Wednesday, November 18, 2009

Newspapers Are Really in Good Shape?

One of my must reads is Editor & Publisher's site. Today is particularly rich--though with contradictory indications.

There are three stories about Associated Press layoffs.

One reported 57 layoffs--"33 newspersons, 19 editorial assistants, and five photographers". These were layoffs not buyouts.

Another story told of 8 AP photographers let go including national photo editor Victor Vaughan "one of the AP’s highest ranking journalists of color". Others cut were Texas-based Harry Cabluck (who had been with AP 40 years) and Donna McWilliam in Texas, Al Grillo in Anchorage (probably an obvious choice considering Sarah Palin's shift to the lower 48), Chitose Suzuki in Hanoi, Mary Ann Chastain in South Carolina, and Winslow Townsend and Lisa Poole in Boston.

A third* was AP's own story on the layoffs. AP expected this year's revenue to come in around $700 million--a 6% drop from $748 million in 2008. AP also noted that though its target was a 10% cut in salary pay outs that would not necessarily mean 400 of AP's 4,000 employees would be let go because some salaries are higher than others. All this comes despite a tripling of AP's revenue from a decade ago. Currently, however, AP's revenue trend is declining with expected cuts to total $75 million--$30 million this year and $45 million more next year.

On the positive side there is an E&P report on "Healthy Newspaper Readership". A recent Scarborough Research study shows that 74% of Americans read a print or online newspaper each week. Scarborough explains the difference in its positive figures as opposed to the Audit Bureau of Circulations September report of a 10.6% drop in daily newspaper circulation by noting that readership is not the same as circulation.

Finally, E&P has a long piece on the benefits of raising subscription rates.

Historically circulation revenue has accounted for 20% of total revenue. The new model increases circulation revenue to 30%-35% to offset declines in advertising. One of the strategies to deflect loss of customers because of higher pricing is to give discounts to new subscribers or to those thinking of leaving but charge full price to loyal subscribers.

Are the positive reports whistling in the dark?

If 74% of Americans really do read newspapers, why is AP laying off people and expecting a 10% decrease in revenue? The only thing I can figure is that 74% of Americans might read a news story from a newspaper each week, but that's just an article here and there and probably from many sources--think Yahoo, AOL and other linking venues like Drudge. (That's why Katie Couric's question about naming two or three sources you get your news from is laughable. My sidebar alone has over 70 sources important to me and most of those link to other important sources.) Even if 74% of Americans read a newspaper weekly only a fraction of them are currently interested in paying a newspaper for the privilege of reading it.

Increasing the subscription and single copy rate might be a fix if the circulation decrease is at or near bottom. But newspaper circulation declined 10.6% this year, significantly worse than the 4.6% decrease the year before, or the 2.5% decrease the year before that. The circulation decrease has more or less doubled each of the last two years. That can wipe out any gains from subscription hikes. As Jerry Kackley, an adviser to newspapers on subscription pricing, points out:
"'Let's say you increase the subscription price in the range of 25% . . . . If you lose 10% of your circulation, you will basically be flat in terms of revenue once you add in the impact on advertising. . . . No matter how smart you do it, when you look at circulation increases of 25% to 30% like you're seeing around the country, it doesn't take a lot of circulation losses to zero out that revenue increase' . . . ."

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