Less of a Loss  | American Journalism Review
 AJR  Columns :    THE NEWSPAPER BUSINESS    
From AJR,   June 2003

Less of a Loss   

The recent circulation numbers show a decline--but not much of one.

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.     


In a way the newspaper industry's circulation can be likened to its capital account--the asset from which all else flows. Circulation drives advertising revenue, profit, influence and myriad other factors that make up the newspaper business as we know it.

For more than a dozen years the industry's capital account has been diminishing, and in the long run this is as harmful to newspapers as it would be for any other kind of business. One can take some faint hope from the preliminary average circulation numbers for the six months ending March 31, as compiled by the Audit Bureau of Circulations.

Total daily and Sunday circulation for newspapers (those reporting to ABC) in the most recent six-month period declined just 0.1 percent from the same period last year--still a decline but a significantly smaller one than registered in the past. In the six-month period ending last September 30, for example, weekday circulation was down 0.3 percent and Sunday had slipped 0.4 percent, and the declines in the period before that were about twice as much.

In effect, circulation seems to be getting worse at a slower rate. Now, as is often the case, there were special factors at work during the last reporting period, notably a heightened interest in news about the war in Iraq. With past major news events, for example the 9/11 terrorist attacks and the first gulf war, newspaper circulation soared for a time, then settled back to earlier patterns. But it is not clear that circulation spiked during the Iraq war, at least based on anecdotal evidence. If true, this may reflect the technologically improved coverage by television, which brought the immediacy of the war directly into living rooms.

As in earlier circulation-audit periods, daily newspapers with circulations of 500,000 or more tended to fare best, rising 0.1 percent, and those under 25,000 (more than half the total newspapers reporting) fared worst, declining 0.4 percent. I have opined before that a reason for this is that large dailies tend to offer higher quality and fuller journalism than do smaller ones.

Still, some large newspapers were affected by other factors. The New York Times, for example, in past reporting periods has shown fairly steady circulation increases. But in the most recent period, the Times dropped 5.3 percent in weekday circulation, to 1,130,740, probably a result of a price increase in New York City to $1 from 75 cents last December and difficult comparisons with the previous year, when circulation soared because of 9/11 coverage.

Also in New York, the Post continued the circulation surge that began when it cut its newsstand price in half to 25 cents, rising 10.2 percent weekdays in the last period. The Daily News' weekday circulation rose 0.7 percent to 737,030.

These ruminations illustrate that price increases or cuts, special promotions and other factors can affect an individual newspaper's circulation performance in any given period. I recall in 2000 the circulation war between the Denver Post and the Rocky Mountain News, in which at one point papers were selling for a penny a day (this was before the papers entered into a joint operating agency and started raising prices). The cheap papers so inflated circulation that it significantly affected the industry's performance. Without Denver, national circulation declined 0.6 percent weekdays (0.4 percent including Denver) and 0.9 percent Sunday (0.4 percent including Denver).

The point is that no six-month period necessarily establishes a trend. Still, improvement even in one period is better than not improving. Also encouraging is that in the last reporting period almost 50 percent of dailies had circulation gains weekdays and nearly 46 percent gained on Sunday.

As after other ABC reports were released, the Newspaper Association of America downplayed circulation performance in favor of readership surveys, which provide a rosier outlook. The NAA's analysis showed nearly 80 percent of adults in the 50 largest markets picked up a newspaper during the week.

Now, readership surveys provide important and useful information, but not so important in my opinion as paid circulation--the capital account. Despite the decline of this account over the years, newspapers remain immensely profitable by most standards.

According to my analysis of the newspaper operations of publicly owned companies, which account for about half of national circulation, newspapers last year--not a stellar one for advertising--saw operating profit before taxes and interest rise 5.7 percent on average. The operating profit margin increased to 22.3 percent from 2001's 20.7 percent. So the circulation capital account, while weakening, still produces strong results.

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