Sept.
 2004

Circulation is the foundation of our business. It is the channel by which we deliver our service. It is the basis by which we are measured. It is also the area of our business that is under the greatest threat. Ongoing declines in circulation - in mature markets at least - have created an unnecessary sense of foreboding across much of our industry.

Yes. Unnecessary. And I say this for three reasons.

The first is that circulation declines need to be seen in context. While newspaper sales are declining by between 1 percent and 3 percent a year depending on the market and its conditions, these declines are nothing compared with the decline in the consumption of TV news.

The average mainstream terrestrial TV news program has seen audiences decline by around 50 percent.

Meantime, viewing levels of TV news are declining at over twice the rate seen in newspapers, despite an explosion in the number of news channels. What is more, newspaper readers continue - in their millions - to pay for their newspapers, while TV viewing is largely free of charge.

Newspapers, along with other media, compete with ever busier lifestyles for attention. Closer linkage to these changing lifestyles and consequential information demands is one route to greater success in the future.

New distribution forms emerge

The second reason is that there is increasing evidence that alternative forms of distribution are generating viable new audiences that advertisers are yearning for.

These new newspapers are finding relevance in the lives of young adults, creating the next generation of readers that traditional newspapers are finding so elusive.

Consider the Metro phenomenon. Metro International launched its first free daily in Stockholm, Sweden, 10 years ago.

Today, it has 37 editions, the most recent Metro published in New York. The company claims to be the world’s third-biggest newspaper brand with a circulation of 5.5 million and daily readership of 14.5 million in 55 cities.

But Metro isn’t alone. In Seoul, South Korea, for example, Metro competes with five other free dailies.

Despite being free of charge, commuter papers such as Metro are achieving high advertising off-takes and good profits.

Free does not equal poor quality

One myth surrounding free dailies is that they somehow lack journalistic credentials.

This is nonsense. The news is simply tailored to its audience and the context within which they are reading. One only needs to look at 20 Minutes, printed by Norwegian publisher Schibsted in partnership in four European cities to realize that free dailies can offer strong news values with an exciting presentation.

What’s most interesting about the Metro concept is this: Free, or “funded” distribution is likely to evolve into more segmented products aimed at other distinct groups, such as business executives, students, and other portions of the population.

Making the switch

Such an argument will soon be applied to some paid-for newspapers.

For many newspapers, revenues flowing from subscription and single-copy sales fall far short of the cost of distribution and marketing.

Subscription canvassing costs are often written off over years, with high costs of fulfillment and follow-up.

My examination of newspapers’ profit-and-loss statements suggests that many publishers could consider a shift from a paid-for model with high operational costs to a free model where an audience of greater value to advertisers can be reached at a fraction of the costs.

Econometric models are essential, but available, to evaluate the viability and risk of such a strategic shift.

The third reason for optimism lies in the fact that many newspapers worldwide continue to grow very successfully. As part of its “Shaping the Future of the Newspaper” project, the World Association of Newspapers recently examined 18 of the most consistently successful newspapers in the world, most of which operate in mature markets. Ten underlying reasons for their success were identified, some of which were obvious; others unexpected.

What works

For example, all 18 operated in competitive markets. It would appear that newspapers that enjoy monopoly positions fail to realize their advantage. Competition gives circulation winners something to better themselves against. It provides focus. But more than anything it provides a ready source of new readers. The executives we interviewed were simply not prepared to let a competitor be better at any critical factor.

Another factor that separated successful newspapers from many others is that they enjoy a culture of shared responsibility.

Journalists, circulation and advertising staff all work closely together with common beliefs and a commitment to help each other improve the business.

Our industry - worldwide - continues to suffer from compartmentalization and internal frictions. Interestingly, such integration is the norm in the new generation of free daily newspapers.  Workers at these newspapers see their readers as customers and see their role as satisfying these customers’ needs.

Yet perhaps the most surprising finding was the number of successful newspapers that enjoyed more female readers than male. This continues to be unusual. They did not specifically target women, but rather ensured that the newspapers appealed to both sexes. Sadly, this commitment was not reflected in the management. Only two of the executives interviewed in this extensive study were female.

Covering all readers

A second dichotomy was that none of the newspapers was overtly focused on young readers. While they recognized the importance of attracting young readers, they also treated an aging population as a positive force to work with rather than against. Despite this, many of the newspapers had a policy of continually attracting and promoting younger writers, believing it to be better to have a young mind addressing older people’s issues, than the reverse.

Forms of ownership varied. There were family owned businesses, corporations with quoted stocks, trusts, single title companies and multinationals. All were committed to investing in circulation growth. While most enjoyed profit levels over time that are above industry norms, they saw the need for continuous growth as more important than permanently reporting short term-profit improvements.

Challenging process

Those of us who have worked in circulation realize what a difficult job it is. Most newspapers are extraordinarily interesting and compelling products, but the function of circulation - of distributing newspapers to outlets, at the same time every day, allowing for fluctuations in demand, different commuting patterns, subscriber types, and the impact of promotions, competitive activity, price wars - is the most underestimated challenge of our industry.

But the truth is that in a market with an increasing range of alternative ways of spending time and money, where audiences have been experiencing an explosion in alternative forms of news and information, newspapers continue to attract more than a billion readers every day, most of whom continue to not only pay for their newspaper but go out of their way to buy it.

Yes the structure of our business will change, and different business models will emerge to meet the changing behavior patterns of readers and advertisers, but those businesses that continue to invest in the future and manage the risk of alternative ways of doing business have a strong foundation upon which to grow.

Editor’s note: The report “Circulation Winners” is available to subscribers of the “Shaping the Future of the Newspaper” program at www.futureofthenewspaper.com.

Jim Chisholm is a consultant and strategy advisor to the World Association of Newspapers and director of the association’s “Shaping the Future of the Newspaper” project, which looks at strategic developments and best practice in the newspaper industry. He can be contacted at jim.chisholm@futureofthenewspaper.com