'Quality' Circ on the Rise, Prudential Study Finds

By: Jennifer Saba Reductions in other-paid circulation -- a category closely scrutinized by industry observers in recent years-- continue on a steady path, according to Prudential Equity Research.

The research firm released its fourth volume on newspaper circulation last week. Analyst Steven Barlow and his team measured the circulation for some of the 50 largest newspapers in the country in its coverage universe.

For the six-month period ending March 2006, other-paid circulation fell 6.8% compared to the same period a year ago. That decline has been steady and, during some periods, drastic: For the six-months ending September 2005, other paid circ showed a decrease of 3.4%. In March 2005, it had grown 6.9%, and in September 2004 it had jumped 34.2%.

"This trend obviously reflects well on the industry as publishers are starting to rely less on lower-quality circulation," wrote analysts.

One of the fallouts from the circulation scandals in 2004 brought greater attention to other-paid circulation, a category that represents hotel, employee, Newspapers In Education (NIE), and third-party sponsored copies. Analysts suspected that publishers were abusing the category to "pad" overall circulation in order to justify rate increases to advertisers.

"While these techniques are not outright fraud as the misstatements of circulation figures were, we felt aggressive use of some of these lower-quality techniques would signal a problem with circulation and would therefore pose future risk to advertising rate stability," wrote analysts in the study.

Over the past two years, publishers got the religion and have made stringent efforts to prune back the category while growing "quality" circ. - i.e. home delivered and non-discounted copies.

Prudential analysts created their own metric, the circulation quality screener, to measure newspaper circulation over several periods.

Accordingly, each paper received a circulation quality (CQ) score based on 10 criteria. By using Publisher's Statements from the Audit Bureau of Circulations, Prudential determined a newspaper?s score by the amount of points accumulated, one for each of the 10. Some of the "negative" criteria: other-paid circulation represents more than 10% of total circulation, other-paid circulation increased 20% or more, and NIE copies represent more than 4% of total circulation.

The higher the CQ score means the circulation is of ?lesser? quality.
According to Prudential, the papers with the highest CQ score (6) are the following: The Miami Herald, The Seattle Times, the Contra Costa (Calif.) Times, and the Star Tribune in Minneapolis.

The papers that scored the lowest -- that is, best -- with a CQ of 1 are the following: The Arizona Republic in Phoenix, the Chicago Tribune, the Winston-Salem (N.C.) Journal, The Providence Journal, The Plain Dealer in Cleveland, and The Sacramento (Calif.) Bee.

In the past, some papers have raised objections about the study's categories and ratings.

The study swoops in and takes a close-up view of 10 "key" newspapers in the study.

At The New York Times, analysts found that its overall circulation would not have grown -- up 0.5% in March 2006 -- were it not for other-paid copies. Stripping out the category would result in an overall circulation decline of about 1.1%.

However, the New York Times lowered its NIE copies by 5%. [A previous version of this story said that the paper's NIE category grew over 70%, giving the paper an extra point on its CQ score. It was due to an incorrect analysis by Prudential.]

Some industry observers note that an increase in NIE copies is not such a bad thing since it?s viewed as an investment in future readership. The New York Times also grew its home-delivered copies, up 0.9%.

Meanwhile the New York Times? sister publication, The Boston Globe, made vast improvements in the other-paid category, which declined 30.3%.

Analysts noted that The Washington Post scored well in the study. It has also cut back on its discounted copies, down 39%. Home delivery is up too, 0.8%, a sign that the free home-delivered Washington Examiner might not be cutting into the Post?s territory as originally feared.

Prudential gave a shout-out to The Wall Street Journal, which grew home-delivered copies by 0.6%. ?We view this small increase as very positive in light of current industry trends. The Journal commands a strong position in metro markets, as other papers have showed declines,? according to the study.

The Los Angeles Times made significant headway in improving its CQ score, the study found. Other-paid circulation fell 41.6%. It also fell at its sister publication, the Chicago Tribune.