Dead Trees
Newspaper Circulation: Parsing The Numbers
Louis Hau, 04.25.08, 7:05 PM ET
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Come Monday, don't expect to see many newspaper companies breaking out the
champagne and party hats. It'll be time once again for the Audit Bureau of
Circulations' semi-annual release of U.S. newspaper circulation figures.
A fresh batch of ABC numbers has seldom been a cause for joy during recent
reporting periods as print circulation continues to tumble amid the migration
of readers to the Internet.
But as you absorb the sure-to-be lower numbers, it's worth remembering that
this ritual doesn't provide a complete picture of the newspaper industry's
overall health. The industry's most pressing problem isn't the state of print
circulation, which has been in decline since the mid-1980s. Instead, it is
figuring out how to generate more advertising revenue from both its shrinking
but still lucrative print product and its growing online properties.
In one sense, circulation data can understate the newspaper industry's
financial challenges. Declining circulation can affect how much a newspaper
charges for print advertising, its biggest and most lucrative source of
revenue.
But print advertising has been sinking faster than circulation as the slowing
economy and new Internet ad platforms like Craigslist have decimated newspaper
classified ads, particularly for the help wanted, real estate and automotive
categories.
Newspaper print ad revenue plunged 9.4% in 2007 to $42.2 billion, according to
the Newspaper Association of America. Meanwhile, average daily circulation at
leading U.S. newspapers fell 2.6% during the six months ended Sept. 30, from
the same period a year earlier, according to ABC. While the two statistics
don't measure the same time period or sample size, the trend is clear: Print
circulation is holding up better than print advertising.
But in other ways, circulation declines can sometimes exaggerate a newspaper's
operational problems. Many papers have been deliberately reducing circulation
as they pull back from heavily discounted subscriptions and efforts to draw
readers in outlying parts of their respective circulation areas where they have
lower market penetration.
Doing so saves on marketing and newsprint costs and results in an "improved
quality" of circulation that appeals more to advertisers, says Ed Atorino, a
newspaper analyst for Benchmark & Co. in New York.
One such example: industry bellwether Gannett (nyse: GCI - news - people ).
During an analyst conference in New York in March, the publisher of USA Today
and more than 80 other daily newspapers explained why the company's February
operating results included a cumulative 4% decline in daily circulation and a
6% drop on Sundays.
"We've made some strategic decisions to cut areas where the circulation is not
profitable and it's not serving the key audiences that our advertisers are
looking for,'' said Bob Dickey, president of U.S. publishing for Gannett. "In
some markets, we've also leveraged some new price increases and there's always
a pushback when we raise our prices."
Similarly, New York Times Co. (nyse: NYT - news - people ) Chief Executive
Janet Robinson said, during the company's annual shareholders meeting this
week, that a key part of the company's efforts to cut costs was its "shift away
from less profitable circulation by reducing promotion, production,
distribution and other related costs."
Another reason why circulation declines aren't a wholly reliable barometer of
overall performance is that the print editions of newspapers are incrementally
accounting for a smaller proportion of a newspaper's total ad revenue. In 2007,
Internet advertising accounted for 7% of the industry's total revenue, up from
5.4% in 2006, according to the Newspaper Association of America.
The transition to the Web is occurring more quickly at some newspaper chains.
For instance, McClatchy (nyse: MNI - news - people ) reported this week that
its online advertising revenue accounted for 11.3% of total ad revenue in the
first quarter, up from 8.6% total ad revenue for full-year 2007.
New Game of Advertising
Black Web's Commercial Bulls Eye
http://www.forbes.com/business/2008/04/25/newspapers-circulation-advertising-biz-media-cx_lh_0425newspapers.html
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