Another Explanation for Declining Newspaper Circulation (GCI, TRB, KRI, SSP)

by: The Stalwart posted on: November 09, 2005 | about stocks: GCI / KRI / SSP / TRB

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The Stalwart submits: Last week we looked at the claim that profits are declining at the newspapers and dispatched with the notion that the internet is the culprit. Quarterly reports suggest that it's increasing costs, not flagging sales, contributing to the decline in earnings.

The buzz this week is not about profits, but about declining circulation. This is a problem, but again, the problem may not be all that it appears. Here's Alan D. Mutter, tech-entrepreneur and former newsman discussing the circulation declines:

On its face, the circulation trend is ugly. Industry-wide, daily circulation slipped 2.6% in the six-month period ended in September, following a slide of 1.9% in the prior six months and a stumble of 0.9% in the six months before that. In the same periods, average Sunday circulation fell, respectively, 3.1%, 2.5% and 1.5%.

To get a better understanding of what’s behind the numbers, however, look at one of my alma maters, the San Francisco Chronicle, where weekday circulation plunged a breath-taking 16.4% in the most recent six months to 419,358.

To be sure, some of the loss is directly attributable to people who have taken to Yahoogling the news or scanning one of the several free papers available around town or flat-out fleeing to Missouri.

But much of the sinking circulation results directly from the enlightened decision at the Chron to eliminate unprofitable readers in several of the more remote reaches of Northern California. The audience was not only expensive to serve, but it also wasn’t valued very highly by most of the advertisers paying for it.

Like the now-discredited online merchant who proudly proclaimed that he lost money on every sale but made up for it in volume, the Chron and other metro newspapers are finding that gross circulation numbers are more likely to gross out savvy advertisers than please them.

It's not clear if this is a real explanation or mere rationalization; clearly the jury is still out.

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