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Monday, May 09, 2005

Report Says Newspaper Circulation Losses May be Worse Than the Numbers Suggest

Journalism.org's latest report on "The State of the News Media" is out and the section dealing with the decline in circulation among the nation's daily newspapers includes lots of numbers and one very troubling confession.

The basic point of the report - which is produced annually by representatives of the two groups behind Journalism.org, the Committee of Concerned Journalist and the Project for Excellence in Journalism - is that the circulation decline that appeared to be lessening in 2003 accelerated even more seriously in 2004.

Here's how the report puts it:

"Figures for 2001 to 2003 suggested that a 30-year decline in circulation was at least slowing and might even be leveling off. The circulation decline for dailies had slowed to a mere .0015 in 2003.1
"What's more, much of the long slide came at evening papers, many of which simply folded. Morning circulation was near its historic peak, and one could argue that the surviving papers were slightly bigger on average, and stronger. Count in the steady growth of newspaper online sites over the last decade, and you could even make the case that total audience was growing rather than shrinking.
"That promise, however, was thwarted in 2004. Save for online, the story of newspaper circulation was a return to accelerated decline. For the six months ending September 30, 2004, circulation at the 841 daily papers and 662 largest papers for which audited totals were available was down 0.9% daily and 1.5% Sunday.2"

But those numbers don't tell the whole story, disturbing as they are:

"It would have been a tough year for circulation in any case. And the audited September 2004 totals do not include purging the books of almost 250,000 phantom readers claimed by the four metropolitan papers (the Chicago Sun-Times, Newsday, Hoy and The Dallas Morning News) implicated in a circulation scandal. Long story short, each revealed that they had been bolstering their numbers the Enron way - by faking them, particularly by claiming single-copy street sales for papers that were literally dumped.
"The succession of embarrassing announcements over the summer had several common threads. The cheating was extensive - overstatements from 50,000 to more than 100,000 - and had been going on for years.
5 All four papers were in big cities and owned by public companies, which took large charges against earnings, almost $100 million for the Tribune Company's Newsday and Hoy and tens of millions for the other two.6 (Circulation directors in Dallas and publishers at Hoy and Newsday departed. At the Sun-Times, a new management team had discovered practices of its predecessors).
"By the summer's end, aggressive New York prosecutors were looking to build a criminal case in the Newsday/Hoy situation. The Securities and Exchange Commission had launched its own investigation."

But read deeper into the report and you find this observation:

"Large-scale cheating is relatively easy to bring off and hard to detect. Some of the fraud was built on top of loose procedures, fully within ABC rules, for newsstand sales and returns, reduced-price or free start-up offers, bulk and third-party sales and other deeply discounted versions of "paid."7 Newsday's aggressive reporting after the fact on its own troubles revealed that agents were carefully coached in how to fool the auditors.8
"Any paper is likely to have a good-sized complement of these loophole cases in its paid total. The variations, and their use, have ballooned in recent years. The analyst Paul Ginocchio of Deutsche Bank Securities examined the circulation statements of 40 large newspapers and found a "hair-raising" decline in fully paid circulation. Heavily discounted and "other" (like group sales or employee copies) had risen from 4.8% to 10.3% of the total paid circulation at the 40 papers in just two years.

Put another way, the circulation decline is likely to be even worse than it appears from the numbers and the circulation fraud that received so much coverage last year may well be only the tip of a scandalously large iceberg.

To put these observations in further perspective, consider the possibility that because things are actually much worse than they appear newspaper circulation in general could see a wholesale collapse sooner rather than later.

I will have more to say about this report, its observations about the health of the newspaper industry and the circulation numbers it contains, as will many others, I am sure. Stay tuned.