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Lessons Learned From Most Recent UK Newspaper Audit: Two Big Exclusives Help a Bit, Cutting Back on DVD Giveaways Has Strong Impact, Price Rises Not Forgiven, And Free Newspapers Really Do Hurt the Paid-For

Philip M. Stone May 14, 2007

Rupert Murdoch’s Sun tabloid had two big exclusives in April – that Prince William and girl friend Kate had broken up, and an interview with the sole British female captive the Iranians released, and they helped push average circulation up 0.52% (15,803 copies) over March, but while that was the largest circulation gain of any national newspaper one had to really wonder why it wasn’t much more.

That's one way of getting the circulation numbers up

Perhaps the answer lies in the overall UK April national newspapers daily circulation that saw a 0.45% decline to 11,542,146 copies, so The Sun’s half a per cent gain in that kind of market may in reality be pretty good after all. It is an indictment, however, on the health of the UK national daily circulation which, with its ups and downs, still sets the trend arrow down.

Since Rupert Murdoch’s bid for Dow Jones, interest in his newspaper properties has heated up so let’s take a look at how his four UK national newspapers are performing.  Murdoch had said more than a year ago he really didn’t like all the promotional money being spent on DVD giveaways. “The fact is the sales go up for a day, and are right back to where they were the following day…People grab (the newspaper), tear the DVD off and throw away the newspaper. They’ve (publishers) got to learn. That’s got to stop!” Finally late last year his UK-based News International (NI) finally bit the bullet and cut back on the DVD giveaways. The result: In the last 12 months combined sales  are down some 500,000 copies, and a large part of that  (only his accountants will know exactly) can be put down to the reduction of the DVD giveaways.

Other newspapers have continued with their giveaways. The Daily Telegraph, for instance, gave away two DVDs, had a token campaign for History Channel DVDs, and also an audio token campaign. Result: Circulation up 0.29% for the month. The   obvious question is what would have happened without those costly promotions, and are they worth the cost (again, only the accountants know the real answers vis a vis promotion costs, keeping advertising rates high based on average circulations those promotions entail, etc. etc.)

News Corp announced in its recently released financial Q3 results that its UK newspaper advertising and circulation revenues had dropped (without giving figures, but in its last financial year ending June 30, 2006, NI profit was down 25%). Those Q3 results must have been bad enough, however, because NI has ordered a 7% spending cutback, already involving some redundancies, that could amount to around £15 million ($30 million, €22 million). 

Its big moneymaker, The Sunday Times, still has not recovered from its price increase to £2 last October. Ever since then circulation has been on a downward spiral and in April it continued, down 0.47% (5,758 copies). Its circulation of 1,231,153 is down in the past six months by 7.72%. More worrying, the problem here may be more than cost – one would think that those who would have left because of the price hike would have done so already, and the Sunday Telegraph  added 3.8% on the month and the Observer was up 1.63%, but for all three when looked at on a six-month basis, the numbers are all down.

At The Times, which with the Dow Jones bid in mind is now referred to as the prime example of how Rupert Murdoch treats a quality newspaper, circulation was down a disappointing 1.62% in April to 629.157 copies. Its six month average is down 4.087% to 644,230 copies.

The Times, the most venerable broadsheet in the world, went compact size (tabloid has too many bad connotations) in November, 2004 when its circulation stood at 660,906. Compact was considered to be the panacea to save newspaper circulation, but today The Times’ circulation stands at 629,157, a 5% drop.  Compact defenders will say the loss would have been much more had the newspaper stayed a broadsheet, but the fact is the compact switch was to have raised the numbers, not see them go down, and The Times’ numbers since going compact show the real problems facing the UK nationals.

Murdoch explained in his April, 2005 speech to the American Society of Newspaper Editors why The Times went compact. “At The Times of London, circulation decline was immediately reversed when we moved from a broadsheet to what we call our ‘compact’ edition. For nearly a year, we offered readers both versions: same newspaper, same stories, just different sizes. And they overwhelmingly chose the compact version as more convenient. This is an example of us listening to what our readers want, and then upsetting a centuries old tradition to give them exactly what they were asking for. And we did it all without compromising the quality of our product.”

Could the same fate await a Murdoch-owned Wall Street Journal with basically the same quote used to explain that move? (Remember the Asian and European versions of the WSJ are already compact size under the Bancroft ownership, but Dow Jones has always said it would not happen to the US edition although it just trimmed its width 20%).

Murdoch, incidentally, is ultra sensitive  to how the media treats him when it comes to his “quality” papers.  Although his instincts were to make The Times compact well before he did, he said he could not be the first, with The Times of all papers, in the UK market to make such a switch because he knew he would be severely vilified for too abrupt a change to such a venerable publication.  He therefore waited a year after The Independent  took the first UK national plunge from broadsheet to compact and the new size had gained approval before making the final move. Not mentioned in any of this, incidentally, is the huge extra cost The Times went to in printing two different sized editions daily. 

In the Sunday market Murdoch’s tabloid News of the World holds onto the country’s largest circulation at 3,282,263 but that’s down 0.78% with its six-month average down 6.73%.

Elsewhere, and in the free newspaper market CityAM finally achieved its target of 100,000 daily distribution. And in the PM market the war between Murdoch’s thelondonpaper and Associated Newspapers’ London Lite continues with around 900,000 copies distributed between them. But still suffering is the paid-for Evening Standard with its numbers down just 0.1% in April, but dig into those numbers and they are down 15.7% in the year, and would be much worse except that the bulk sales have now doubled from around 37,600 a year ago to 68,700 today, mostly to airlines.

Doing the math, and today, with the Standard costing 50p but with only 74% of its total circulation paying full price, the daily newsstand circulation revenue is £98,500 whereas a year ago when 88% of its then sales were at the full 40 pence price the daily newsstand circulation revenue was £111,200. That means it’s down some £63,500 a week, £275,000 a month, some £3.3 million a year.

When numbers like that are written, publishers immediately blame media pundits for saying the situation is being exaggerated. And to an extent they’re right. Even with that circulation revenue drop The Evening Standard is no doubt still a good money spinner for Associated Newspapers. It’s just not producing as much as it used to, and the company will continue to make cost savings to restrain as much as possible that margin cutback.

And the trade organizations will see all of this as a huge plus. Sure the Evening Standard has lost around 100,000 circulation but the free newspapers are distributing some 900,000 copies daily in London (never mind that so many of those free newspapers are tossed by readers that it is causing a huge trash problem in London every afternoon)  so let’s lump all those numbers together as the trade organizations do and lo and behold we have a story of great advancement for the London newspaper market. You buy into that?

Just last week Sly Bailey, chief executive of Trinity-Mirror, the UK’s largest newspaper publisher, said at the company’s annual meeting that newspaper pundits were continuing to exaggerate  newspaper problems.  Bailey had previously said the current bad advertising climate was purely “cyclical” , and she expanded upon that by saying the “fragmentation” fear is being overdone – newspapers have historically overcome fragmentation whether it be with 24-hour TV news  or celebrity magazines -- and she said advertisers will soon realize they have re-directed too much of their spend onto the Internet.  “We are convinced that newspapers will be in business for many years to come.

Mind you, having said that, she admits Trinity-Mirror is increasing its digital investments  while at the same time the company is in the late stages of getting rid of some of its regional newspaper that no longer “fit”, hopefully for some £600 million ($1.2 billion,€890 million), including the sale of its national Racing Post.

And, oh yes, she also reported a 3% drop in newspaper revenue for the first four months of the year.

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