Halloween week brought another trick — and no treat — to newspaper executives. A scary new FAS-FAX emerged, and for the six-month period ending September 2008, daily circ for 507 newspapers reporting to the Audit Bureau of Circulations dropped 4.6 percent to 38,165,848 copies. For 571 papers, Sunday dipped 4.8 percent to 43,631,646 copies.
The most disturbing part wasn't so much the overall slippage but that the declines are accelerating, even with kinder comparables from the year before. For the six months ending March 2008, daily had shrunk 3.5 percent and Sunday was down 4.5 percent. For the September 2007 period, daily and Sunday had shed 2.5 percent and 3.5 percent, respectively.
The reasons are myriad. Looking for bonus-day perks? Forget about it. Publishers made a point of shucking the extra copies. Live outside the "core market"? You're outta luck. Read us on the Web (please)! Other-paid circulation? Publishers continue to march it to the guillotine.
The Dallas Morning News, for example, issued a press release emphasizing "continued focus on delivering quality audience" in explaining its 9.3 percent loss in daily circ. The paper eliminated all remaining bonus days and third-party copies. It raised its newsstand price, so single-copy sales slipped. Instead, the paper chose to trumpet gains made in circ sold at more than 50 percent of the basic price — i.e. "quality" circ — by more than 8,400 copies.
Rising material costs, in addition to falling ad lineage, mean it is too expensive to produce newspapers that are considered less valuable by advertisers.
If these actions sound all too familiar — the same reasons newspapers have cited to explain away circ declines since at least March 2005 — remember it takes time, cautions newspaper analyst John Morton. When asked if publishers were singing the same tune over and over, pointing to, for example, controlled distribution, Morton says newspapers "didn't do it all at once, and it doesn't happen overnight. Some companies price [their product] out of existence; others take more dramatic action. They just stop delivering."
There's interest in keeping core readers, but some of those are dropping out too.
"It feels pretty much like the same old story," former Goldman Sachs analyst Peter Appert says of the most recent numbers. "It's a combination of secular forces" — a younger demographic's aversion to inky fingers; the dying off of mature readers — "and the proactive efforts on the part of publishers to reduce their newsprint consumption."
One way to gauge how much of the decline is caused by loyal subscribers sending Dear John letters is by looking at individually paid circulation. The category is broken down in two subcategories: copies sold at 50 percent or more of the basic price, and copies sold at least 25 percent but less than 50 percent of the basic price (usually referred to as "discounted" copies). E&P did a breakdown of the top 50 papers ranked according to the September 2008 FAS-FAX to get a better sense of where the drop-offs and gains were occurring. (The Chicago Sun-Times is not included because its September 2007 information was not available.)
Overall daily circ for the group, based on a Monday-through- Friday average, declined by 4.7 percent compared to the September 2007 FAS-FAX (this list includes the national papers). But copies paid at 50 percent or more of the basic price slipped 5.8 percent. Discounted editions grew 6.7 percent — as other paid fell 8.2 percent. There was a surge in electronic editions, which spiked 35.4 percent.
Based on this information in the aggregate, one could infer that people are willing to pay for newspapers — at least discounted copies, since that category showed nice gains. Many times newspapers will move a discounted subscription to full price, which could also account for a decline in the 50 percent or more category.
Exacerbating the situation is an economy gone hellbound. A newspaper subscription is seen as discretionary spending, adds Morton, so some people, even core readers, will drop it.
The effects of pricing
ABC is addressing the pricing issue. In July, the organization introduced wide- ranging changes that affect how newspapers can count circulation.
Beginning April 2009, U.S. dailies will be able to report circulation as long as its paid, even for, say, a penny. This move effectively eliminates the individually paid category.
During its most recent board meeting in New York, a few days after the fall FAS-FAX was released, directors agreed to modify some of the rules in a byzantine fashion. If a newspaper sells more than 5 percent of its circulation below 25 percent of its average price, it will be noted — just not on the FAS-FAX or publisher's statement. That information will be made available to advertisers through an ABC database.
Merle Davidson, chairman of the ABC board and director of media services at J.C. Penney, said in a statement about the latest FAS-FAX, "Many newspapers and their advertisers are under increasing economic pressure. The ABC board is finalizing the implementation of a broad set of sweeping rule changes that will help to lower costs, streamline audits, better define circulation categories, and provide greater pricing and marketing flexibility for publishers."
This is part of the big push on the part of newspapers to throw off the yoke of paid circulation — one they fashioned to themselves during the boom days that in turn was used to justify increases in ad rates. The new changes noticeable at the end of the September 2009 reporting period will try to show advertisers "wantedness" on the part of readers despite the price paid.
It's a natural progression as the industry transitions away from a print-based revenue model toward a digital one. Publishers don't want to chuck the print product entirely — despite the experiment by The Christian Science Monitor, which announced on Oct. 28 it would publish primarily online. The Monitor is a rare exception in the industry, since it receives a subsidy; most newspapers can't afford to make such a dramatic switch. Other publishers, in the meantime, must hang on to core readers willing to pay for the print product.
Jerry Hill, director of audience and new business development at the St. Petersburg Times, was one of the few executives at a big metro that could lay claim to gains made on Sunday. Circ inched up .08 percent to 390,289 copies. Daily (Monday-Friday) slipped 6.8 percent to 268,935. He explains the increases on Sunday had to do with sports events — including the local Rays who improbably went to the World Series for the first time — which generated tons of interest.
Like many of its peers around the country, the St. Pete Times eliminated bonus days, increased single-copy prices, and raised home- delivery subscriptions approximately 12 percent. Here's something else Hill observed in the data: People's lifestyles are changing. They may still want the print edition, but maybe only on weekends. Plus, the company is having success with its free daily product tbt. "We have seen so many losses — more so from people changing how they come to us," he says.
Good reach, but no TKO
There are some other interesting numbers in the St. Petersburg Times' story line that back up Hill's thesis. People aren't taking the print edition as frequently as they once were, but the paper is still reaching them through other vehicles.
For the first time since it was introduced in September 2007, the Audience-FAX reveals whether newspapers made any traction with print, online, and net combined readership. The Audience-FAX tallies readership and market reach for 190 newspapers in four columns. The first three track print readership, based on the past 7 days; online readership, based on the past 30 days; and net combined audience. ABC also audits online unique users for participating newspapers based on a six-month average.
In St. Petersburg, print readership in the designated market area rose 6.3 percent. Online readership slipped 5 percent. Net combined audience, which includes people who read the print and/or online edition (but they are only counted once) advanced 5.6 percent.
Several participating papers made great strides in readership, according to the Audience-FAX. Greenwich Time in Connecticut, for example, grew its net combined audience 22.1 percent year-over-year. The Atlanta Journal-Constitution saw one of the steepest losses in daily circ (down 13.6 percent) but it advanced its net combined audience by 3 percent, thanks to increases in online and print readership.
Daily circ slid 11.6 percent at the Houston Chronicle. The newspaper put a stop to distributing editions outside a 90-mile radius of downtown, cut third-party circ, and hiked newsstand prices (Hurricane Ike also affected circulation). But its focus on core readers and online expansion efforts paid off. Net combined audience is up 4.3 percent year-over-year. In Dallas, online readership grew 21.5 percent for the same period last year.
Is Audience-FAX the answer?
It's high time newspapers start emphatically shouting that they are reaching more readers. But is the effort too late?
In a research note about the FAS-FAX, David T. Clark, an analyst at Deutsche Bank, voiced his concerns over the rapid descent of print. "We're still pretty uncertain how much of the decline is due to reductions in outlying, third-party, and unprofitable circulation, but it is increasingly clear that the circulation trend is in accelerating structural decline. Our best guess is that the secular rate of decline is between 3.0 percent and 3.5 percent," he wrote.
Clark isn't ignoring audience numbers. He pointed to the top 25 participating Audience-FAX papers that made the biggest advances in reach due to their Web sites. Topping the list is the San Francisco Chronicle with a 23.7 percent gain (see chart below).
But print circulation still hogs the majority of the headlines. It raised the ire of one newspaper executive — who could stand in as a proxy for executives who complain that too much emphasis is placed on paid print circulation. He took newspapers to task for highlighting that very subject in a memo released to E&P and other outlets.
"In over three decades as a media research professional, I'm continually baffled by the newspaper industry's insistence on self-flagellation when it comes to reporting circulation declines and the maddening failure to properly position the reality of media transformation," wrote Matt Baldwin, vice president of research at MediaNews Group.
"So what's really up with print? Metro Denver is a perfect example. According to the Denver Scarborough Report (a national media research firm), 1.3 million adults read a printed newspaper at least once a week. That number hasn't fluctuated significantly in over three years, even with the circulation changes documented in the article. Here's what has changed: In that same three years, the weekly unique visitor average for the Denver newspaper's family of Web sites has grown from 827,582 to 1,286,070. Even with some duplication between print and online, there's no question that the Denver newspaper total audience (print plus online) is at an all-time high."
Newspaper analyst Morton thinks that publishers need to stress audience, and that it's an effort that newspapers have to take seriously. "They have to at least emphasize their strengths — and that's a strength," he says.
Meanwhile, ABC is still working out the kinks in its new methods, and Audience-FAX is a work in progress. In September, the top-tier newspapers were set, as directed, to submit panel-based metrics for unique users as opposed to the measurement of their choice, such as their own internal numbers tracked by servers. Internal numbers tend to be higher. Newspapers had the option of using a second set of server data — such as Omniture, for example — as well.
Yet publishers blinked at the eleventh hour, days before the Audience-FAX's release. The matter was tabled at ABC's New York board meeting and is under further review. Several newspapers were upset they had to submit panel-based metrics for a variety of reasons: some don't subscribe to a panel-based service, and some newspapers didn't want to provide numbers that tend to be smaller than server-centric counts.
The hemming and hawing undercuts the need for consistency across the report, whatever the perceived faults of panel-based data — which is used widely in the online world.
ABC Senior Vice President of Communications and Strategic Planning Neal Lulofs says of the Audience-FAX's foothold, "I think its fair to say the print numbers are getting the heavy scrutiny. I have seen more this time around where the papers themselves are looking at the bigger picture." The industry needs to educate and publicize audience numbers, he adds.
Also problematic is the number of dailies actually taking part in the Audience-FAX. The number of news-papers participating has fallen to 190 from 206. Many tier-two newspapers in small markets accounted for the decrease. Participation needs to be higher for this effort to truly coalesce.
According to Randy Bennett, senior vice president of business development at the Newspaper Association of America, the Audience-FAX is on the radar of advertisers. "I'm hearing that advertisers are paying attention, it's a good reference point," he says. "Whether they are making planning decisions based on it or not is unclear. It's clearly a resource to get a quick read. We still have some more work to do to get more newspapers on board and standardize some of the data."
Goldman Sach's Appert (who is losing his position in the company's latest cutbacks) says talking in terms of audience is a "relevant and compelling" story. "The industry is doing a better job selling on that basis, but there is still a lot more work to be done."