Baugur-backed Frettabladid is to merge with Posthusid Arvakri, the company responsible for Morgunbladid, it emerged this weekend.

"Under the deal, Frettabladid (see Wikipedia for proper Icelandic spelling) will become the freely distributed sister paper of Morgunbladid, and 24 Stundir (the current holder of that title) will be merged into Morgunbladid itself, which is a paid-for newspaper. The deal will mean the loss of dozens of jobs. The reason given is the dramatic shift in the market with a slump in advertising sales and record prices of printing paper," reports Icenews.is, which has the full news story (my Norwegian report of yesterday is here).

To say that another Baugur-backed freesheet bites the dust, might be an exaggeration, but it does look like the end of Baugur's ambitious newspaper adventure. After all, Frettabladid - the "quality" door-to-door distributed freesheet read by some 70 per cent of the Icelandics each day - was supposed to be the media business model of the future, a concept that would turn the world's newspaper industry upside down when Dagsbrun, with Baugur as its main investor, launched it internationally - with Denmark as the first stop.

The news of Frettabladid's arrival in Denmark caused nothing short of a full-blown freesheet war, with a number of new freesheets rushed out to fend off the new Icelandic competition. It was August 2006, the Icelandics had announced their ambitious plans many months before their new baby saw daylight, so early in fact that all their main competitiors all had new freesheets on the street  before Nyhedsavisen finally started publishing 6 October 2006.

I'm digressing of course; we all know how the Nyhedsavisen saga ended last month. But the project was so ambitious, some would say so overtly ambitious, that the end of the saga seems grim. The freesheet was called reckless, immoral even, by its competitors, seeing how it brought down advertisement rates and earnings for other newspaper companies. Its ambitions, and the atagonism they sparked, almost seem like a classic tale of hubris and nemesis, something that has the making of a proper Greek tragedy. But back, to Frettabladid

It was launched in 2001, drawing inspiration from free publications on the continent. At first it wavered, and one year after its inception it had to file for bankruptcy. But only a few days after the bankruptcy it was announced that a group of investors had bought the publishing rights and publication was promptly resumed.

Initially the identity of the new investors was kept secret but in face of heavy criticism and speculation, it was revealed that Baugur Group, a leading retailer and one of the most powerful Icelandic companies, was among the biggest new shareholders. The exact proportion of its shares was however still kept secret as well as other details about the ownership. The fact that Baugur had acquired shares in Fréttabladid proved to be a highly contentious issue and the criticism was fuelled by the apparent secrecy surrounding the deal (as has been the case with so many of Baugur's deals).

Now the concern at the Saga Island is that the new merger will mean an end to media diversity as it effectively creates a newspaper monopoly (see Icenews.is for more