New Rules To Count On

By: Jennifer Saba In early november, the Audit Bureau of Circulations released the latest semi-annual circulation numbers for the six months ending Sept. 30, 2007. This ritual has long played out as the newspaper industry's Groundhog Day, minus the laughs: Every time the FAS-FAX is released, it's the same nightmare of bad numbers. Since March 2005, daily circ has been slipping in the mid-2% range in every report. Sunday is even more troubling, plummeting at least 3% each time.

An analysis of the FAS-FAX shows that for 538 papers reporting daily numbers, average Monday-through-Friday circ dropped 2.5%. For 609 papers on Sunday, circulation declined 3.5%. Publishers, from The New York Times on down, are still saying the declines are mostly of their own design, three years into these significant losses. Other-paid circulation, which includes hotel, Newspapers-in-Education, employee, and third-party sponsored copies, is no longer being embraced by advertisers. Off with the category's head!

With rising gas prices and nominal readership, it's also getting too expensive to deliver outside the core market. Newspaper executives are weighing the economics of bringing copies to outlying districts and other less desirable locations.

These were the explanations coming from some of the top metros recording steep declines. Says Robert Eickhoff, The Atlanta Journal Constitution's Senior VP of Operations: "We are focusing on individually paid and marching down a very strategic path. We have taken a very pragmatic view of how to grow circulation with advertisers in mind." The San Diego Union-Tribune almost completely eliminated third-party copies, reined in bonus days, and cut its discounted circ, according to Bill Nagel, vice president of circulation.

In Dallas, Morning News Publisher Jim Moroney notes that while circ may be down, the paper is making progress where it counts: It's pulling back on its discounted copies ? that category fell 56% ? and also improved its churn. In the past four months, that number fell to 33% for new subscribers.

Some papers that bled circulation in the past started to show signs of stability. The Los Angeles Times, after years of turmoil, was one of the few big metros to post a gain. Sure, it was only 0.5%, but it made that increase on even more improbable odds: Discounted copies plunged by almost half.

In San Francisco, daily circulation slipped 2.2% (below the industry average); not bad, considering the the Chronicle coughed up circ hairballs for several periods. The San Jose Mercury News' daily circ was essentially flat.

Publishers are talking up their role of the harvester, sickle in hand, but there's no doubt fewer people are reading the printed paper. According to industry sources, single-copy sales for this period slipped 5%. Single-copy is often used to gauge the true health of paid circulation.

Yet a potentially vital innovation ? if not quite a panacea ? has finally arrived, after years of hints, rumblings, and promises.

Getting the bigger picture
For too long, newspapers emphasized their local dominance in the marketplace by bellowing about paid circulation. Meanwhile, other local outlets like television and radio instead touted the notion of audience reach. For this reporting period, the industry tried to change that perception, moving away from measuring ink on paper and instead focusing on a greater measure of information delivery, including the Web.

This period, ABC and the NAA rolled out the Audience-FAX, its new initiative to incorporate both print and online readership numbers in the FAS-FAX. These stats include print readership, online readership, unduplicated combined print and online readership, and a newspaper Web site's monthly unique users.

It was greeted with some skepticism when, on the morning of the FAS-FAX's release, ABC, the NAA and others hosted a conference call about the initiative. Several reporters on the line couldn't help express the feeling that this was simply an attempt to change the subject.

On the contrary, it's too bad it wasn't rolled out sooner. Only 28% of news- papers (206) took part in the voluntary reporting. Most of them are big metros. There is no comparable data either, since this is the first time for the rollout, making it difficult to suss out trend lines.

According to Scarborough Research, which is also working with ABC, many newspapers are reaching a very high portion of their markets when their Web sites are factored into the report. The Rochester (N.Y.) Democrat and Chronicle, for example, reaches 83% of the city's designated market area (DMA) with its print and online products. The Washington Post reaches 65.7% of its market when Washington post.com is considered. Same for the San Antonio (Texas) Express-News, which reaches 65.8% of its DMA.

Change will do you good
The Audience-FAX is just the first leg in a strategy that will overhaul how circulation is counted. Already there is evidence that media buyers are paying more attention to total audience measurements, according to Wachovia Equity Research (which hosted a mid-November conference call with one of the industry's largest buyers on newspaper advertising). In a year or two, the whole notion of discounted circulation and other paid might be a thing of the past with new changes approved by ABC.

During ABC's annual conference in Chicago in November, presentations were made to its board that were the culmination of work that began back in the summer of 2006. The board approved a measure that will essentially redefine paid and other-paid circ, and shine more of a spotlight on total audience.

Right now, ABC breaks out total paid circulation into three main categories: copies on which 50% or more of the cover price was paid, copies that are 25% to 50% paid (commonly referred to as discounted circulation), and other paid.

Under the new rules, ABC intends to implement a flexible pricing model in which newspapers would be considered "paid" by ABC regardless of the price for which a copy is sold.

This is not a new concept: Canada has been doing this for years without objections from advertisers.

As for other-paid circulation, the idea is to change its heading to "verified circulation" ? and that's more than just a name switch. Third-party copies, for example, fall under this category but they are currently not free: The sponsor usually pays some portion of the cover price for the copies, which are in turn distributed gratis. Under the new rule, a sponsor will not be required to plunk down anything for it to be considered verified circulation. ABC already does this with the magazine industry, which has a "verified circ" heading. Hotel copies are also getting a new classification.

Prototypes of publishers' statements and the FAS-FAX were presented at the November conference. The FAS-FAX could list home-delivered copies, single-copy sales, and other distribution channels (such as schools) to arrive at "total core circulation." Verified circ would be included in those numbers. If an advertiser wanted a breakout of that verified circ, they would turn to the publisher's statement.

All of this is predicated on several factors. The NAA conducted some research this summer that looked into a cross- section of 10 papers. What they found was that third-party sponsored copies work, as long as they are delivered on a consistent basis (as opposed to a one-off edition handed out during a football game, for example). Seventy-seven percent of people read their third-party copies, compared with 87% of those who received the paper seven days a week for the full price.

The numbers were even better for newspapers that were deeply discounted by 25% to 35% of the price. In that survey, 95% of those who regularly received discounted copies were as likely to read it as full-paid subscribers. Both sets of readers spent the same amount of time with the paper: 43 minutes. The research bears out that people are just as likely to read the paper if they pay something for it or get it for free ? if they receive it often, not just here and there.

Both advertisers and publishers on ABC committees spent a lot of time vetting this concept. It's expected to take about a year of so for the changes to show up in the reports.

The reason for this is twofold. First, publishers need time to embrace and adjust to the new methods. Second, and perhaps more important, the industry needs to sell the total-audience concept to analysts and investors who might think they're getting hoodwinked.