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 AJR  Columns :    THE NEWSPAPER BUSINESS    

From AJR,   August/September 2005  issue

Spreading the News   

As circulation dwindles, newspapers turn to new products to court readers.


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.     

Circulation is the traditional measure of the newspaper industry's strength, and news about circulation has not been good for many years. Yet circulation has not been a reliable measure of newspapers' financial health, which has been good for many years.

It is worth exploring this anomaly to illustrate what many newspapers are doing to make the best financially of what remains of the business. And if some readers might think this dwells overmuch on the pursuit of filthy lucre, it is also worth remembering that newspapers can only be as good journalistically as they can afford to be.

Over the last 50 years, the nation's population has grown about 80 percent. Total weekday circulation, though, at about 54.6 million, is now slightly below where it was 50 years ago. In 1984, total weekday circulation reached 63.3 million, but it has been mostly downhill since that peak.

Several factors contributed to the weak circulation performance, most notably the growth of television and other competitors that helped kill off more than 300, mostly afternoon, dailies since 1954. When a newspaper disappears, some of its circulation is picked up by competitors, but about half of it evaporates. And in recent decades the failure of young people to read newspapers in the numbers they used to has become the principal cause of declining circulation.

In response to weakening paid circulation, the Newspaper Association of America and many newspapers have started emphasizing readership to advertisers. Since the average sold newspaper is read by two to two-and-a-half people, the readership numbers obviously look more impressive than circulation. And many newspapers have gone beyond readership measures of paid circulation by adding myriad new products, mostly free, to expand local business.

This was brought home to me during a recent management retreat for Hearst Corp. executives by a presentation by Jack Sweeney, publisher and president of the company's largest newspaper, the Houston Chronicle. He explained how the Chronicle is responding to "industry challenges" by transforming itself from the newspaper business, as traditionally defined, into "the business of news and information."

Establishing an Internet presence is one obvious expansion that most newspapers, including the Chronicle, have adopted. The Chronicle's effort enables viewers of the Web site to click on ChronLinks, which sends them to sites of individual retailers who have paid the newspaper fees for links to their sites (the fees can be quite low so that even small businesses often priced out of the newspaper itself can participate). Another feature, Click & Buy, presents classifieds from the main paper along with an online transaction service.

Offline, the Chronicle publishes two weekly Spanish-language papers, one an entertainment guide and the other featuring general news; both are linked to a Spanish-language Web site. A Spanish-language sports tabloid is under development.

Five free monthly magazines published by the Chronicle are devoted variously to automobiles, jobs, homes, upscale homes and something called Mixed Metal, which covers hopped-up vehicles of all types. Two monthly niche magazines focus on fashion and African American life. Two more are in development, on personal makeovers and life within specific zip codes.

Finally, the Chronicle has direct-marketing services through which advertisers placing inserts into the main paper can also have them delivered to nonsubscribers, and the Chronicle operates a market-wide, zip code-specific mailing service for advertisers.

Having created all these products and services, how well has the Chronicle done? Management estimates that with everything, including the main newspaper, the Chronicle's overall business reaches 68 percent, or 2.6 million, of the market's adults. This is an impressive gain over the 52 percent of adult readers reached with the Chronicle's paid circulation of 527,744 weekdays and 720,711 Sundays.

Moreover, again by Chronicle estimates, the newspaper's entire business captures 26 percent of total local media spending--twice as much as television, twice the Yellow Pages, 1.7 times direct mail and 1.6 times radio.

In pondering all this, it is important to remember that only newspapers are economically organized to gather, process and distribute mass amounts of news. Television, limited by its broadcast time, does not. Radio does not for the same reason, although all-news stations could at least make a stab at it but for being so protective of high profit margins. And non-newspaper Internet sites don't provide the detailed local news coverage that newspapers do.

This function of newspapers is so vital to the quality of public discourse and to the workings of democracy that anything a newspaper does honorably to support its economic model is desirable. The result may not resemble the newspaper business many of us grew up with, but the changes are necessary if newspapers are to continue to fund their important public-service function.