Tuesday, September 17, 2013

USA Today forecasts big plunge in retail sales with doubling of cover price, company documents say

As its restructuring enters a second year, USA Today is bracing for a 35% drop in newsstand sales when it doubles the single-copy price to $2 on Sept. 30, according to internal company documents.

What's more, already-low vending machine sales could tank entirely, the documents say, leading the paper to remove most if not all the iconic TV-shaped honor boxes installed on sidewalks with the paper's launch 31 years ago.

I received the documents and related information from Gannett Blog readers over the past week.

1982's iconic rack
Any more circulation losses would follow steep declines since 2008 that cost Gannett's marquee brand 600,000 in daily sales -- and with that, its status as the nation's top-selling paper. Further losses also could force USAT to cut advertising rates to reflect a smaller circulation footprint. To be sure, some of the lost ad revenue would be recovered when the cover price rises to $2 from $1 in two weeks. Plus, a parallel initiative called the Butterfly Project may help claw back circulation.

USAT's circulation sank 8% to 1.7 million during the most recent reporting period, ended March 31. At the same time, its two national competitors advanced. The Wall Street Journal jumped 12% to 2.4 million, and The New York Times soared 18% to 1.9 million. Those figures include digital subscriptions; USAT doesn't charge for online access.

The big price hike and other changes come as the paper undergoes a major restructuring that began after Larry Kramer was named publisher in spring 2012. Kramer, founder of the MarketWatch financial news site, is trying to turn the paper around as its bread-and-butter audience, business travelers, shuns print for tablets and smartphones. Kramer's work included overseeing an extensive redesign, begun well before he arrived, of the print edition and the website a year ago this week.

USAT's new pricing is part of a broader strategy at Gannett's other 81 U.S. dailies favoring revenue over volume. Last year, after raising single-copy prices weekdays and Sundays, then boosting subscription rates, Gannett said circulation revenue companywide rose $53 million, or 5% -- the first such annual increase since 2006.

But daily volume fell 8% to an average three million copies, while Sunday declined 3% to five million.

Affluent readers walk
Much of USAT's circulation losses over the past five years came after some of its biggest buyers -- hotels -- stopped providing copies to guests, many of whom were leaving papers untouched outside their hotel room doors. The paper has swung back with a digital news portal sold to 3,000 Hilton hotels, and is talking to other hotel owners about a similar deal.

Its unclear how much of USAT's current 1.7 million in circulation will be affected by the price hike, so I can't provide any estimates of aggregate volume losses. Although the increase will hit subscribers, it doesn't apply to hotels, restaurants, airlines and other bulk buyers, according to the documents. Those accounts have historically made up a big part of circulation, and gave the paper a nearly ubiquitous presence among affluent business travelers.

Last year, 76% of USAT's net paid circulation was from single-copy sales at newsstands, vending machines or provided to hotel guests. The rest was home and office delivery, mail, educational and other sales, according to Gannett's annual report to the U.S. Securities and Exchange Commission.

Any circulation and ad losses from the new single-copy price may be mitigated by another Gannett print paper initiative, the Butterfly Project, started more than a year ago. The company plans a pilot test starting early next month, according to readers.

About Butterfly
In the test, USAT will produce a multi-page section of news plus advertising that would be inserted in around a half dozen of the company's U.S. community newspapers, according to several of my readers. Subjects likely would include USAT staples: world, national, business, sports and entertainment. Corporate hasn't officially announced the project, although CEO Gracia Martore dropped hints during the quarterly earnings conference call with analysts in late July.

If the Butterfly test succeeds, the special section -- perhaps numbering as many as six pages -- would then be included with about three dozen of Gannett's biggest community papers seven days a week. Those dailies are published from coast to coast, including New York, Florida, Arizona and California.

Many questions remain unanswered, including especially whether USAT will try to count the section as paid circulation when it submits figures to the industry's Alliance for Audited Media, formerly known as the Audit Bureau of Circulations. Evan Ray, president of Gannett's printing and distribution subsidiary Gannett Publishing Services, is a member of AAM's 38-seat board of directors.

The combined circulation of Gannett's top three dozen dailies is about 2.3 million on weekdays. (I'm not including the Detroit Free Press, which delivers to homes only three days a week, and is sold at retail in limited locations.) On Sunday, total circulation of those 36 papers is about 3.5 million. (Spreadsheet shows circulation by title with losses 2005-2012.)

Those include Gannett's biggest: The Arizona Republic in Phoenix, which sells around 300,000 weekdays, and 540,000 Sundays. Also, The Indianapolis Star, 156,000 weekdays and 290,000 Sundays. Other markets are Louisville, Ky.; Nashville; Des Moines; Rochester, N.Y., plus smaller ones in four Florida cities.

USAT didn't respond to my e-mailed request for comment. Last week, spokeswoman Heidi Zimmerman confirmed the cover price hike after it was reported here.

First weekend editions
A seven-day publication would for the first time give USAT a dedicated print presence on weekends, making it more competitive for advertising with the NYT, which publishes seven days, and the WSJ, which publishes every day but Sunday.

Since it was founded in September 1982, USAT has only published weekdays, largely following the work lives of its core on-the-road business readers.

To be sure, the community dailies have been using USAT stories and artwork virtually since the paper's launch. In more recent years, that came in a single national news page formatted in USAT's typeface and published by most if not all the dailies in lieu of what had been prepared at the community level. Butterfly would extend that far more.

The new section would be produced by USAT editors at the paper's main office at McLean, Va., in suburban Washington.

Other questions
  • Would USAT's national edition also lose circulation in cities where the special section is included in local newspapers? That would surely be part of the calculus at Corporate's headquarters when evaluating the Butterfly Project tests.
  • Will advertising in the USAT section be limited to national, or will it also include local advertisers?
  • How would the section be inserted in papers that don't print in conventional broadsheet formats, including in Cincinnati; Shreveport, La., Lafayette, Ind., and Burlington, Vt.?
The Butterfly project has been in the works at least since summer 2012. It's unclear how long the pilot test will last before a final decision is made on whether to extend it. Martore could give a progress report to Wall Street in mid-October when Corporate releases third-quarter financial results.

Community newspaper publishers were briefed on the project in April. And editors of newspapers that ultimately could carry the section were given details last month.

USAT last raised its cover price to $1 from 75 cents in fall 2008, just as the Great Recession was deepening.


  1. I work at one of the design hubs -- the majority of those papers DO NOT run the USAT page.

    1. Has that always been the case, or did some drop the page after it was first introduced?

  2. Before the the sideliners and the plain old haters pile on here, I give props to Kramer for trying to turn USAT around and keep us employed here (and no, I'm not an executive). Print is in decline everywhere. Maybe you disagree with his plan. But at least he's not blindly flailing around like the incompetent suits who preceded him.

  3. I have asked this before and will do so again. It is rather clear that this company is sunsetting its print operations in the most financially lucrative way possible. Instead of continuing to add a nationalized page here and another there, wouldn't it just make sense to completely turn the apple cart upside down and produce one major paper that is distributed 81 separate ways? The infrastructure is certainly there for such a move. Readers in Oshkosh and Melbourne would clearly never realize that both papers had similar layouts and centerpieces. For the complainers, you would basically have spaces left on certain pages for local news inserts. I'm just wondering why in this day and age of advanced technology you would make an effort to produce 81 separate papers when you could rake in a TON of savings by eliminating 80 of those editions? Certainly, at first, it could be a logistics nightmare to figure out how stories are going to flow 81 separate ways, but it seems like a lot of savings could result. All that I am saying is that if I was a Gannett executive, solely focused on profits, why wouldn't this be a feasible option if I was serious about maximizing profits? It just seems like they are going about their efforts all wrong; A band aid here, another there. Wouldn't such an effort ensure a longer future for the print product? I just can't believe the people in charge are so dumb that they haven't considered such an option.

    1. @2:25 p.m. said "It is rather clear that this company is sunsetting its print operations in the most financially lucrative way possible."

      Yes. Precisely. This is the most succinct and best description I've seen of what I believe GCI's real (i.e. unwritten) long-term strategic plan is. Much consternation and ink spilled at Jim's site (which I like and approve of) betrays a lack of understanding of this, though I believe that Jim does understand it.

  4. In an e-mail, a reader asks whether the USAT section would mean the participating community papers would have to drop the Associated Press and other wire services.

    1. This is a vital question, one surely of interest to AP HQ as well. USAT itself publishes AP copy, and presumably pays AP a rate calculated, in part, on USAT's circulation -- though USAT is such a unique animal that it's conceivable its AP rate structure is a one-off.

      Local Gannett publishers may be salivating at the prospect of eliminating their annual AP bill, but AP will insist this be a revenue-neutral move. Either the local publishers will be required to keep paying for AP, or USAT will be required to jack its AP payment in lockstep with its increased circulation. At least the former would preserve, at the local level, a 7/365 flow of AP copy to fill newshole outside of USAT's supplied pages. Putting the entire Gannett AP bill on USAT would leave editors across Gannett without a dependable copy spigot.

  5. I don't think we'll be able to count those local copies as paid circulation, but the increased distribution will mitigate the losses on the circulation side. If we are honest and open with advertisers AND price this right, this could work.

    1. @3:24 – If you can’t count USAT’s Butterfly inserts as paid, then how will increasing distribution through it mitigate losses on USAT’s circ side?

      It can’t.

      So let’s be honest and open about that change as well as how attempting to offset USAT’s fast paid decline with advertisers via Butterfly appears to be one of the few things left in Gannett's shrinking quiver of tricks to keep advertisers tired of paying ever more for increasingly less.

    2. 3:42,
      I didn't explain myself properly. It won't mitigate PAID circulation losses, but advertisers could in fact react positively to this if we market it right, which includes telling them exactly what this is and why it could benefit their brands. We will also have to price it properly so their ROI, and efficiencies, and other performance metrics are met.

  6. WSJ circ up 12% to 2.4 million
    NY Times up 18% to 1.9 million
    USAT circ down 8% to 1.7 million

    The first two have digital subscriptions and arguably more distinct, unique content. The third doesn’t and is fast readying to double its print price to a shrinking audience that continues to prove it doesn’t want it.

    Gannett’s problem is obvious to all but those at its top.

  7. First, nice job of reporting, Jim. Good analysis and congrats on breaking this story. Watching those racks go away will be both sad and satisfying for many of us who once loved USAT but haven't agreed with much of anything that's gone on at the nation's newspaper in the last 5-6 years.

    Also, if anyone thinks USAT's top managers' priorities include keeping people employed, I just stunned by that opinion. Here are their priorities:

    1. Keeping their own job.
    2. Securing a golden parachute in case things go wrong.
    3. Laying off people when corporate tells them to or when stock prices dip.

    That is the established pattern and the priorities. Saving jobs isn't in the top 10 list of USAT execs or top editors...at least not in the last decade or so. All these guys talk about how painful it is to layoff employees and how they are working day and night to avoid it, and then proceed to do it anyway, and without much regard for who they let go or how it might impact the quality of the product or the working lives of those who survive the cuts.

    Trust is not going to be restored anytime soon. There is too much blood on the hands of too many managers, past and present, to alter the karma in McLean. I feel for the good people who still work there, but I have no confidence that USAT is any closer to turning things around. If you're on the outside and want proof of USAT's downward spiral, look at the paper or website on any given day. Read a few headlines, stories, captions...look at the design, the photo editing and other content. That will tell you everything you need to know about where USAT is heading.

    1. I'm stunned that you can make these blanket claims without actually working here and without running into Kramer, who is often in the newsroom and is quite open about his plans for turning USAT around. Nobody here is naive about Gannett and layoffs. But, Kramer has been protective of us. And he sits on a pile of dough from selling MarketWatch. He doesn't need the job. He doesn't need to protect his job. He's also not a typical publisher. He rose through the journalism ranks, from stringer to editor. He knows print. He knows digital. So, yeah, his efforts might founder. But he's trying. And we, on the inside, find it remarkable that so many on the outside seem so keen to see us -- their former colleagues -- crash and burn. That's a shame.

    2. Just because Kramer "sits on a pile of dough" and doesn't need this job doesn't mean he isn't surrounded by many, many people who don't have a pile of cash and actually need this job.

  8. Heard this rumor from a former wholesaler last week, this is the first I've seen it. Is there truth to the rumor that large chains like Walmart and Speedway are refusing to carry single copy now. Good luck removing thousands of vending boxes in areas with no USA Today rep now due to partnerships.

  9. Butterflies in my stomach9/17/2013 10:58 PM

    You increase the price when the product gets better, not when it gets prettier, but smaller. Ask the American auto industry how well that approach worked in the 80's and 90's while Honda and Toyoda decimated them with good product that people wanted. (and we're willing to pay for.)
    What USAT is doing (and Gannett by virtue of the Butterfly project) is to try and sell a watered down product for more money. Readers aren't as dumb as upper management thinks, they will see through Butterfly in a heart beat and there goes more circulation, followed by advertisers because the eyes they need aren't reading the paper any more. This is the best idea they could come up with? It's time to clean house in the Crystal Palace.

  10. People have already stopped buying the local product since USAT material has shown up more and more. Maybe a distinctly different USAT section would help if it meant the local content could grow back.

  11. there will be "MORE" local content, stay tuned

  12. I've bought USAToday nearly everyday since day one. Effective tomorrow I am done. $1 to $2 you've gotta be kidding.

  13. Today is the day USAT died.

  14. Well, the good news is instead of costing myself an additional dollar each day, i'll just quit it and actually save myself a dollar each day. I'll just daydream over lunch I guess. It's kind of a rag anyway. Bye bye now!

  15. USA Today was a great constant , wherever you travelled in the US it was a good read , especially for someone who had no real interest in local news..... but today , well money I will save can go to paying the data usage on the smartphone ... goodbye USA Today

  16. I enjoyed the paper since its introduction. No more. The price increase is insulting. Newspapers have been swirling in a death spiral since ownership changed from families to corporate shareholders.

  17. I read USA at breakfast when I traveled for business, and frequently after retiring when I would eat breakfast out, but I never really enjoyed the paper because it came across as too liberal, and I am a conservative. However, after that 100% price increase I have never purchased another copy. I just learned to use my wife's iPAD instead, and frankly, I now enjoy it more than I did USAT in the first place. Oh well, another dinosaur gone!

    1. During a recent stay at a Radisson hotel, I picked up a free copy of USAT from a stack in the lobby. (My only other choice was the local paper.)

      This was a weekend edition, so it had more pages than you'd find in a weekday edition. Also, I was pleasantly surprised to see a fair number of paid ads throughout the sections -- paid as opposed to public service or trade ads.

      Still, its page count made it awfully thin. If I were actually putting down my own money, I would choose a New York Times or Wall Street Journal. They are so much more weighty, both literally and in terms of substances.

      That's a personal preference. There are clearly still plenty of people that want a breezier, faster read, and they still chose USAT.

  18. Talk about the world of price gouging. I won't buy the USA Today anymore.

  19. Need to do some strategic means to
    increase sales and attract buyers.


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