Free for All

Decrease Font Size Increase Font Size Text Size Print This Page Send by Email

Inside Toronto's commuter paper war, a battle that left everybody bloodied

For two weeks in March 2000, Vian Ewart woke early each morning and headed for the Toronto subway system, not to get anywhere in particular, but to observe. Starting at 6 a.m., he rode the Bloor-Danforth line from the west end of the city to the east end and back again, moving from car to car, until the rush hour died down at around 10 a.m. Or he would ride the U-shaped Yonge-University-Spadina line from north to south, sitting quietly, watching the other passengers and jotting down notes. He found that most subway riders were under 35, on their way to work or school, and that they travelled alone. There was little conversation. Some people read books, very few read newspapers. Others listened to music, but most stared blankly at the subway walls. “They were like zombies,” says Ewart, who was senior editor of page one at the Toronto Star at the time. If anything, he says, they seemed tired or worried about what the day would bring. “So they weren’t really up for a discussion or chat. They were right for something that would give them a little lift.”

Ewart was part of a team whose challenge was figuring out how to give them that lift. “You have all these diverse people,” he recalls thinking to himself. “What is the one common denominator that they would all be interested in?” He came to the conclusion that it was stories about people. And the way to deliver those stories was a free commuter paper, otherwise known as a transit tab.

Not that Ewart’s scheme for a giveaway paper was born solely out of his two weeks on the subway. In fact, his underground sojourn was part of a larger, ongoing reconnaissance mission, gathering intelligence for a mounting battle in Toronto’s already raging newspaper war. And it was a battle that, looking back, arguably need not have happened.

Transit tabs are skimpy, tabloid-style newspapers, 20 to 40 pages in length, that are designed to be read in their entirety in the space of a 20- to 30-minute commute. They feature short news stories-usually rewritten wire copy-no longer than 600 words; there are no editorials. The trick to their success is not stellar journalism, but their distribution strategy: simply, they’re available free on weekday mornings to users of public transit. And they’re pitched to the lucrative advertising market: 18- to 35-year-olds.

The Swedish firm Metro International S.A. is credited with inventing the concept of free daily newspapers targeting commuters. The idea first took off in Stockholm’s subway system in 1995, and since then Metro has brought its like-named Metro tab to transit systems around the world. There are now 26 editions of the free daily newspaper in 16 countries across Europe, Asia, and the Americas (the first North American edition launched in Philadelphia in late January 2000; the only other U.S. edition is in Boston).

Maintaining that the young readers it attracts don’t read traditional newspapers, Metro International insists its giveaway tabs don’t compete with traditional dailies for readers. Rather, the Swedish publisher says it’s tapping into an entirely new market. The traditional papers don’t always go for this line, however, and create spoiler tabs to protect their markets. And that’s exactly what happened in Toronto soon after Metro International came to town in the winter of 2000, anxious to duplicate its successful free newspaper concept in Canada’s largest commercial market.

At the time of Metro International’s arrival, Toronto’s four major dailies-The Globe and Mail, the National Post, the Toronto Star and The Toronto Sun-were already locked in an intense newspaper war, making the city one of North America’s most fiercely competitive newspaper markets. While the Globe, the Star, and theSun had long sparred over readership, the fight intensified immensely in 1998 when the Post arrived on the scene. With Metro International in the mix, it would only get nastier.

First, though, Metro International needed to find a Canadian partner. Since the Income Tax Act prevents advertisers from claiming tax deductions on ad costs in publications whose publisher is not at least 75 percent Canadian-owned, going it alone was simply not an attractive option. The Swedes first approached Torstar, owner of the Star, and negotiations went well. Representatives from Metro International met with Star publisher John Honderich and Andrew Go, president of Torstar’s Business Ventures, and a tentative agreement was soon reached.

On the very day the document was submitted to Torstar’s board for approval, Metro International’s senior vice-president arrived at the negotiating table to finalize the deal. It was then that the agreement went sour. “The deal that we thought we’d negotiated changed,” says David Galloway, who was CEO of Torstar at the time. “I wouldn’t want to call it a friendly meeting.”

An argument erupted over control of the paper. Torstar envisioned a joint venture with authority over both editorial and business sides of the operation shared by the two companies. Metro International envisioned Torstar as more of a silent partner with editorial and the paper’s day-to-day management lying solely in its domain. Torstar did not agree with the new parameters and ceased negotiations, opting to create its own commuter tab.

Enter Vian Ewart, brought in by Honderich to develop the new paper. After embarking on his two-week intelligence-gathering exercise on Toronto’s subway system, Ewart flew to London, England, where he spent a week observing the success of another commuter tab, Metro. It was launched in March 1999 by Associated Newspapers Ltd., publishers of the Evening Standard and the Daily Mail, after rumours began circulating that the Swedish Metro was preparing a London edition. By securing a trademark on the name Metro and signing an exclusive distribution contract with the London Underground, keepers of the city’s massive subway system, Associated Newspapers managed to effectively shut out the Swedes.

Ewart read the English-bred Metro and got his hands on editions of the Swedish-owned Metro from other parts of the world. He carefully scrutinized both publishing models, taking note of the strengths and weaknesses of each. And while in London he rode the subway-or the Tube, as it’s known there-and saw many people reading Metro.

Upon his return, Ewart drew out his idea for a tabloid and brought it to Honderich. To help design the prototype, they recruited Ian Somerville, the Star‘s art director; Bill Reynolds, then editor-in-chief of eye Weekly (Torstar’s free weekly magazine); and Gregory Boyd Bell, then eye’s news editor. Two weeks and several focus groups later, GTA Today was born. Ewart was named editor-in-chief, Andrew Go was appointed publisher, and Boyd Bell was brought aboard as news editor. With Torstar’s corporate intelligence reporting that the Sun had no plans to also publish a free paper and that the Swedes had packed up and were no longer interested in the Toronto market, the GTA Today team began preparing for the paper’s official launch on July 4.

Meanwhile, at the Metropolitan Hotel on Chestnut Street in downtown Toronto, a suite had been transformed into a newsroom. Computers were hastily set up on desks, dressers, bedside tables-anywhere that room could be found. It was hot and crowded, and energy and excitement filled the air. Not only had Metro International not left town, it was busily putting together its own newspaper. On any given day or night there would be 20 to 40 people crammed into the suite, hard at work. A mix of languages could be heard as editors from Sweden, Germany, and other countries were brought in to help get the newspaper off the ground and train the newly hired Toronto team. The first edition of Metro was slated to hit the streets on June 29, effectively getting the jump on GTA Today.

Excitement was also in the air over at Sun Media, the division of Quebecor that publishes the Sun. Again, contrary to Torstar’s intelligence, the Sun was indeed moving forward with its own plans for a free daily. Lou Clancy, who was special assistant to the Sun’s publisher at the time, was given the job of developing the paper. “We knew there were two other free papers coming into the market,” says Clancy, “so we responded to the competitive pressures.” He sat down at Betty’s, a restaurant across from the Sun‘s offices, and drew out the concept of FYI Toronto on a napkin. Five days later, on June 27, the paper was out, beating bothMetro and GTA Today to the streets.

GTA Today, which had moved up its launch date once it realized its corporate intelligence was dead wrong, debuted two days later, as did Metro per its original plans. So began the battle of the transit tabs in Toronto’s ongoing newspaper war, with the city’s subway stations and street corners serving as the battleground.

Metro immediately got the upper hand when it struck an exclusive distribution deal with Gateway Newstands, which owns all of the newsstand kiosks in the Toronto subway system. Under the agreement, Metro would be the only freebie carried by Gateway, literally leaving GTA Today and FYI out on the streets. There, newspaper boxes and dozens of hawkers from all three tabs dispensed copies to morning commuters.

(Interestingly, Metro International struck a similar deal with the Transport Company of Montreal for exclusive subway distribution of its Montreal freebie, M?tro, which it launched in March 2001 in partnership with GTC Transcontinental Group Ltd. Sun Media soon followed with its own giveaway, Montr?al M?tropolitain, and is now fighting M?tro‘s exclusive subway contract before the Quebec Superior Court. Metro International also sparred with U.S. publishers in 2001 over an exclusivity deal with Philadelphia’s transit authorities.)

With a circulation of 100,000, Metro planned to outlast its Toronto competitors and end up with the entire market to itself. GTA Today had a circulation of 120,000, and its goal was to outlast Metro and “rip a thick, meaty strip out of the Sun’s readership,” recalls Boyd Bell. FYI Toronto’s ambitions were less lofty, however, precisely because of concern over the Sun losing market share to the free tabs.

Unlike the Star, the bulk of the Sun’s circulation income comes from single-copy sales rather than subscriptions, meaning newsstand buyers account for most of its readers. If FYI contained too much news, the argument went, readers would have no reason to pick up the Sun. As a result, FYI was less of a newspaper than it was a promotional tool for the Sun. Readers were often told to buy the Sun or log onto Sun Media’s website (canoe.ca) to get the full stories. In the end, the 50,000-circ giveaway fared the worst of the three tabs.

Not that it was all easy sailing for any of the papers. Forced to go ahead without a Canadian partner, Metrohad to deeply discount its ad rates to match the tax deductions advertisers would have otherwise received had they bought space in a Canadian-owned publication. And the very fact that there were three competing papers fuelled even further discounts, with each tab attempting to undercut the others.

By the time the battle ended less than a year after it began, all three papers had bled vast sums of money; GTA Today says it lost $5 million, while officials at Metro and FYI will only say that their losses were within the same range.

The first sign that the battle was nearing a decisive conclusion came in late January 2001, when Metropublisher Greg Lutes announced at the Advertising Club of Toronto that he was in discussions with a potential Canadian business partner, a Vancouver-based venture-capital company. Torstar’s Galloway learned of the announcement and contacted Lutes the very next day. “I called them up,” says Galloway, “and basically said, ‘We’re at a standoff. This is what we consider our market, so we’re not going to back down. This is what you consider your business, so you’re not going to back down. So we are both going to lose a lot of money over the next few years. Why don’t we put the two papers together? Fifty percent of a profitable paper sounds a lot better than 100 percent of a losing paper.'”

“I was absolutely thrilled when I got the call from David Galloway,” says Lutes. “If you look at a situation where you can eliminate a competitor and draw on the resources that Torstar brings to the table-from editorial and IT and human resources and all those things that we had no support on-it was a marriage made in heaven.”

By all accounts, the second round of negotiations went smoothly, with issues such as editorial control reopened for discussion. “I think we’d both proven to each other that we were both pretty strong in this business,” says Galloway. After just 10 days they had an outline of what the joint venture would entail: the creation of a new publishing company, as well as a new sales company. To accommodate the Income Tax Act’s Canadian ownership rules, Torstar would own 75 percent of the publishing entity, while Metro International would hold 75 percent of the sales company. The end result was a 50/50 partnership with Metro International and Torstar sharing the profits. As for the actual papers, Metro and GTA Today would morph into Metro Today (a year later, it reverted to the name Metro).

While the suits met to discuss the logistics of the merger, the editorial staff from both papers continued to compete as rumours of the deal floated through their respective newsrooms. In early March 2001, about a week before the merger was publicly announced, Galloway called Ewart up to his office and told him about the plans. “I know you’ve put a lot of your time into GTA Today, and a lot of effort,” Galloway told him, “and we appreciate it.”

Ewart listened and then told Galloway that he didn’t agree a merger was the best option, arguing that the real battle was with the Sun, not Metro. “I think we already had Metro beaten and I think we could have taken on the Sun,” Ewart says. “We could have done some serious damage.” Galloway took in what Ewart had to say, but his mind was already made up. “We can still beat the Sun, even in the merger,” he told him. “Perhaps,” Ewart replied.

Three months after the merger, the Sun quietly stopped publishing FYI Toronto. “We sat down a few months after Metro and Torstar merged and looked at the long-term prospects for FYI, and with the downturn in the market it just didn’t make financial sense any longer,” says Clancy. “You try things. You have to have the courage to try things and you have to have the courage to say, ‘No, this isn’t working.'”

As for the Sun itself, it emerged relatively unscathed, largely because it launched FYI to counter Torstar’s planned readership grab. According to NADbank, which monitors circulation figures for the Canadian newspaper industry, the Sun‘s readership has held up, particularly in the 18-to-35 age group. In that respect, at least, FYI performed admirably as the proverbial spoiler.

Still, now that only one free paper remains-the tab that was essentially in the works when the original negotiations between Torstar and Metro International collapsed-the entire battle does appear to have been a huge waste of time and money. Predictably, though, the warlords themselves see things differently.

The Star‘s Honderich, for one, argues that the clash with Metro International was anything but a waste. “We battled them toe to toe and we ended up in the agreement with 50 percent ownership of the paper,” he says. “We have a deciding say in the destiny of the transit paper in this city and that is very important.” Moreover, argues Honderich, Torstar now has a stake in the number one and number two newspapers, by circulation, in the city of Toronto-the Star and Metro respectively. “The effort that was extended and all the money were very much worth it to protect our position.”

Even Clancy, whose involvement was more of a rear-guard action than an offensive tactic to increase market share, puts a positive spin on the costly battle. “I think that it was a worthwhile process,” he says.

Protectionism aside, Clancy observes, there’s clearly a market for a transit tab: Metro‘s circulation now stands at 190,000, and most boxes around the city are empty by 10 a.m. Not that Sun Media is in a rush to jump back into the Toronto fray, but it has learned valuable lessons from its defeat. As Clancy concludes, “We would do it differently if we went at it again.”