Newspaper Circulation ContinuesDecline, Forcing Tough Decisions

By JULIA ANGWIN and JOSEPH T. HALLINAN Staff Reporters of THE WALL STREET JOURNAL
May 2, 2005; Page A1

The newspaper industry, already suffering from circulation problems, could be looking at its worst numbers in more than a decade.

Circulation numbers to be released today by the Audit Bureau of Circulations probably will show industrywide declines of 1% to 3%, according to people familiar with the situation -- possibly the highest for daily newspapers since the industry shed 2.6% of subscribers in 1990-91.

The biggest publishers may show the largest declines: Gannett Co., which owns about 100 newspapers, says it will be down "a couple of points" from last year's levels. Circulation at Tribune Co.'s Los Angeles Times is likely to be off in excess of 6% of its most recently reported figures. Belo Corp.'s Dallas Morning News expects to report daily circulation down 9% and Sunday circulation down 13% from the year-earlier period. All projected figures are for the six months ended in March.

The Wall Street Journal, published by Dow Jones & Co., expects to report today that total circulation for the six-month period declined 0.8% to 2.07 million.

Long stuck in a slow decline, U.S. newspapers face the prospect of an accelerated drop in circulation. The slide is fueling an urgent industry discussion about whether the trend can be halted in a digital age and is forcing newspaper executives to rethink their traditional strategies.
Rather than simply trying to halt the decline, which can be done readily through discounts and promotions, they're being forced to try to "manage" their circulation in new ways. Some publishers are deliberately cutting circulation in the hope of selling advertisers on the quality of their subscribers. Others are expanding into new markets to make up for losses in their core markets. Some are switching to a tabloid format or giving away papers to try to attract younger readers. Others are pouring money into television and radio advertising and expensive face-to-face sales pitches to potential subscribers.

The losses come at a time when Americans have many news outlets that didn't exist 20 years ago, including cable-television news channels and Internet sites, as well as email and cellphone alerts. Many newspapers have substantial and free online sites offering much of what is in the printed paper. These sites might not hurt readership overall, but they can erode a newspaper's paying audience.

At the same time, many newspapers have undercut the print product itself, trimming staff and coverage. They also have failed to figure out how to attract younger readers to their pages.
At a recent industry conference, News Corp. Chairman Rupert Murdoch sounded the alarm about what he called a "revolution" in how young people access news. News Corp. owns television stations, movie studios, cable channels and 175 newspapers world-wide. Mr. Murdoch said young people essentially relied on the Internet for news, and unless the newspaper industry recognized these changes, it will "be relegated to the status of also-rans."

Others say newspapers are simply facing the familiar fate of TV and magazines, which have also lost audience in the past 20 years and have tried to adapt by focusing more on demographic groups. "Mass media in general has just become a little bit less mass," says Jason E. Klein, president of the National Newspaper Network LP, a sales arm of the industry.

Daily circulation of American newspapers peaked in 1984 and had fallen nearly 13% to 55.2 million copies in 2003, according to the Newspaper Association of America. At the same time, advertising revenue -- adjusted for inflation -- has barely budged. In 1985, newspaper advertising, adjusted for inflation, was $43.04 billion, not much less than the $44.94 billion reported in 2003. That's just 4.4% real growth over 18 years. During that same period, the gross domestic product, measured in current dollars, grew 161%.

The circulation declines have accelerated recently due in part to two major problems. The federal do-not-call law, which went into effect in 2003, particularly hurt newspaper publishers, who had relied on telemarketing for as much as 60% of new subscribers. And scandals at several newspapers have made some publishers less aggressive about counting certain kinds of subscribers.

Newspapers have long used various techniques to boost circulation. The New York Post famously doubled its circulation in the early 1980s through contests and giveaways -- but lost all those readers as soon as the contests stopped. In recent years, the Post, owned by News Corp., has boosted circulation in part by cutting its price to 25 cents.

"If you're willing to spend the money to buy circulation, you can pretty much make your circulation what you want it to be," says John Morton, a newspaper-industry consultant.
In the past year, some newspapers fabricated circulation figures. Hollinger International Inc.'s Chicago Sun-Times, Belo's Dallas Morning News and Tribune's Newsday have all acknowledged that they overstated circulation figures.

The large decline at the Dallas Morning News is partly due to circulation figures for the March reporting period being compared with year-ago figures compiled before the company announced that circulation had been overstated. The company said at the time that these overstatements would reduce circulation by about 1.5% daily and 5% Sunday. Dallas-based Belo says it expects its March 2005 report to be audited by the Audit Bureau of Circulations and released in mid-May.

And many other companies have come under scrutiny for bulking up their circulation with discounted copies that didn't attract high-quality readers.

In the wake of these scandals, advertisers have been demanding accountability from publishers. "I want the quality readers proved to me," says Brenda White, who buys newspaper ads for clients of the media-buying agency Starcom, a unit of Paris-based Publicis Groupe.

Now, many publishers are taking fewer shortcuts to boost circulation. Chicago-based Tribune, for instance, is cutting back significantly on the number of discounted copies sold to places such as hotels, hospitals and schools. Scott Smith, president of Tribune's publishing unit, said this number will be down 10% from year-ago levels. Such readers -- who often pay nothing for the paper -- often aren't considered good quality and their actual numbers are impossible to validate. Good-quality readers tend to pay for the newspaper with the intention of reading it.
At the Tribune-owned Orlando Sentinel, those types of daily sales jumped 53% in two years, to nearly 38,000 copies a day. But advertisers were unenthusiastic, so the newspaper pulled back. Take hotel copies, Mr. Smith says: "Are the people staying in those hotels actually going to shop with those advertisers?" The answer in many cases, he says, is no. In February, the Sentinel sent a letter to advertisers saying it was cutting many of the nearly 20,000 papers a day it sent to hotels.

At the same time, publishers are searching for ways to attract new readers to replace telemarketing and discounted sales. McClatchy Co., which has posted 20 straight years of subscriber growth -- an unprecedented record in the industry -- uses everything from door-to-door sales crews to sending lapsed subscribers handwritten notes imploring them to resubscribe. McClatchy is a small newspaper chain that operates 12 dailies, including the Sacramento Bee and the Minneapolis Star Tribune.

McClatchy Vice President of Operations Frank Whittaker notes that the company keeps its newsstand and subscription prices low, guarantees "on the porch" delivery in most of its markets, has never cut the amount of space it allots to news and has never had across-the-board layoffs -- all of which is fairly unusual in the industry. The company has also been favored by strong markets such as Sacramento, Minneapolis and Raleigh-Durham. "There's no silver bullet," says Mr. Whittaker. "It's really a story of blocking and tackling."

The New York Times Co., which is losing circulation in its core market of New York, says it will post circulation gains in today's report due to its strategy of expanding into new markets around the nation. In the past year, the company has added about 50 markets. At the same time, the Times is marketing to immigrants in New York and college students around the country. "We are cultivating the next generation of readership," says Scott Heekin-Canedy, president and general manager of the New York Times.

The Wall Street Journal's 2.07 million circulation total after an expected 0.8% decline includes some paid online subscriptions allowed under ABC rules. A company spokeswoman said the decline in print circulation reflects the impact of aggressive price increases over the past few years as well as a decision to drop some marginal marketing programs and to eliminate some copies distributed to public waiting rooms. The spokeswoman said that the Journal's year-earlier figures, reported last May at 2.1 million, have since been adjusted downward by 13,600 copies due to minor errors and the effects of rule changes.

But replacement marketing efforts can be costly. The Los Angeles Times, where circulation has fallen to 902,000 copies from 1.1 million in 1999, has pledged to spend $10.5 million to boost circulation. Gannett Chief Financial Officer Gracia Martore told analysts last month that "we are clearly spending more money per order" to bring in circulation."

Gannett, which is based in McLean, Va., and whose daily circulation is likely to be down in today's report, has also joined an industrywide effort to promote an alternative metric: readership. Readership is how many readers view each copy of the newspaper -- a number that is typically two to four per copy. Readership is a widely used metric in the magazine industry but has only recently begun to be promoted by newspaper publishers.

"Newspaper circulation is important but readership is the key issue," says Don Stinson, senior vice president of marketing for Gannett's newspaper division. "At the end of the day what we want to deliver to advertisers is prospects who are ready, willing and able to buy what they have to sell. Whether the person pays for the newspaper or got it from somebody else isn't particularly relevant. It's whether they read it."

To that end, 500 newspapers have begun submitting detailed demographic data about their readers to the Audit Bureau of Circulations to provide newspaper ad buyers with the same kind of data they get about radio listeners and TV viewers, such as age, gender and household income.

"Generally what we're trying to do is get a level playing field," says Kevin Campbell, director of marketing and sales at ABC.


Write to Julia Angwin at julia.angwin@wsj.com and Joseph T. Hallinan at joe.hallinan@wsj.com
Corrections & Amplifications

The Wall Street Journal, published by Dow Jones & Co., said it expects to report that total circulation for the six months ended in March declined 0.8%. The initial version of the above article incorrectly said total circulation declined 1.5%.