Newspaper Audience - 2006 Annual Report

Following a series of circulation scandals in 2004, advertisers increased their demands for more aggressive auditing rules that would ensure a higher level of transparency and accountability for American newspapers. A 2005 report from Prudential Equity Research underscored the importance of accurate circulation reports. “As circulation is not only a revenue source but also a key metric in setting advertising rates, it is critical at this point,” the report said.27

The Audit Bureau of Circulations is a 90-year old organization that audits nearly 1,400 newspapers. Its board is made up of 36 members who come from both the newspaper and advertising industries. In 2005, the ABC made several decisions that could have an effect on overall circulation numbers for several years.

First, the ABC beefed up its staff, announcing that it would add 20 auditors in 2005. The organization also made punishments more severe for newspapers found to be padding their circulation totals, and now requires newspapers proven to have been deceitful to pay any of the ABC’s legal fees.

Perhaps most critically, board members also voted to change several rules about how newspapers can report circulation numbers. Among the changes:

• Effective October 2004, newspapers can eliminate only 10 days when they report their circulation totals for each twelve-month audit period. Previously, papers were permitted to exclude an unlimited number of days from their circulation reports, and some omitted as many as 30 days in earlier reporting periods, often for days when circulation was affected by weather or when customers left town during the holidays.
• In March 2005, the ABC board agreed that newspapers would have to report circulation for each day of the week in addition to their traditional multi-day averages (e.g. Monday through Friday, Monday through Tuesday, etc.). Critics complained that the old system allowed publishers to cherry-pick averages that were most favorable to them and that the new arrangement would help create more standardization so annual comparisons could be made more easily. Papers with circulation under 25,000 were not required to participate.
• Newspapers now have to disclose the details involved in sales to third-parties, such as hotels, who then pass the papers on to the readers for free.

There appear to be two different views of the potential ramifications of such rule changes. Some critics argue that they will restore a much-needed sense of confidence in the industry that some advertisers lost following the circulation scandals.

Perhaps a smaller number, however, think the changes will give advertisers the upper hand and suffocate a “legitimate way to market newspapers,” as Stephen Johnson, circulation director of Freedom Communications, told Editor & Publisher last year. Some feared steep declines in ad rates.

The effects of the rule changes may not fully materialize for several years, but will be surely an additional challenge for an industry already facing others on a number of different fronts.