Metro International reports Q3 profit

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.

Metro reports profit, Törnberg to leave

Metro International, publisher of 100 free newspapers in 20 countries, reported its first annual profit today and announced that president and chief executive Pelle Törnberg (left) will step down this year.

In 2006, Metro reported net income of $16.9 million in U.S. dollars -- its first annual profit since Metro started in 1995 -- although $12.3 million came from the sale of its money-losing paper in Finland. In 2005, Metro lost $2.5 million (including $2.5 million from the sale of a minority stake in Boston Metro to the New York Times Co.).

The company said it reduced its debt in 2006 from $23 million to $16.7 million.

The report said sales were up in the United States, where Metro has papers in Philadelphia, Boston and New York. But there was no indication that any of those papers were in the black.

An exact date for Törnberg's departure wasn't given. Nor was there any indication of the size of the severance package he will receive.

His exit comes three months after Metro announced a management shakeup that saw the elevation of Chris Spalding to executive VP of operations and the departure of Steve Nylund, who made headlines for telling a racist joke at a company get-together.

However, the report did note: "Competition increased sharply in 2006. 230 free daily titles are published in 41 countries with a combined circulation of 34.8m daily copies (including Metro), up 43% year-on-year."

COMMENTARY: Törnberg's leadership has been a mixed bag. On one hand, he's led the company's worldwide expansion, but Metro has been an underperformer, losing money from 1995 through 2005. Why did it take 10 years to turn the corner? Could another CEO have done better?

What's more, his papers have always been heavy on wire copy, making them vulnerable to competitors that provide quality news coverage and local appeal. With more free dailies starting, quality is only going to become a bigger problem for Metro.

Take New York, where Metro launched the first free daily but has drifted as AM New York has come to dominate the free daily market both in terms of readership (again, editorial quality) and ad billings. AM New York's former publisher, Russel Pergament, thinks Boston's Metro is vulnerable too because he's going to launch a free daily there this summmer, with backers from Iceland.

It's also been embarrassing to hear Törnberg and Metro falsely claim over the years that they invented the free daily. The lie popped up again in today's news release about Törnberg's exit. "Under Pelle's leadership Metro has invented and dominated the free newspaper industry," it said. As we have stated before, free dailies started in Northern California (Walnut Creek, California) in the late 1940s and a second strain emerged in Colorado in the 1970s, with free dailies in Boulder (1971), Aspen (1979) and Vail (1984) all starting well before Metro was ever conceived. The Palo Alto (California) Daily News launched in 1995, the same year Metro claimed to have invented the business.

Hopefully Metro's next CEO won't engage in resume fabrication.

UPDATE: The International Herald Tribune reports on Törnberg's departure. Note that he promises Metro's U.S. editions will turn a profit this year.

Ouch! Metro goes from black to red

This is not pretty. Metro International, the chain that thought it knew everything about free dailies (heck, it claimed to have invented them -- 30 years after somebody else did), had a remarkable setback in the first quarter of this year. Metro has been gradually reducing its losses and reported a profit in the previous quarter, it's first profit since its founding in 1995. So it seemed that Metro was out of the woods, and the first large-scale free daily company was making money. Not so fast! In the first quarter of this year, Metro's loss was $14.3 million.

What were the causes? Parsing Metro's quartly financials, it appears:

• Metro Sweden lost some ad reps, and they took some accounts with them. "Inadequate management" was also to blame, Metro says.

• In Spain, where Metro faces a lot of competition from home-grown papers, advertisers are demanding lower rates.

• "The U.S. market underperformed our expectations due to tough local market conditions."

Metro's other problem -- its CEO, Pelle Törnberg, has announced that he's leaving, and no successor has been named. It's a company adrift.

COMMENTARY: The fact that Metro is in trouble shouldn't be a cause of celebration by others in the free newspaper industry. Yes, Metro has been arrogant (remember the Philly transit scam?) and their papers have been terrible editorially. And they don't know how to sell.

But Metro, by virtue of the fact that it has editions in so many countries, generates headlines. If they go under, then the advertising industry might write off free dailies due to the sins of Metro.

Not only will Metro's troubles frighten advertisers, but what about those of us who rely on the capital markets for funding? Metro's problems will be projected upon us, even if we have been making money from the beginning.

Our hope, here at free-daily.com, is that Metro hires a strong, dynamic CEO immediately, and that the company finds a way to get back into the black. Perhaps that means closing some editions in the U.S. -- so be it. Financial discipline is important.

And a word to Dagsbrun, the Icelandic phone company that wants to roll out 10-12 free dailies in the next three years. Listen, billionaire Phil Anschutz had even grander plans -- 70 editions. He stopped at No. 3. His papers are all losing money. They also are having no impact on their audiences. (He has a conservative daily in San Francisco -- yet nobody there is reading Examiner editorials and deciding to recall Nancy Pelosi or Dianne Feinstein!). This isn't an easy business. And after a few quarters of bleeding millions of dollars, what will you tell your shareholders?

Metro needs a U.S. partner

If you're following Metro International, the world's biggest free daily newspaper publisher, you'll see reports later today about the company's first quarter financials. The headline will be that Metro had a loss of 5.6 million euros ($8.9 million U.S.), which was 36 percent better than during the same quarter a year ago.

A year ago, Metro was in a free fall, with a CEO who had one foot out the door. No leadership was on the horizon. A year later, Metro has a new CEO, former Danish TV executive Per Mikael Jensen, who is straightening out the company's finances by closing unprofitable titles and investing where growth is likely. He's even cutting back on expenses at company headquarters. It's the kind of story smart investors crave — an undervalued company on the way up.

The one country where Metro seems to have the most problems is the U.S., where its three editions lost a combined $3.2 million in the first quarter. Sales were down 5.7 percent in the quarter excluding the 12 percent impact from the depreciating U.S. dollar.

Real sales were down 12 percent in Philadelphia and 8 percent in Boston. However, New York was flat — not bad considering the advertising slump all media faced in the Big Apple. Metro noted that a new Scarborough study it commissioned found it was the most-read free newspaper in New York City, a slam on competitor amNewYork.

In one of his first moves as CEO, Jensen put the three U.S. editions up for sale in mid-January. But three months later, it appears there are no buyers.

What's next for these editions?

Previous CEO Pelle Törnberg said he had a policy of shutting down titles that didn't make money after three years. He didn't apply that rule to the prestigious U.S. market. Philadelphia began in January 2000 and hasn't made money. Boston began in May 2001 and hasn't made money. New York, which launched in May 2004, isn't profitable but is the closet to making money.

For Metro to call itself a "global" or "worldwide" newspaper company it needs to be in the United States. So Metro under Törnberg was willing to lose money in order to stake its claim in the USA.

Today's financial report also notes that Metro is losing less money in the U.S. after the layoffs of 27 of its 138 employees. At the moment, Metro Boston lacks a publisher and Philly editor Ron Varrial is covering for New York. Georg Tsaros, from Sweden, is the interim publisher in New York. There are a few other blank spots in the papers' mastheads.

The bright spot in Metro's report was its Canadian joint venture. Sales surged by 23 percent, from $12.3 million to $15.3 (U.S.). While Metro is having problems in the U.S., it says its Toronto and Montreal editions "deliver good profit margins while the new start-ups in Ottawa, Vancouver, Edmonton, Calgary and Halifax invest in readership.

COMMENTARY: Metro needs to find a partner in the United States. It should look at its experience in Canada. If it were to pair up in the U.S. with a big national newspaper chain (MediaNews, Gannett, McClatchy, Tribune, Lee, Journal Register, etc.) it could expand effortlessly, allowing paid papers to go free. Free means more people see print ads and those ads work better.

Metro has good news, bad news

Metro International is back in the black with a $5.1 million profit in the fourth quarter. While that is a 56 percent decrease from the same quarter in 2006, the chain's sales were up 12 percent -- from $124 million to $139 million. (Click on graphic for details.)

That's the good news. The bad news is that company suffered a $28 million loss in 2007 compared to a net profit of $13 million in 2006. And that's probably the headline you'll see in the financial media.

But with the gains in the fourth quarter — its first quarter with former Danish TV executive Per Mikael Jensen as chief executive — Metro is turning a corner.

Metro did better in France, Italy, Chile, Hong Kong and Canada. The company's problems are in Spain and the U.S.

Metro has put its three U.S. papers — Boston, New York and Philadelphia — up for sale, and not a minute too soon. A statement from Metro says its fourth quarter in the U.S. was "very disappointing" following good revenue growth in October.

In the fourth quarter (October-December), Metro Boston had $2.3 million in sales, Philadelphia $2.4 million and New York $3.5 million. During the same period, the three papers had a combined loss of $2.8 million. For the year, Metro had combined sales of $34 million and a loss of $12 million in the U.S.

To cut costs, Metro is combining operations at the three papers, which previously were somewhat independent of one another. Those three papers remain up for sale, but Jensen wouldn't comment on how the bidding is going. We have reported previously that billionaire oilman Phil Anschutz, owner of the struggling Examiner chain, isn't bidding, but BostonNOW owner 365 Media (Iceland's phone company) was interested.

While Metro has not made a profit in the U.S., Jensen said his chain is doing better in Canada because it has gone coast-to-coast and has become a factor in the national advertising market. He admitted that the same could not be said for Metro in the U.S., which has a presence in only three markets.

But Metro had some eyepopping news to report:

"Our joint venture operations have delivered an additional $0.3m EBIT (Earnigns before interest and taxes) in Q4 including a quarterly profit in Brazil after only eight months of operation. The improvement arises from the operations in Mexico, Korea and Canada which all continue to deliver improving profits. Canada's sales have increased 53 percent in Q407 versus 2006 and it is now the second largest Metro operation in terms of revenue."

Canadian publisher sells free dailies

CanWest, the largest publisher of newspapers in Canada including the Ottawa Citizen and the Vancouver Sun, is selling its one-third interest in the Metro newspapers in Edmonton, Ottawa and Vancouver to Metro Internationl and Torstar Corp., the publisher of the Toronto Star newspaper. Metro International and Torstar will now be 50-50 partners in the two Metro papers.

As a result, Torstar and Metro International will now own five Metro papers across the country -- including ones in Toronto, Calgary and Edmonton.

CanWest this year rolled out its own free daily, RushHour, in Calgary, Edmonton and Ottawa. As a result, it was essentially competing against itself as long as it held its share in the Metro papers.

“We had come to the conclusion that these two properties are no longer a strategic fit for our publishing group,” Dennis Skulsky, president of CanWest MediaWorks Publications Inc.

Metro Canada executives were happy CanWest was pulling out of the partnership: "With a consistent ownership structure now in place in all five English Metro markets, the Metro newspapers will be managed with a single-minded focus on the development and growth of the Metro brand across English Canada," said Jagoda Pike, president of Star Media Group and chair of the board of directors of the English Canada Metro newspapers.

Personnel changes at several free dailies

Metro, the international chain of free dailies, announced yesterday that it has named Tony Metcalf as its Editor in Chief for Metro U.S., overseeing editions in Boston, Philadelphia and New York.

The announcement formalizes the role Metcalf has had since February, when he was asked to temporarily head up the chain's newsrooms after Metro cut 27 positions. Metcalf was planning to return to the Middle East, where he had worked as a editor and publisher, when he was tapped for the temporary job.

Metro's decision to give Metcalf the title of U.S. editor is an indication that the chain plans to keep open its U.S. papers. The three had been on the block earlier this year, but no buyers emerged.

Prior to Metro, Metcalf served for four years as the owner and editorial director of "7 days" in Dubai. Previous to that, he was Global Editor in Chief for Metro International, overseeing the launch of Metro World News, a newswire utilizing Metro's reporters in cities around the world. Metcalf has been involved in launches of Metro around the world including Boston, Toronto, Barcelona, Madrid, Paris, Hong Kong and Seoul.

"Metcalf's global media background, coupled with his localized experience, makes him perfect to helm Metro US," said Georg Tsaros, managing director and publisher of Metro New York. "Metcalf is ideal to unlock the vast editorial potential of Metro in the United States."

OTHER PERSONNEL CHANGES

Amanda Barrett, who has been promoted by the AP to be its deputy editor for the Eastern U.S. Regional Desk in Philadelphia. She arrived at AP last year from amNewYork. She was the free paper's Web site editor.

In California, two big changes at the Tahoe Daily Tribune, the free daily based in South Lake Tahoe owned by Swift Newspaper. Mary Jurkonis has been appointed publisher. She most recently served as publisher of the North Lake Tahoe Bonanza in Incline Village. Jurkonis succeeds Gail Powell-Acosta.

Also at the Tahoe paper, city editor Elaine Goodman has been promoted to managing editor. Before joining the Tribune in November 2004, she worked for the Reno Gazette-Journal and the Palo Alto Daily News, another free daily.

Metro sells NY, Philly, Boston to its former CEO

The Metro International chain announced today (May 11, 2009) that it is selling its three U.S. editions to a group started by former Metro chief executive Pelle Törnberg (pictured) for $2 million.

Törnberg was the founding CEO of Metro, which started in Sweden in 1995. He expanded Metro around the world, but left the company in 2007 with heavy debts. Metro found new readers, but had a harder time finding profits.

Törnberg's Seabay Media Holdings will publish Metro under a service-and-licensing agreement with Metro International, a European holding company with newspapers worldwide.

The three newspapers — in Boston, New York and Philadelphia — have a combined circulation of 590,000 copies per day and reach about 1.2 million readers.

The New York Times Co. will retain its 49 percent stake in Metro Boston for now. But with the Times under pressure to cut costs, it could possibly sell that stake.

The sale follows Metro International's closure of its operations in Spain. Most of Metro's losses last year came from its operations in Spain and the U.S.

The transaction is scheduled to close June 1.

Many large media markets lack free dailies

Four of the nation's top 10 metropolitan areas don't have a free daily. Yet New York and Boston each have two. And San Francisco and Washington each have three.

The growth of free dailies in the United States hasn't been predictable or logical. At least that's what we found when we took a list of the country's top 50 metro areas and looked at which ones have free dailies. Here's what we found.

1. New York has two, Tribune Co.'s amNewYork and Metro New York. It's believed that am makes money, Metro doesn't. (This analysis doesn't include Spanish-language dailies or trade publication dailies, like Daily Variety or Women's Wear Daily.)

2. Los Angeles has zero. The suburb of Santa Monica has one. The Orange County Register has launched a tabloid paper called the OC Post, but it's paid. Some have suggested the OC Post would thrive if it were free. Rumors that billionaire oilman Phil Anschutz would expand his Examiner chain to L.A. appear to be wrong (see separate item).

3. Chicago has one, the RedEye (one word), owned by the Chicago Tribune. It's profitable and just launched a weekend home-delivered edition. The RedEye appears to be picking up the young readers the Chicago Tribune has lost. And it seems to be an effective way of reducing the circulation of the rival Sun-Times, a paid tabloid that often is sold side-by-side the free RedEye.

4. Philadelphia has one, Metro. This appears to be the most successful of the three Metros in the U.S. (Boston and NY being the other two locations) and it is said to be close to making a profit. When Metro started in 2000, it obtained an exclusive contract to distribute on train station platforms with a local transit agency. Both the Philadelphia Inquirer and New York Times sued, saying a government agency can't sell distribution rights on its property. Metro won, but it was a hollow victory. Metro soon discovered that the people riding public transit weren't the desirable demographics ad agencies wanted to reach. When the contract expired, Metro did not want to renew, and nobody else took their place.

5. Dallas-Fort Worth -- one free daily, Quick, owned by the Dallas Morning News. The Belo-owned Morning News used Quick to fight off a startup called the American Journal, which disappeared less than a year after it started. Quick has blossomed since then into daily that, like RedEye, is catching younger readers who aren't reading traditional paid papers.

6. Miami-Fort Lauderdale -- none. Maybe one reason is that Miami and Dade County have become increasingly Spanish speaking, but Broward County (Ft. Lauderdale) certainly has enough English-speaking potential readers.

7. Washington -- three. The newest is The Politico, which was launched earlier this year by the Albritton family, owner of the town's ABC affiliate and the defunct Washington Star. Anschutz has an Examiner there, with a number of conservative commentators, who apparently are trying to compete with the paid Washington Times for that segment of the market. Washington's biggest and most successful free daily is the Express, which was launched by the Washington Post out of fears that Metro would be coming to town.

8. Houston -- nada.

9. Atlanta -- nope.

10. Detroit -- zip.

11. Boston -- two. Metro and the new BostonNOW, owned by an Icelandic phone company that plans to launch 10-12 free dailies across the U.S.

12. San Francisco -- three. The Examiner, the San Francisco Daily and The City Star. This could be the most saturated media market in the country. It's also home to three alternative weeklies, several community weeklies, a handful of glossy city magazines and Web sites of every stripe. Six more free dailies operate in the suburbs, giving the Bay Area a total of nine — the most of any market in the country and maybe the world.

No free dailies in markets 13 (Riverside-San Bernaardino-Ontario, CA), 14 (Phoenix), 15 (Seattle), 16 (Minneapolis-St. Paul), 17 (San Diego) or 18 (St. Louis).

19. Baltimore — one. An Anschutz Examiner. Rumors that the incumbent Baltimore Sun is planning one too.

20. Tampa-St. Petersburg — one, the "tbt*" which is owned by the St. Petersburg Times (which, in turn, is owned by the Poynter Institute) and is targeting the 18-34 audience. It may also have an impact on the rival Tampa Tribune (owned by Media General) like the Chicago RedEye has had on the Sun-Times.

21. Pittsburgh -- one. A suburban paper, the Greensburg Tribune-Review, is delivering a free afternoon daily (called Trib p.m.) to selected Zip codes in steeltown. (See our May 13 item on this paper.

22. Denver -- one, the Denver Daily News, an independent.

No free dailies in markets 23 (Cleveland), 24 (CIncinnati), 25 (Portland), 26 (Sacramento), 27 (Kansas City), 28 (San Antonio), 29 (Orlando), 30 (San Jose, CA), 21 (Columbus, OH)

32. Virginia Beach-Norfolk-Newport News, VA -- one, Link, a youth oriented free daily owned by The Virginian-Pilot in Norfolk last year (See our May 5 item on Link.

No free dailies in markets 33 (Providence, RI), 34 (Indianapolis), 35 (Las Vegas), 36 (Milwaukee), 37 (Charlotte, NC) or 38 (Austin, TX), 39.

39. Nashville -- one, The City Paper, independent.

No free dailies in market No. 40 (New Orleans), 41 (Memphis), 42 (Jacksonville), 43 (Louisville), 44 (Hartford), 45 (Buffalo, NY), 46 (Richmond, VA), 47 (Oklahoma City), 48 (Birmingham, AL), 49 (Rochester, NY) or 50 (Salt Lake City).

While some markets probably have too many free dailies (San Francisco, Washington, Boston) most of the Top 50 cities don't have any. As paid papers crumble, the opportunities in these unserved markets look more attractive.

(If you see any errors in this report, please e-mail me at free-daily@hotmail.com.)

Metro International loses ground

Metro International, publisher of 70 free dailies worldwide, is in a nosedive as it looks for a new CEO to replace Pelle Törnberg (left), who announced Feb. 13 that he would be stepping down. Word is that a new CEO will be named within days. Good thing, too, since Metro's second-quarter financials (released today) are a disaster.

• Metro reported a profit of $900,000 in the second quarter, compared to $4.6 million in the same quarter last year. Sales rose, but expenses are growing much faster.

• The company's three U.S. papers still haven't made money. In fact, they're headed in the opposite direction. In the second quarter, Metro U.S. lost $2.07 million, up 92 percent from the $1.08 million loss reported in the same period last year. U.S. revenues grew by 12.6 percent, from $8.6 million in Q2 2006 to $9.7 in Q2 2007. But that 12.6 percent increase, while good compared to the rest of the U.S. newspaper industry, is not nearly enough to cover soaring costs. None of these papers are start-ups in their early fledgling years. Philadelphia is seven years old, Boston six and New York three. They should be making money by now. Since they're not, management should either shut them down or make radical changes.

• Even in Sweden, where Metro started, profits are down — from $5.5 million in Q2 2006 to $3.9 million in Q2 2007.

• In Spain and France, where other free dailies have taken off, Metro is getting pounded to the point that margins are at 3 percent.

• How much money can Metro lose? On page 12 of today's report management reveals that they used another $10 million on the company's $90 million line of credit from Sweden's Nordea Bank. The total draw is now $57 million.

Whether the rest of the free daily industry likes it or not, Metro International is the leader in our sector. So it's disappointing to see these results. They create a ripple effect -- ripples that turn into waves for others.

We can just imagine what the guys at Dagsbrun, the Icelandic phone company, are saying to themselves. They're the guys funding the Russel Pergament's BostonNOW. Pergament wants to launch similar NOWs in other U.S. cities with their money. They're probably saying, "Wow! $57 million? What are we getting ourselves into?"

Billionaire oilman Phil Anschutz may have figured out the same thing awhile back. He was supposed to fund 70 free dailies across the country (if you believed the hype), yet he stopped at No. 3 in Baltimore in early 2006. Anschutz has money to burn ($7 billion at last count), but he's nobody's fool.

We're bullish on the future of free dailies but the future probably isn't these corporate, top-down, one-size-fits-all papers. Pergament has a good feel for Boston, where he has worked for many years, but would he give Fort Worth, Texas, or Columbus, Ohio, a paper residents would embrace? That's what's tricky about this business. It's a local business.

And that's good. The cost of starting a daily newspaper has never been cheaper. Yes, it takes millions, but not hundreds of millions. This would open the door for some truly local players to get into the newspaper business and start eating away at ad dollars now going to paid dailies.

As for Metro, a lot depends on who will become its next CEO. The tone he or she strikes from the first day will be crucial.

Signs of improvement at Metro U.S.

COMMENTARYThe Web site MediaLifemagazine.com posted a story Thursday headlined "For Metro, the future looks doubtful."

I can't argue with the headline. Metro's three U.S. papers, in Philadelphia, Boston and New York, are apparently losing money and have been on the block since January with no takers. Of course merger and acquisition activity is at a standstill due to the credit crisis. That's not Metro's fault. And the U.S. is in the midst of a recession.

We also can't quibble with the statement that the three papers need capital to remain open. It's expensive to print papers with daily press runs of (and these figures are about a year old, but the most reliable I have at hand) 300,000 in New York, 187,000 in Boston and 140,000 in Philly. Printing costs for the three combined are likely over $1 million a month. The last I heard, the three papers have a combined head count of 120. I have no guess on payroll.

But we looked at a few recent issues of Metro and were impressed by several things:

• The content is more lively and upbeat than we've ever seen it. Gone are the boring wire stories. They've been replaced by staff-written, edgy, youth-oriented stories like you'd see in RedEye.

• Better layout. In Friday's Philadelphia Metro — which celebrated the Phillies World Series victory — the headlines were big, colorful and conversational: "Metro gives Palin a little career advice," "At least we're better than Boston," "We agree with J-Roll: Skip work" and "Slacker Prodigy."

• Friday's edition was 28 pages not including a four-page wrap. While that page count might seem small to some, it keeps paper costs down and lets editorial pour its talents into fewer pages, resulting in better work.

• A quick statement from the city editor about the news, with his picture. This adds a personal dimension to the paper (so that a reader thinks that real people are putting out the paper, not a faceless corporation).

• The ads in Friday's edition were impressive — Macy's, Citizens Bank, local car dealers, movie theaters, a double-truck from Carnival cruiselines and a wrap (four pages) from the state Department of Transportation. The paper looks healthy from an advertising perspective. It's easier to sell ads when you have ads.

• Metro is now placing a front page ad to the right of its flag, called an "ear," something the free dailies in the San Francisco Bay Area began doing a couple of years ago. Again, this is a smart move that attracts advertisers and adds to the bottom line.

While Metro is having money problems, it is putting out a better product than we've seen before. It is producing a newspaper that should be attracting readers and advertisers — which may help Metro ride out this economic downturn.

Online publication insults free dailies

EDITORIAL
Paid-circulation newspapers have long found it useful to characterize free dailies as "down market," containing nothing but wire stories. It was a slap in the face intended to keep advertisers from trying free dailies. MediaLife Magazine, which rarely gets anything right when it comes to free dailies, has published a condescending piece saying they are suddenly trying to become quality publications -- as if they didn't care what they printed in the past.

Several things caught our attention in this ridiculous article:

• MediaLife points to the Examiner chain's hiring of "name columnists" as proof that free dailies are improving their news coverage. OK, who are those columnists? Conservatives Bill Sammon (a Fox News regular) and Rowan Scarborough, both of whom constantly write "news stories" defending the Bush administration. They're entitled to their opinions, but they belong on the editorial page like other pundits. If hiring these Republicans is a winning "strategerie" for the Examiner, how come the chain isn't selling more ads?

• MediaLife credits Metro with convincing U.S. advertisers to buy ads in free dailies. What about the free dailies that existed before Metro entered the U.S. market in 2001? Before Metro arrived, the U.S. had more than a dozen thriving free dailies (Denver, Boulder, Vail, Aspen, Glenwood Springs, Steamboat Springs, Telluride, Colorado; Burlingame, San Mateo, Santa Monica and Palo Alto, California; Conway, Laconia, Berlin, N.H.). Where did those papers get their ads in all of the years before Metro blazed the trail for them? Metro just copied what these successful papers had been doing for many years, claimed they invented it, and the idiots at MediaLife don't know any better. (See June 20, 2006 article where MediaLife actually claimed that Metro brought the free daily to the U.S.)

• Then there's this appalling paragraph: "Then comes the issue of how to get that free upscale paper in people's hands. With downmarket papers, that's easy. Stick it in commuters' hands as they're boarding a train or bus." Maybe Metro or the Examiner need to "stick" their papers in people's hands, but most free dailies haven't had to force their product on anyone. To the contrary, papers like the Palo Alto Daily News have readers who walk for blocks just to get their paper.

The experts quoted in the MediaLife article complain that it is hard to get a free paper in front of an upscale reader. Actually the experience of many free daily publishers is that readers of all income levels will pick up a paper — if it has news.

That makes us believe that free dailies have a bright future. But that future has little to do with what Metro or the Examiner are doing today. Both are money-losing chains where high-level managers have little idea about what readers want. In the three cities where the Examiner operates, it throws papers on driveways -- and residents are furious. And Metro Boston is purchasing recycling bins for the local transit authority to help it deal with the trash problems created by discarded papers.

If you want examples of "best practices" or "successful formulas," look at those free dailies that have been making money for years. Mostly they are driven by hard hitting local news coverage. Or visit tbt* in Florida or RedEye in Chicago, which have advanced the youth-oriented free daily.

Finally, it is easy for elitists to criticize free dailies for supposedly lacking quality. But the public decides which paper succeeds. We'd rather trust the public when it comes to selecting which newspaper prevails than an elitist anyday.

END OF EDITORIAL

Metro to sell U.S. papers; Examiner may bid

Metro International is putting its three U.S. papers on the market, and among the interested suitors is the Examiner chain, according to The Phoenix, a Boston alt-weekly. The Examiner has free dailies in San Francisco, Washington and Baltimore.

Metro's decision to sell isn't a surprise. Since taking over as Metro's chief executive, Per Mikael Jensen (pictured) has been closing or selling the company's money-losing editions to get Metro back in the black.

Though it is publicly held, Metro does not break out financial information for individual papers. However a report in Crains New York quoted "insiders" as saying Metro New York has annual revenue of $14 million and losses of up to $500,000 a month. In October, Metro disclosed that sales in the third quarter were off 12 percent in Boston and 5 percent in Philadelphia compared to the same period in the previous year. New York was the only bright spot with a 18 percent jump. The fourth-quarter report is due February 8.

All of the Examiner papers are believed to be losing money too, though it probably is not a concern to owner Phil Anschutz, who is listed by Forbes Magazine as the nation's 41st richest person with a net worth estimated at $7.6 billion. His wealth comes from oil, real estate, railroads, movie theaters and a phone company.

The New York Times Co. owns a 49 percent stake in Boston Metro, and it is unknown at this point whether the Times, which has been liquidating its assets, would sell that non-controlling interest to a new buyer.

Metro is the first free daily? Not exactly

We chuckled this morning when we read this news release in which Metro, the Swedish-based chain of free dailies, claimed it was "the first ever free daily newspaper."

Metro's claim must have come as surprise to the people working at free dailies in places like Boulder, Vail, Aspen, Conway, N.H., and Palo Alto, California.

While Metro says it was the first free daily (starting in 1995), The Colorado Daily in Boulder is actually the oldest continually operating free daily newspaper.

It had been a student newspaper at the University of Colorado until the spring of 1970 when the school's regents kicked it off campus for its editorials against the Vietnam War. To survive without assistance from the university, the Colorado Daily became a community newspaper. But unlike traditional community papers, the Colorado Daily remained free and stuck with its tabloid-size format.

I don't think it's a coincidence that Colorado today has more free dailies than any other state.

Before the Colorado Daily, there were two other free dailies -- the San Fernando Valley's Los Angeles Daily News and the Contra Costa Times, based in Walnut Creek, Calif., east of San Francisco. However, the Contra Costa paper switched to paid in the 1960s and L.A. Daily News began charging in 1982.

When Metro started in 1995, the Colorado Daily had been an independent free community daily for 15 years. The next free daily was the Aspen Daily News, which was started by Dave Danforth in 1979. For the first several years, Danforth's paper was printed on a single sheet of paper on a sheet-fed press. In 1984, Jim Pavelich began the Vail Daily. In 1988, the Aspen paper got a competitor when Dave Price converted the weekly in that ski resort town to a daily. In 1989, Mark Guerringue and Adam Hirshan started the Conway Daily Sun in a New Hampshire ski town. The Sun has since launched free dailies in Berlin, Laconia, and most recently the Portland, Maine, Daily Sun.

In 1995, the year Metro started in Sweden, the Palo Alto Daily News began in Northern California. Unlike Metro, which took years to show any profit, the Palo Alto paper hit break-even nine months after opening. Ten years later, the Daily News was sold to Knight Ridder for $25 million, a record price for any free daily.

A lot of history in the free-daily industry took place before the first issue of Metro ever hit the streets. We're not sure why Metro is daring enough to issue an inaccurate news release, but it hurts the credibility of a news organization that relies upon the public's trust.

Metro puts serifs on headlines

Metro in NY, Philly and Boston will unveil a redesign on Monday that a press release says will help the free daily in "targeting the hard-to-reach metropolitan." The big changes we see on the front are:

1. A new serif headline font
2. No copy on the front, just teases and photos
3. A different shade of green for the flag.

Starting Monday, Metro will be divided into three sections:

1. Local and world news, commentary, business and environmental topics
2. "My Metro" — entertainment, education, pets, health, style, money, home, travel, technology
3. Sports — previews, predictions, analyses, scores

Metro is also adding material from CNN, Self, Fodor’s, Wired, Chow.com, Thrillist, DealBreaker.com, Geeksugar, Lucky and Flavorpill.

“Heightened expert analysis, commentary, powerful pictures and reader views will enhance Metro’s editorial core keeping the news dynamic, fresh and interesting," says Tony Metcalf, editor-in-chief, Metro US. "Metro is known to innovate, changing print and design history several times, and leading the pack in targeting the hard-to-reach metropolitan. This redesign is the next stage of that."

"This is a bigger change than a standard redesign; we are in the middle of transforming the newspaper itself," says Per Mikael Jensen, CEO of Metro International. “Our ambition is to continue to deliver the free newspaper of choice.”

Metro Toronto's founder heads to Halifax

Greg Lutes, who was Metro Toronto's first publisher and got that free daily going during a four-year stint, has been named publisher of Metro's new Halifax edition on Canada's Atlantic coast.

The Halifax paper will start on Thursday. It replaces the Halifax Daily News, which closed on Monday after suffering millions of dollars in losses, according to a report in the competing Halifax Chronicle Herald. Lutes left Metro Toronto in 2004 to take on the role of Publisher of the Moncton Times & Transcript. Prior to joining Metro Toronto, he also worked for several leading media companies in a variety of senior sales and management roles.

"It is very exciting to be back with the Metro family. Halifax, with its young, upwardly mobile population is the ideal market for the free daily -- Metro," Lutes said in a news release from Metro.

Canadian chain shows impressive growth

Perhaps one of the most exciting stories about the growth of free dailies is unfolding in Canada. The percentage of Canadians reading newspapers has been steady in recent years because those who have abandoned paid papers are now picking up free dailies.

Three free-daily chains have spread out across the broad expanse of Canada, publishing in most markets. They are:

• Metro Canada, a joint venture of Metro International and TorStar Corp., publisher of the Toronto Star

• CanWest (headed by Leonard Asper) which publishes RushHour

• Quebecor Media, publisher of the 24 hours or 24 heures papers. And, yes, the "h" is lowercase.

Quebecor Media (Toronto Stock Exchange symbols QBR.A and QBR.B) is a huge diversified company with broadcasting, cable, telephone, wireless and phone book businesses. So the results of its smaller free daily division are often overlooked. But five days ago Quebecor Media reported its third-quarter results and they showed that revenue at the company's 24 hours/heures papers saw a 69.1 percent jump in revenues compared to the same quarter last year (See page 23 of the company's Management Discussion and Analysis for the third quarter). Dollar figures weren't given.

The third quarter must have been the best quarter for the 24 hours/heures chain because for the first nine months of the year, revenues of the free dailies grew by 58.0 percent compared to the same period last year.

One reason for the revenue jump is that Quebecor Media in the past year has added Ottawa, Gatineau, Calgary and Edmonton to its network of free daiiles that started with Montreal, Toronto and Vancouver. Again while not providing dollar figures, the company reported an 87.2 percent reduction in operating losses at its free dailies in Montreal, Toronto and Vancouver compared to the same quarter a year earlier. In other words, Quebecor Media's free dailies are still losing money, but not as much as before.

CanWest MediaWorks did not report any information about its RushHour chain in the documents it provided to shareholders.

As for Metro Canada, its 50 percent shareholder, TorStar Corp. (Toronto Stock Exchange symbol TS.B), didn't provide much information in its most recent quarterly report. But it did say, "Newspapers and Digital revenue grew $6.1 million to $253.5 million with growth at Metroland Media Group, Metro and the Digital properties." Since its 50 percent share of Metro Canada was lumped in with other assets, it is impossible to know how its five free dailies (Toronto, Ottawa, Vancouver, Edmonton and Calgary) performed. The same type of information was given for net income.

But later in the report, TorStar Corp. provides a clue: "Higher revenues at Metro and the Digital properties offset lower advertising revenue at the Toronto Star both in the quarter and year to date. ... Advertising revenue was down 7.1 percent at the Toronto Star in the third quarter ... Metro continued to have strong revenue growth through the third quarter in both the Toronto market as well as the expansion markets." Under the heading "Outlook," TorStar Corporation's managers said, "{T]he revenue outlook is mixed with advertising trends continuing to be challenging for the Toronto Star but stronger for Metro, Sing Tao and the digital properties."

A couple of observations:

• It's unclear whether any of Canada's free dailies are making money, but with revenue increasing, many will in the next few years.

• In the United States, free dailies are owned by a wide variety of owners with a lot of independents in the fray. In Canada, the free daily industry is dominated by three chains, which have expanded into every major market.

Metro battered by new competitors

BusinessWeek magazine is questioning whether Metro International, which it describes as the "Free Dailies King," has been dethroned by imitators in France, Spain and its original market of Sweden.

The article points out that one of Metro's toughest challengers is the free daily 20 Minutes, owned by Norwegian media group Schibsted. In Spain, 20 Minutes has 2.4 million readers compard to 1.7 million for Metro. In France, 20 Minutes has 2.4 million readers compared to 2.0 million for Metro.

BusinessWeek talked to analysts who said 20 Minutes has pulled ahead because it has jazzier visuals, a more conversational tone and a stronger emphasis on local news. Metro carries a lot of international stories while "20 Minutes is very French," said Patrick Bartement, director general of OJD, a group that audits media circulation in France.

Piet Bakker, the University of Amsterdam associate professor who tracks free dailies, is quoted by BusinessWeek as saying Metro is in a precarious position because it has no other business to fall back on—unlike 20 Minutes' owner Schibsted, whose holdings also include traditional newspapers, magazines, and TV and online operations. In the battle for supremacy among free newspapers, he says, success may come down to "who has the deepest pockets." Metro International may have to dig deeper to stay in the game.

Metro U.S. did better in 2008 than 2007

Has Metro finally found the right formula for U.S. audiences? This year the paper has had a successful redesign and appears to be attracting more mainstream advertisers — major department stores instead of fly-by-night 1-800 ads. Metro is growing its real estate sections at a time when real estate isn't supposed to be doing that well. And Metro seems to have more ads than in the past and probably a higher yield per page.

"Metro U.S.'s performance in 2008 is very promising and has improved a lot compared to 2007," Metro chief executive Per Mikael Jensen (right) told Free-Daily.com in an e-mail Wednesday. "We really feel that we are embraced by readers and advertisers.

"So whilst everyone else seems to have a hard time, we have seen big improvements," Jensen wrote. "Our base of advertisers and our yield per page has, as you point out, been increasing during the year."

A year ago, there was talk that Metro was going to close or sell its three U.S. editions (New York, Philadephia and Boston). Jensen put the papers on the market, but there were no takers. Of course the financial meltdown has halted all lending for mergers and acquisitions, so even if somebody was interested, they couldn't get the financing.

Now Jensen tells us, "I’m very sure that Metro has a great future in U.S."

Metro? Anschutz: no; Dagsbrun: perhaps

Billionaire oilman Philip Anschutz (left) will not bid for Metro International's three U.S. papers, a spokesman says. But a unit of Iceland's phone company, which started a free daily in Boston last year, is giving the Metro papers a serious look, a source tells Free-Daily.com.

Dagsbrun, a Reykjavik-based TV-phone-publishing conglomerate, made it clear when it launched BostonNOW that it wanted papers in major markets across the country. Dagsbrun has two reasons to buy the three Metros:

1. One of the Metros is in Boston. Dagsbrun could eliminate a free daily competitor to its BostonNOW.

2. It could rebrand the New York and Philly Metros as "NOW" papers and get started on its nationwide rollout. The Metro format, imported from Sweden, hasn't caught on in the United States. A re-design and a re-branding could help.

Meanwhile, we continue to hear unconfirmed rumors that The New York Times Co. is interested in the Metros as well. The Times owns 49 percent of Boston Metro and it has a classified-sharing deal with New York Metro. The thinking is that if the Times views Metro as a good way to extend the reach of its classifieds, then the paper is worth owning.

As for Anschutz, his spokesman, Jim Monaghan, was crystal clear when he told the Denver Business Journal that his boss was not interested in buying the three Metros. Monaghan shot down a report that originally appeared in The Phoenix, a Boston alt-weekly, and then the Boston Globe which claimed Anschutz wanted to add the Metros to his Examiner chain. Funny thing, though — the Globe's parent is the NYT. The Gray Lady might know something about the situation since it owns 49 percent of Boston Metro.