Fudged Circulation Figures

— The Union-Tribune has two problems with its circulation: quantity and quality.

The numbers are sinking, but they're also artificially bloated, according to two Wall Street media analysts. The analysts rate 50 major metropolitan newspapers for quality of circulation: the Union-Tribune is one of the 5 worst.

First, the numbers. In its in-house magazine, the U-T says that its average August daily circulation was 306,571, down from 329,453 a year ago. Average Sunday August circulation was 398,381, down from 422,037 a year earlier. September numbers improved moderately.

There are 3.05 million people in the county and 1.06 million households. This means that the daily newspaper is directly reaching only 10 percent of people and 30 percent of households. In 1960, Copley papers were reaching almost 80 percent of households; by 1983, that was down to 46 percent.

In 1950, household penetration of U.S. daily newspapers peaked at 123 percent. (People then read more than one paper.) Now the average is 51 percent. The Union-Tribune is well below 51, but so are many large metro papers.

In 1999, the Union-Tribune announced its 400,000/ 500,000 plan. In three years, it intended to raise daily circulation to 400,000 from 381,256 and Sunday to 500,000 from 453,666. Those would have been modest increases: 400,000/500,000 really wasn't that ambitious. But six years later, the company is now down around 300,000/400,000.

Indeed, if low-quality circulation is eliminated, the Union-Tribune is now below that threshold. On Monday, the Audit Bureau of Circulations, the industry monitor, came out with data for the six months ended September of this year. Average Sunday circulation was 416,682 and Monday-Friday 314,279. But there is a category called "other paid," which is above 25,000 in both cases. Without "other paid," Sunday plummets to 389,198 and Monday-Friday to 289,009.

That "other paid" category is one thing that arches eyebrows among followers of newspaper circulation. Most of it refers to those newspapers that show up in your driveway Sunday morning, even though you don't have a subscription. In such cases, a large retailer such as Target has purchased the papers and wrapped its own ads around them. Trouble is, potential advertisers look askance at the "other paid" number; they think it's a statistical tumor.

This is an issue of circulation quality -- something that Steven N. Barlow and Philip J. Mulé of Wall Street's Prudential Equity Group have been addressing. They have set up a "circulation quality screener" that attempts to filter out bulges from reported figures.

Among the factors it measures: whether home delivery, single copy, and general circulation are down; what percentage of total circulation is "other paid" and how much it has risen; how much of circulation goes to employees; and what percentage of circulation represents "newspapers-in-education" (papers distributed to schools) and how much that number has risen. The last report compares March 2005 Audit Bureau of Circulations numbers with March 2004.

Of 50 newspapers, 5 get dinged in six of the categories and are ranked the worst: the Newark Star-Ledger, New York Daily News, Wall Street Journal, San Diego Union-Tribune, and the jointly distributed Detroit News and Detroit Free Press.

The Union-Tribune takes a hit for declining circulation across the board, the rise in "other paid" (33.3 percent), the percentage of newspapers-in-education (5.5 percent), and the increase in that category (62.9 percent). Its percentage of "other paid" (9.4) barely sneaks under the no-no threshold of 10 percent.

"The sense in the industry is that this analysis is arbitrary," argues a Copley spokesperson, noting that the paper took its biggest hit in newspapers-in-education and "other paid." The former is a community service that the company feels is beneficial. It's "ramping down" the "other paid" category but hasn't moved as fast as other papers have.

An industry circulation expert notes that the company delivers its Saturday and Sunday papers to schools -- thus artificially boosting Sunday circulation, which accounts for more than 40 percent of revenues.

Harold W. Fuson Jr., vice president and general counsel of Copley Press, says there is "nothing peculiar about our penetration problem." It applies to the entire industry. Copley's revenue from newspapers is holding relatively steady, while online business is growing 30 to 40 percent annually. The company's revenues are now $550 million annually, dominated by the Union-Tribune.

The online business is profitable, although not yet up to the returns of the printed product. Copley's online revenues are 5 percent of newspaper revenues; the industry average is 3 percent, says Fuson.

What he doesn't say is that it's doubtful that online will continue to grow at 30 to 40 percent, because it's coming from a low base. And if current trends continue, printed product sales could easily begin declining. Then the company would have gnarlier problems, because it is virtually 100 percent newspapers. It went into debt to buy dailies in Peoria, Illinois, and Canton, Ohio, and has a number of other papers. The debt is manageable, claims Fuson.

However, the vampire is getting ever closer. The 50-year decline of daily newspapers is accelerating. There are a number of factors: society has dumbed down; young people shun reading; people of all age brackets except those over 65 are reading newspapers less; and competition from the Internet, cable TV, and other media is sucking blood from daily newspapers. "The most common response of people who cease taking newspapers is that they do not have enough time to read the newspaper," says Fuson.

A big question is whether the Union-Tribune's kowtowing to the business establishment and the Republican Party hurts its circulation. Are the people who are disgusted with the pro-corporate-welfare bias likely to drop the paper, and if they do, are they numerically sufficient to make a dent in circulation? Or do the majority buy it for the ads and coupons and overlook the establishment bootlicking?

For a while, it appeared that the publication was trying to straighten out. But in the Donna Frye-Jerry Sanders mayoral race, it went back to its old tricks. "They did five or six editorials that completely distorted my [economic] plan," says Frye. Among other things, the paper falsely claimed that she would impose a tax increase as a "first resort." And editorial writers asserted it would be a tax increase of over $1 billion. But they could only get there by multiplying the annual tax return by ten. Sheer demagoguery.

Similarly, a news article about the candidates' approach to any Chargers' handout omitted the fact that last year, Sanders was listed among 14 "Chargers Champions Leadership Team" members promoting the footballers' interests. That can be found on the Internet and in print. Since former mayor Dick Murphy deceived the public on his pro-sports-subsidy intentions, Sanders's coziness with the Chargers is critical information.

Many people (including me) believe that if the Union-Tribune were a watchdog instead of a cheerleader, the city wouldn't be in such miserable shape. "There is an internal debate within the paper," says city attorney Mike Aguirre. "Some want to be aligned with reform, but there is a contingent that wants to continue painting special-interest programs as public-interest programs."

If the forces of journalistic reform prevail, will circulation improve? Unfortunately, that's a knotty question that has been debated for years. Says Fuson, who disagrees with my characterization of the paper, "If we had known and had reported five years ago what we know and are reporting today, I doubt if it would have had a meaningful impact on our circulation.

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