What do you need to pay for a newspaper these days? The answer can be nothing, or as little as five cents a copy.

Yesterday the latest circulation figures were released with mixed results  for newspapers. As Fusion strategy says, overall the results were “solid if not pleasing”. There was a slight trend down, with weekdays drifting south and weekends slightly up:

Gross Copies sold – Domestic circulation – Quarterly results

September 06

December 06

March 07

Total

221,546,676

220,885,665

219,268,517

Weekday

141,942,775

141,210,160

139,051,575

Weekend

79,603,901

79,675,505

80,216,942

(Thanks to Fusion for the table)

But behind the circulation figures there is a hidden story – the surreptitious move by newspaper companies towards an all-but-free-to-user business model. This week Crikey has spent some time investigating the cheap deals in the market and how they work in practice.

We find that that depending on who you are and how you work it, you can subscribe to a broadsheet for as little as five cents a copy. If you are a school teacher or a student and have the right newsagent, you can probably get it for free.

It is a basic rule of human behaviour that if you impose a system to measure performance, then organisations will distort their behaviour to maximise their chances under that system. Newspaper circulation is no exception.

The key to the game at present is that since audit bureau rules changed last year the customer must pay something – no matter how little – for a copy to be counted as paid circulation. Free copies don’t count and bulk and promotional copies delivered to hotels, airlines and the like must be declared. But so long as the subscriber “opts in” and pays something, there is no way of knowing whether they have paid full price or next to nothing.

How many copies are distributed under the cheap deals? That is a strictly guarded secret, with newspaper companies having “heavied” their distributors about not giving out figures – particularly, according to some, if Crikey rings! Nevertheless a ring around yields off the record and anecdotal information.

Based on the interviews I have done, with between 300 and 1000 copies being dropped off daily at each university campus, plus dozens to each Fitness First outlet, thousands to sporting club members plus an unknown quantity being presented “free” or very cheap by newsagents to school teachers and students, it is safe to say that very cheap or effectively free deals are adding tens of thousands of copies to the circulation figures.

First there are the standard subscription deals for The Age   – seven days home delivered for $6.50 a week; and the Sydney Morning Herald and Sun-Herald  – seven days for $7 a week; and The Australian   – $7.45 for six days a week.
These prices represent discounts of between 30 and 40% of the masthead price, but the real action is around discounts that go much deeper. Fairfax is pushing deals through sporting clubs, and both News Limited and Fairfax are pushing deals for students and teachers.

In early 2007 The Age was offering tertiary students a deal under which they picked up weekday copies on campus and got home delivery on weekends at a cost of just $20 for 40 weeks – or about 7c a copy.

The Australian’s tertiary students deal was just $15 for 40 weeks of the Australian and the Sunday Tele . That’s around 5c a paper.

Tertiary students can get the Sydney Morning Herald and Sun Herald home delivered  for $4.40 a week – or just 63c a paper.

Meanwhile Fitness First  members can get four day (Friday to Monday) subscriptions to The Age for just $49 a year, which works out to about 25c a copy, and seven day subscriptions to the Sydney Morning Herald and Sun Herald (delivered to the gym Monday to Friday and to the home on weekends) for just $39, or around 10c per paper.

Another good deal is available through AFL football clubs, where a four day a week (Friday to Monday) home delivered subscription to The Age can be included in the cost of membership for $25 per year, or about 12c a copy.

Meanwhile listeners to 3RRR can get The Age for just $5.45 per week home delivered, with the comfort of knowing that The Age will also donate  $20 to the radio station. It goes on. Year 11 and 12 school students pay just $40 for a school year of Sydney Morning Heralds delivered to the school Monday to Friday. Teachers can get the whole week of papers home delivered  for just $2.50 a week. In Victoria, teachers can get discounted weekend home delivery to The Age for $100 for the whole year.

The lines between very cheap and free are blurred in some cases. Newsagents sometimes get full price commission on the very cheap copies delivered to schools, which means they have a vested interest in getting the whole school signed up.
Some pay the subscription themselves and tell the teachers and students they can have the paper for free. Says one newsagent: “This can turn a $20.00 investment into around $60.00 in net profit. Multiply that by, say, 150 students and teachers at a school and the newsagent makes $9,000 net. The publisher is getting under 10 cents per copy delivered. But they are also getting guaranteed audit numbers and, of course, that’s gold.” Whether those free papers dropped at the school are read is, of course, another matter entirely.

A ring-around the nation’s big university campuses reveals that they get up to six pallets of newspapers each day for the cheap deals — and student unions say that between 60 and 80% are picked up by students, with wide variations between campuses.

Those that are not picked up get returned to newsagents, should not be counted towards paid circulation, and in most cases are not — but some of the newsagents who supply campuses admit there may be some “slippage” due to the chaos that reigns in some student union buildings.

The system of policing varies enormously. Students who have signed up for the cheap deals are meant to show a card before taking their cheap copy, and this operates tightly on some campuses. On others the papers are simply left in stacks with little to prevent students from picking up copies for free — particularly after hours when all the union shops have closed down.

Chris Perkins at Fitness First headquarters says that before the new audit rules copies of Fairfax papers used to be left at the gym free to anyone who wanted them, but now “we aren’t allowed to do that anymore” and staff manage the system to make sure only those who have signed up for the deal get the copies.

Does any of this matter if the paper is, by push or shove, reaching its readers?

Steve Allen of Fusion Strategy doesn’t think so. The heat has gone out of the cheap and free copy issue since the audit rules changed, he says, and it won’t come back unless there is some reason to suspect the integrity of the system.

He will be comparing the circulation figures closely with Roy Morgan’s readership figures, due out soon, but so long as the newspapers are being read, advertisers don’t care how much people are paying, or not paying.

Meanwhile Fairfax insiders say all this is part of a strategy to get high income readers to commit to the product, while allowing Fairfax to assemble data bases of subscribers. The long term view is that newspaper revenues from subscriptions will drop as a proportion of overall revenue, and the companies become almost totally dependent on advertising.

At present masthead price accounts for only between a quarter and a fifth of revenue for a broadsheet. That is likely to drop to next to nothing over the next decade. Partly this is forced by the internet, where most newspaper content is available for free.

What does all this mean for the journalism? It’s a tense game – the value to advertisers depends on newspapers drawing “high end” readers – educated and wealthy. No newspaper can trash its credibility, yet common sense tells us that the less the readers pay, the less value they attach to what they get, the more pressure there will be for newspapers to dance to the advertisers’ tune.

Witness the post it note ads over the masthead satirised by ABC’s The Chaser this week – something that annoys the readers and the newsagents and a compromise to the dignity of the masthead that would not have been tolerated a decade or so ago.

Meanwhile some subscribers — the poor nellies who sign up through their newsagents in the traditional way — are getting much lower discounts than school teachers, football club members and the like. This is something at least one newsagent has winged about publicly .

A crucial figure — which the publishers keep a closely guarded secret — is yield per issue. Don’t expect those figures to be released any time soon.