More Thoughts on U.S. Circulation Declines

I’ve more thoughts about the accelerating declines in circulations of major U.S. newspaper:

  • Many newspaper executives are blaming the new Do-Not-Call anti-telemarketing lists for a large portion of their newspapers’ recent circulation declines. That is disingenous. In reality, the blame should be placed on those executives’ and their products. Major daily newspapers in the U.S. have huge churn rates. The Newspaper Association of America has long reported that large dailies (those with more than 400,000 weekday circulation) generally have 50 to 60 percent subscriber churn rates each year. That is why those newspapers have had to feverishly telemarket for new subscribers

    In other words, the average large newspaper loses more than half of its subscribers each year. Think of that: a product that is aimed at consumers but that loses half of its consumers each and every year. There is a problem with that product. And that problem surely isn’t Do-Not-Call lists.

  • Newspaper executives also explained the recent declines as partly due to newspapers that “deliberately reduced third-party-sponsored home delivery, in which advertisers and businesses pay for the subscriptions” and on newspapers that have “cut back on single-copy bulk sales.” (I’m quoting Tuesday’s The Wall Street Journal story about the declines).

    What are ‘single-copy bulk sales’? One example is when unsolicited copies of USATODAY are slipped under hotel guests’ doors. The newspapers pays hotel to distribute these copies.

    What is ‘third-party-sponsored home delivery’? It’s when consumers are given free subscriptions that newspaper advertisers or affiliates underwrite.

    Long ago, the Audit Bureau of Circulation would have penalized any newspapers that claimed these types of copy dumpings were circulation, but the ABC a decade ago yielded to newspapers and began counting these unsolicited copies as circulation. The rational is that ‘single-copy bulk sales’ and copies from ‘third-party-sponsored home delivery’ are paid circulation because someone — just not the consumers — has paid for those copies.

  • Another method by which newspapers dump copies and count those copies as circulation is the Newspapers in Education program. Decades ago, NIE programs were started as a way to get school children into the habit of reading newspapers. Most people who today administer NIE programs still think that is the purpose (but see below). Decades ago, the average newspaper provided only a few hundred copies per day to schools. Today, those newspapers provide thousands or tens of thousands copies daily. I know of newspapers at which NIE accounts for ten percent or more of circulations.

    Are these increases in NIE circulations due to more youngsters reading newspapers? Certainly not! Most of those NIE copies are unread. The increases in NIE circulations are due to newspaper circulation executives realizing that NIE copies are counted by the ABC as paid circulation, even though no one pays for those copies.

    (My friend Stuart Garner, the former CEO of Thomson newspapers, once said that if there is one obviously unsuccessful program in the newspaper industry, it is NIE. Well, it’s obviously unsuccesful at its stated aim: getting more young people to read newspapers. But it’s secretly been successful as a method of artificially boosting newspapers circulations.)

  • Finally, after Steve Yelvington pointed to my post yesterday about the circulation declines, a reader of his blog remarked, “In the world of Instant NEWS the traditional News will continue to loss its value proposition. Newspaper is bound to become a Niche medium.”

    No, that reader’s predictions aren’t necessarily true or ineluctible. Newspapers shouldn’t be any longer limited to the capacities of paper and can again become people’s main source of breaking news. The problem is been that few newspaper executives realize this.

    Electronic publishing — whether by Web sites today or the type of instantly updatible wireless e-paper shown in the science fiction film ‘Minority Report’ — has the potential to let newspapers publish news as instantly as radio and TV do now. Online newspaper can publish news with all of the audio and video capabilities of radio and television plus with the detailed texts that TV and radio lack. Unfortunately, few newspaper Web sites nowadays update more than once per day. What a waste!

    Last month, a publisher told me, “We know that our readers these days get most of their news from television, so we want our newspaper to contain not so much breaking news as analysis and commentary and thoughtful features.” Many newspaper industry analysts see that as an eluctible and necessary trend for the newspaper industry. I disagree. I see that as surrendering newspapers as vehicles for breaking news when instead victory is nearly in hand.

    The Web is a wonderful retrieval vehicle but it doesn’t actually deliver anything, and what it delivers is limited to single iterative pages of HTML (even with CSS). It lacks the portability and layout capabilities of paper. The alternative of digital editions (i.e. electronic facsimiles of newsprint editions) offers the layout capabilites and multiple pages of an entire intact edition, but most digital editions today (such as those from Newsstand.com and Zinio) use huge,non-interactive files downloaded onto desktop, laptop, or tablet PCs, devices that lack the portability and convenience of newsprint. Plus, everything today is becoming wireless, but current handheld devices (mobile phones and PDAs) don’t have screens large enough to read much easily.

    However, by the end of this decade, electronic paper and highspeed wireless broadband (in the forms of 3G, UTMS, or WiFi G) should be in consumer use. That e-paper will be certainly wireless. If publishers can create interactive digital editions that don’t use huge file sizes (why are today’s digital editions sent in 300 dpi resolution when PC screens can’t render more than 72 dpi?) and automatically deliver those files to subscribers, using the type of subcarriers that SMS and MMS transmissions use today, then the instantly updatible wireless news-e-paper of ‘Minority Report’ becomes a reality and revolutionizes the newspaper industry. It’s what I’m working towards. I only wish that the newspaper industry was, too.

    Someone tell me if it is?

8 thoughts on “More Thoughts on U.S. Circulation Declines

  1. The newsapper in the current form may be a losing proposition as a trend, but while this is true right now in more developed markets like America, in countries like India where TV News is in it’s (relative) infancy and the internet is restricted to the urban elite, Newspapers continue to be a powerful medium at least in the near term.

    Of course, it goes without saying that we need to reinvent the concept of newspapers. “Minority Report” style newspapers will be something really cool. The technology for them will be available in not more than 5 years.

    But for them to happen, newspaper publishers need to move on from the ink on paper mentality to news, especially when technology allows us to break news real time, sometimes even faster than TV.

    Right now online divisions are hostage to the print news teams. So we have a long time to go.

    Done rightly, this is the next chance for newspaper publishers to take on the dominance of TV in a new medium, especially when TV itself is coming under attack due to the emergence of new devices like TiVo

  2. Vin, have you ever wondered what would happen if a newspaper (regardless of current size) simply allowed its circulation to settle at the level of loyal users?

    No more churn marketing. Refocus those resources on analyzing why the smaller subset of lingering loyalists sticks around, then refocus the product on things that will more thoroughly satisfy that audience.

    I agree that papers are headed for a circulation free-fall, but believe the numbers would bottom out somewhere above zero.

    I know, I know … it’s almost impossible for a contemporary newspaper executive to contemplate “right-sizing” the organization or the product to serve only a loyal subscriber base. And no one wants to admit that base may be as little as 10 percent of current numbers, even if that 10 percent would still be an attractive market to a subset of current advertisers.

    But isn’t it better to think about that now — and at the same time, start investing in real development for digital media — rather than waiting until you have no choice?

    I’d like to see just one newspaper say it’s going to wean off the crack cocaine now, endure the tremors and just try to survive them until it can start to regain strength.

  3. Jay, is it better to pursue all customers who are somewhat interested in your products or to simply forgoe them and serve only the most loyal customers?

    I realize that foregoing occassional users has become the vogue at some newspaper websites. There’s nothing wrong with serving best the most loyal users, but you can’t grow a business that way. And the newspaper business is anything but growing.

    Like you, I believe that newspaper circulation won’t free-fall to zero but will bottom out somewhere above zero. My question is whether that lower level will be enough to make newspapers financial viable anymore.

  4. What I’m saying is: acknowledge that the dead-trees portion of the newspaper business will always be high-fixed-cost, and for the foreseeable future will continue to decline no matter what measures circ managers take to prop it up. So the huge margins we’ve all enjoyed gradually go away, or they go away all at once.

    Maybe the approach I suggested — just going cold turkey on circulation marketing — would kill the patient. But I’m not suggesting that ALL you would do, as a publisher, is allow the crash to happen on the print side without investing in transferring that occasional-interest crowd over to media/delivery formats that balance costs (low) better with their interests (scarce and fleeting). The Web is only one such medium.

    Regardless of how it happens, news media will simply not be able to extract as much hard-dollar value out of communicating messages to audiences in the future as they do today.

    They don’t control the channels.

    And even if they did, consumers understand that it costs so very little nowadays to get a story, or 1,000 stories and just as many commercial messages, in their hands. So do advertisers. Neither group is going to pay us as much for delivering messages in digital media as they have in the past for delivering on paper.

    That’s why I continue to believe news media will have to become more selective about which niches they serve, and learn to serve the selected niches much more profoundly than they would today. Just having a health-beat reporter isn’t the way to serve the health-care industry if you expect loyalty from that group of people.

  5. I think Jay’s question is legitimate and very difficult to answer. Clearly mass media business models are rapidly weakening. Whether targeted models can adequately replace them is very much an open question. What if print morphs into a specialty medium? That might be its natural longterm position.

    I like economist Robert Picard’s decision point model (it’s buried in one of those WAN reports; email me if you want a copy). It lays out a future in which mass print may go cash-negative BUT still be sustainable by the enterprise for some time. It also points to a second decision point at which the whole enterprise could become unsustainable. It’s not a doomsday scenario as much as a “change or face doomsday” scenario.

  6. Jay

    Almost every analysis I read about the newspaper industry’s woes says something like, “Regardless of how it happens, news media will simply not be able to extract as much hard-dollar value out of communicating messages to audiences in the future as they do today. They don’t [any longer] control the channels.”

    The latent assumption underlying such analyses is that what news organizations deliver is an immutable commodity. In other words, that the service of a news organization will always be to deliver a generic product.

    Yes, news publishers will never again be able to extract as much hard-dollar value out of delivering the same news to everyone. However, the reason why they were able to extract so high a value from their generic products because there were no other distribution channels but theirs.

    There are basically two economic factors: the product and how many sources consumers have for it. Yes, the number of sources has rocketed and that means that if you produce a generic product, you’ll get paid less for it. But why assume that you can produce only a generic product?

    If you had a choice between of newspaper (in print or online) that you could custom-tailor to your own interests or a generic newspaper, which would you as a consumer choose to receive? The newspaper industry’s business isn’t to produce the same product for everyone but to route the right stories to the right interested readers.

    The way for the newspaper industry to combat its increased number of distribution channel competitors is to make its product more valuable. You do that by not making the product the lowest common denominator, one-size-fits-all. The heydey of the generic edition died with the Ford Model T.

  7. I agree with you that the era of the personalized information product is not just here, it’s overdue.

    I also believe that effective personalization happens at least two ways: through selection and filtration at the user end, and through decisions to beef up some interest niches over others at the content provider end.

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