Changing the numbers game

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Three southern California newspapers, usually fiercely competitive, have joined together in a united mission. They want the newspaper industry to reconsider how it reports its circulation for advertisers.

Times Mirror Co.'s Los Angeles Times, Freedom Newspapers' Orange County Register and Spanish-language national La Opinion have hired Price Waterhouse Coopers to conduct quarterly circulation audits that advertisers can use instead of the industry's standard, half-year audit reports issued by the Audit Bureau of Circulations.

The first Price Waterhouse Coopers audits, which cover the quarter ended Sept. 30, were released earlier this month.

The newspapers, frustrated by ABC rules and procedures, decided that the best way to tell their true circulation story was to hire their own auditor.

"The Audit Bureau report is critical-it's the industry standard. We have always used it and we will continue to use it," said Robert Magnuson, Los Angeles Times senior VP-regions and the executive in charge of circulation. "But paid circulation [as defined by ABC] is a fairly narrow representation of what we do with our newspapers. As we get more aggressive about marketing-as we must and the industry must-we need to define circulation more broadly to take into account all the ways we distribute to readers."

By hiring an independent auditor, the three newspapers hope to change the way advertisers in their market evaluate paid and unpaid circulation. ABC rules-which have been crafted through years of debate and consensus among advertisers, agency executives and publishers that sit on the ABC board-have long held that the only circulation that should be reported as paid are copies purchased for at least 50% of the standard price.

UNREALISTIC RULES

But the California group maintains that rule-and other ABC restrictions on what counts as paid circulation-is an unrealistic way to track how newspapers are marketed today.

"The Audit Bureau is a bit arbitrary and capricious with their decision-making. A lot of the rules weren't made in this day and age, and they're arcane and a bit out of touch," said Ron Redfern, president-CEO of the Orange County Register. "We are developing an alternative to the ABC statements. Something that will complement but also serve advertisers better."

The California papers have taken a stance increasingly popular among newspaper publishers, which is that readership is actually a better gauge than paid circulation for determining an ad buy.

The argument put forth by the Newspaper Association of America and other newspaper publishers is that newspapers should be evaluated much as broadcast TV and other media measured on total audience numbers. Readership, unlike paid circulation numbers, would attempt to measure how many people see the paper each day rather than how many people actually pay for it.

EASIER TO READ

The Price Waterhouse audit, according to executives at the papers, are designed to be easier to read than the ABC statements. The new audits also account for all distribution of the paper, including bulk sales, copies sold at below-basic prices and those distributed at events or through marketing promotions.

The Los Angeles Times, Mr. Magnuson said, will continue to work with Price Waterhouse to develop a way to credibly measure readership beyond the number of copies distributed each day.

"We want to give advertisers as specific information as possible as to who is reading the paper and why they are reading the paper," he said.

With newspaper circulation on a steady decline over the past decade, newspaper publishers have developed ever more creative means of reaching new readers, from offers of a free paper with the purchase of a cup of coffee to distribution at events such as baseball games and community fairs.

The Los Angeles Times and La Opinion, which is 50%-owned by Times Mirror, worked out a joint distribution deal this year that sold the two papers as a package at newsstands for 35›. But under ABC rules, all papers sold under that agreement were originally disqualified from paid circulation tallies because the cost was deemed too low.

NEW SUBCATEGORY

The papers and ABC eventually arrived at a compromise in which a new subcategory for paid circulation was created. Still, the drawn-out debate left executives at the two papers annoyed and frustrated.

"Even though we were able to work out something in the La Opinion case, it does raise the question of how much energy can you expend satisfying a set of arcane rules as opposed to putting energy into creative programs that promote the newspaper? We want to get these ideas into the marketplace, without having to satisfy a group of industry regulators," Mr. Magnuson said.

The California papers follow The Wall Street Journal's 1998 decision to issue its own Statement of Total Circulation, an audit report from Price Waterhouse that shows all retail and bulk circulation, as well as newsstand sell-through rates.

Tom Hyland, partner at the accounting/consulting company and chair of the new media group, said its goal is to expand business in this area, and it has received a half-dozen inquiries from other newspapers that want to do their own independent circulation audits.

His company also has started providing similar audit services for Internet companies.

"We're not focusing on newspaper circulation audits as a separate unit where our people are just pursuing that. We view this as just an extension of our assurance and attestation services, which we would be happy to do for lot of other media companies," Mr. Hyland said.

BUREAU OFFERS OPTION

The Audit Bureau, a spokeswoman was quick to point out, also offers its members the ability to issue quarterly reports in addition to the standard six-month reports. This past summer, in response to requests from the newspaper industry, it rolled out a service called Reader Profiles, its own attempt to qualify a newspaper's readership beyond paid circulation figures. Approximately 25 newspaper members have signed on for the service.

The ABC supplies Conde Nast Publications' The New Yorker with its specialized circulation statement-similar to the WSJ's Statement of Total Circulation-through a service known as Statements Plus. Any ABC member, newspaper or magazine, can opt to add Statements Plus to its standard audit reports.

"At ABC, we have a responsibility to answer the needs of both sides, both publishers and advertisers," the Audit Bureau spokeswoman said. "We have a hand-selected board of directors that gives us feedback about what they would like to see. The standard reporting methods were those voiced by buyers and publishers. . . . The fact that Price Waterhouse Coopers puts out a report that deviates from the standard could make it tough to compare . . . and may confuse the task of the buyer."

The ABC, established as a non-profit cooperative of publishers, ad agencies and advertisers, cannot undertake new initiatives without board approval. That inevitably means the organization needs a fairly long lead time to implement any major changes to its operations.

"The ABC has a window of opportunity to respond to marketing demands of its members if it wants to continue to preserve its leadership in this area," said Samuel Wolgemuth, president-CEO of Freedom Newspapers. "If they don't do that, we're going to see more of these independent audits."

Whether or not advertisers adopt the independent audits as a viable means of measuring circulation progress remains to be seen.

DIFFERENT PERSPECTIVE

"It certainly gives advertisers a different perspective, another view. But it's going to be an uphill battle," said Karen Hardison, VP-marketing for McClatchy Co.'s Newspaper Network, a national ad sales network.

"ABC is the industry standard, and how credible the independent audits are with advertisers really depends on how they compare to the ABC audits. If circulation is significantly higher or lower, advertisers will question that."

Wendy Mitzner, VP-advertising and marketing for Bloomingdale's, isn't yet convinced that readership should be used to evaluate newspapers.

"A paid-circulation paper is always where I prefer to be," she said. "Readership numbers get varied quite a bit, anywhere from four readers per copy to 10 readers per copy. I really prefer to use circulation numbers. I think it will be very difficult to prove readership is the better way."

So far, with this first audit, the two counts were not that far apart. The Price Waterhouse Coopers audit, for the three months ended Sept. 30, shows the Orange County Register with a daily circulation of 363,363 and a Sunday circulation of 418,792. The ABC audit for the six months ended Sept. 30 records a daily circulation for the Register of 358,754, while Sunday circulation was 418,929.

The Los Angeles Times daily circulation for the three months ended Sept. 30 was 1,126,335, while Sunday was 1,383,571, according to Price Waterhouse Coopers. The ABC audit for the six-month period shows the Times' daily circulation to be 1,078,186, while Sunday circulation was 1,362,195.

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