Faced with falling circ, publishers retool rules

Unable to arrest a decline that has consumed nearly a third of print circulation in the last decade, newspapers are doing the next best thing: Revising the way they count readers to make themselves look better to advertisers.

In the second major overhaul of circulation rules in two years, publishers as of Oct. 1 will be able for the first time to include certain types of free products in their top-line circulation totals. This change follows a rule implemented last year that permits newspapers to count print or digital products sold for as little as a penny as “paid” circulation.

Before publishers started retooling the nose-counting rules in 2009, newspapers used to have to collect at least 25% of the price of a product to count it as paid.

While there are good and valid reasons for many of the changes in the complex circulation rules adopted by publishers in the last couple of years, a not-so-unintended consequence of these changes is that they will make it all but impossible to compare newspaper circulation in March, 2011, with circulation in March, 2010.

Given the dramatic drop in newspaper readership in the last decade, you can’t blame publishers for wanting a do-over. As illustrated below, weekday newspaper sales since 2000 have fallen 28.4% to an average of a bit less than 40 million copies per day. At the same time, Sunday sales slid 30.4% to an average of 41.4 million per week.

This means that only about a third of the households in United States today take newspapers, as compared with a penetration in excess of 100% in the years immediately following World War II when some people bought more than one newspaper a day.Nowadays, of course, news junkies consult their smart phones, instead.

As reported last month by the Pew Center for People & the Press, only 31% of Americans get their news from newspapers, as compared with 44% who check headlines on mobile media and 34% who use the Internet to keep current on current events.

The new rules that went into effect on Friday are part of a two-year effort on the part of the industry to account for the digital and niche print products that represent a growing proportion of their readership.

Whereas newspapers a few of years ago counted only paid print copies in the reports they provided to media buyers, publications today want – and deserve – credit for selling digital facsimiles of the print edition, paid access to some or all of their websites and premium-priced mobile apps.

Newspapers also need to count print editions targeted to such distinct groups as youthful readers, commuters or Spanish-language speakers. Most publishers also distribute free packages of advertising inserts to the homes of non-subscribers.

Because all these channels legitimately enhance the reach of the flagship print product, it is only fair that publishers take credit for them. The new reporting standards also will aid advertisers by giving them a comprehensive and detailed picture of the growing portfolio of products being brought to market by most publishers.

The complex task of revising the rules fell to the Audit Bureau of Circulations, an industry-funded group that sets standards for counting circulation and then monitors compliance among participating publishers. While the ABC supports itself by the fees it charges publishers to audit their numbers, two-thirds of its governing board consists of media buyers.

Although the ABC rule overhaul is far from complete, the changes that took effect last week mean that many circulation directors woke up on Friday morning with distinctly different numbers than they had when they went to bed on Thursday night.

In some cases, the new rules will improve their numbers. In other cases, they will not. Either way, it will make comparisons difficult between this year and last.

“It will be hard to do a straight apples-to-apples comparison,” said Kammi Altig an ABC spokeswoman in a telephone interview from her office in Arlington Heights, IL. “We will be working on some materials to help buyers navigate that.”

One of the biggest changes is that newspapers for the first time have adopted a category called “verified circulation,” which gives publishers credit for free copies of media distributed to individuals who agree to accept them. The new ABC rules (summarized here) actually permit two types of verified circ:

:: In one case, called “requested” verified circ, the recipient has to agree to take a product, which then is included in a consolidated, top-line figure called the newspaper’s “executive summary.” Although verified circulation long has been a major component in the rate bases of many consumer and trade magazines, it is a new wrinkle for newspapers.

:: In the second case, called “targeted” circ, newspapers will be able to count in the “executive summary” all copies of unsolicited papers delivered to an address as long as the homeowner does not object to receiving the copies. The ABC requires publishers to tell the recipient she has a right to stop delivery, but lets the paper count the copy as verified circ if it is delivered continuously to an address for no less than 12 weeks.

Publishers giving away free papers have to pay the costs of printing and distributing them, as well as taking an accounting charge for the circulation revenue they forfeited. Because heavy use of free distribution can have a material impact on the bottom line, it is not likely that most publishers will suddenly become profligate in handing out free copies.

Other rules allow publishers to count the same subscriber multiple times if she signs up for multiple products. It works like this: If an individual agrees to take home delivery of the print product and agrees to buy the online e-edition of the newspaper and purchases a mobile app, the publisher gets to count each product as a separate subscription. Remember, payments of a penny a year count as fully paid.

Publishers also will be able to include certain types of qualifying niche print publications in their top-line circulation numbers. So long as the logo of the flagship paper appears someplace in a copy of the Red Eye or Hoy editions of the Chicago Tribune, for example, the numbers will count toward the over-all circulation of the parent paper.

Some of the potential negatives for publishers include elimination of the “other paid” category and a reclassification of the way they account for the papers they give to educational institutions.

One thing is sure: The new rules and categories will make ABC reports (see a sample of the new format here) more complicated than ever. On the other hand, proponents of the new system argue that the detailed reporting system will make circulation numbers more transparent to advertisers than ever before.

If publishers create the right products and do a sophisticated job of selling advertisers on their ability to efficiently deliver desirable audiences, then the new reporting system could prove to be an asset.

At the same time, however, the dismaying trend illustrated below suggests that publishers need to invest aggressively in creating new products to offset the declining circulation of their flagship newspapers.