Overall US Newspaper Daily and Sunday Circulation Continues Decline According To Latest Audit Numbers, And With Online Growth Slowing That Space Between A Rock And A Hard Place For Publishers Is Getting Ever Smaller

In the April, 2006 figures, the percentage decline for dailies was 1.9% from 2005, so this year’s 2.1% indicates things are not getting better.

Most publishers blame their poor results on the spin that they are still culling their third party sales – newspapers paid for by those other than the actual recipients such as hotel or airlines – since that readership is not coveted by many advertisers, and they are reducing outer circulation areas where the returns are not worth the effort.

But no matter how it’s spun, many advertisers will look at these new numbers and ask why they are paying higher advertising rates each year for declining circulation. The industry has a spin for that, too. It’s not just newspaper circulation anymore; now one has to take into account the total readership of print and its web activities.

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That may be the package that publishers are trying to sell, but with web advertising rates no more than a quarter of what print gets the real bottom line says that print is still far more important. For many newspapers the huge increase in online readership and its increased web revenues do not make up for the loss of print advertising revenue.

In 2006, newspaper web site advertising rose 31.5% ($637,000) but newspaper print advertising revenues dropped 1.7% ($800,000) so putting that huge web percentage revenue increase up against the tiny percentage drop for print and it’s an overall loss of $173,000. And in those figures one sees why print is still so important, no matter what is going on with web activities.

Nevertheless, newspapers had been counting on the web growth rates of 30% of the past couple of years to continue, but as if newspapers don’t have enough bad news it now looks like that growth rate for this year is slowing down to the low 20s. The New York Times Company in its Q1 report summed up that situation, “With Internet advertising growing more slowly across the industry, the Company expects that revenues from Internet-related businesses will be less than originally forecast for 2007.” That forecast had been for 30% growth; it is now closer to 20%.

Web advertising now averages around 7% of a newspaper’s total revenues. Even at the 30% growth rate it was going to take several years for that revenue to become really meaningful. Now it looks like it will take even longer. But print is still sinking.

If there is a bright spot in all of this trust the Newspaper Association of America to find it. Their spin is that the circulation churn rate is slowing down while the retention rate is getting longer. Does that mean many of the younger readers are finally gone and it’s mostly the middle aged and older that are left?

New York is a fascinating story. Rupert Murdoch’s New York Post steamrolled past arch-rival TheDaily News with a 7.6% daily circulation jump to 724,728 compared to the Daily News’1.3% gain to 718,174. On Sundays The New York Post gained 6.5% to 439,202 but still lags far behind The News that saw a 2.4% decline but its circulation remaining way ahead at 775,543. The Daily News is said also to be far ahead of the Post in advertising revenues. Murdoch has been busy buying up some 30 local newspapers in the New York boroughs where the Post has been traditionally weak and maybe cross promotion campaigns have had some circulation effect, but the probability is that its 25 cents newsstand price that has cost Murdoch oodles of red ink has finally won the day.

Anyway, to celebrate its good fortune the Post doubled its newsstand price to 50 cents on Monday, and that will give the accountants the opportunity to compute for the next audit in six months whether the doubled cost makes up for the probable circulation drop plus whatever savings are enjoyed from the likes of reduced newsprint and ink, but it certainly won’t help advertising rates. And in classic newspaper war style The Daily News on Monday cut its newsstand price in half to 25 cents, committing to just one week at that price, but firing its salvo right across the Post’s bow.

The New York Times surprisingly lost 1.9% daily to 1,120,420 and Sunday fell 3.3% to 1,627,062. The question that must be asked there is whether its strategy of being a “national” newspaper is running out of steam, and it needs to reverse some of the cuts it has made in its local coverage? Incidentally, its troubled Boston Globe did not have a good six months either. Daily circulation fell 4% to 382,500 from 397,300 and the Sunday circulation fell 7 percent to 562,300 from 604,100.

The country’s top two circulation newspapers saw slight circulation increases – USA Today up 0.2% to 2,278,022 and the Wall Street Journal up 0.6% to 2,062,312. Among other prominent publications not mentioned previously, The Los Angeles Times fell 4.2% to 815,723 (was it that many years ago its circulation was around 1.2 million?) The Washington Post fell through the psychological 700,000 barrier to 699,130, a 3.5% drop, and The Chicago Tribune was down 2.1% to 566,827.

Larry Grimes, president of newspaper brokerage business WB Grimes & Company, says that adding to newspapers’ woes he is “sensing there is a huge disconnect right now between the retail community and daily newspapers.

“I am not convinced retailers are driving such significant revenues through their on-line ventures as to warrant a steep curtailment of their print advertising,” Grimes said in an email exchange with FTM. “Yet, the newspapers don’t seem to be doing a good job courting retailers and keeping them in print. Instead the newspapers are trying to ‘join the online party’, but without the online tools needed to ensure retailers success.

Grimes, who specializes particularly in the weekly newspaper sector, believes much of the misery suffered by the metropolitan newspapers can be set at the feet of the weeklies. “Stronger household penetration, far superior local news coverage, more advertiser-friendly rates – the weeklies seem to be holding up well, especially in retail advertising, although there may be a crack in their real estate advertising armor,” he says.

And he gives one more dire warning. “Should gasoline prices ratchet up to $4 a gallon, one can assume the retail sector will suffer significantly which in turn will have a ripple effect on retail advertising. We are all holding our breaths gasoline prices will hold steady.”

On top of everything else, that’s all metropolitan newspapers need – a $4 gallon of gas!