The decision by Trinity Mirror to “hand back” four of its Metro franchises to their ultimate owner, dmg media, “because of questions over profitability” is not quite as it may seem.
What it really illustrates are the divergent strategies of two major publishers. Trinity Mirror, acutely aware of the difficulties of selling regional newsprint titles, is eager to forge ahead with a switch to digital.
By contrast, dmg media, the publishing arm of the Daily Mail & General Trust (DMGT), has managed to make a huge success of its nationally distributed free paper, Metro. It has found a way to make newsprint pay, and handsomely at that.
That’s the reason it feels confident enough to increase its national distribution by 10% from 1 October, raising its total daily figure to a total of 1.47m.
In a sense, both publishers stand to gain from Trinity relinquishing the Metro contracts for Scotland, Cardiff, Bristol and the East Midlands.
Although those franchises are profitable, Trinity thinks the returns too marginal. Then again, aside from a single seller in Scotland, it didn’t set out to secure advertising for its Metros for obvious reasons: it needs its own papers in those regions to maximise the advertising take.
It is holding on, however, to its four other Metro franchises in the larger cities - Manchester, Liverpool, Birmingham and Newcastle - because, despite the competition with its own titles, it sees a benefit is doing so.
In fact, Metro is read by many more people in Birmingham and Newcastle than the print versions of Trinity’s own titles.
Metro’s managers are evidently delighted with the fact that Trinity is handing over four franchises and would be even more pleased if they could have the other four (plus the single contract, in Yorkshire, held by Johnston Press).
A Metro source told me the paper’s management were sure that the titles would make “an instant and significant” contribution to the bottom line. They believe the four can make healthy profits despite Trinity Mirror arguing otherwise.
It is well to recall that the original contracts between Metro’s owner and the regional companies were drawn up in order to defuse arguments about Metro’s intrusion into the regions.
Giving regional publishers the chance to print the papers and enjoy a portion of the advertising revenue can be seen as something of a truce deal.
Since then, as the digital revolution has rolled on, the situation has changed, as witnessed by Trinity Mirror’s online ambitions. Meanwhile, Metro has become a standout counter-revolutionary newsprint success.
I mistakenly wrote in May this year that Metro’s profits - which dmg media refuses to break out from its overall figures - were slight. In fact, I am reliably informed that the paper makes more than £1m a month and, possibly, much more.
One major reason for that is the revenue it enjoys from classified advertising. So it’s no wonder that dmg media, which will have 75% of Metro in its grasp when it assumes responsibility for the Trinity quartet on 1 January 2017, would like to control 100%.
London remains its most lucrative region by far. Most of the extra copies it will distribute from next month will be in the capital, with a greater presence on buses. Some 900,000 copies will be available each morning in the metropolitan area - up from 763,000 - and will therefore reach roughly the same distribution total as the London Evening Standard.
Charlie Cox, Metro’s chief executive, called the expansion a “testament to Metro’s continued success”, while its editor, Ted Young, referred to “the extremely low return rate we see on our London edition... [so] we know the appetite is definitely there for these extra copies.”
