Do Newspapers Even Care About Circulation Growth?

By: Lucia Moses

Correction: In ?New circulation focus will finally
pay off,? April 22, p. 24, E&P should have reported that 45% of only the nonfinancial bonus points (a third of
all bonus points) that determine Knight Ridder executives? bonuses are circulation-related.

Do newspapers even care about circulation growth? It sounds like a nutty question, but consider the evidence. With exceptions such as the McClatchy Co. and MediaNews Group Inc., few companies directly tie a large part of executive compensation to circulation gains.

While it’s true that circulation growth can be inconsistent with profit growth, losses in circulation have refocused papers lately on growing their numbers, says Conrad Fink, author of the book Strategic Newspaper Management. “Advertisers are not dumb,” Fink says. “They know 80% of revenue comes from them … and advertising rates have risen sometimes faster than inflation.”

This explains why Knight Ridder is pouring money into growing circulation at its papers this year, and shifting a greater portion of the bonus to circulation results. “We’re tired, as our advertisers are, of our newspapers continuing to lose market share,” says Arden Dickey, Knight Ridder’s assistant vice president for circulation and regional call centers. “The long-term health of our newspapers relies on our advertisers increasing coverage, not decreasing coverage.”

To underscore that goal, circulation growth now represents 45% of nonfinancial points that determine Knight Ridder executives’ bonuses. Those nonfinancial points are about one-third of the total points considered. Before, publishers had discretion in setting the level of these bonus points. The decision came at the suggestion of a publisher during a circulation meeting late last year attended by top corporate executives. “If you really mean this, then you should put a heavy percentage of bonus points on it,” Dickey recalls the publisher saying.

Knight Ridder isn’t just looking to grow its circulation statements, though. Publishers have been told to make sure they expand in areas most beneficial to advertisers. That means no bonus days and smarter use of discounting.

Some papers, recognizing that certain readers won’t pay more than rock-bottom prices, will offer permanent discounts. One of its biggest papers, the Saint Paul (Minn.) Pioneer Press, responded to the mandate last week with the rare move of cutting its seven-day home-delivery rate by 2.9% and Sunday newsstand price to $1 from $1.50.

Other companies have found that making circulation growth a top priority can indeed pay off. Lee Enterprises Inc. last year made circulation one of its five top goals, and, after reporting an overall decline in its Sept. 30 statement, Lee says its overall daily circ will be up more than 1% in the March 31 report.

McClatchy, which boasts 17 straight years of circulation growth, says 15% of its editors’ and publishers’ bonuses are based on circulation. At MediaNews, between 25% and 50% of an executive’s management-by-objective goals are circ-related — and, as a result, says CEO William Dean Singleton, “we have routinely had growth year after year after year.”

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