Shrinking only on paper Newspapers are still losing readers - but more are going online.

Posted: May 09, 2006

It may not be news that Americans are shifting their reading habits from the printed page to online.

But yesterday's stock rally by newspaper chains - despite yet another decline in print circulation - shows that newspaper publishers are doing a better job convincing investors that their business isn't dying, but moving online, raising hopes that advertisers' dollars may follow.

The Audit Bureau of Circulations reported yesterday that newspaper circulation fell 1.2 million, to 45.4 million daily, during the six months ended March 31, compared with a year earlier.

The Inquirer's daily circulation fell 5 percent to 350,457; Sunday Inquirer sales also slipped 5 percent, to 705,965; Philadelphia Daily News circulation fell 9 percent to 116,590, the ABC reported. Other area newspapers also reported circulation declines: Total newspaper sales in the Philadelphia area, Wilmington and South Jersey were down about 6 percent.

Publisher Joe Natoli said The Inquirer dropped giveaway or deep-discount readers, but gained paying subscribers. Home-delivery customers paying full price or getting a small discount grew by 38,351 on Sundays and 6,148 on weekdays during the year, according to Natoli. The paper dropped an average of 21,447 "heavily discounted and third-party sales" each weekday, and an additional 57,829 on Sundays. The Los Angeles Times and other newspapers also reported cutting free or discount copies left in hotels, schools and other institutions.

The Newspaper Association of America reported viewership at online Web sites jumped more than 5 million, to 56 million in March, compared with a year earlier. However, it was unclear how much a change in Web data-collection methods may have contributed to that gain.

NAA president John F. Strum said advertisers are increasingly interested in the total online and print "audience" for papers, not just their print sales. Investors appeared to be buying that argument yesterday: Share prices at the nation's largest newspaper chains - down steadily over the last year - rallied on the news.

Gannett Corp., the nation's largest newspaper company, closed at $56.86, up $1.60. New York Times Co. closed at $25.70, up $1.14. Tribune Co. closed at $29.84, up $1.82. Knight Ridder Inc., which owns The Inquirer and Daily News, closed at $63.06, up 61 cents. McClatchy Co. closed at $47.09, up $1.44.

McClatchy plans to purchase Knight Ridder this summer, but it is selling the Philadelphia papers and 10 others it doesn't want. The chain hopes to close the sales this summer; its share price has drifted lower since announcing the Knight Ridder purchase earlier this year. A Boston investment firm, Highfields Capital Management L.P., reported yesterday in a Securities and Exchange Commission filing that it had purchased 5 percent of McClatchy.

Agents representing Onex Corp., of Toronto, paid their second visit in two weeks to the Philadelphia papers' Broad Street headquarters yesterday; other last-minute visits by would-be owners are expected before final bids are due for the papers on May 16. Onex director Kosty Gilis declined to comment.

NAA's online data were collected by Nielsen//NetRatings. NAA vice president Randy Bennett said the firm changed its data collection methodology last fall, the period that corresponded to the largest increase in reported viewing. NAA officials could not immediately say how the change would have affected viewer totals.

Circulation was also down at big metro papers in Atlanta, Boston, Houston, Los Angeles and San Francisco, among other cities. The New York Times, USA Today, the Chicago Tribune, and the Newark (N.J.) Star-Ledger were among papers showing small gains.

NAA did not report estimated annual online readership by newspaper. But the group is speeding its efforts to present comparable online and print totals in future reports, said Randy Bennett, vice president at the association.

Last year NAA asked Nielsen//NetRatings to begin tracking "unique visitors" and page views at papers in Philadelphia, Dallas, and other major markets. According to Bennett, online viewers who checked the philly.com site shared by The Inquirer and Daily News at least once a month rose to 1.3 million in November from 1.2 million in July; page views jumped to 24 million from 14 million. The typical online viewer checked the site eight times in a month, viewing 47 pages, up from seven times a month and 38 pages a year earlier.

Generally, "newspapers are seeing pretty significant increases in their traffic, month to month," Bennett added.

In a news conference, association officials told reporters that papers were using profits from print advertising - their major source of funds - to finance small but fast-growing and potentially more profitable specialty and online publications. Online ads, while growing more than 25 percent a year, still account for little more than 5 percent of newspaper revenue, association senior vice president John Kimball said.

Contact Joseph N. DiStefano at 215-854-5957 or jdistefano@phillynews.com

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