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For many years it's been well known that newspaper readership is in

decline. So when the daily city freesheet Metro started to make waves in

Stockholm in 1995, bringing new, young readers into the market, there

was a collective rush of blood to the heads of newspaper publishers

everywhere.

Metro now has 21 editions in 15 countries. It can boast a combined

circulation of nine million or so, making it the fifth-biggest newspaper

in the world.

The only other European titles in the top five are the UK's The Sun and

Germany's Bild.

In Europe, the circulation totals almost 2.5 million. There are Metros

in Sweden, Finland, Denmark, Italy, Spain, Switzerland, Holland,

Hungary, Poland, Greece and the Czech Republic. All operations, apart

from Greece, have been started from scratch, giving Metro International

control and ensuring that the Metro concept isn't watered down. In

Greece, where Metro bought up a local paper, it has used this to plumb

in its own publishing model and reach profit in a speedy ten months. It

is, by any standards, a phenomenal publishing success story.

But it hasn't all been plain sailing. As the Italian example shows (see

box), even in the markets where Metro International has done a good job

at rooting itself, it can struggle against indigenous competition.

Other markets have blocked Metro International's path before it could

get a hold. The UK is a good example, where Associated Newspapers saw

that the Swedish publisher had London in its sights and launched using

the same name, tying up a deal with the London Underground and then

finding ways of launching in other cities. Metro International didn't

give up at first. It took the opportunity of launching in Newcastle. But

despite putting up a good fight, it eventually backed off and decided to

give up and go elsewhere, retaining an office in Newcastle to generate

material for its various editions across the world.

So it is testament to Metro International's seemingly inexhaustible

tenacity that it has come so far. In September it launched in Madrid, so

it now has coverage in both the Spanish capital and in Barcelona.

Similarly, in Italy there's an edition in Rome and in another key

centre, Milan.

In other countries it claims national coverage. Apart from its homeland

of Sweden, those include Hungary, the Netherlands and Switzerland.

In Hungary, the majority of copies are distributed in Budapest, but it

goes out to 14 other cities. In Holland, where Metro Holland was first

launched in the summer of 1999, it now goes to five other centres and is

the country's fourth-biggest newspaper. In Switzerland it has moved from

its Zurich base to cover German-speaking areas.

It is in Switzerland that Metro International has come up against the

only other international city freesheet operation that it might consider

as a competitor on the grand scale. 20 Minutes Holdings is a venture

backed by Norwegian publisher Schibsted, which has so far launched

editions of a free daily in Switzerland and Spain. The company's chief

executive officer, Dr Ekkehard Kuppel, makes no bones about the close

rivalry: "20 Minutes is based on the Metro concept with a series of

modifications. First, we are localised to a greater extent than Metro,

which turns out to be an important competitive advantage. Then we have a

stronger focus on a younger, urban and active target group, not just the

urban community."

Kuppel says recent readership figures in Switzerland have proved that 20

Minutes is stronger. Given the newness of Metro's launch in Madrid he

says it is too early to predict success in Spain, but: "We are pretty

optimistic that we will be able to replicate our success in

Switzerland."

Yet it hasn't all been sunshine and roses for 20 Minutes Holdings. Its

push into Germany was halted after its first edition, published in

Cologne, had to be closed down, putting paid to its ambitions to publish

in other German cities. Its demise was largely put down to opposition

from the German publishing giant Axel Springer.

Metro International has not even got past the German borders. The same

goes for France, where it has no presence. The two markets are

notoriously hard to penetrate. "Both have got very regional newspapers,

that's the first thing," Christine James, the managing director of CIA

International, says. "You tend to find that they already have local

newspapers and you have one of the highest levels of newspaper

readership in Europe which is a compounding factor."

With Germans already tucking into a paper, why would they need

another?

In France there's the opposite problem. "In Paris the readership of

daily papers is relatively low which may deter someone from moving in,"

CIA's James says. On the other hand, this could be seen as a pool of

potential new readers. "If I was Metro, I would be looking at the French

market before the German market."

Actually, Metro International is busy outside Europe launching titles in

the US and deciding whether to have a crack at Asia. The fact that it

does not have either national coverage in some European countries or

international coverage across the continent is not, after all, a big

stumbling block. "It's not a problem," James says. "It's very rare for

multinational advertisers to look for equal coverage across countries.

It tends to be more retail driven and the advertising tends to be

specific to whatever's happening locally."

But is European expansion off the agenda? "No, definitely not," Metro

International's chief operating officer, Jens Torpe, says. "There is

organic growth in the markets where we already are - we see a lot of

opportunities there." Ideally, Metro International likes to break even

in a country and have advertisers behind them before launching a second

or national edition.

"Of course there are still some countries where we're not present at the

moment. Two major countries - Germany and France - still remain." Torpe

won't be drawn on any specific plans, but points out that the Schibsted

venture in Germany has already come to an ugly end. The group would not

consider launching there without a partner to give it both credibility

and coverage.

Does the low readership of newspapers in France put him off? "I don't

think that would pose any special problems," Torpe says, pointing to

other countries with similarly low newspaper readership, such as Italy

and Greece, which have already come up trumps.

Revenues have been healthy to date with most advertisers using Metro as

a local vehicle, although Torpe thinks there's promise for national and

international advertising. "With adding more and more cities we will be

very well suited for global advertisers," he says. He points out that

those cities with the newspaper are generally the most important in each

country. Of course the audience is also an alluring one, with a strong

showing of young readers and female readers.

Wherever the revenue is coming from the available figures look

impressive, with the Stockholm operation still reporting a 37 per cent

operating profit, despite the general downturn in the economy. But with

all this success it's worth remembering that, with a three-year schedule

to break even, only four of the Metro International operations are

actually in profit.

Similarly, Schibsted's titles are not actually bringing in money. There

are bound to be plenty of paper corpses across Europe before the

freesheet wars are over.

ITALY: AN AFFAIR WITH FREE PRESS

The Italian affair with the free press is a colourful example of how

European cities have been taken by storm with the success of city

dailies The affair started two years ago in October 1999. The Swedish

Modern Times Group began talks with the management of Metroferro, the

public company that operates the underground in Rome and negotiated a

licence to distribute a daily freesheet. It launched in July 2000.

After Rome, the next city on MTG's hit list was Milan. The capital of

fashion, of business, of the stock exchange and, moreover, with almost

double the number of commuters using the underground than in Rome. But

the local public transportation company, ATM (Azienda Trasporti

Municipalizzata), decided to call a contest to decide who would publish

the first free tabloid to be distributed in the underground. ATM

specified that the contract must be for a long haul of three years and

with a minimum yearly licence (which would add up to the sum of one

billion lire). On top of that they wanted a percentage of advertising

income.

The stakes were high but the bidders still lined up: Metro

International; RCS Editori (the publisher of Corriere della Sera);

Ediemme (the publishing group of regional dailies owned by Alberto

Donati); and a partnership of Schibsted (the publisher of the free

tabloid 20 Minutes in Koln and Zurich), SEE (the publishing house behind

the Milanese daily newspaper, Il Giornale) and Mondadori Pubblicita, the

advertising arm of publisher Mondandori. The three-way partnership

emerged triumphant on 26 October.

Meanwhile, rather than sit still while the bidding process carried on,

Metro International had decided to sidestep the competition. On 30

October, Metro Milano was being handed out outside the entrances of the

Milanese subway.

Then the launch of the partnership's Milanese 20 Minuti was delayed.

Italian law forbids that the majority of a publishing company is held by

a non-EU partner and 20 Minutes Holdings, the majority stockholder of

Newspaper Milano, the publishing company of the partnership's 20 Minuti,

is based in Switzerland.

Finally, in February ATM decided to invalidate the bid and consider

another partner for the venture. In the new round of talks were RCS

Editori (who came second in the initial bid), Alberto Donati and Metro

International.

RCS Editori won this second round and published City in Milan in

September in a partnership with Il Giornale. Now City Italia, a joint

venture between RCS and Alberto Donati, plans to be in nine cities by

2002.

Turin is the latest city to be given the freesheet treatment. Existing

paper Torino Sera has been handed out free in the past two months and

Leggo Torino has joined the fray.

Leggo Torino comes from the stable of another publisher with national

ambitions for city freesheets - Gruppo Caltagirone, owned by the

southern real estate entrepreneur Francesco Gaetano Caltagirone. The

Leggo titles include a freesheet in Rome which launched in March 2000,

and one in Milan which came out two months later.