Churn, Baby, Churn   

It takes constant tending to maintain subscription levels.

"Churn" is an uncomfortable word for newspaper circulation executives, one they wish didn't exist and probably just as soon nobody talked about. Churn is the newspaper industry's soft underbelly.

Churn, for the uninitiated, is the number of subscriptions that a newspaper has to sell every year just to keep the circulation level the same. The term was picked up from the magazine and cable-television businesses, where churn has long been a problem.

It was not a huge issue for newspapers in earlier days, say 30 or 40 years ago, but in time it became clear that subscription turnover was a growing headache, especially for newspapers with large circulations.

Thus Miles Groves, then the chief economist for the Newspaper Association of America (now he's a consultant to the newspaper industry), decided in the early 1990s that it was time to find out precisely what was happening. What he learned was not encouraging.

The NAA's first statistical analysis in 1996 showed that churn was significant. Predictably, the problem was less acute for smaller newspapers. For papers with circulations under 25,000, the churn rate was nearly 23 percent. Had the same analysis been done, say in the early '70s, I suspect the churn rate for small dailies would have been in the single digits.

The initial NAA study also showed that churn rose with circulation: to nearly 36 percent for dailies between 25,000 and 50,000 circulation, to 52 percent for those between 50,000 and 100,000, to 57 percent between 100,000 and 200,000, to 64 percent between 200,000 and 400,000, and to nearly 66 percent above 400,000. The average for all dailies was nearly 50 percent.

Now I'm sure these results were not a surprise to circulation managers, who had been slugging away in the trenches trying to maintain the numbers. Especially at larger papers, the cost of keeping subscriptions up easily mounts into the millions--spent on employees soliciting subscribers or on outside telemarketing services. And there are substantial administrative costs in dealing with starts, stops and billing.

The NAA repeated its statistical analysis annually. By last year, the churn rate for dailies in all circulation categories had climbed--to an average of nearly 58 percent.

The logical questions are, what causes churn, and why is it rising? The most prevalent response in polls as to why people drop newspaper subscriptions, apart from poor delivery service, is that many people believe that they just do not have time to devote to reading a newspaper. (See "Why Do People Read Newspapers?")

The industry's response to that challenge, and the vexing problem of attracting young people, often has been to offer special deals--short-term subscriptions at a low price. Unfortunately, offering discount deals is akin to taking drugs--the more you do it, the more you have to do it.

I have several times served as an expert witness in litigation involving a question about the viability of, say, a second newspaper in a two-newspaper market. I often have been asked why I was convinced that the second paper was in serious trouble and likely to fail. Among other things, I pointed to the inevitable fact that the second newspaper always had a much greater proportion of its circulation sold at a heavy discount compared with the dominant paper.

Now, even the dominant paper (and usually by now the only surviving newspaper) must sell many subscriptions at a lower price just to replace lost readers.

Robert G. Magnuson, now a journalism teacher at the University of California, Berkeley, and formerly business editor at the Los Angeles Times and a senior vice president in charge of circulation at the paper, recalls receiving a phone call from a subscriber demanding to know why his friend was getting the paper at a lower cost than he was.

There was no easy answer. The newspaper industry has created a class of subscribers that takes advantage of a discounted offer, drops the paper when the discounted period ends, then waits for the next discounted offer to come around before re-subscribing (if ever). All of this, of course, contributes to churn.

It is one thing to point to a problem, as I have, but a more challenging thing to offer a solution. There is not a simple one, but in the long run a newspaper's success in circulation, and in everything else it does, depends on the quality of its product, its ability to engage subscribers by offering breadth and depth of coverage that can be found nowhere else.

Neither circulation discounts nor circulation-building schemes like Wingo games and the like can take the place of this.

Meanwhile, churn continues to grow.