Papers' Reader Tally to Change

I found this article on-line (irony at it's finest) from the Sacramento Bee reporting how newspapers are creating new ways to exagerate their circulation and get credit for the early adapters that abandoned fish wrap for the Internet years ago. In light of the Dallas Morning News fiasco from a year ago, I find this hilarious! Enjoy, ~ Curt

Sacramentan Kasey Cotulla is a loyal reader of The Bee. But when the newspaper tallies up its paying customers, Cotulla is among the missing.

The Curtis Park resident dropped his subscription about two years ago and only reads the paper online, for free. "I feel like I get the highlights," said Cotulla, 42, a small-business owner.

For decades, newspaper audience -- the basis for setting advertising rates -- has been measured by paid circulation. Now, caught up in a multimedia world that is siphoning off circulation and advertising dollars, newspaper publishers are trying to make people like Cotulla count.

The industry-supported Audit Bureau of Circulations, a nonprofit organization that verifies newspaper circulation, is about to roll out a system for counting papers' total audience. The system will go beyond paid circulation and include measurements of "pass-along" print readership -- reflecting the copies that are shared among friends or members or a household -- and the paper's local Web site traffic.

Newspaper executives admit the new system won't solve everything but say it will blunt the notion that newspapers are doomed -- and help them reverse their slide in ad revenue. They note that it has the endorsement of the ad community, which is a partner in ABC.

"It's important for people to realize that more people want what we produce today than wanted it yesterday," said Gary Pruitt, chairman and chief executive of The McClatchy Co. of Sacramento, parent of The Bee. "Our total audience is growing. That's not an easy thing to do in today's modern media mix. ... We regard that as an important sign that our future is secure."
The new system arrives at a crucial time for newspaper chains, including McClatchy, which one year ago today completed its $4 billion takeover of Knight Ridder Inc.

When McClatchy announced the purchase, in March 2006, the industry was in a troubling but still relatively mild slump, largely caused by structural changes in the business: the migration of some readers and advertising to the Internet and other media.

After the deal wrapped up, things started getting worse and have yet to improve. The ongoing structural problems have been exacerbated by cyclical factors, notably the end of the housing boom. That's cut heavily into real estate ads, particularly at McClatchy's California and Florida papers.

Profits are down, as expenses from the takeover have offset the near-tripling of the company. On a pro forma basis -- meaning as if McClatchy were as big a year ago as it is now -- year-to-date ad sales are off 7.1 percent through May. McClatchy's stock price closed Tuesday at $24.25, down almost 38 percent since the takeover was completed.

Last week the company said it expects the slide to continue through the second half of 2007.
Although newspapers still earn fatter profit margins than most U.S. corporations, this industrywide downturn has intensified the debate over the sector's future. Tribune Co. was forced by rebellious shareholders to sell itself. Dow Jones & Co., publisher of the Wall Street Journal, is being pursued by Rupert Murdoch's News Corp.

Layoffs and buyouts have become routine. McClatchy has avoided across-the-board layoffs but has conducted selective employee buyouts and made other cost-cutting moves.

In addition, McClatchy sold its largest paper, the well-respected but struggling Star Tribune of Minneapolis, at a hefty loss to a private equity firm that has begun downsizing the staff. Pruitt said the Minneapolis staff cuts sadden him but confirm the wisdom of selling the paper.
"We're trying to make the best decisions in the long-term interest of the company," he said. "Occasionally, these decisions will not be popular, but it doesn't mean they're wrong."

Pruitt said McClatchy is stronger than it was a year ago. During the eight months between the acquisition of Knight Ridder and the sale of the Star Tribune, McClatchy's cash flow -- a measure of profitability -- declined just 0.3 percent on a pro forma basis. If McClatchy hadn't done the Knight Ridder and Minneapolis deals, cash flow would have dropped 16.3 percent.

Despite growth online, non-Internet products still account for more than 90 percent of McClatchy's revenue. Meanwhile, the company's weekday circulation fell 3.2 percent in the six months ending March 31, according to the latest ABC figures. Sunday circulation was off 2.6 percent. Both figures were roughly in line with industry averages.

McClatchy officials say that about half the decline in circulation was due to a decision to scale back some promotions, including "third-party" circulation programs. Third-party programs are bulk sales to customers like hotels, which then distribute the papers free.

No wonder, experts say, that newspapers are pushing the new ABC initiative. The organization has given its preliminary approval and is expected to make it official in July. Newspapers could begin reporting total audience figures late this fall, when the numbers for the six months ending Sept. 30 are published.

"It's an important and very valid measure of a newspaper's reach," said Peter Zollman, an advertising consultant whose clients include McClatchy. But he added: "There is no cure-all for the newspaper industry."

Newspaper executives believe the new numbers will provide ample evidence of a healthy industry. McClatchy officials cite The Bee as an example.

Frank Whittaker, McClatchy vice president for operations and an ABC board member, said The Bee's weekday circulation fell 3.4 percent to 283,561 between 2000 and 2006. But total audience -- from paid circulation, pass-along readership and online traffic -- grew 15.3 percent to 1,054,900.

"We can only help ourselves by providing this data," Whittaker said. Although the ABC plan is voluntary, "we think it is the right move for the newspaper industry, and therefore the right move for McClatchy," he said.

The ad industry, through its part ownership of ABC, has signed on to the concept of estimating total audience. "We've used it in other media for years," said Dave Walker, an ABC board member.

But some big advertisers, like Macy's Inc., aren't sure what to make of it.

The retailer doesn't do a lot of advertising on newspapers' Web sites. Nor does it place a lot of value on the "pass-along" readership of the print paper, said Mike Monroe, vice president for media at Macy's regional office in San Francisco.

While Macy's believes total audience figures "could be useful numbers," it remains focused on paid print circulation, Monroe said. That's because its research shows that many of its shoppers buy the paper partly to see the Macy's ads, he said.

"I want the guy that wants the newspaper," Monroe said.

Some advertisers may be leery of the methods used to calculate total audience. There are various systems used to measure Web page views, and "when I look at that information, I take it with a grain of salt," Monroe said.

Similarly, newspapers have been offering estimates of pass-along readership for years, but the research has met with mixed reactions from advertisers.