If you think about the free newspaper movement worldwide, you're likely to think of Metro International, certainly the largest player with papers in key cities around the globe, including the U.S.

If Metro didn't set off the explosion in freesheets, as they're called, it certainly gave it a big boost.

Now Metro's in trouble, and its trouble speaks to the troubles facing the entire freesheet business model, which relies entirely on advertising.

Can it even work in these new, tougher times?

At the end of January, Metro closed operations in Spain, and earlier this week the Swedish company announced it was considering a bid to buy the company. It claims a readership of some 17 million in more than 100 cities in 19 countries.

That came as the Metro board met to arrange a $61 million injection of funds after the company found itself short of cash.

"Newspapers in general are very vulnerable for economic downturns, and when advertising is your only revenue you’re in real trouble," says Piet Bakker, professor of cross media content at the School of Journalism and Communication at the Hogeschool Utrecht in the Netherlands.

The result has been a rash of mergers and closures in the industry, with more expected to come.

"The frantic pace of consolidation of the freesheets now reflects the frantic pace of new launches in a few years ago," says Henrik Schultz, head of media research at Argo Securities, an Oslo-based brokerage house.

Still relatively young, dating back to 1995, the industry has yet to prove itself in hard times, or for that matter in good times.

"The freesheet sector has not been profitable overall," says Shultz. He says that there have been certain areas that have been profitable, such as Sweden and, at one point, Spain; however, the overall picture is one of losses. And that is particularly true in the last few years where falling ad revenues have further undermined profits.

Yet Schultz and others believe that there is still plenty of potential.

The problem lies not in the model but in the massive rush of competing papers that have launched in recent years.

"When you look at the media situation in general, it is very clear that readership is not a problem for free papers, meaning that the business model in itself is not the main problem," says Bakker.

Agrees Schultz: "The lack of profitability over the last three to four years is probably because of over-establishment of papers."

As such, the current rounds of consolidation, in which free papers are being closed or merged with other competitors, was necessary.

"I think out of all this will come a freesheet sector that has even stronger growth prospects. The underlying trend of increased readership for free titles and decreasing for paid, that is not going to change," believes Schultz. "In five or 10 years, the longer term, the freesheet business will eventually be attractive."

Bakker agrees: "Having no other revenue stream and having competition is a pain in the neck. Even in the recession, being the free paper monopolist would be a good position."