By: Jennifer Saba More industry analysts are expressing concern that the circulation overstatements will have a negative effect on the investment environment. Goldman Sachs released a note this morning that said "the circulation problems add another worry to a list that already includes lackluster near-term revenue trends ... The recent circulation troubles reinforce our already cautious coverage viewpoint."
There are two red flags with circulation: its continual decline and the uncertainty that the amount claimed is even accurate, the report said. This affects advertisers and newspaper's ability to charge higher rates. On top of it, competitive media like TV and radio are using the decline in aggregate newspaper circulation when pitching to advertisers.
The investment firm points out a few positive factors. The decline in circulation is mostly due to industry consolidation, which helped profitability. And the drop in readers is not nearly as bad as the drop in viewers and listeners. Newspapers reach 56% of the total adult population, while primetime TV reaches 39%, and morning drive radio reaches only 23%.
But that doesn't let the industry off the hook. Goldman Sachs views the circulation misstatements as a "serious black eye for the companies involved, particularly in light of their previously pristine reputations for tight financial and management controls ... These circulation restatements can only serve to reduce advertiser confidence in the data supplied by publishers and the ABC, which in turn could add to pressure on ad rates industry-wide."
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