To the widely accepted notion that the newspaper business is going to hell in a bucket, here is a curious exception: circulation revenues (and profits) have risen over the last several years at the same time expenses have been substantially reduced.

The particulars of the case are laid out in the 15th edition of a data-heavy Newspaper of Association of America report, Circulation Facts and Figures, released this week (free to NAA members only).

Among 175 papers responding to a NAA survey, the median "bottom-line contribution" of circulation had risen from 42.6 percent in 2011 to 56.1 percent last year. That's not the same thing as a profit margin -- since circulation (like advertising) must produce revenues well above that department's operating expenses to carry other parts of the enterprise like the newsroom and pressroom.

However, John Murray, NAA's vice president of audience development and author of the report, said the significance of that improvement should not be underestimated.

"I think we haven't told the story very well of how the industry has managed to stay profitable after five to seven years of declining ad revenue," he told me in a phone interview. "People think it's (all about) newsroom cuts, but the consumer revenue part and operational savings are a much bigger factor."

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Graphic: Gurman Bhatia / Poynter

At a typical paper, Murray found, the median rate for a one-week seven-day subscription rose from $3.66 in 2008 to $4.50 in 2011 to $5.74 in 2014. That is a 64 percent increase over the six years. And three quarters of the papers now also charge non-subscribers for digital access.

Typically the higher-priced print subscription is bundled with digital access. Nearly 60 percent of "paid starts" in 2014 were for this combination.

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Graphic: Gurman Bhatia / Poynter

Single copy prices have risen similarly with $1.00 daily and $2.00 Sunday now standard. Many companies also charge a premium for the bigger paper published on Thanksgiving Day.

The indicators on the expense side of circulation operations are a little more complex.

  • The traditional coin-operated newsrack is doing a fast fade with 40 percent fewer on the street since 2008 at the newspapers surveyed. Using retail outlets instead is cheaper to service and results in a better sell-through rate. (Plus not everyone has $2 in change to buy a Sunday paper from a rack should they wish to).
  • Outsourcing some home delivery, as most papers with more than 50,000 circulation do, and distributing other publications (like the national newspapers) are both financial pluses.
  • "Audience and circulation departments are selling fewer and better targeted subscriptions, and the result is fewer stops, lower overall home delivery volumes and less expense."
  • Most are accepting slightly higher complaint rates (about missed or late deliveries or wet papers) and finding that to be a benefit on the cost side.

The majority of the report is about print circulation -- since that is where most of the money is. But Murray also notes the growth of digital audience up 10 percent as measured by Comscore's count of unique visitors from March 2014 to March 2015.

But he notes a pair of oddities. According to a separate Nielsen Scarborough study, just over half of subscribers read only the print version of their local paper. Digital only combinations account for about 20 percent and print + digital another 29 (see chart).

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Graphic: Gurman Bhatia / Poynter

In the same vein, only a quarter of print subscribers even activate their digital account. That is despite print + digital now accounting for well over half of new subscriptions sold.

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Graphic : Gurman Bhatia / Poynter

What gives?

Murray offered three explanations in our interview, (and I would add a couple more):

  • It appears longtime subscribers, probably many of them older, have very limited interest in getting local news digitally.  So the new subscribers are a different group from the print loyalists.
  • There is a lot of variation by circulation size.  Papers over 200,000 circulation sign up a respectable 61 percent.  Murray said that he knows of two chains, who have spent substantial time and money on activation and now are targeting rates in the 70s.
  • While improving, the activation/password process remains glitch-prone. Some people try to register, hit a snag, and give up.

I also wonder whether many smaller organizations offer so little distinctive digital content that print readers find going there not worth the trouble or get what they need without triggering the paywall limit on free articles for a month.

Murray said that survey response was down from roughly 300 in recent years to 175 - only an eighth of roughly 1,400 U.S. dailies. He speculated that with reduced staffs, audience execs may be too busy to fill out the questionnaire. At chains that have centralized circulation functions, tracking the numbers for individual papers would be doubly difficult.

The study does not offer a year-to-year comparison of circulation revenue. A separate NAA study, not yet done for 2014, found gains of about 4.6 percent in 2012 and 3.7 percent in 2013. Murray said that his best guess is that in 2014 circulation revenues "were still increasing but at a decreasing rate" -- perhaps about 2.5 percent.

Another question outside the scope of Murray's study is the impact of these changes -- more revenue but less volume -- on advertising. Probably on balance, it is negative, Murray said, especially since in the important preprinted insert category, placements are priced by how many papers are distributed.

For run-of-the-paper local advertising, having a smaller but more engaged audience may be more of a wash. Distant circulation or cheap trial subscriptions to those not all that interested were probably mostly waste. So if ads continue to bring customers into the store, Murray said, their value may not be falling.

I know that there are few formulations more irritating to newsroom survivors than "doing more with less." On the evidence of Murray's report, however, it looks as if colleagues in circulation have done just that.