XCity – City University Journalism Department Magazine 2010

There’s no such thing as a free paper

Metro’s blue metal bins have marked its territory on the tube since 1999, but with the rights to the bins up for renewal, upstart rival thelondonpaper could gain ground. John Sunyer looks a few stops ahead to the unfolding battle for supremacy

At East Putney in London, piles of red-tops and broadsheets are heaped onto the newsstand. There’s no queue: the papers aren’t selling well. But the newsagent is used to it. Every weekday commuters grab a free paper from the blue bins beside his stall. Metro, the first giveaway daily paper in Britain, is now the paper of choice for the morning commute.

Most of the passengers packed onto the 7:45 to Upminster have picked one up. One schoolgirl scans the gossip from the ‘Guilty Pleasures’ page, while a businessman in a pinstripe suit reads about Boris Johnson’s latest gaffe. A young man sitting beside them reads about the sportiest parrot in the world. All flick through the same paper: a mixture of bite-size news and entertainment designed to be read in 20 minutes.

By midday, discarded papers litter stations and tube carriages. Most are Metros. But this could all change as the Daily Mail & General Trust’s (DMGT) 10-year contract to distribute their paper on the tube network expires in March.

In the next few months, Transport for London (TfL) will decide the terms of the new contract, which will be awarded this Autumn. Rupert Murdoch’s thelondonpaper, launched in 2006, will almost certainly challenge Metro and try and win exclusive rights to distribute newspapers from the boxes, known in the trade as “dump bins”, inside the 240 stations on the tube network.

Why? Because, while the other London freesheets have lost huge amounts of money, Metro has been turning over a profit estimated at around £8million annually. The paper is now distributed to approximately 750,000 of the capital’s residents, almost 10 times its circulation a decade ago. But are the ubiquitous blue bins the real secret of its success?

Distribution from the Underground network is central to Metro’s success, says Richard Addis, former Daily Express editor and co-owner of media consultancy firm Shakeup Media. “Exclusive distribution is what everyone looks for when it comes to free newspapers.

“The Underground system gives you a very good base readership, and having metal boxes in every station is a good and simple way of ensuring the paper gets to lots of people. It’s very, very important for Metro to hang on to this.”

But Steve Auckland, the managing director of DMGT subsidiary Associated Newspapers’ free paper division, downplays the bins’ significance. “When we first launched Metro I think it was quite important to have them in the bins, because the advertising agencies were sceptical about the idea of freesheets and whether anyone would want to read them. So for a brand like Metro, which is now reasonably well known, it’s a lot less important than it used to be. With London Lite, we’ve proved that hand distribution can work.”

Key to Metro establishing its brand was the 10-year length of the original contract. Auckland says: “It took Metro about four years to get itself into profit. If you look beyond the payback on the business since it was launched, it’s making a decent profit now, and we’ve paid back our debt. But only just. It’s quite a long build up on these products to get them into profit.”

TfL is refusing to comment about the cost and length of the new contract. In 2005 Mayor Ken Livingstone said that the contract was costing DMGT as much as £1million each year. Some media analysts, however, predict the cost of the new contract will be considerably higher.

Auckland confirms that Metro will put in a “competitive bid”, although the paper “is not prepared to be a hostage to fortune”. And outside London, the blue bins will be proliferating in different cities. Parent company Metro International has already secured long-term contracts beyond 2012 to distribute papers in underground networks in Leeds, Liverpool and Manchester, amongst others. It has also won distribution on major overground networks serving London. Although the tube market accounts for around 25 per cent of Metro’s nationwide circulation, Auckland says the TfL contract is “desirable, but not crucial”.

Not everything has gone Metro’s way, though. Spanish Metro folded in January, largely because of the decline in advertising revenue. And the Irish branch recently merged with Tony O’Reilly’s Independent Group in a bid to cut costs. London Lite, also owned by Associated Newspapers, records heavy losses as well.

Metro’s profit margin has also suffered in recent times, partly because its business model is based heavily on advertising. On average, adverts make up 47 per cent of Metro, 30 per cent of thelondonpaper, and 34 per cent of London Lite.

When you consider The Guardian’s report that London Lite loses between £10-£15million a year – and thelondonpaper is expected to lose around £15million a year – the outlook for Metro isn’t good.

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What do people think of the freesheets? XCity finds out.

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For City Journalism professor and media commentator Roy Greenslade, it’s nothing to do with profit. He says making a multi-million pound bid for the upcoming contract shows “no business logic”. “What we have here is an old fashioned newspaper war between two newspaper moguls [Lord Rothermere and Rupert Murdoch] who refuse to give in. Whether they should actually give the paper up might be something on the minds of James and Rupert Murdoch on one side and the finance chiefs on the other. The only sensible thing would be to give it up.

“I think the feeling is that if you could obtain a monopoly that you would mop up the advertising and it would fall into profit,” says Greenslade. “London Lite exists to ensure that Murdoch doesn’t have it all his own way with thelondonpaper, and to make sure that he doesn’t get his hands on all the supposedly lucrative advertising. Although that has disappeared.”

Addis agrees that thelondonpaper will be Metro’s biggest competitor for the tube distribution contract. He says: “It will be another way for Murdoch to make life more difficult for them.” Addis attempted to launch his own London freesheet three years ago, when Express Newspapers owner Richard Desmond complained to the Office of Fair Trading that Metro had an unfair monopoly on the tube. An afternoon slot for distribution via tube stations was duly established. But Addis – and other news organisations – ultimately decided that TfL’s contract was too expensive.

Despite the current slump in advertising revenues and TfL’s hefty asking price, Addis sees a positive future for well-established freesheets. “They’ve been the hardest hit because all of their revenue comes from advertising,” he says. “But when the advertising revenue returns sometime after 2012, freesheets will blossom again.”

While thelondonpaper refuses to comment whether it will bid for the contract, Auckland is not so reticent. He says: “Metro will continue to be a morning paper. If we lose the contract to a higher bid we will hand-distribute from outside stations. People will still have a copy of our paper in their hands before they get inside the station.”

For the passengers on the platform, Metro is part of the daily commute. The lightweight format seems to suit short journeys and busy lives. Theatre assistant Amber Leah, 31, says that the free papers are a “perfect distraction” from London’s overcrowded public transport. “Plus,” she says, “broadsheets are too big for the tube. I don’t have time to read long articles before work. Does anyone?”

But, having created demand for their product, DMGT now face a tug of war for the best spot in the market place.

Could it be the end of the line for Metro? Let the bidding commence.

Related posts:

1. XCity investigates the London freesheets