Discounting gets notice

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New rules on how newspapers report circulation and readership-the result of years of wrangling among publishers over the definition of "paid circulation"-will arm publishers with new ways to sell ad space.

The Audit Bureau of Circulations' board last month gave final approval to rules that redefine paid circulation, the bedrock number long used by newspapers as the key indicator of their audience and reach. For the first time, publishers will be able to count papers they sell at less than half the basic price as paid circulation, and will be able to dangle readership numbers as well as "total" paid circulation in front of advertisers.

Newspapers using the audit bureau's Reader Profile Service will be able to add a number indicating "readership" beside the usual "total average paid circulation" figure in the twice-annual publisher's statement. This change formalizes newspapers' use of readership surveys conducted by research companies that follow guidelines for uniformity set by the audit bureau, which then will certify the surveys. Depending on the newspaper, the new readership figure of "total estimated average issue adult readers" may be as much as four times the number for average paid circulation.

EASIER TO COMPARE

As more papers conduct audited readership surveys, advertisers will be better able to compare one paper with another. And having a readership number puts newspapers on a more even footing with other media that sell an audience with characteristics desired by particular advertisers. Newspapers have long been at a disadvantage in this regard, because until now, audit bureau reports showed geographic distribution-where the paper is being bought-but not demographic breakdowns, or who is buying it.

"It's really about arming the advertiser with information to assess the value of different levels of circulation," says Matthew D. Spahn, audit bureau chairman, and director of media planning and analysis for Sears, Roebuck & Co. "Where we are benefiting is in the disclosure itself."

Under the new rules, all circulation except a tiny sum called "other audited distribution" is considered paid. Gone is the "50% rule," which said that only papers sold at more than 50% of the basic price were considered paid circulation. Instead, there are three tiers of pricing:

* Copies sold to individual buyers for more than 50% of the basic price.

* Copies sold to individual buyers for 25% to 50% of the basic price.

* Other paid circulation, which conceivably can be discounted by more than 75%.

Discounted bulk sales become part of the new classification of "other paid circulation," representing a compromise in a longstanding, thorny debate in the newspaper industry. Previously, discounted bulk sales to such entities as hotels and airlines, which in turn gave the newspapers to their customers, were not counted as paid circulation. The term "bulk sales" now disappears from the publisher's statement.

Newspapers can use the individual tiers to indicate to advertisers the readers' various levels of interest, or "wantedness," in editions.

A WANTEDNESS ISSUE

"From the advertisers' standpoint, we had some concerns over the issue of wantedness with the discounting level," says Harry Tropp, senior VP-associate media director for PentaMark World-wide, New York, a division of Omnicom Group's BBDO World-wide. "Does that mean the consumer still wants the newspaper? For the most part, yes, they do want to read it."

Disclosures in the "other paid circulation" tier will provide data on several categories of sales that had been sticking points in the past. The publisher's statements issued when the current six-month reporting period ends Sept. 30 will be the first to include these four categories as "other paid circulation":

* Single-copy sales, including at hotels and events.

* Educational programs, including papers distributed to registered college students.

* Employee copies.

* Sales to third-party distributors, in which the third party, not the reader, pays for the paper.

Expanded disclosure in the publisher's statement was a vital change for advertisers, explains S. Scott Harding, chairman-CEO of Newspaper Services of America, an ad sales and placement agency in Downers Grove, Ill., which handles $1.5 billion in ads each year.

"The more the circulation is broken down and segmented and disclosed, the better understanding advertisers will have of that-and, frankly, be able to compare those elements from newspaper to newspaper," says Mr. Harding, who preceded Mr. Spahn as chairman of the audit bureau.

Mei-Mei Chan, senior VP-circulation of the Seattle Times Co., welcomes the change: "Does it make it a little easier to sell hotel copies [as paid circulation]? Yes, because it goes to that flexibility."

Ms. Chan will move cautiously under the new rules. "The hardest part is converting the new guidelines to reality," she says, noting that discounting may hurt circulation revenue more than it helps.