AJR  Columns :     THE NEWSPAPER BUSINESS    
From AJR,   July/August 1994

Higher Prices, Fewer Readers   

Circulation at more than half of the top 100 papers has declined.

By John Morton
John Morton (mortoninc@msn.com), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.     


A quirk of the newspaper business is that the definition of "aggressive pricing" is the opposite of what it means in most other businesses. This anomaly helps explain the sluggish circulation performance of most newspapers in recent years.

When a department store, a grocer or a car dealer indulges in aggressive pricing, it means it cuts prices. It's a strategy to get more customers in the door in the hope that increased sales will more than make up for lower prices.

In the newspaper business, aggressive pricing means that the cost to customers is raised, not lowered, and the predictable result is that sales go down. The strategy is based on the hope that selling fewer newspapers for more money will produce higher profits because costs – chiefly for newsprint – will go down and the revenue per copy sold will go up.

When the advertising recession hit newspapers in 1990, many publishers started raising circulation prices to make up for the advertising shortfall. This aggressive pricing policy remained in place throughout the recession, and it is no wonder that total national weekday circulation has sagged ever since while Sunday circulation has barely increased.

At the end of 1988, total national weekday circulation was 62.7 million. By the end of 1993, this had dropped to 58.5 million – almost 7 percent in five years. Total national Sunday circulation was 61.5 million at the end of 1988. By last year, it had risen to 62.6 million, an increase of only slightly less than 2 percent.

Price increases are not the only causes of soft circulation performance. Over the last several years a number of newspapers have gone out of business, and ordinarily when a newspaper shuts down only about half its readers take up another daily. The other half just disappears – a disquieting indication of newspapers' hold on readers. And last year, floods and winter storms affected street sales and, in particularly socked-in communities, hampered home deliveries.

The Audit Bureau of Circulations, an association of publishers, ad agencies and advertisers that seeks to assure truthful circulation claims, issues audits of newspapers every six months. In the six-month period ending last March 31, the audit showed that 60 of the 100 largest newspapers in weekday circulation suffered circulation declines from the previous year, and another four were essentially flat. Even Sunday circulation took some hits. Of the 100 largest newspapers, 90 have Sunday editions. Fifty-three of these suffered declines and four were essentially flat when compared with a year earlier.

The most recent declines can be blamed in part on tough comparisons. In the same six-month period in 1992-1993, newspapers were benefiting from heightened reader interest in the presidential political campaign and its aftermath. Still, over the long run the most enduring factor slowing circulation growth has been price increases.

Should an industry that has a major image problem because of poor circulation performance ever be aggressive in setting prices? There are several ways of looking at this question, and none of them yields a wholly satisfactory answer.

An argument for raising prices is that at many newspapers the paper alone – disregarding the cost of what is printed on it or the cost of delivery – is often worth more than the price charged. Why should readers expect to get all this for less than they would have to pay for a can of soda at a dispensing machine? This is a comforting line of reasoning, but it overlooks a fundamental weakness in the newspaper business: Circulation has failed to keep pace with population growth.

The argument against aggressive circulation pricing is that prices should be kept as low as possible to encourage higher sales. In fact, even with aggressive pricing, the cost to readers has not kept pace with inflation. This has been the basic strategy of daily newspapers in countering the long-term decline in readership.

How successful newspapers are in collecting advertising revenue is intimately tied to circulation performance. Advertisers, who last year contributed nearly 78 percent of newspaper revenues, are prone to shift their spending to other media when circulation falters, so maintaining a strong circulation base is the paramount concern of newspaper managers.

Now that advertising spending is starting to come back – advertising revenues were up 8 percent in the first quarter this year – I suspect newspapers will be entering a period of less aggressive pricing. That may help circulation start to show modest growth.

But the only way newspapers will be able to show real progress in the race with population growth is to improve the product – more and better prepared news, improved design, higher quality printing. High quality papers create a reader demand that not even aggressive pricing will harm. l

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