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REPORTING MAY HELP COOL ABC ROW OVER PRICING Latest proposal finds a new way to apply old rules about discounting and circulation.

If at first you don't succeed, take another look at the rules and try, try again.

In the wake of the acrimonious attempt to alter the relationship between marketing and pricing a newspaper through a concept called market segment pricing, the Audit Bureau of Circulations is proposing a series of changes -- and no-changes -- in how newspapers may price, market and report circulation.

What will not change under the proposal that will be considered by the ABC board at its annual meeting Nov. 4-7 in Chicago? The criteria for membership and the definition of paid circulation. To be a qualified member of the circulation-auditing service based in Schaumburg, Ill., a newspaper would have to continue to sell at least 70 percent of its copies for at least 50 percent of the basic price it sets for its editions.

What will change under the proposal drafted by a task force headed by Jeremy Halbreich, former general manager of the Dallas Morning News? Newspapers will have the option of reporting "other circulation" -- copies sold for less than the 50 percent threshold for paid circulation -- which then is added to paid circulation for a number defined as "total distribution."

Those other circulation and total distribution numbers would be detailed in a Supplemental Data Report, presenting such things as the price paid for each category of reduced-rate circulation, how many copies were sold and the value of any premiums used to promote a sale. They also will appear on the front page of ABC circulation audit reports.

Where will newspapers gain flexibility in marketing? By selling into the other circulation category with below-50 percent pricing -- with only one proviso, already in place, that no more than 30 percent of total distribution in any one ZIP code could fall below the 50 percent threshold.

The key lies in the reporting of all these numbers.

"This is a recommendation which I think has a lot of strong attributes for everyone involved," says Michael Lavery, ABC's president and managing director. "It really leverages off what our current reporting and eligibility requirements provide."

Halbreich is direct in summing up the work of his task force, which was expanded after it presented its proposal on market segment pricing and this time shunned any idea of changing the definition of paid circulation. "What we realized was," he says, "we could play with that 30 percent."

The beauty of the proposal lies in the fact that "if a newspaper wants to sell some circulation for less than 50 percent, or with a premium that does not qualify that circulation as paid, they could still have that circulation audited," Halbreich says. In short, advertisers will still get the clout of ABC behind the newspaper's numbers, and the "30 percent opportunity" for the newspaper to explore new ways to sell copies "should be more than enough to do what they need to do," Halbreich says.

The Dallas Morning News, which Halbreich is leaving (see Persons, Page 8), could use the freedom to discount below 50 percent to, say, try to increase penetration among apartment dwellers. It could offer "a much lower price," he says. The basic price might be $11.50, so half is $5.75; a limited number of renters might buy the paper for $4, which under the proposal would be fine because the details of such sales "would be broken out" in a Supplemental Data Report.

Key to all discussions about pricing, marketing and auditing has been the matter of reporting circulation in a way useful to advertisers. The proposal calls for the paid circulation figure to appear in boldface on the front page of the ABC statement, while also providing lightface lines for "other circulation" and "total distribution."

That meets with the approval of one advertiser representative on the task force. "The fact that newspapers are given the opportunity to show other circulation figures and have that added to paid circulation to obtain a total distribution figure, and have it reported on the front page of the report, is a notable advantage to newspapers," says Matthew Spahn, director of print media services for Sears, Roebuck & Co. in Hoffman Estates, Ill.

Spahn calls the total distribution figure "a win for newspapers" because it encompasses more than just paid circulation. In the absence of readership surveys which would show not only how many copies were sold but just how many people actually saw each copy, the changes are a "step in the right direction," Spahn says. Detail counts when it comes to measuring how many people actually may see an ad, he says, adding, "The price they paid for the newspaper is secondary to that."

'50 PERCENT THRESHOLD IS ENOUGH' That is not how some newspaper representatives on the task force see the situation.

"I don't think you have to give the newspaper away to increase readership or circulation," says Gayle Pryor, vice president of circulation for Thomson Newspapers in Wexford, Pa. "We believe that a 50 percent threshold of a discount is enough."

Should the proposal be approved, Pryor worries that papers of the size Thomson publishes will be at a disadvantage in a competitive situation where they go up against a larger paper which can afford to offer deep discounts in those shared ZIP codes. "What's going to be happening now is, people are going to be leveraging that 30 percent more than ever in the past," he says, using it as "a pricing tactic" that he labels "dangerous."

Pryor adds: "Say a major metro comes in and sells home delivery for a penny a day. How does a small local daily compete with that?"

The Orange County Register in Santa Ana, Calif., is no small local daily, but its vice president for consumer marketing, John Walsh, shares Pryor's concern. "Frankly, nothing has really changed in my mind since the last time this proposal was floated under a different guise," he says, referring to the market segment pricing plan.

This issue pits two groups within ABC, he says, those who believe "we have enough flexibility" under current rules and those who feel circulation can be expanded "only through deep discounting."

Walsh objects to the inclusion of total distribution on the ABC report's front page as potentially misleading. "Ultimately, that's what many sales representatives walk in and sell off of," he says. Any ad rep "not used to dealing with sophisticated tools will confuse the issue even more."

In nearby Los Angeles, Jeffrey Klein sees some advantages to the proposal for all newspapers. Klein, the senior vice president for consumer marketing and general manager for news at the Los Angeles Times, says the proposal would "allow us to do a lot more new and different things" instead of "worrying about the rules."

Klein, also a member of the task force, says the proposal has the advantage both of allowing "different pricing scenarios" and ensuring that papers sold under those scenarios "will be categorized under a different bucket and fully revealed so advertisers can decide how to value them."

Saying the proposal would promote "full disclosure" through the optional Supplemental Data Report, Klein suggests: "What makes this palatable is one, it's voluntary; two, you can compare apples to apples and oranges to oranges -- and if you don't have any oranges, you don't count oranges."

-- P.W.
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Date:Sep 28, 1998
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