In circulation: Newspapers look to clip costs

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With ABC statements and quarterly revenue reports for the nation's newspapers showing a general slump in circulation and ad sales, many publishers are changing business strategies and implementing cost-cutting measures.

“This [downward trend] is structural,” said Andrew Davis, president and executive director of the American Press Institute. “This is a classic case of disruptive innovation, where the traditional industry is being disrupted by new, less costly players in the marketplace….The way forward for newspapers is to develop a strategy where, in each of their markets, they become the dominant local information and connection utility. The challenge is to build an audience beyond news and to generate revenue beyond traditional advertising.”

In an effort to control the losses in its newspaper division, Scripps has sold some of its Denver real estate. It also cut newsprint expenses by 11% with a reduction in paper usage. The cuts and sales echo the efforts of many other publishers, including the Tribune Co., which is accepting bids for properties ranging from Newsday to the Chicago Cubs.

The McClatchy Co., too, reported losses, with ad revenues falling 15.3% and circulation revenues down 5.6%.

Online ad revenues, however, were up 10.6%, initiating a shift in growth strategies.

“[W]e continue to aggressively price our online advertising products to match demand,” Gary Pruitt, chairman and CEO of McClatchy, said in a statement. “Excluding employment advertising, which has declined nationally both in print and online, our online advertising grew 52.1% in the first quarter of this year.

"We will remain focused on realigning our cost structure as our business continues to transition to a hybrid online and print company,” he added.

McClatchy has also sold some of its assets to reduce debt, unloading SP Newsprint Company early in the second quarter of 2008.

In spite of lower numbers on its recent ABC reports, The New York Times Co. reported a 2% increase in circ revenues for the quarter, thanks to a price hike for its flagship paper in the third quarter of 2007. With ad sales dropping as well (9.2% for the company), the Times looked to cut corners with employee buyouts and possible firings, but also sought new, revenue-boosting product lines.

“The New York Times Co. has a very clear-cut strategy, which is to introduce new products in print and online,” said Catherine Mathis, SVP of corporate communications for the company. “What we've done at both the New York Times and the Boston Globe is introduce new print products in growth areas, so one thing is the new magazine at the International Herald Tribune, which focuses on style, luxury goods and fashion. At the Boston Globe we introduced Fashion Boston and Lola magazine for women in the Boston metro area.

Likewise, the Baltimore Sun and Chicago Tribune are looking to new print products and revenue models to bump up readership and woo advertisers. The Tribune cited its free daily RedEye as an important piece in raising reader numbers, even while paid circulation fell off. Web audiences also grew for the Tribune, with monthly traffic at its three main sites up more than 25% this year. Baltimore's paper, which showed a 0.1% increase in circulation, just introduced b — a free daily aimed at young, urban professionals. B's creators looked at dailies like RedEye as a business model.

“The smart publishers are realizing that the product that they publish has to be across multiple media platforms and can't just be ink on paper — although ink on paper will survive for some time,” Davis said. “Newspapers that are publishing free dailies and niche publications and magazines are all doing what they need to do.”

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