As The UK National Newspapers Cut Back On Their DVD Giveaways A Truer Picture Emerges On Just How They’re Doing -- The Circulation Numbers Are Down, Down, Down!

Philip M. Stone March 12, 2007

The enlightened Fleet Street spin said UK national newspapers were doing well in February, continuing January’s recovery and rebounding from a disastrous 2006, but the February audit numbers shows every single national newspaper down on its UK circulation from a year earlier and just three of 20 eked out month-on-month gains. So much for spin!

What makes the numbers even more interesting is that with one major exception most newspapers cut back on their February DVD giveaways. Whether it was because marketing departments believed their own recovery spin, or whether it was the accountants getting really concerned with just how costly those promotions are, the giveaways were reduced (although not disappearing) and some newspapers seemed to take some hard knocks because of that. But at least a truer circulation picture is beginning to appear.

At the end of the day, what advertiser is interested in what were really false circulation numbers anyway? As Rupert Murdoch said more than a year ago, “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!”

The one major exception is the Daily Mail that really hit panic mode in February when for some reason the bottom fell out of what had been really a pretty steady performance over the past year. The Mail ended February with a slippage of only 0.68% to 2,339,733, but to achieve even that it pulled out all the stops -- in Scotland it cut its price in half for a couple of weeks and in Northern Ireland it discounted it by two-thirds; on the month’s last Saturday it slashed its England price from 70 pence to 50 pence; it increased its bulk sales during the month by 10,000 – something advertisers really aren’t that interested in; and it used an ultimate weapon sure to bring in the masses -- it gave away a Princess Diana DVD.  Even so, year-on-year the Mail is down 4.08% -- around 100,000 copies.

Regular ftm readers know we have been tracking closely what has been going on at The Sunday Times since it increased its price to £2 last September with circulation diving by about 100,000 through January – it had a good first month of the year picking up some 75,000 copies, a 6.25% increase over December, but was that increase just those wealthy readers returning  from their foreign Christmas holidays that had caused December to drop so much, or were they additionally some of those missing readers who were finally forgiving their favorite newspaper for pushing the pay envelope too far?

February’s numbers indicate readers were not in a forgiving mood and  looked elsewhere -- the month-on-month number was down by 43,000, a 3.33% drop that was the worst for any quality Sunday newspaper, and year-on-year the numbers were down 9.19%, a drop of some 120,000. The Sunday Telegraph, on the other hand, was up 1.19% for the month – but it did give away a DVD.

Already News International is cutting expenses. Promotional budgets, such as for DVDs, have been cut (The Sunday Times offered just one Charlotte Church CD in the month) and journalists have been told to watch their expenses. Times Newspapers reported in February that for its last fiscal year it lost £80.7 million ($157 million, €120 million) a 72% increases over the year before. Some 40% of that is a charge to cover redundancies when the new £600 million ($1.17 billion, €900 million) color presses come on line next year, but that still leaves around £50 million as a direct loss, and while there is no breakdown the thought has always been that The Sunday Times is the big moneymaker while The Times continues to hemorrhage money.   

Only the Sunday Times accountants really know whether a Sunday Times 100,000 circulation drop is worth the extra 20 pence a copy, vis a vis savings from reducing DVD promotions, vis a vis newsprint savings and the like, vis a vis whatever happens, if anything, to advertising rates, etc. etc., but there can be no doubt that News International requires a very financially strong Sunday Times to offset the losses from its sister daily newspaper.

The Times, incidentally, had a bad February, down 4.08%, some 27,000 copies, and down 4.03% for the year.

The UK newspapers have been hit hard by not only declining circulation but also declining advertising revenues, but Trinity Mirror, the UK’s largest publisher of national and regional newspapers, says that advertising revenue is beginning to stabilize, meaning that by the second half of the year it expects the declines to stop and for second half ad revenue performance to be pretty much the same as in 2006.

While that may not sound very encouraging, consider that the first half of 2006 saw a 10.6% ad revenue decline that reduced down to 7.6% in the second half. Again the Fleet Street spin has been that 2007 has gotten off to a good advertising start, but it might all be in the semantics with Trinity Mirror saying the decline in January And February was down to 4%. In other words “a good start” means that things are still worse than a year ago but the rate of decline is slowing.

So the talk isn’t really about increasing advertising revenues this year, but rather stopping the rot, and looking for 2008 to build upon a stabilizing 2007.

Trinity-Mirror said in a statement it sees the current environment as  “challenging and volatile”.

The company’s year-end results show how really tough it is out there. The national newspapers (among them the Daily Mirror, Sunday Mirror, and People), saw a 12% fall in operating profit, caused mainly by a 10% decline in advertising revenue, but they still turned in a 17% profit margin on fierce cost-cutting. At the regionals, operating profit fell by 18% with ad revenues down 6%.

So there is the double edge sword. Advertising’s downturn is, at best, stabilizing but circulation decline is near freefall – how many 4% a month declines can these papers absorb? - and surely that in turn will have a negative effect on advertising revenues?

There’s an awful lot of smart brainpower in the executive wings of these newspapers but no one seems to have really figured out a solution to stem the circulation drop, and get advertising back where it belongs. Trinity-Mirror says the advertising downturn is cyclical and is now showing signs of recovery. Many doubt that cyclical view.

Like their North American and European cousins, UK newspapers are getting into web activities as fast as they can – Trinity-Mirror for instance announced some £30 million ($59 million, €45 million) in online revenues -- but with the advent of the web and all those free newspapers out there how do you encourage people to pay for information that is available elsewhere for free, albeit in a different form. 

The solution, of course, is to continually have information in print that the competition doesn’t – easier said than done -- but the Observer newspaper showed on a recent UK train crash that if you provide superlative coverage of an event, they really will come.

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