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Newsman complains that j-ethics textbooks tend to rely on theory, not examples

Philadelphia Inquirer
"What a lot of the current books do is to say, 'You figure it out,'" says former journalism prof and newspaper editor Gene Foreman. "I think [students] ought to know, 'Here are the consensus guidelines in the profession.' Here are all the experiences, good and bad, that practicing journalists have had." He put those things in his new book, "The Ethical Journalist: Making Responsible Decisions in the Pursuit of News."

Circulation Declines Driven by Cost-Cutting, Price Hikes, Voluntary Pullbacks

By Rick Edmonds

I suggested three weeks ago that the current six-month circulation period, ending September 30, would be the worst yet for the newspaper industry. 

This morning's results show daily circulation off 10.6 percent and Sunday down 7.5 percent compared to the same period a year ago, and it gives me no pleasure to say I told you so.

 

To recapitulate, there are a bunch of factors driving the extraordinary losses:

• Readers continue to migrate from print to the Internet -- sometimes to newspapers' own sites, sometimes to aggregators.
• Papers, metros especially, are voluntarily trimming circulation to remote areas because they are more expensive to serve and less valuable to advertisers.
• So-called "start pressure," the selling of new subscriptions to replace lost ones, has taken a hit from cost-cutting.
• Decisions at many papers to aggressively increase subscription and single copy prices has resulted in fewer copies being sold, though circulation revenue has increased.
• This period is the first to include the full impact of the recession, in which some consumers are dropping subscriptions and others buying the paper less frequently. 
• Smaller news staffs and news space make the product weaker and less appealing.

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Among the biggest losers in the top 25 papers are the San Francisco Chronicle (down 25.8 percent daily), The Boston Globe(down 18.5 percent daily) andThe (Newark, N.J.) Star-Ledger(down 22.2 percent daily). 

All three of these papers were on course to lose unacceptable amounts of money this year and made especially drastic cuts as a result. And even in better times, the Chronicle was notorious for weak household penetration over an enormous area, so pulling back to its geographic center and getting smaller was inevitable.

 

Winners for the six months include The Wall Street Journal, which is up 0.6 percent and replaces USA Today as the largest-circulation paper in the U.S. The Journal is the very rare paper that has expanded editorially over the last year and has a parent company, Rupert Murdoch's News Corp., willing to spend generously to market subscriptions (print and online, in this case).

 

The Denver Post and The Seattle Times both benefited in daily circulation from the closing of competing metro papers, though that kind of gain tends to melt away over time. Among the 25 largest papers, The Arizona Republichad the best Sunday performance, with a loss of only 0.9 percent.

 

Not so long ago, robust online growth was a counterpoint to mildly negative circulation news. Now, with print circulation much more alarming, newspaper Web audiences continue to grow modestly -- though time spent on site is flat.

 

But the industry is basically stalled in the much-talked-about move to some form of paid online content or getting a better deal from big aggregators like Google. As The New York Times notes in a story this morning, the first signs of an online advertising recovery seem to be passing newspapers by.

 

The best that can be said is that by dint of stringent budget control, papers are mostly returning to operating profitability, and share prices have rallied. McClatchy CEO Gary Pruitt described the cuts in an earnings conference call to analysts last week as "extremely painful. We had hoped to avoid [them], but we couldn't. We are committed to doing what it takes but no more."  

 

What is worrisome is that advertising declines and new rounds of cost-cutting continue in a cycle that further weakens papers' usefulness for advertisers and readers. 

Online Focus Is Working for Christian Science Monitor

By Rick Edmonds

The Christian Science Monitor is an atypical publication in many ways -- church-supported, small but loyal circulation base, minimal reliance on advertising. Add one more anomaly:  Seven months after discontinuing its print edition, the Monitor is growing and thriving.

 

For starters, 93 percent of the 43,000 subscribers of the printed daily agreed to switch to a new weekly print magazine, Editor John Yemma told me in a phone interview. In the magazine's brief lifespan, its circulation has increased to 67,000 fully paid subscribers (at $89 a year). And another 18,000 trial subscribers are paying a reduced rate. 

With the Web site now the place to get daily Monitorjournalism, page views are up about 20 percent from April (7.1 million) to October (8.5 million), Yemma said. Monthly unique visits have increased by an even higher percentage, he added, though that estimate varies greatly depending on how it's measured.

 

None of that means they're printing money in Boston's Back Bay. Financially, Yemma described the changes as "close to a wash":  the money saved on printing, paper, distribution and a reduced staff balances the lower circulation revenue (subscriptions to the print daily went for $219 a year). Advertising revenue, a minor factor for the Monitor, was soft earlier this year but has started to trend up.

 

More than half the Monitor's budget, roughly $20 million a year, comes from income on an endowment and a subsidy from the Church of Christ, Scientist. That is well north of the budgets of even the biggest philanthropy-supported startups such as ProPublica, which will spend about $9 million this year. So Yemma and his business-side colleagues aim to generate a pre-targeted "revenue contribution" rather than turn a profit.

 

Aggressive and expensive marketing are behind the magazine's growth. At one point this summer when theMonitor conducted a full-scale direct-mail campaign, Yemma noted, it was practically alone among magazines.
 

The competitive landscape has helped as well, he said. WithU.S. News & World Report cutting back to monthly publication, he said, the Monitor has picked up subscribers looking for a weekly. And I think the Monitor, which takes a straight news approach, stands to harvest at least a few current Newsweek subscribers disgruntled with the magazine's new straining-to-be-clever commentary.

 

Regular polling has confirmed that Monitor readers want a "stronger news orientation" rather than off-the-news essays, Yemma said, and the new Monitor retains the old's international orientation with eight bureaus abroad.

 

Yemma described in an earlier Biz Blog post the difficulty for reporters and editors to adapt to a structure in which print deadlines have disappeared. "It's still a daily learning experience," he told me Friday. 

The site is updated frequently, Yemma continued, but "not totally around the clock" -- mostly from 7 a.m. to 8 p.m. They pick their shots on video and multimedia, running a little less than planned after rough-and-ready mo-jo work by former print correspondents generated disappointing traffic.

 

One of the site's big splashes has been a yearlong multimedia series, "Little Bill Clinton," tracking a young Congolese immigrant named Bill Clinton Hadan as he makes his way through third grade in America.

 

Yemma describes himself as "a big skeptic on paid [online] content," and the Monitor is not going that way anytime soon. The Monitor doesn't face the same financial dilemma on this as most papers, considering there is no daily print subscriber base to cannibalize and no substantial advertising base to protect online or in print.

 

Yet the Monitor has made a modest foray into paid content: the Daily Briefing, a three-page PDF e-mailed to subscribers at 5 a.m. each morning that costs $7 a month. Yemma said it has picked up 1,800 subscribers without much promotion -- typically older readers who use e-mail but don't read much online. The briefing is a mini-version of a traditional daily, with a hierarchy of stories the editors think most important and a brief commentary by Yemma or Managing Editor Marshall Ingwerson.

 

The reshaped online/print combo honors Yemma's pledge when he announced the changes a year ago -- that this would be the same Monitor in editorial philosophy, only in new dress. The Monitor openly advocates all things green and has a tilt to positive, solution-oriented reporting. It is serious but not totally above the fray of pop culture.

 

The Monitor did Letterman, did balloon boy and has been heavy on the Fox News-Obama administration feud. When I asked if he was taking a pass on Steve Phillips' messy affair, however, Yemma said, "Who's Steve Phillips?" (He's an ESPN commentator and former New York Mets executive.)

 

The Monitor also covered Kanye West's rant at the Grammys and related incidents of incivility. That sparked some reader complaints, which Yemma addressed in a six-months-in column: "Well, clearly Mr. West's antics aren't the same kind of news as climate change or Afghanistan. But civility in public life is a subject worth exploring. ... News is, in part, what people are talking about and thinking about. TheMonitor will provide news that is factual and fair. Even fun. We can do fun."

 

Maybe Yemma was channeling a bit of fun that's in the air at the Monitor's offices these days. The story there is a whole lot more cheerful than most in the industry -- though, given the special circumstances, it doesn't necessarily chart a path for others.

Downie, Columbia Study: Government Has a Role in Funding News

By Rick Edmonds

Longtime Washington Post executive editor Leonard Downie did more than his share of afflicting the comfortable in government with the paper's ferociously independent reporting of the Walter Reed scandal and a host of other such stories.

 

But after a deep dive into problems of the news business in transition and a scrupulous attempt at framing some solutions, Downie and his collaborators and the Columbia Graduate School of Journalism reached a conclusion many will find surprising and controversial: a bright future for news must include some government funding of the enterprise.

 

In a lengthy report being released this week, these two sentences stake out the case for federal intervention: 

 

"The days of a kind of news media paternalism or patronage that produced journalism in the public interest, whether or not it contributed to the bottom line, are largely gone. 

 

"American society must now take some collective responsibility for supporting independent news reporting in this new environment -- as society has, at much greater expense, for public needs like education, health care, scientific advancement and cultural preservation -- through varying combinations of philanthropy, subsidy and government policy."

 

Specifically, the report advocates creation of a Fund for Local News on the model of the separate National Endowments for the Arts and Humanities or the National Science Foundation. The money could come from Federal Communications Commission fees on telecom users and Internet service providers, the report suggests.

 

Distribution of the money would be modeled on the National Endowment for the Humanities; projects are screened and awarded in open competition by 50 state Humanities Councils. The report doesn't say how much should be in the kitty, but I've heard preliminary discussions in Congressional circles suggesting $500 million a year.

 

Nonprofit and commercial ventures on any platform would qualify. The Councils "would fund categories and methods of reporting and ways to support them, rather than individual stories or reporting projects, for durations of several years or more, with periodic progress review."

 

Downie has spent the better part of this year preparing the report with co-author Michael Schudson of Columbia. The full text of the report is to be published as a special issue of theColumbia Journalism Review and will be posted Tuesday onCJR.org, but is not available until then (a somewhat 20th Century way of doing things, but so be it).

 

The paper, titled "The Reconstruction of American Journalism," does not prescribe a solo federal government rescue. It assigns philanthropy and universities major roles in nurturing news start-ups and argues that well-organized citizen journalism efforts and searchable government information can make up for some of what legacy media has stopped doing.

 

It also advocates recognizing news gathering as legitimate activity for a non-profit or low-profit corporation, clearing the way for various forms of hybrid news organizations that could receive tax-free donations. (My colleague Bill Mitchelland I have discussed this option in posts earlier this year).

 

Downie and Schudson are also bluntly critical of the Corporation for Public Broadcasting and public radio, saying their efforts need to be "substantially reoriented" to an expanded local news capacity. 

 

They flatly reject a bailout of newspapers (as has the industry itself). However, they also judge anti-trust exemptions that would allow newspapers to act together to seek payment for digital distribution of content (an idea the Newspaper Association of America has advocated) to be unwise and probably ineffective.

 

The first three-quarters of the report offer a familiar but well-done summary of the fading of newspapers and the rise of promising digital alternatives. The report is comprehensive, well-argued, specific and current, all qualities one would expect from Downie.

 

Having written more than a few such reports both on the news crisis and on assorted Florida public policy questions, I know that diagnosis is the easier part, a credible prescription lots tougher. Downie and his Columbia sponsors do not cop out.

 

That's not altogether surprising. In the slow-fuse discussion of possible government interventions, both J-School Dean Nicholas Lemann and Columbia President Lee Bollinger (a First Amendment expert) went on the record early saying government assistance should not be ruled out simply because it hasn't been a tradition here as it is in Europe.

 

The fund-for-journalism idea has intrigued me for a while. The National Science Foundation is an especially good model. Like scientific research, public service journalism is a good thing with multiple sources of sponsorship that we don't have enough of. Government has the resources to help plug the gap if the money flows through the right kind of buffering structure.

 

Establishing such a fund also permits changing what kinds of news projects get funded over time or winding down if a transition to vibrant new formats is completed.

 

In the end, such a fund may prove a tough sell politically or a flawed concept. But credit to Downie and Columbia for kicking an important public debate up a gear.

Watch Worcester Now That New York Times Decides Not to Sell Globe

By Rick Edmonds

The more I cover newspaper ownership sagas like theBoston Globe's on-again-off-again inclusion as part of the New York Times Co. family, the more they remind me of major sporting events. The Angels clobber the Red Sox in three. It makes perfect sense in retrospect, but who could have predicted?

 

Same with the Times' decision Wednesday to pull back on the possible sale of the Globe, which seemed to be speeding along to a transaction. This is a clearly a terrible time to sell a paper if the object is to get paid something. Better for the Times to harvest the benefits of its aggressive reduction of expenses, either by continuing to own the paper indefinitely or at least waiting for operating results and the sales price to improve.

 

With a mixed record in anticipating the twists and turns of this year-long string of events, I arguably should consider hanging up my spikes as a prognosticator. But what the heck -- there is almost certainly more of the story to come, so here is a forecast.

 

Watch Worcester. The announcement in recent weeks thatformer Telegram & Gazette editor Harry Whitin and a local businessman are bidders and the Times' confirmation Thursday that the paper is still in play point to the likelihood of a sale. Assuming the local group will not need to pay much, the Times Co. could book most of the 1998 purchase price of $295 million a capital loss.

 

As discussed in an earlier Biz Blog post, that can balance against capital gains the Times is taking on the sale of its radio and television holdings and the likely sale by the end of the year of its share in the Red Sox. That capital gains benefit generates a much larger financial benefit than T & Gearnings will anytime soon.

 

Why in the world did the Times pay $295 million for the Worcester paper? At the time of the transaction, profitable papers were selling for a 10 to 12 times multiple of pre-tax earnings. The T & G may well have been pulling in a $25 million operating profit.

 

Should the sale go through, Worcester will become a fresh test case of whether or not a mid-sized paper can do better as an independent with local owners calling the shots than as a low-priority holding of a chain.

 

Boston's back in the fold, but just for now? There is a remote chance that the Times Co. will squeeze a better bid from one of its two prospects and reverse course again in the next few weeks. But I don't think so. The bids may have been next to nothing, but what more could the Times expect to get in the current dismal industry climate for a metro in distress?

 

My view is that the motive for selling was to get free of theGlobe's current losses and potential future losses -- not so much to bank proceeds of a sale. Union concessions and other savings improved the current operating picture; an easing recession and a modest advertising rally could help in 2010 and 2011.

 

The Globe has been the highest profile newspaper for sale this year. But at least two other potential sales ended the same way. Despite having several "final bidders," Cox pulled the Austin American-Statesman off the market in August.Similarly, Landmark Communications quit after a year of trying to sell its papers in Norfolk, Va.; Roanoke, Va.; and Greensboro, N.C.

 

In any of these situations, the sellers could go back to market if conditions improve, if the pool of buyers grows, and if there is a chance to make some money in the deal. But that's going to take a year or two.

 

Labor friction remains. Yesterday's "town hall meeting"with Times CEO Janet Robinson addressing Globe staffers was mostly celebratory. Robinson credited Globe workers for improving the paper's finances. Civic leaders and those at the Globe are feeling a lot more loved by corporate than they were at the start of the week (and breathing easier knowing that they won't fall into the hands of Beverly Hills private investment firm, Platinum Equity).

 

But there were questions about draconian changes in the cost of health care benefits in the works. The Newspaper Guild is making the case that not only is the package much worse for employees than before, it is skimpy compared to the norm for American corporations. Both Robinson andGlobe publisher Steve Ainsley said the proposed health care changes are likely to stick, and that more job cuts may be necessary.

 

On balance, though, this week's news is upbeat all around. The Times Co. has a clear path to keeping the Globe and eating the cake on its tax benefit, too. The Globe stays tethered to a newspaper company with proven journalistic commitment and present-tense operating experience. I'd stop short, though, of declaring a happy ending. More likely, many eventful episodes remain to be written in this story.

Shrinking Newspapers Have Created $1.6 Billion News Deficit

By Rick Edmonds

Nearly everyone agrees now on the basic narrative of the news business in transition. Old media -- newspapers especially -- are contracting drastically. They don't field the news effort they did in better times and probably never will again. On the other hand, alternative digital startups are exploding, and may in time plug much of the gap.

 

It occurs to me, though, that there has been very little effort to quantify what has been lost, then compare that figure to the scale of the best of new media.

 

This is a first shot at those numbers.

 

By my back-of-the-envelope calculations (see below), newspapers have, just in the last several years, reduced their spending on journalism by about $1.6 billion annually. 

 

The new media sector defies that kind of collective measurement. By its nature, digital launches are extraordinarily diffuse. There is room for debate over what qualifies as a news/information site. And by any definition, new media ventures are a fast moving target with the pace accelerating even in the last few months.

 

What is known is the dimension of some of the most prominent ventures, the majority of them non-profits. Pro Publica has an annual budget of nearly $9 million and is growing. The Knight Foundation is investing up to $5 million a year in start-ups through the Knight News Challenge. The Kaiser Family Foundation is spending millions on a health policy news service launched in April.

 

San Francisco financier Warren Hellman is commiting $5 million through his family foundation over several years to a non-profit digital service that will also seek to harness volunteered effort by UC Berkeley journalism students. Venture capitalist John Thornton, several foundations and individual donors have committed $4 million to launch the non-profit digital Texas Tribune, which expects to operate on a $1.6 million budget in it first year.

 

Probably best known of the start-ups are MinnPost and Voice of San Diego. Both operate on a total budget of a little more than $1 million a year, probably about $1 million of that a direct spend on journalism. Geoff Dougherty recently suspended operation of Chi-Town Daily News, saying he had been unable to raise $300,000 to keep going. He commented that a metro digital report needed at least $1 to $2 million a year to make a difference.

 

So here is an indicator of relative scale. It would take roughly 1,600 MinnPosts or Voice of San Diegos to replace the spending on journalism newspapers have cut.

 

How do I figure the deficit at $1.6 billion? In 2004, 2005 and 2006, newspapers were a $60 billion industry with advertising revenues just over $49 billion and circulation revenues of about $11 billion. 

 

Deep advertising losses will take the advertising total for 2009 down to around $28.5 billion. The Newspaper Association of America no longer offers estimates of circulation revenue. I'm estimating that despite some rate increases, the total has fallen to around $8.5 billion. That will leave roughly a $37 billion industry as 2010 begins.

 

The Inland Press Assocation's cost and revenue study is the best source I know for figures on newsroom spending as a percentage of revenues. The latest report, as of the end of 2008, finds that figure at 13.7 percent for papers of roughly 100,000 circulation.

 

But in earlier work with these numbers, I found the newsroom spend was a lower percentage at the biggest papers of 250,000-plus circulation. Given their outsized weight as a share of the industry, I estimate the current industry average at 12 percent. When profits were higher in the middle of the decade, I estimate newsroom share was closer to 10 percent of revenue.

 

So at $60 billion total revenues in 2005 and 2006, the newsroom spend would have been roughly $6.2 billion. Now as a $37 billion industry, newspapers are likely spending $4.4 billion on news. That's $1.6 billion less. 

 

Newsroom spending, by the way is 80 to 90 percent salaries. It also includes fees for wire service and freelance contributions, as well as a travel and training budget. In the Inland survey, benefits are counted separately as part of "general and administration."

 

These raw numbers, you may already be thinking, don't tell the full story. Even stalwart newspaper enthusiasts would admit that some of the trimmed spending and positions were expendable with little impact on quality for readers. The industry is still hacking at inefficiencies like having six editors read a single story or sending hundreds of reporters, editors and photographers to the Super Bowl.

 

MinnPost, Voice of San Diego and the rest have made canny decisions about what to leave out of their report -- sports results, breaking crime news and more -- the better to deliver serious reporting. A number of the new non-profit units -- like Pro Publica -- focus exclusively on investigative reports.

 

The start-ups typically dispense with the expensive print, delivery and ad sales costs of newspaper organizations and thus can spend the great majority of their revenues -- not just 12 percent -- on content.  My comparisons, however, back out most of that legacy expense structure to look apples-to-apples at levels of news spending.

 

All that said, new media at best appears to be covering a small fraction of the traditional news capacity lost. (Broadcast and magazines have cut coverage too, though I do not have a handy way to measure how much).

 

We will save further discussion on how far a dollar goes in the old and new media for later in the week. Your thoughts are welcome in the meantime, however, and feel free to check my math, too.

Can Self-Service Newspaper Ads Crack the Small Merchants Market?

By Rick Edmonds

Mike Sacks describes the logic of Tribune Co.'s new self-service ad initiative this way: How many dry cleaning businesses are there in your city? (Lots.) How many ever advertise in the newspaper? (Probably zero.) Would they advertise if the placements were free? (Sure.) What if the ads cost a tenth as much as a conventional placement? (Quite possibly.)

For a year or so, Tribune Co. papers have been piloting a system that targets small businesses, takes out the expense of a salesperson and relies on a technology that lets the customer build the ad and place it. The system has worked well enough that Tribune and its partner Mediaspectrum Inc.announced last month that they would market it industry-wide.   

Like most new media venturers, Sacks was reluctant to talk about revenues for competitive reasons, though he called the added income "not insignificant." But he said, in a phone interview Tuesday, the Los Angeles Times is adding 200 new advertisers a month; the Sun-Sentinel in South Florida had picked up 12 that morning. 

So is the system -- or at least the idea -- taking the country by storm? Not yet. Sacks concedes that even within his own company adoption has been an uphill slog at times. At first the technology was unavailable or untested. But the heart of the matter, Sacks said, is that "traditional thinking is what's in the way."

Possible cannibalization of existing business and the integrity of the rate card raise hackles for many, he explained, though in practice bigger, full-service advertisers have tended to stick with the programs they have, and there has been little, if any, trading down by established clients.

The idea that newspapers are missing a big opportunity among smaller businesses is hardly new. Finding ways to serve that segment of potential advertisers was a key recommendation of the American Press Institute'sNewspaper Next study three years ago. Pilot efforts followed at the Richmond Times Dispatch and other papers.

A well-received panel at the Newspaper Association of America's annual meeting in spring 2008 focused on stories of major innovation from companies in three unrelated industries. The CEO of Dow Corning talked about adding a self-service option for economy-minded customers who wanted a "Sam's Club" version of her company's  glass and plastic products. That was a hard sell internally, she said, in a culture wedded to scientific R & D and top-of-the-line quality.

Sacks' work developed on a parallel track. He actually began five years ago, he said, trying to build a self-service classified alternative that would reduce telephone order-taking and encourage customers, freed from dictation, to write their ads longer.

But as classified faltered, the more interesting application was display. He commissioned Scott Killoh, CEO of Mediaspectrum, to "build (a system) out very fast." The business opportunity clearly improved as papers were offering zoned editions, community and niche products in Web and print formats. As the self-service platform has evolved it can offer a "good, better and best" options mixing combinations of placements, with the cheapest buy as little as $150.

Mediaspectrum has sold the system to other clients (notably the United Kingdom's Trinity-Mirror group). The new partnership kicks the sales effort up a notch with Tribune now trying to market the system as a best solution broadly through the industry.

Some newspapers or chains may be holding back as they cook up a tailored, homemade solution for pursuing the small merchant base, Sacks said. Others may be waiting for an industry-wide solution with a critical mass of participants (like the Yahoo partnership) or some official imprimatur from an industry group such as NAA.

Sacks conceded that Tribune, deep in a complex bankruptcy proceeding, may seem an unlikely source for ambitious innovation. "Even in a bankruptcy, business goes on," Sacks said. "The industry is looking for a silver bullet solution (to broaden the advertiser base), and we think this could be it."  

The announcement got scant coverage beyond a favorable mention in Ken Doctor's Content Bridges blog.  Doctor and I are of a mind on this one. I'm not qualified to judge the technological merits of the platform or assess the terms the partners are offering. But there appears to be serious additional revenue potential, and that's what the industry needs most right now. 

Another Dismal Circulation Report Is on the Way

By Rick Edmonds

The most recent six-month period for measuring newspaper circulation ended last Wednesday. It takes a month or so to assemble the results, so watch for actual numbers around Halloween. I'm sticking my neck out only a little in predicting they will be a veritable house of horrors.

 

Here's why this six-month period is likely be be even worse than the period ended March 31, which saw average losses of 7 percent daily and 5.3 percent Sunday compared to the same period in 2008:
 

This is the first six-month period likely to show the full effect of the recession on customers who have chosen to cancel subscriptions or buy the paper less frequently.More people have lost their jobs (or are worried that they will) since the last reporting period, and there's no reason to expect a bounce-back in circulation before those people find new employment.
 

Many newspapers have raised their subscription and single-copy rates over the last year. In my view and that of other analysts, this is a healthy and necessary move to price the print product more realistically and wean papers away from a lopsided dependence on advertising. The industry has been reporting good retention rates, but still stands to lose lose at least some circulation as a result.

 

Tight budgets continue to drive so-called "voluntary" circulation cutbacks. Newspapers are still saving money as they pull back from distribution distant from their home bases. They also have less to spend on the expensive exercise of selling new subscriptions and thus keeping up with churn.

 

In fact, the Newspaper Association of America released a report last week saying that churn (defined as replacing a lapsed subscriber with a new one in the course of a year) has been almost halved since 2000, from 54.5 percent to 31.8 percent in 2008. That bolsters the argument to advertisers that the remaining circulation, while smaller, has a higher concentration of loyal and attentive readers.

 

Not to ignore the obvious, over time print readers also continue to drift away to the Internet  -- whether to a paper's own Web site, other news sites or aggregators. I think the evidence is squishy on the rate at which people simply quit the newspaper in favor of online. But users of both who shift more of their reading to the Web, especially if they opt to go Web-only some days of the week, are contributing to the industry's audience slide.

 

Tight budgets are making the product weaker, too -- fewer reporters and editors, less news space and fewer ads. Not to belabor a point made in many earlier posts, but much of the industry is flirting with editions so skimpy they risk losing even print loyalists as customers.

 

The math of how circulation is measured also works against breaking a cycle of accelerating losses. Since the comparison is to the same period a year before, roughly half of the damage this period actually reflects losses incurred in the six months that ended March 31.

 

Spinning the half-full version of the audience story, you will hear claims that newspaper Web sites continue to grow their numbers, as measured by unique visitors per month. Or that total audience is bigger than ever.

 

However, I think a closer reading of those numbers shows that the faster growth is in very quick visits via search, which now accounts for more than half the traffic at most papers. As a result, average time on site has declined most of this year, though a revised methodology in recent months has shown some increases. And of course advertisers are far from valuing Web visitors with the rates they pay for exposure to print readers.

 

Put all these factors together, and staying even with the last period's losses would be an excellent result. I would bet against the reports being that good.

 

What this means for advertising

Weak print audience numbers are bad for the industry's image, and image has become a consequential matter in itself. But the bottom-line question is the impact on advertising.

 

Lower circulation directly hurts revenue from inserts because they are priced by the number distributed. As noted in my last post, inserts with coupons remain the healthiest segment of the print advertising portfolio. Also noted, newspapers are not standing by watching the revenue drift away in pace with circulation losses. They have added supplemental distribution to non-subscribers, especially in desirable, high-income ZIP codes.

 

Measuring the impact on regular print display rates is trickier. All year, I have listened to corporate earnings conference calls in which analysts seek to pin down the effect and executives tap-dance around an answer. To be fair, it's hard to calculate effective rates on the fly since they are heavily influenced by frequency discounts and advertisers' choice of size and format. (Booking smaller ads or running them less frequently raises the effective rate.)

 

I think it is a reasonable guess, though, that rates are down 5 percent or so, which contributes to ad revenue losses that have been running 25 to 30 percent lower than a year earlier.

 

The good news for the industry lately has been the ability of companies to cut expenses sufficiently to show at least modest profits. Share prices for the public companies have rallied from first quarter lows. However, circulation dynamics dictate another bad news day for the business coming soon.

Keller: Whitney didn't save us from "The Daily Show," but...

Nieman Journalism Lab
"On a number of occasions he has saved us from ourselves," Bill Keller says of standards editor Craig Whitney (left), who just retired from the Times. "I don't think there was ever any prospect that Arthur [Sulzberger] would propose to invite opinion-makers to his house for paid salons with our reporters -- but if someone at The Times had given birth to such a scheme, I have no doubt Craig would have been the first to smother it in its crib." ||Peter Osnos: "In every way definable, Whitney upheld the standards and ethics of his trade."

Prolonged Recession Boosts Coupon Clipping, Newspaper Inserts

By Rick Edmonds

Evidence continues to build that the drawn-out recession has been good for something in the newspaper industry: It has more frugal customers clipping coupons, which in turn leads them to that thick sheaf of Sunday inserts.

 

The New York Times was the latest to note the trend in a feature Monday. I especially liked the photo of "coupon queen" Susan Samtur sorting her clippings into an accordion file case. The picture suggests that there is a tactile appeal to clip-and-save, plus a sense of planning and control, quite different from being the passive recipient of a random barrage of online ad messages.

 

Indeed, the Times article, like one in the Wall Street Journaland a Biz Blog post of mine in February, suggests that online start-ups are trying to grab a piece of the action but make up only a tiny half a percent share of redemptions, so far.

 

Here are a couple more indicators of the robust health of the coupon sector:

• The Newspaper Association of America recently released a commissioned study by MORI Researchreinforcing the traditional sales pitch that newspaper advertising is especially effective at getting consumers to the store. Of those surveyed, 73 percent of adults said that they regularly or occasionally read newspaper inserts, and 82 percent said they were "spurred to action" most often clipping a coupon.
• Valassis Communications, a public company that produces newspaper inserts and distributes such flyers directly to homes, reported revenues for the second quarter of 2009 off just 8.6 percent compared to the prior year. Its coupon processing subsidiary recorded a 23 percent increase in redemption -- the third consecutive quarter of double-digit growth.

Neither the NAA nor individual newspaper companies typically report insert income as a separate category. It is fair to infer, though, that inserts are running relatively strong -- certainly compared to problem categories like cars, real estate and help wanted. But the bad outweighs the good, with overall ad revenues off 25 to 30 percent so far this year.

 

My hunch is also that as insert advertising holds its own that is probably accentuating the imbalance between Sunday papers, which often account for 50 percent of total ad revenue, and the unpopular early days of the week, whose editions are increasingly barren of ads.

 

Newspaper companies are routinely slammed these days, fairly or not, for letting parts of their ad franchise slip away to competitors. Not so in the case of inserts. Larger newspapers routinely supplement the basic insert option with separate delivery to non-subscribers or ZIP-code-specific distribution.

 

For example, Gannett has had success with a "Sunday Select" advertising supplement with light editorial content that it delivers to non-subscribers from targeted ZIP codes who opt to receive it in Gannett's 17 largest markets.MClatchy will offer the program in four markets beginning in November, and more McClatchy markets as well as several MediaNews and Tribune Co. papers will add Sunday Select next year.

 

GateHouse Media and the Suburban Newspapers of America launch a new venture next month, Zip2Save.com focused on the sunrise Internet coupon segment.

 

It is clear that consumers remain cautious spenders for now, though measures of consumer confidence are ticking up along with economic indicators in recent months. Whether the new frugality will continue post-recession for months or years is the subject of considerable debate in business and economic circles.

 

For newspapers, it's the old double-edged sword. Continued price-consciousness is good for the kind of advertising at which print newspapers excel. However, a return to American spending as usual could bring back some of that auto, luxury goods, real estate and travel advertising, still in a deep funk.