More Trouble for Print?
There was a small item buried in the New York Times yesterday.
Man Sues Hotel Over 75-Cent Newspaper
“A California man is suing the Hilton Hotels Corporation for charging him 75 cents for a copy of the USA Today newspaper that he did not request, according to a complaint filed last week in federal court in San Francisco.
The man, Rodney Harmon of Sacramento County, spent the night of March 28 in the Hilton Garden Inn Sonoma County Airport. When he left his room the next morning, he saw a copy of USA Today on the floor in front of his door, the familiar, bright blue logo peering up at him. But Mr. Harmon, 55, was not interested. He stepped over the paper and walked away.
Several days later, according to his lawyer, Kirk J. Wolden, Mr. Harmon glanced at the Hilton Garden Inn pouch that held his key card and found that it said, in small print, that he would be charged for the paper unless he specifically un-requested it.”
If you haven’t been around circulation issues, this might seem to be a story about some oddball trying to cash in on a minor sin committed by the hotel giant. That’s not the story. The Times writer must have known better, but the last thing the old gray lady would want to do is call attention to the real issue.
Let’s review. The great majority of magazines and newspapers in this country derive their revenue from ad sales, not sales of subscriptions or single copies. In general, the more readers a publication could “prove”, the more they could charge for the advertising, a system known as “rate base”.
Rate base is the circulation that is guaranteed to the advertisers. If the newspaper or magazine falls short on delivering the promised rate base, the advertisers can make life miserable by demanding “make goods”, free ads or even cash refunds. There is also a lingering stench that follows a missed rate base, including pressure for future discounts because of perceived weak circulation.
In years past, say before the dawn of the internet age, most creditable publications had little trouble managing rate base, and always looked for ways to grow their “paid” circulation so they could increase that base and raise advertising rates. The list of mechanisms that newspaper and magazine circulators came up with over the years to achieve that goal is truly a marvel of man’s ingenuity.
One of those schemes was the delivery of the “free” newspaper to hotel guests each morning. We’ve all gotten the paper delivered just outside our door overnight when we’ve traveled: sometimes we may have actually read it.
Seems like a great deal for everybody, right? The traveler gets the amenity of a “complimentary” copy of either a local or national newspaper (or both), the hotel and the paper enjoy a little bit of extra revenue, and the circulation department gets to pad their rate base in a way that’s approved by the industry’s governing body, the Audit Bureau of Circulations (ABC). The rule states that the guest must be
“…notified upon check–in that a specified amount is included in the price of the room for the newspaper and that amount will be refunded should the guest elect not to receive the newspaper.”
You remember seeing that, don’t you? Didn’t think so.
Do the math. According to the American Hotel and Lodging Association, in 2010, there were just under 5 million hotel rooms in the United States, with an average occupancy of 57%. If just half of those properties provide these “free” newspapers, then that means that last year newspaper circulation in this country was inflated by about 500 million copies.
The question is really whether or not this is a good deal for the advertisers. Do they even know that part of the rate base they’re paying for is the road warrior who checks out at 7 am and is in his first meeting at 8 am, or the wedding party trying to sober up from the previous night’s debauchery? Is this the target market they’re trying to reach? Is this what they thought they were buying?
It’s well know that print is under pressure. Newspaper and magazine circulation is still falling, revenue is still plummeting, display ad sales are still in decline and income from classified advertising is a shadow of what it had been, all thanks to the internet. Circulators will generally tell you that even in this environment, they have no trouble selling subscriptions, but if the ad sales department can’t sell the advertising, there’s not much call for increased circulation.
For decades, print was able to hide behind smoke and mirrors. If the client started to imagine a magazine campaign in January, it would’t hit the streets until April or May, and it would take a while to evaluate the results, which were often amorphous. Compare that to an internet campaign where the time between concept, launch, testing and precise evaluation can be hours, not months.
In a 2002 meeting of ABC members held at the Waldorf Astoria, advertising maven Donny Deutsch unsettled the small group of publishers in the room by saying:
“It used to be that when a client was getting to ready to launch a new product, we’d advise them that they have to be in Vogue, or Cosmo, or Newsweek. Right now, they don’t have to be in any magazines.”
That was nine years ago and nothing has gotten better for print. The tricks that circulators have used to bolster rate base in the past have helped create a shaky structure that continues to crumble.
This Times story is just a thread. The damage suffered by Mr. Harmon is minor. The damage that will be suffered by the print media if this practice of counting millions of unwitting “paid” copies is scrutinized by advertisers could be cataclismic.