Newspaper circ stats: Murkier than ever

At a time newspapers ought be striving to earn the confidence of their remaining advertisers, they are reporting not just record low circulation numbers but also the murkiest figures ever.

The historic 10.6% drop in circulation reported on Monday would have been trouble enough for the ailing newspaper industry. But publishers managed to make matters worse by taking unprecedented liberties with the way they tally the discount circulation that represents a significant percentage of the readership at many papers.

While publishers previously were required to collect at least 25% of the cover price of a paper to report it as paid circulation, the industry changed the rules as of April 1 to permit a copy of a newspaper to count as being fully paid if it sells for as little as a penny.

The consequence of the change in the discounting rule is that circulation figures are all over the map. As we will see in a moment, circulation cratered at one newspaper that reduced discounting but remained comparatively healthy for a competitor that continued to offer promotional pricing.

Both approaches are perfectly legal under the rules the publishers set for themselves at the Audit Bureau of Circulations, the official-sounding organization they fund to monitor the way they count bellybuttons. So, all’s well in Publisher Land.

But the inconsistent circulation data is bound to not merely confound advertisers but also cut into the industry’s fragile credibility with them. Here’s a case in point:

Of all the circulation declines reported this week, none was more eye-popping than the 25.8% drop in the last six months at the struggling San Francisco Chronicle. The plunge at the Chronicle seems even more dramatic when compared to the 7.2% tumble reported at the papers published by its rival in Northern California, MediaNews Group.

While there may be many explanations for the disparate results, both publishers agreed the principal reason for their divergent performance is the way they approach discount circulation.

Mark Adkins, the president of the Chronicle, says his newspaper has all but sworn off selling newspapers at discounted prices in the interests of boosting subscription revenues to offset a long-running decline in advertising sales.

Where 25% of the subscribers to the Chronicle paid a discount price a few years ago, fewer than 10% of its subscribers get a bargain today. The paper has raised prices aggressively, charging $1 for a single copy in its home city and double that – or more – in distant locales.

Adkins credited the aggressive circulation-pricing strategy with helping the paper reduce losses that previously had surpassed $1 million a week. He is hoping the paper can at least break even in 2010 after suffering annual losses in excess of $50 million.

At MediaNews, president Jody Lodovic says his company has made a strategic decision to keep subscription prices low to hang on to the largest number of subscribers for the sake of the long-term business.

While Adkins said the Chronicle today derives some 40% of its revenues from circulation (and hopes to boost it to 45% next year), Lodovic said MediaNews pursues the more classic formula of generating 20% of its sales from circulation and the balance from advertising revenue.

Lodovic said the Chronicle made a “short-term decision to boost pricing” to cut its operating loss. “We consider ourselves to be longer-term thinkers,” he added. “We’ll compare notes in two or three years from now to determine who had the best strategy.”

In the meantime, the deep drop in the Chronicle’s circulation means that MediaNews dramatically has increased its dominance in Northern California.

MediaNews has a combined daily circulation of 712,868 among such properties as the San Jose Mercury News, the Oakland Tribune and Contra Costa Times. The daily circulation of the Chronicle, which used to bill itself as the largest paper in Northern California, has shriveled to 251,782.

Thus, MediaNews outsells the Chronicle by 2.8 copies to 1. Six months ago, the edge was 2.2 to 1.

Will advertisers understand the difference in the way the newspapers count their subscribers? Will it matter when they make their buying decisions? Or will they be too confused to bother with newspapers altogether?