By: Jennie L. Phipps

Can Papers Compete With Transit Freebie?

American newspaper publishers anxious about the launch of the free
Metro newspaper in Philadelphia might learn some lessons from European
counterparts who’ve battled Metro for a while.

In Stockholm, Sweden, the city’s largest newspaper, Dagens Nuheter,
didn’t flinch when Modern Times Group introduced their free newspaper
distributed on commuter trains. The paper has nearly 362,000 home-

delivery customers and virtually no single-copy sales.

‘We didn’t look on it as a real newspaper,’ says Thomas Axen, president
of Dagens Nuheter. All the news in Metro was gathered through agencies
rather than its own staff and it lacked an editorial page and pithy
columnists. ‘We didn’t think it was a threat because we didn’t believe
anybody would read it,’ Axen says.

Five years later, Axen believes that was a mistake. Metro now claims a
press run of 250,000 in Stockholm and a readership of twice that,
making it the second-largest paper in the city. A regretful Axen says
people do read Metro and that they ‘regard it as a newspaper of high
quality.’ And worse still, ‘Metro sells lots of ads and makes tons of
money,’ Axen says.

In Philadelphia, where Metro has been in business about six weeks, it’s
too early to tell how successful the publication will be. The deal
Modern Times Group initially cut with the Southeastern Pennsylvania
Transportation Authority (SEPTA) is similar to the one made with the
government agency managing rail transportation in Stockholm. Metro
agreed to pay SEPTA a minimum of $45,000 a month to distribute the
paper on train platforms, on trains, at bus stops, and on buses. SEPTA
also gets one page of free advertising each day and can exercise
control over editorial content.

In practice, the papers are only available on the concourse, although
Metro has announced that is beginning to distribute papers onboard

Will legal action be futile?

Every major newspaper company operating in the Philadelphia region,
including Knight Ridder’s Philadelphia Inquirer and Daily News, The New
York Times, and Gannett Satellite Information Network Inc. (doing
business as USA Today), has sued Modern Times on two grounds. The suit
contends that the publication’s distribution arrangement gives the
company unfair advantage, and it argues that because transit officials
have authority to oversee the editorial content of the publication, the
publication violates First Amendment rights to a free press.

So far, the courts have decided in favor of Modern Times, but Michael
A. Schwartz, an attorney with Dechert Price & Rhoads, representing the
newspapers, expects ultimately to prevail. ‘A government transit
authority shouldn’t be able to sell access to public property to the
highest bidder, and they shouldn’t sponsor a single newspaper to the
exception of all others,’ he says. ‘The agreement allows SEPTA to
exercise editorial control. Even though they say they’re not doing
that, they have that ability. That ability is enough to chill speech.’

Axen, who also went the legal route in Sweden, looks back on it as a
waste of time and money. ‘You can’t fight them; you have to compete
against them,’ he says. To date, Dagens Nuheter hasn’t started a
competing publication.

In London, Associated Newspaper Group, publisher of the mass-

circulation Daily Mail, did just that. When it became clear that Modern
Times Group was moving from Stockholm to London, Associated licensed
the name Metro and started its own subway publication. Modern Times
Group sued to regain the name and lost. Ultimately, it ditched its
London effort.

In the aftermath, Modern Times Group’s CEO Pelle Tornberg told the
World Reporter last October that he didn’t mind losing London because
he thought he could make much more money in Philadelphia. Now there is
also speculation that he is planning a move into San Francisco as well.

Representatives of Associated Newspaper Group haven’t been willing to
discuss publicly their winning strategy, but Constantine Kamaras of the
Paris-based World Association of Newspapers, which held a seminar last
week for European publishers concerned about competition from Metro,
says Associated won big.

‘The project has quickly transformed itself into an aggressive,
product-development venture which taps a very important market – young,
non-newspaper readers,’ Kamaras says. ‘Other newspapers should
recognize this is a new paradigm and take advantage of it.’

Certainly, it has been profitable for Modern Times Group, which went
public in 1997. The company now trades on the Stockholm exchange and on
Nasdaq (MTGNY). The company lost money in 1997, but was in the black by
the middle of 1998. Its stock is currently near its 52-week high, which
was $285 a share on Jan. 24. That’s a significant increase over last
year when it was trading at around $75 a share. Most of the company’s
revenues come from television, but a successful expansion of the Metro
newspapers couldn’t hurt.

Will Philly become cash cow for Metro?

Zachary Stalberg, vice president and editor of the tabloid Philadelphia
Daily News, says the 24-page Metro has three paragraphs on every
subject. ‘If you care at all about writing or substance either as a
reader or a journalist, it has to make you squirm,’ he says.

And the free Metro hasn’t hurt the Daily News’ circulation. ‘We’re
running about the same as we were last year – 160,000,’ Stalberg says.
‘We’re up in some SEPTA locations and down in others.’

The 60-cents-per-copy Daily News, which prides itself on great sports
coverage and columnists with an edge, estimates that it sells about
15,000 papers near transit entrances. But it doesn’t have the right to
sell on platforms or on buses – where Metro can distribute its papers.
‘If they can be there, we want to be there too,’ Stalberg says.

In Stockholm, Axen describes Metro as thick with classified employment
advertising and small retail ads. His company’s own research says
Metro’s readership is young, blue collar, and primarily made up of
people who weren’t previously newspaper readers. ‘We can’t figure out
precisely how many readers or how much money they take from us, but I
believe it is more than we think,’ he says.

Philadelphia’s Metro also plans to make its money off advertising.
Floyd Weintraub, vice president of Metro USA, says his company is ‘in
negotiations’ but hasn’t attracted department stores, automotive, or
real estate. Stalberg says most of the current ads appear to be give-


On the editorial side, Metro’s Editor Mary Ellen Bornak, who previously
edited The Courier Times in Levittown, Pa., a daily in the wealthy
suburbs of Bucks County, north of Philadelphia, says she’s proud of
what her staff of 16 is creating. ‘We don’t drill down, but we have
most of the news that the other papers have, just in a brief format,’
she says. ‘And that’s all most people think they need to know.’

Or at least it’s what Metro thinks its target audience wants.


Jennie L. Phipps ( is an independent
writer and editor based in Bloomfield Hills, Mich.

(c) Copyright 2000, Editor & Publisher

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