Metro International SA, the London-based publisher of 70 free dailies from Santiago to Stockholm, posted a third-quarter profit of $2.6 million (U.S.), mainly from a gain from the sale of a free daily in Finland. The quarter's net income of $2.6 million compared with a loss of $12.2 million a year earlier. Sales in Q3 rose to $87.1 million from $74 million in the same quarter last year, and Metro's management reiterated a plan to post a profit for the year. Metro sold its Finnish paper in August after it failed to generate a profit three years into its inception, a requirement Metro says it has set for all its editions. Metro has three in the United States, in Philadelphia, Boston and New York.A CLOSER LOOK at Metro's Q3 report shows:
- • Metro's papers that are three years and older generated profits of $39.98 million on sales of $314.38 million for the 12-month period ending Sept. 30, 2006. That's a 12 percent profit margin, which is 30 percent better than during the same period a year earlier. Metro's papers less than three years lost $16.2 million on sales of $74.6 million for the same period.
• Metro's three papers in the United States (NY, Boston and Philadelphia) are still losing money, although no indication is given whether Metro is close to pulling the plug on any of them. For Q3, combined sales for the three were $7.9 million with a loss of $2.08 million, or 26 percent. That's slightly better than Q3 in 2005, when sales were $7.6 million and losses were $2.59 million (33.9 percent).
• Metro didn't break out how each of the three U.S. papers did individually, but it included these notes in the report: "The sales growth of the U.S. operations for the quarter was affected by the restructuring of sales departments; the U.S. operations reported 4 percent year-on-year growth in net sales in the third quarter, and 17 percent for the nine months. In New York, sales growth for the third quarter increased year on year by 10 percent, and operating losses correspondingly were reduced by 26 percent from the third quarter of 2005. The Metro New York classified sales agreement with The New York Times Company began in late September. In Philadelphia, quarter losses were reduced by 43 percent and in Boston sales in the quarter were flat year on year."
• Metro CEO Pelle Tornberg (left) said that he has reorganized the company's management team during the quarter. Chris Spalding, formerly vice president of logistics, was elevated to the No. 2 position, executive vice president of operations. Robert Patterson, who was CFO, is now an executive vice president in charge of half of Metro's papers. The other half will be overseen by Marin Alsander, also an executive vice president. Robert Murrels is joining metro as CFO on an interim basis while a permanent CFO is sought. No mention was made as to whether executive vice president Steve Nylund, who got caught up in a major controversy over a racist joke he told, is still with the company.COMMENTARY: Metro Philadelphia began in 2000. Metro Boston came along in 2001. Metro New York turns three next year. None of them make money. Metro's rule that its editions must generate a profit three years after inception apparently doesn't apply to its U.S. papers. Maybe that's a good thing -- we'd rather see more newspapers than less. But we'd also like to see papers that are sustainable, not subsidized. The fact that Metro is able to make money everywhere else in the world except the United States should force management to reexamine their business model in this country. What works in Stockholm or Hong Kong may not necessarily work in New York or Boston.
With sales growth that is described as "flat," it would appear that the only thing stopping Metro from pulling the plug on its Boston edition is its partnership with The New York Times Co., owner of the Boston Globe. But that relationship may not be so solid. The Globe is for sale, and presumably the NYT's 49 percent interest in Metro Boston is part of what's being sold. A new owner would probably look to cut costs. Former General Electric CEO Jack Welch is said to be interested in buying the Globe. Given Welch's reputation of demanding profits and top performance from GE's many divisions, it's hard to see him accepting Metro Boston's current money-losing P&L statement.
