• by Michael Shields , December 8, 2004

Remember when many newspaper analysts were predicting that this year's circulation scandals would force newspapers to cave in when it comes to ad rates in 2005?

Based on statements made by major newspaper publishers at Wednesday's UBS Media Week conference presentations, don't count on it.

While circulation was a central topic during many of the day's sessions, when asked, most said that they expected ad rates to hold or increase next year.

"Ad rates will hold steady in 2005," said Robert Decherd, president and CEO at Belo, the company that owns the circulation-deficient Dallas Morning News.

Not that Decherd was denying a need to "regain your confidence," as he affirmed to attending investors. In fact, Belo appears to be out in front of the issue, attempting to turn a mistake into a strength for the company.

Decherd said that at the Dallas Morning News, the company's circulation review team, despite causing "significant disruption," in developing "the most modern and nimble circulation team as possible."

Back in September, the Dallas Morning Newswas discovered to have overstated its circulation by 5.1 percent for its daily edition and approximately 11.5 percent for its Sunday edition for the six-month period ending September 30, 2004. Following that scandal, the newspaper announced a $23- million-dollar advertiser compensation program.

Decherd announced that of the thousand-plus advertisers who were provided compensation, 88 percent have cashed their checks, accounting for 76 percent of the dollars.

Since then Decherd said that the paper has also revamped its circulation procedures, eliminating in many cases its reliance on third-party vendors for selling single copies, delivery, and billing while also requiring the physical return of all unsold copies.

Advertisers appear to have been appeased. Chief Financial Officer Dennis Williamson said there have been "minor concessions" on things like ad positioning, but not in negotiating rates. He said the company's reputation from past efforts has helped. "We have never gouged anybody."

If any paper would seem to be bending on ad rates next year, it would be the Tribune company's Newsday, perhaps the most tarred by scandal. Yet Donald Grenesko, vice president of finance and administration, was non committal on the subject. "There are a number of factors that influence ad rates," he said. "[Circulation] is one of a number of factors."

But Scott Smith, COO for the Tribune, did acknowledge that Tribune company's papers were feeling pressure from advertisers to limit the use of third-party or sponsored circulation. "We want responsive readers, not just paid copy," he said.

This sentiment was echoed by many. Knight Ridder, which recently launched a circulation task force, "is focused on home delivery and single-copy sales," said Chairman and CEO Anthony Ridder. "We have heard from advertisers. That will be our core circulation strategy."

Even New York Times COO Janet Robinson made a point to show that the paper had the largest number of individually paid subscriptions compared to other national newspapers.

Both Ridder and Robinson confirmed that ad rates will increase next year, indicating that the isolated scandals of this past summer were not having an impact. "We've had no issues," Ridder said. He estimated that rates will increase in the 3-4 percent range, while the Times' Robinson promised a 5 percent hike.

Yet while promising to hold firm in negotiations, most were not quite bullish on the upcoming year, and few were willing to provide and hard growth numbers.

But at least the inconsistent 2004 was coming to an end. "It's been a challenging year, one we will not be sad to see end," said Tribune Company CEO Dennis FitzSimons. "It was not the recovery year we had looked for."