Newspaper circulation game

Bless Merrill Lynch and Prudential for a touch of reality in their assessment of the newspaper circulation decline figures. From Editor & Publisher:

Merrill also noted, however, that while overall industry declines were about 2% daily and 3% Sunday, slippage was much worse in so-called "quality" circulation that was 50% or better paid: down 5% daily and 7% on Sunday.

Translation: It is spin to suggest the decline was 2%. It's two-and-a-half times that at 5%. Sunday papers are even worse. Down 7% average. And those are average losses across the board for the industry.

The Disturbing Other Paid Category
Continuing:

Digging into the numbers, specifically in the other paid category. Merrill noted that while many newspaper companies during Q1 earnings calls indicated they are trying to cut back on third party and discount copies, the numbers so far tell a different story: "Our initial analysis of select newspapers shows that in many cases 'other paid' circulation" numbers were "seemingly in direct conflict with some company remarks."

Prudential put a pencil to the matter and found that the top 50 papers continued to rely on discounted copies -- where newspapers sold at 25% to 50% of the cover prices -- finding that this category increased 16.6%. And other paid circulation rose 10% from the March 2004 Fas-Fax.

As noted before, 'other paid circulation' refers to giveaway newspapers to hotels, company employees, and schools, and those papers deeply discounted (25%-50% off the cover price.) Overall, if you don't count the giveaways and advertiser-sponsored giveaways or the trash in the driveway giveaways or the free hotel newspaper or the 10-cent-a copy coffeeshop papers, the decline in circulation overall for the industry was not 2% daily and 3% Sunday, but as Merrill Lynch calculated "a decline of 5% daily and 7% on Sunday." Translation: newspapers that claim they are relying less on deep discounted papers are lying. People in the know, however, know it. Newspapers certainly do.

What does it mean?
How will it affect papers? Advertisers, of course, will pursue advertising rate reductions, those who pay based on circulation figures. Unless, of course, the newspaper is a monopoly market. "But Merrill isn’t quite sure what advertisers will make of the circ drops: “Certain advertisers buy on reach and readership rather than circulation so it is hard to gauge the impact on ad revenues." In other words, where else are they going to go?

Perspective
It's worth remembering that in 1977 the daily circulation of Pravda was 10,000,000 Izvestia reported 8,000,000. (Source: CBS News Almanac 1977, p 767.) Today: 263,650. In 1977, the New York News had 2,790,700 subscribers; New York Times had 1,415,515 in sales. The Los Angeles Times reported 1,227,377 in sales in a market population of 6,926,000, a market shared with the Los Angeles Herald-Examiner sales of (377,067.) (Same source as cited. All figures Audit Bureau of Circulations.) Today's Los Angeles Times? Without any 'other paid' circulation broken out, stands at 907,997.

The Bottom Line
If you were in business to sell newspapers and make a profit, the newspaper model certainly seems unpromising. If, however, you are in the business of power politics, the losses are a small price to pay to pay for an agenda, one increasingly and demonstrably not shared by the American public. And it's getting harder and harder for newspapers to deny it.