Monday, November 07, 2005

Less may be more, more or less

Newspaper circulation dropped once again in the last six months, leading to the usual hand-wringing and crepe-hanging. But shrinking circulation isn’t necessarily a bad thing -- as long as it stops real soon.

Normally, I would be the first to agree that rising sales are better than falling sales, unless the products are cigarettes or assault weapons. But at least some of the circulation decline represents a strategic retrenchment by publishers shrewdly targeting their core audience while simultaneously reducing the high costs of superfluous and somewhat spurious promotional circulation.

The burning question, of course, is how much of the recent readership reduction was intended and how much was beyond the control of an industry battling the exodus of some of its patrons to the Internet, iPods and the other forest-friendly media.

On its face, the circulation trend is ugly. Industry-wide, daily circulation slipped 2.6% in the six-month period ended in September, following a slide of 1.9% in the prior six months and a stumble of 0.9% in the six months before that. In the same periods, average Sunday circulation fell, respectively, 3.1%, 2.5% and 1.5%.

To get a better understanding of what’s behind the numbers, however, look at one of my alma maters, the San Francisco Chronicle, where weekday circulation plunged a breath-taking 16.4% in the most recent six months to 419,358.

To be sure, some of the loss is directly attributable to people who have taken to Yahoogling the news or scanning one of the sevral free papers available around town or flat-out fleeing to Missouri.

But much of the sinking circulation results directly from the enlightened decision at the Chron to eliminate unprofitable readers in several of the more remote reaches of Northern California. The audience was not only expensive to serve, but it also wasn’t valued very highly by most of the advertisers paying for it.

Like the now-discredited online merchant who proudly proclaimed that he lost money on every sale but made up for it in volume, the Chron and other metro newspapers are finding that gross circulation numbers are more likely to gross out savvy advertisers than please them.

As the world moves rapidly to focused and empirically verifiable advertising, newspapers have come to understand, albeit belatedly, that they can and must become targeted media. Accordingly, they are paring their circulation rolls to concentrate circulation on the demographics and geographies that advertisers want to reach.

To some degree -- and we can't yet tell how much -- the junking of junk circulation is behind the hefty circulation declines witnessed this year in places like the Baltimore Sun (off 8.5% in the last six months), Boston Globe (off 8.2%), Los Angeles Times (off 2.9%), Miami Herald (off 4.3%), New Haven Register (off 8.2%), Philadelphia Inquirer (off 3.2%), Rocky Mountain News (off 4.5%) and St. Louis Post-Dispatch (off 3.4%), according to a Banc of America Securities analysis of data reported by the Audit Bureau of Circulation, the industry-funded group that monitors readership.

Like any subscription-oriented business required to continuously replace departing customers, the average newspaper has to recruit an amount equal to 56% of its reader base every a year. To battle churn, newspapers aggressively recruit new subscribers with discount subscriptions that require them to continuously scrounge still other fresh subscribers to replace the ones who melted away when the previous promotion expired. It’s an expensive exercise even known to be fraught with fraud on some occasions.

When newspapers do right by their advertisers, they will do well for themselves, too. In right-sizing their circulation, publishers will shed the significant costs associated with promoting, printing and delivering newspapers to people who weren’t serious about taking them in the first place. Quality circulation will merit premium advertising rates, thus protecting and potentially enhancing the top line.

The decline in circulation, while no cause to rejoice if you love newspapers, could be a sign that publishers increasingly understand the need to scale circulation down to a core level of committed, valuable readers.

When readership stabilizes with reliable customers paying full price, advertisers not only will be confident that they are getting what they paid for, but -- we hope -- they will pay handsomely for it, too.

6 Comments:

Blogger Jenny D. said...

But using this argument, you could say that the best newspaper has 100 readers who are perfectly suited to advertisers.

I understand trimming bad circulation, but I suspect that this is more than the industry had in mind.

7:58 AM  
Blogger Al Cross said...

Re the Chronicle cuts in NorCal, many other papers have done likewise in recent years, and that is part of the rationale for the Institute for Rural Journalism and Community Issues -- helping smaller papers take up the slack in coverage of rural areas. Read us at www.ruraljournalism.org.

9:32 AM  
Blogger Lex said...

I certainly understand the financial rationale for this approach.

But coming from News, I've got to raise another question: How is this different from bank redlining? (Other than the rather obvious fact that newspapers, unlike federally-insured banks, aren't regulated by the government.)

2:10 PM  
Blogger Robin 'Roblimo' Miller said...

The "I take a loss on every sales but the volume makes up for it" quote originally came from a 1940s Earl 'Madman' Muntz billboard. Another great Muntz billboard quote: "I'd give them away but my wife won't let me. I think she's crazy."

At the time, Muntz was in the used car business. He later produced the first American sports car, the first low-cost TV, and the 4-track (later 8-track) stereo. Crazy? Maybe. Smart and fun-loving? For sure!

If Muntz was alive today (he died in 1987) he'd surely be an Internet entrepreneur -- and a successful one at that.

8:14 AM  
Blogger Robin 'Roblimo' Miller said...

The "I take a loss on every sales but the volume makes up for it" quote originally came from a 1940s Earl 'Madman' Muntz billboard. Another great Muntz billboard quote: "I'd give them away but my wife won't let me. I think she's crazy."

At the time, Muntz was in the used car business. He later produced the first American sports car, the first low-cost TV, and the 4-track (later 8-track) stereo. Crazy? Maybe. Smart and fun-loving? For sure!

If Muntz was alive today (he died in 1987) he'd surely be an Internet entrepreneur -- and a successful one at that.

8:15 AM  
Blogger stuart888 said...

Understood...but electonic media is taking over. It has been working very well for us at Home Buying Intelligence Magazine. Good points, but times change.

2:42 PM  

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