Why rise of free papers around the globe may have limits

The company is taking over a newly-constructed floor in the Lutyens-designed building that is acknowledged as one of the landmarks in the former home of Britain's press, known variously as the street of ink and the street of shame.

Reuters occupied 85 Fleet Street from its opening in 1939 until the news agency decamped in the summer of 2005 to Canary Wharf.

Since then, although the listed exterior and the extravagant entrance hall remain the same, the interior has been entirely refurbished.

The newspaper industry has also been refurbished in recent years, and Metro International is proof of that. As the publisher of nine million free newspapers a day, in 100 cities in 21 countries, it has been responsible for a sweeping change in the reading habits of millions of people across the globe.

Its launch of a free daily paper in Stockholm 12 years ago started a trend that has since led to the publication of freesheets in almost every major city in Europe, the United States, Canada and Australia. Several South American and Asian cities have daily frees too. But making profits from free papers has proved a difficult trick to pull off. Metro International finally managed to turn a profit for the first time last year, but it has just posted an operating loss of £6.5 million for the third quarter this year. With masterly understatement, its chairman, Dennis Malamatinas, called the result "disappointing".

It was certainly an unwelcome greeting for the new chief executive, Per Mikael Jensen, who started work this week. He inherited the job from the man who pioneered what is often called "the free revolution", Pelle Tornberg, who resigned earlier this year.

Jensen, the former head of Denmark's largest free-to-air TV channel, has arrived while the company is conducting a strategic review that is aimed at improving the company's financial performance. But could it also lead to retrenchment, with the closure of certain titles?

No-one is saying just now. Indeed, the company's chief operating officer, Chris Spalding, sounds upbeat, citing the move from Mayfair to Fleet Street as symbolic of the company's positive outlook for the future.

Metro International's choice of London as its centre of operations is somewhat odd. After all, Britain is one country where it does not publish, having been effectively beaten to the punch in 1999 by Associated Newspapers, the publisher of the Metro UK titles (and also the Evening Standard).

Metro UK now publishes 10 editions in urban areas across Britain, totalling 1.35 million copies a day, and it has been making a profit for years. It has also forged a working relationship with Metro International, which sells pan-European advertising on its behalf. But ads can be sold from anywhere. So why is a Swedish-registered company quoted on the Stockholm stock exchange operating from London? Spalding says without a blink: "Because it's a great aircraft carrier, the perfect hub from which to reach the rest of the world."

The real question, however, is whether Metro International can sustain its current global reach. Earlier this week, Gavin O'Reilly, the chief chief operating officer of Independent News & Media, made a hard-hitting speech about the state of the newspaper industry in which he was less than sanguine about free newspapers.

It was not a viable business model, he suggested, a clear hint that his own company's freesheet in Dublin - launched as defence against a Metro title jointly published by Metro International and Metro UK - is proving to be an expensive on-cost. Other publishers elsewhere in the world have also found the going tough.

My long-held view is that frees represent a kind of interim stage in the gradual move from newsprint to screen. On the other hand, I readily concede that hundreds of thousands of people, especially the affluent young, nicknamed the urbanites, are being lured into the newspaper-reading habit by freesheets.

What none of us know is whether, a little later in life, this will lead them to graduate to paid-for titles.