languages, distributed in more than 100 cities worldwide, including, most recently, New York City. Revenues soared 43%, to $203.5 million, last year. While giveaway tabloids have traditionally been viewed as downmarket, Metro is drawing mainstream advertisers such as the Hennes & Mauritz apparel chain because its readers are educated and relatively well-off. Tornberg says time-strapped 40-and-unders like Metro because they can zip through it. "The newspaper industry didn't understand that its biggest competitor wasn't television or the Internet," he says. "It was breakfast, aerobics, careers, kids."
One group that still needs convincing is Metro International shareholders. The company's shares have plummeted from $12 to less than 60 cents since it was listed on the Stockholm exchange in 2000. Because of heavy spending on expansion, the company hasn't yet posted a profit, but the tide of red ink is starting to recede: Losses declined from $63.2 million to $10.8 million last year, and Metro says its newspapers posted a $435,000 operating profit during the first quarter.
Metro increasingly faces rivals -- for example, the free tabloid amNew York, launched last year with backing from Tribune Co. But Tornberg, who runs Metro International full-time from London, doesn't seem worried. "In cities where we have competition, we have reached profitability more quickly," he says. A former broadcast journalist, he moved to the commercial side 15 years ago, helping to develop a home-shopping network for Kinnevik and Strix, a Swedish production group specializing in reality-TV shows. The world is likely to hear more from this innovative media exec.