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NOVEMBER 19, 2007
Free Papers, Costly Competition After a fast start, the 70-plus tabloids of Metro International are taking a beating from rivals When the daily Metro hit the streets of Stockholm a dozen years ago, many media watchers scoffed at the concept of a free newspaper aimed at time-strapped commuters. But Metro's street-corner distribution and easy-to-read format proved a hit. Metro has since spread to more than 70 cities, including three in the U.S.—striking fear into traditional papers and inspiring scores of imitators. Now those imitators are eating into Metro's bottom line. Metro International lost $32.7 million on sales of $314 million during the first nine months of 2007, and its shares have fallen by a third this year. In France and Spain, rival 20 Minutes, owned by Norway's Schibsted, has become the most widely read paper in those key markets. Analysts say Metro has failed to match 20 Minutes' jazzier visuals and its emphasis on local news. "If you put the French, Spanish, and Swedish editions [of Metro] next to each other, you won't see a big difference," says Patrick Bartement, director general of OJD, a circulation auditor. By contrast, "20 Minutes is very French." In the U.S., Metro has been hit by the ongoing credit crunch, which has prompted advertisers to curb spending. Third-quarter revenues were down 5% at its Philadelphia edition and 12% in Boston, where the New York Times Co. (NYT ) holds a 49% stake. Metro founder Pelle Tornberg, who invented the free-daily concept, was too "aggressive in launching new newspapers" and overextended the company financially, says Rasmus Engberg, an analyst at Handelsbanken in Stockholm. Metro says it can fix the problems by tweaking its papers to suit readers in each market. Hong Kong, for instance, has extra business news for that commerce-minded city, while the Italian editions have more politics. "All our papers can be stronger in understanding local markets," says Chief Executive Per Mikael Jensen, who took over from Tornberg on Nov. 1. One disadvantage Metro faces is that it doesn't have other media holdings to fall back on. By contrast, its rival in New York is backed by publisher Tribune Company (TRB ). Amsterdam-based Telegraaf Media, publisher of Spits, Metro's fiercest rival in the Netherlands, has operations in six countries. And Schibsted owns newspapers, magazines, and TV stations and can tap their journalists and ad salespeople. Says Sverre Munck, international operations chief for Schibsted: "We have more content and more original content."  By Jennifer Fishbein, with Carol Matlack in Paris Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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