• by Erik Sass  @eriksass1, May 9, 2006

Paid newspaper circulations continued to decline across the country between March 2005 and March 2006, according to a semi-annual report released Monday by the Audit Bureau of Circulations. With a few notable exceptions including The New York Times, Chicago Tribune, and USA Today, most regional and local newspapers experienced a decline in paid circulation ranging from one to five percent. Overall, the 770 newspapers measured in the so-called FAS-FAX report had a total paid circulation of 45,414,979, a 2.5 percent decrease from March 2005.

In a report released this morning, Merrill Lynch analyst Lauren Rich Fine described the rate of decline as "surprising," noting, "We had optimistically thought trends would improve slightly in this March audit as it was a year ago when trends deteriorated in the wake of the mid 2004 circulation misstatements."

Fine attributed the correction to the fact that publishers are still weaning themselves off of third-party circulation volume in favor of "individually paid circulation," as well as a delayed impact from the government's Do Not Call registry.

Big regional dailies seemed to take the biggest hits. A few representative data points: in Monday-Friday circulation, the LA Times lost about 50,000 readers, ending at 850,000 (a 5 percent loss), the Miami Herald lost about 30,000 to end at 295,000 (9 percent), and the Boston Globe lost about 36,000 to end at 397,000 (8 percent). The San Francisco Chronicle showed the biggest drop in weekly paid circulation, losing more than 70,000 readers to end at 398,000 (15 percent).

In these circumstances a "bright spot" often meant stagnation or a small gain at best, with heavyweight The New York Times gaining 6,000 readers to end at about 1.4 million and the Chicago Tribune posting a similar gain to end at about 580,000; USA Today remained essentially even with a paid circulation of 2.7 million.

In the face of this gloomy news, industry organization the Newspaper Association of America (NAA) searched for positive data in other studies--including ABC's measurement of the actual readership of each daily issue, which turned out to be much higher than paid circulation across the board. In the case of most dailies, each paid issue was read by anywhere from two to six individuals including the buyer, a testament to the transferability (and disposability) of cheap print products.

Meanwhile, according to the NAA's own data, newspapers' online audiences are booming, with 56 million daily visitors on average in the first quarter of 2006--a remarkable 37 percent of people using the Internet, and an 8 percent increase over the same period in 2005. Further, among a total cohort of 112 million users seeking news and information, 58 percent visited newspaper Web sites.

Although these facts may hold out hope for the newspaper industry in the long run, up until now online advertising has proven markedly less lucrative than print: according to Ken Doctor, an analyst with Outsell, Inc., a research firm focused on the news and information industries, "There's a whole bunch of metrics out there. Some people say you need 100 users to yield the same revenue as one reader online, some people say that's much too high, it's closer to five or three. No one really has a handle on what the exact number is--but whatever the case it's clear that the metrics are quite different for online and print."

So--are the NAA's numbers really as hopeful as they look? "NAA is right in that there's clearly a growth online, and that growth has been substantial," Doctor said. "But ad revenue is really generated by demonstrating an ability to touch readers. They know they need to be achieving reach and duration... But overall, newspapers fare pretty poorly there... Users don't come often enough, and when they come, they don't stay long enough."

According to Doctor, online news aggregators are faring much better. "Yahoo, for example, is the number one news site in terms of minutes spent. The last number I saw for Yahoo News was an average 30 minutes spent per month. The top newspaper Web site was 14 or 15 minutes. Other newspaper websites were in the 8 to 12 minute range. Overall, aggregators' news time is substantially ahead of individual news sites, and the growth in their readership is quicker."