Next Time, Quality Circ May Make a Comeback

By: Jennifer Saba The latest circulation figures for the six-month FAS-FAX period ending September 2004 contained no bombshells. As always, there was an overall decline, and it was fairly minimal. No new paper came forward with tales of tampering with the numbers.

Analysts damned the industry with faint praise. Merrill Lynch issued a report saying that "while hardly encouraging, the declines were not as drastic as some had feared." Goldman Sachs wrote, "While the declines are larger than the recent trend line, in light of the recent circulation scandals that have impacted the industry we believe investors will perceive this data to be 'good news' in the sense that it's not as bad as some had feared."

Though no landmines were discovered, there definitely appeared to be a new effort to clean up circulation in the "other paid category," which includes third-party, Newspaper in Education, and employee copies. By no means useless, this kind of circulation has nevertheless come under fire from advertisers looking to put pressure on rates.

It was an issue during the Audit Bureau of Circulations board meeting in mid- November. No rule changes will result, but the organization did its own analysis of the "other paid" line looking purely at third-party copies. It's on the rise but it's still a small slice of the pie, says John Murray, vice president of circulation at the Newspaper Association of America.

Latest analyses put that less-than-50% share at about 10.2%, up from 4.8% just two years ago.

The scrubbing in this category was particularly evident among those papers that reported the steepest overall circ declines. The San Francisco Chronicle dropped a whopping 6% in daily circulation for this period. Chris Blasser, vice president of circulation, explains that they looked at less profitable circulation while working with advertisers to see what portions were less meaningful, and "self-reduced."

A 25-cent price increase introduced for the Chronicle last November, now at 50 cents, is starting to have an effect on the numbers as well. "Any time there's a loss, well, we're not overjoyed," Blasser says. "But the reduction was self-determined and we feel it's the right price for the product." The Chronicle is surrounded by competition including the free Examiner and the San Jose Mercury News and Contra Costa Times, which cost 35 cents and 25 cents respectively.

Not that the Mercury News fared much better. Polk Laffoon, vice president of corporate relations at Knight Ridder, says that the Mercury News is starting to chafe off the weak circ too. The daily circulation for the paper declined 3.2%. The Tribune Co., which pre-announced the 6% slip in daily circulation at the Los Angeles Times, cited the same reasons for its sinking numbers.

There are some success stories, including the North County (Calif.) Times, which managed to grow its circulation (daily is up .9%) and land the number one spot on both the Deutsche Bank and Merrill Lynch analyses of papers that have the highest percentage of "quality" paid circulation.

Mark Henschen, circulation director for that paper, gives all the credit to Easy Pay. He says that 64% of all subscribers use the system. The North County Times offers readers a rate of $11.90 per month if they sign up using Easy Pay (the first four months cost $7 or $28 total) versus the full price of $13 per month. It's also helped reduced churn: A decade ago it was 134%, now it's at 44%. "It's declining methodically," he says.

Executives at the New York Post ? the paper that always makes acrobatic leaps in circ ? are keeping a close eye on the other- paid category. The paper's meteoric rise surely has to do, in part, with its 25-cent price tag. Geoff Booth, vice president and general manager of the paper, says the paper did away with its in-flight, third- party sponsors, essentially axing free copies of the Post at airport gates.