Wednesday, October 28, 2009

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?


Anonymous Anonymous said...

Interesting news, but what are the news media channels doing to change the way news is delivered to their consumers, have they woken up to the fact that they need to innovate to capture the attention of their readers, advertisng needs to be better targeted so that it isn't seen as newspaper spam and the readers need to be able to choose the news they want to read in a printed format.... otherwise they will just use the web!

6:57 AM  
Anonymous Anonymous said...

Advertisers aren't stupid, and know these circulation figures have been fixed because they see their ads aren't drawing shoppers as they did in the past. That is the key metric advertisers use. It doesn't do retailers much good to spend money advertising if no one sees their ad.

7:21 AM  
Anonymous Anonymous said...

Discounting isn't the only questionable effort.

Papers are playing frequency games, building in copies that used to be "Bonus Days" into non 7-day frequencies. The customers don't even know they are entitled to the papers and the carriers don't bother delivering them. On top of that, they exploit the rule allowing declared bonus days to be counted in individually paid home delivery as long as they don't exceed a certain number per statement period and audit year.

Then there are the old standards like NIE, pump-and-dump single copy around elimination days, "requested" samples counted under the 4% rule, third party paid, etc.

Probably a good consulting gig out there for a recently laid off circulator, showing advertisers what they've really been paying for all these years.

At the end of the day, advertisers simply need to measure ROI. If your ads contribute to profitability, stay the course. If not, work with your newspaper partner to get there, or find another way to reach your target.

8:20 AM  
Anonymous Neal Lulofs said...

Alan, I'd like to clarify something in your post. You imply that ABC circulation rules are set by publishers alone. This isn't true. ABC is a tripartite nonprofit association consisting of publishers, advertisers and ad agencies. Per its bylaws, the board is led by a majority of buyers. The changes in ABC rules you reference were vetted among all constituency groups for more than two years before being implemented. It should also be noted that next year the rule changes will refine paid circ definitions further by moving NIE and other sources to a new "verified" category.

Neal Lulofs, SVP
Audit Bureau of Circulations

10:00 AM  
Anonymous Anonymous said...

Unless you are selling really high-end products, I would think a home-delivery subscriber is a home delivery subscriber.

2:25 PM  
Anonymous Anonymous said...

the change in rules is helpful...10 years ago, the paper I work for had to WORK to fudge circulation

5:45 PM  
Blogger Steve Ross said...

... and when all else failed, just make up the numbers. The Tribune papers were the most creative at that game just a few years ago.

At least ABC hasn't abandoned counting only full copies rather than, ahem, page views....

7:19 PM  
Anonymous Anonymous said...

Jeez ... it's almost as if ... journalists were an isolated and self-referential class of people divorced from the rest of society!

Why else would they be losing communication and influence?

1:03 AM  
Anonymous Anonymous said...

Steve Ross makes a good point - that publishers are exchanging cooked print circ numbers for cooked page view numbers. Newspaper execs are throwing money at their websites in the hope that someday, some way, somehow it will make a return. Sounds like the glory days all over again.

5:24 PM  
Anonymous Katherine Warman Kern said...

Wow. Thanks for setting the record straight. We will get to a better future so much better when we start trying to understand the story behind the numbers instead of fudging them. Maybe now that advertising $ are down, it is time to get wise . . . My post: When ignorance is bliss, 'tis folly to be wise

Katherine Warman Kern

8:07 PM  
Anonymous Anonymous said...

Newspaper audit companies are a joke. If newspaper companies would devote their time and effort in doing a better job of getting their products to consumers rather than playing games in tacit cohorts with the various audit agencies, they'd be a lot better off.

Having the ABC audit your newspaper is akin to having your CPA do an audit of your tax return.

4:01 PM  
Blogger Steve Ross said...

I still regard the circ numbers as a short-term problem. If it costs $700 a year to deliver the paper daily, and your subscription price covers only $200 of it, and annual ad revenue per print subscriber is down from $880 (the industry average at the end of 3Q 2007) to about $500, you're on the edge and will cut circ.

(And what about the Internet stealing readers, you ask.... and I respond by saying that circ for Sunday papers and morning dailies rose until they cut back on circ promotion starting three years ago.) And yes, circ rose too slowly to avoid dropping share of households that take a print daily.

WSJ called me today -- I had been getting a $99/year subscription (print plus online) offered to educators. Last year I just beat the increase to $150. THIS year they wanted $495 and I've been doing so much traveling that I read the WSJ off my mobile phone half the time. So I cancelled the print copy three months ago. Now they'll sell me print and online for what I pay for the online -- $99 for 39 weeks plus 13 weeks "free."

What this tells me is that (1) the circ folks at WSJ are not dumb and (2) ad revenue is looking up at the J.

Because the NYT (motto: Local ads? Why should we go after local ads?) told me today that ITS ad revenue continues to slide and thus ALL newspapers must be in the same situation although few share the NYT business model, one wonders what WSJ is doing to execute better.

9:57 PM  
Blogger Unknown said...

Article in the SF Chronicle (well, like most of their articles, off the AP Wire) adds a bit of color. Many papers have subscribers that receive the printed copy but pay a bit extra for online access. Now they get counted twice.

8:35 PM  

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