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We knew that USA Today's early word of a circulation plunge -- 17%, announced by Gannett (NYSE:GCI) two weeks ago -- would probably be a sick canary in a dark coal mine.

Monday's semi-annual circulation FAS-FAX numbers for U.S. dailies, though, are still breathtaking. On average, down 10.6% daily and 7.4% Sunday. That's on average, and largely twice as bad as the declines have been over the past four-plus years. Look at some of the individual results and you'll understand why the New York Times (NYSE:NYT) just announced that it is taking another 100 jobs out of its newsroom and why other newsroom (and, of course, wider) cuts may increase -- not decrease -- as Wall Street indicates that an overall economic recovery will be a 2010 reality.

Daily, these losses, as examples:

  • L.A. Times: 11%
  • Houston Chronicle: 14%
  • Boston Globe: 18%
  • Star-Ledger, Newark: 22%
  • San Francisco Chronicle: 26%

The Sunday losses, same papers:

  • L.A. Times: 6%
  • Houston Chronicle: 6%
  • Boston Globe: 17%
  • Star-Ledger: 18%
  • San Francisco Chronicle: 22%

So what's happening?

More of the same, though now with evidence of a tipping point. Inevitably, for the print product, less is less.

Newspaper readers have hung with their local papers through thick and increasing thin, but the value proposition they now see is a lesser one. Smaller product, less news, fewer ads of all kinds, more e-reading choices -- and higher prices.

Yes, most newspaper companies have embarked on a premium print pricing strategy, in some cases doubling single-copy prices and upping home delivery significantly. And, yes, these increases have provided a circulation revenue bump just as ad revenue tanked (both McClatchy (NYSE:MNI) (6.7%) and Media General (NYSE:MEG) (11%) recently reported quarterly circ revenue gains). Yet, they've made the value proposition for print harder to justify. Now, add the recession-induced pocketbook concern to all the greater changes in the news world, and publishers may have shone a spotlight on the print newspaper product.

They have moved it from being a necessity, a habit, to a discretionary buy. (More on the history of the ebbing habit, from Alan Mutter.)

It's been a tough formula, but one that did make a kind of sense. Acknowledge that newspapers are a niche buy (while Google (NASDAQ:GOOG), Yahoo (NASDAQ:YHOO), AOL and MSN have become the mass daily stop) and price accordingly. Take a hit in volume, but make it up in pricing. It looked like that strategy was working for the past couple of years, as circulation revenue has been flat to slightly up at most companies.

The risk? Too many readers would opt out. One ABC survey isn't enough to tell us whether we've reached that point definitively, but it's a huge warning sign.

Put yourself in the publishers' shoes, planning for 2010. Monday's numbers tell them a couple of things, at least:

  • If fewer readers won't pay for print, can they get them to pay for new e-reading choices? They'll watch the Wall Street Journal's test of mobile pricing. They'll work with Journalism Online to see which digital value propositions have a prayer of working. They'll think hard about the Kindles, Nooks (good comparison with the Kindle by Gizmodo's Matt Buchanan on NPR), Ques and Readers and how they can get news readers to pay for delivery through that new platform.
  • It's going to be harder to get a thick slice of the ad spending returning to the marketplace, as the economy normalizes. Publishers' mass market proposition, already weakened, is now further in question (more on the cycle of decline, from Rick Edmonds). Their pricing, always a sore point among advertisers, is now even harder to justify among the proliferation of pay-for-performance ad choices. (Good piece on this by NYT's Stephanie Clifford on that.) As they look anew at their ad sales propositions, they'll need to double down on the notion of premium content, premium audience and superior targeting -- and give often skeptical ad buyers reasons to believe.
Source: Newspaper Circulation: Less Really Is Less