'USA Today' Will Show 17% Circulation Decline in Next Report, As Single Copy Sales Sink -- But Revenue Flat

By: Jennifer Saba When the Audit Bureau of Circulations releases the latest numbers on Oct. 26, it will show that USA Today's circulation fell 17% to 1.88 million for the six months ending September 2009, a drop of about 390,000 copies. The decline could also threaten USA Today?s position as the No. 1 newspaper in the country by circulation.

To put that in perspective, the reduction of copies represents roughly the entire daily circulation of The Arizona Republic the 10th largest paper in the U.S. as of spring.

The loss was an expected one at the Nation's Newspaper, which implemented a price increase last December to $1, and has been punished by the travel industry struggling to cope with a serve economic downturn. "We have known this," David Hunke, president and publisher of USA Today, said on a phone call from a Marriott hotel in San Francisco. "We have been aware the statement coming out is the toughest one we have ever faced."

Hunke said that USA Today was down about 100,000 in single-copy sales, editions sold at racks and newsstands at airports. Home delivered copies, which represent roughly 16% of total circ, is flat.

The significant magnitude of the loss is related to its hotel programs and a decline in room occupancy. Hunke explained business for the hotel partners is off about 40%, which has been a drag on circulation. "While we have been able to do a lot of things to keep their business, we suffer with them," he said.

Earlier this year, Marriott announced that it would stop automatically delivering copies of USA Today to rooms and instead implement a program where guests can request the newspaper of their choice: USA Today, The Wall Street Journal, the local daily or no paper at all.

Hunke described the relationship presently with Marriott as "very solid" and that USA Today is scoring very high in surveys about preferences.

It should be noted that USA Today shies away from discounting its circulation and that includes copies sold under hotel contracts. Hotel partner deals vary depending on the brand, explained Hunke, but all of copies sold under the hotel category are considered fully paid or in ABC parlance, more than 50% of the basic cover price. "We have maintained the contract and pricing structure with everybody," he said. USA Today is in nearly 22,000 hotels.

As a result circulation revenue -- a growing area of interest for publishers -- is relatively stable and an important revenue stream for USA Today. It is expected to be flat in Q3 and up in 2010.

Hunke said USA Today derives more revenue from circulation than advertising. Granted, advertising revenue has dropped significantly at USA Today -- paid ad pages were down 38% in Q2 -- but it's an extraordinary ratio for an industry where the benchmark is typically 80% advertising revenue to 20% circulation revenue.

Hunke anticipates that circulation volume will be flat by September 2010 publisher's statement and that travel will snap back. "These are tough numbers," he said adding, "We have a very good aggressive plan."