Charging Your Readers More for Less — Bad Idea?

By: Jennifer Saba

(Commentary) A few weeks ago on an unusually warm November evening, I had the pleasure of catching up with a leading newspaper executive ? who shall remain unnamed ? over a few glasses of Chablis. We chatted easily about the industry until we got to one subject that was stuck in his craw. Even at this late date, he remains dismayed over the state of circulation and how the industry is buried under a barrage of bad news.

This executive noted the hopeful trend that is catching hold in newspaper suites: renewed efforts to wrench more circulation revenue. My drinking companion was curious how far that strategy could advance, given the tricky formula of raising prices ? how high can you go? ? to combat sinking print readership.

It got me thinking: Even as publishers may blame sticker shock to explain huge drops in copies sold, circ revenue could still go up. What would be telling ? and what we’ll probably never know, thanks to new rules put in place by the Audit Bureau of Circulations ? is just how much a newspaper is discounting. Not that we really knew under the old rules, when ABC counted 50% or more of the basic price as “fully paid.” In any other industry, most of that would be considered wholesale.

In other words, are these price increases holding, or has this strategy already run its course?

My colleague Mark Fitzgerald and I have been covering this move in these pages over the past two months (and at our “Fitz & Jen” blog). It is beneficial to the health of the industry. There’s still a good number of people who want to read the print edition: more than 30 million daily copies were sold during the six months ending September 2009. But you’d never know it, for all the newspaper industry’s pouting and shoe-gazing.

These consumers prefer to get their hands inky, and the numbers clearly show there’s no reason to put the print product on ice. Raise the prices, and reach out to that segment in any way possible.

But here’s where I see newspapers messing up a good thing: There’s a growing suspicion that too many newspaper executives are using a simple formula to ramp up circulation revenue. Namely, an increase in price will result in a decrease in volume. Plug in various combinations of the two variables and fiddle with the formula until the newspaper arrives at a number where circulation revenue advances despite the drop in volume.

But one issue prevents executives from spreadsheeting their way into more revenue: There’s another variable, one that’s much harder to quantify. Loyal readers will only accept rate increases if they feel they’re getting something of value in return. A newspaper’s mere existence does not prove it’s valuable. Saying you are giving readers more in some chatty editor’s note is vastly different from actually rolling up your sleeves and actually giving them more.

When I travel around the country and check out newspapers, the print editions are often fairly dismal. They are thin, and are packed with AP stories often in a Section A that’s supposed to be “Local.” There’s no business section, because it’s been moved to Local ? which really isn’t Local, because it relies on wire stories. Sure, there are some bylined articles from reporters on staff, but not nearly enough of them. The advertising is a complete snooze.

Rick Edmonds, the Poynter Institute’s incisive media business analyst, recently completed the Herculean task of quantifying just how much the industry has cut in newsroom investment. His back-of-the-envelope calculation found that over the past several years, newspapers reduced their spending on journalism by $1.6 billion annually.

I don’t think that every newspaper deserves its own D.C. bureau or a sports reporter who covers every major event, whether or not the home team is involved. Change is necessary. Just not change that runs counter to giving consumers something of real value.

And my heart sinks, because executives are obviously in no rush to plug that $1.6 billion hole. During the same period in which ABC released the fall FAS-FAX numbers, many public newspaper companies were reporting quarterly earnings. Executives were much more upbeat than they had been in past earnings calls. Why? Well, many companies reported a profit ? and not because of gains in ad revenue. News-papers made that money by whacking staff. Many trimmed costs 15%, 20%, 25%. When even Wall Street does a double-take and starts questioning the logic of such a move, that’s trouble. And since ad revenue doesn’t appear to be turning around any time soon, the industry is probably in for more cuts.

No amount of shell-gaming with circulation revenue and pricing, however, is going to save you unless you invest in your product. If you don’t, you can’t expect readers, even the die-hard ones, to hold their noses and pay more for less.

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