October 31, 2006

According to a leading industry report released yesterday, most newspapers in the US lost significant circulation in 2006, as more of the population turns to the Internet to read what's happening in the world.

However, the NAA (Newspaper Association of America) said its analysis of newsprint circulation did contain some good news, with the group estimating that newspapers increased their total audiences by leveraging their online presence to reach more readers.

The Association said reports from 770 newspapers found circulation at the average daily fell 2.8 percent between March and September 2006.

That left about 43.8 million readers of those newspapers, compared with about 44.9 million in 2005. Sunday circulation dropped more sharply, falling off 3.4 percent at the 619 papers it examined. Large, metropolitan papers were more likely to lose circulation than smaller, locally focused publications.

But the group also said when Web site visitation figures from the Nielsen//NetRatings are factored in, newspapers appear to be healthier. A record number of 58 million Web users visited newspaper sites in September, the group said.

In the third quarter, the average amount of time users spent on those sites was up to 41 minutes per month, an 11 percent increase over last year.

"At a time when competition for audiences is at an all-time high, it is more vital than ever for newspapers to provide information that most accurately reflects total audience," said NAA President and CEO John F. Sturm.

"Data that measure the expanded audience is precisely what advertisers want to enhance their understanding of consumer use across newspapers' multiple media platforms. Simply focusing on print circulation numbers in a vacuum obscures that understanding" added Sturm.

But the lower circulation numbers do pose a threat to the industry, which has long relied on them to demonstrate the value of print advertising.

As those numbers continue to fall (circulation peaked at about 65 million in the mid-1980s) and as papers shift more resources to the Web, many are finding the old economics don't always apply.

As a direct result, many newspapers are laying off staff and the industry is seeing a wave of consolidation and ownership change.

Sturm said the drop in circulation is about in line with forecasts and a longer-term trend. The group noted that users now have many more options for obtaining news from around the world as well as in their own back yard.

Despite all of this, newspapers are getting better at combining online and print packages for advertisers, he argued. "Publishers are re-focusing their marketing efforts on adding and retaining the readers that deliver most value to advertisers and make economic sense," Sturm said.

He added "the other important focus is the conversations publishers and advertisers are having about newspapers' audiences that cover a wider scope than net paid circulation."

The report cited several success stories underscoring how newspapers can use the Web to reach more readers. For instance, the Dallas Morning News and its sister publications have grown their total audience by 10 percent since 2001.

The New York Times print edition reaches 6.5 million readers on any given weekday and reached an average of 13.4 million online visitors monthly, with just a 15 percent overlap in the two audiences.

Demographically speaking, newspapers may be making even bigger gains, the group argued, with 17 of the top newspapers showing audience gains of 20 percent or more among the desirable 25- to 34-year-old age group.

While the industry is moving to embrace the Internet, financial analysts say there may be more hard times ahead for what has traditionally been a consistently profitable business niche.

The Web is already putting a significant dent in classified ads, once a key revenue source for newspapers, with sites such as Craigslist and eBay as well as online real estate sites drawing away much of that business.

Even though newspapers are growing the amount of revenue they derive from their Web operations, that revenue stream is growing too slowly to replace the losses represented by plunging circulation numbers.

"The financial performance of newspaper companies will continue to be weak, as advertising revenues continue to drop" said Michael Simonton, an analyst with Fitch Ratings.

Internet and online ads make up about 7 percent of all ad income, estimated Merrill Lynch analyst Lauren Fine. It could well be yet another 30 years before online ads make up more than half of all newspaper income, she pointed out.

"The proportion is still small overall," Fine said. Newspapers are getting help, with Google boosting its efforts to sell packages of online and off-line ads to marketers that include a print element.

Many newspapers stumbled onto the Internet. Early on, many adopted a walled-garden approach that allowed only paid subscribers to view content, a model that has largely given way to a free-for-all approach that lets users find Web content through major search engines and on multiple sites through syndicated RSS feeds.

Despite all of this, some major papers including the New York Times, have begun to set off so-called "premium" content so it can be accessed only by paid users.

"Newspapers have brand power and credibility with consumers that should be translatable to the Web," said Forrester Research analyst Charlene Li. "It's clear the transition is not going to be an easy or quick one, however."

Source: eCommerce Times