Analyst Concerned About Circ Woes

By: Jennifer Saba The Dallas Morning News' recent circulation disclosures certainly aren't helping the industry move beyond the scandals previously announced by Newsday, Hoy and the Chicago Sun-Times. "The fact that four newspapers (three companies) have disclosed circulation overstatements has been a real shocker," wrote Lauren Rich Fine in a Merrill Lynch report released today. "Now, of course, there is concern that more companies will step forward with disclosures, especially in view of Sarbanes-Oxley," a federal law that imposes stringent new compliance and disclosure rules upon publicly traded companies.

Fine also expressed doubt that other companies have a tight handle on the issue, though she gives high marks to Gannett Co. Inc. "We felt confident that [Gannett] had the systems and controls in place to avoid the problems that are surfacing. We don't get the sense that other companies are as buttoned down," Fine wrote.

The circulation mess is not helping the tepid advertising recovery either, yet it's going to be hard to judge the impact. Fine wrote that the circ problems will "create some added skepticism, but should not prove to be a huge issue."

In the report, Merrill Lynch did a break-out summary of circulation of home delivery versus single copy sales for some of the nation's largest newspapers. (Belo, Tribune and Hollinger pointed to single-copy sales as a part of the circ problem.) According to the report, single-copy sales have grown as a percent of daily sales to 21.9% in 2003 from just 15.7% four years ago. The industry median percentage of single-copy sales returned was 22% daily and 19% Sunday in 2003.

Some findings of the report for daily newspapers based on audit reports for the period ending March 31, 2004: At The Morning News, 24.4% of audited circ is single-copy sales. At Newsday it's 34.6% (for the period ending Sept. 30, 2003). At The Washington Post, single-copy sales account for 20% of total circ. At the Detroit Free Press it's 29.5%. At The New York Times it's 28%.