Passalong Newspaper Readership

I am going to lift the introductory section from my article of the same title written a few years ago.


A man clambers onto the streetcar after having bought the daily paper and tucking it under his arm. Half an hour later he gets off, the same newspaper under the same arm.

Only now it's not the same newspaper, now it's a pile of printed sheets which the man drops on a bench in the plaza.

It hardly stays alone a minute on the bench, the pile of printed sheets is converted into a newspaper again when a young boy sees it, reads it, and leaves it converted into a pile of printed sheets.

It sits alone bench hardly a minute, the pile of printed sheets converts again into a newspaper when an old woman finds it, reads it, and leaves it changed into a pile of printed sheets. But then she carries it home and on the way home uses it to wrap up a pound of beets, which is what newspapers are fit for after all these exciting metamorphoses.

Cronopios and Famas by Julio Cortázar

In the parlance of media research, the copy of the newspaper in the story had three readers per copy. But this is getting ahead of the story. Our intention here is not to offer a meditation on the life and death of a newspaper copy. Rather, we wish to provide a dispassionate analysis of the economics of newspaper publishing.

Newspapers have two principal sources of income. The first source of income is the newspaper sales. Thus, the man in the story paid the kiosk operator for that newspaper. After subtracting the commission for the kiosk operator (with further deductions by an intermediary distributor, if applicable), the newspaper receives the sales revenue. If this were the sole source of income, the newspaper publisher would be forced to price the newspaper at a profitable rate. The gross profit would be a function of the circulation, defined as the total number of copies that were sold. 

In practice, newspapers are often priced at unprofitable rates. In fact, some newspapers are even distributed for free. How is this possible? This is because the newspaper publisher can count on advertising as another source of revenue. For the purpose of setting advertising rates, the trading currency is not just the circulation, but the total number of readers. As the story demonstrates, a single copy of a newspaper can be read by more people than the original purchaser. The total number of readers is usually established by some form of consumer survey. 

On one hand, a large number of readers will bring in large advertising revenues, which enables the newspaper publishers to set lower copy prices and/or improve editorial content, which attracts more readers. On the other hand, a smaller number of readers will result in low advertising revenues, which forces the newspaper publishers to set higher copy prices and/or reduce pages, which loses more readers. So it is a delicate balancing act that the newspaper publisher must play.

From the above, you can see that there are two basic numbers for every newspapers: circulation (=the number of copies printed, distributed and sold) and readership (=the number of readers who actually read the newspaper).  Circulation does not equal readership automatically.  Circulation is less than, equal or greater than readership.  From reading the example above, you will agree that circulation may be less than or even equal to readership.  But you may be astonished as to how circulation could exceed readership.  Oh, yes, there are plenty of examples, even in Hong Kong.

Example 1 is hearsay, but it is the stuff of urban legend.  Once upon a time in Hong Kong, there were two brothers in Hong Kong.  One of them was in the newspaper publishing business and the other was in the heroin-smuggling business.  It is a matter of speculation whether the newspaper operation was a money-laundering front for the heroin-smuggling business.  In any case, the heroin smuggler had sensed that the police were about to spring upon him and fled to Taiwan where he lived happily ever afterwards.  Meanwhile, perhaps relieved of that white elephant, the newspaper went on to become very successful indeed.  Today, that newspaper is sometimes still called the White Powder Newspaper (白粉報).  Simply put, given that the heroin connection was quite well-known back then, would anyone trust the circulation number offered by the newspaper, or otherwise believe that they were trying to make a real business?

Example 2 is less of an innuendo.  Once upon a time in Hong Kong, a certain newspaper published a fixed number of copies everyday, which is counted and then loaded onto the trucks.  That much was not in doubt.  And then some of the trucks took the newspapers directly to the garbage dump and unceremoniously tossed them away.  This became a scandal of monumental proportions that brought in the Independent Commission Against Corruption because such activity was clearly commercial fraud against advertisers who depended on circulation figures.  Today, of course, circulation figures are credible only if they come through the rigorous scrutiny of organizations such as the Hong Kong Audit Bureau of Circulations (HKABC).

Example 3 occurred more recently, as there is a new freely distributed newspaper named Headline News in Hong Kong.  This week's Next magazine showed how where some of its copies went.  The sequence of photos showed a man helping himself to the stacks of Headline News in Hong Kong Central by loading batches of them onto his handcart.

In the next photo, the man looked quite happy as he left with his collection.  Where was he going?  Right to the garbage recycling center where he will sell the newspapers.  The man complained to the reporter that this was very hard work, because he'll only make about a dozen Hong Kong dollars for his efforts.  Unfortunately, used newspapers are only worth the paper that they are printed on, and that isn't much.

Advertisers are less concerned about the circulation than actual readers.  Advertising messages do not work on newspapers; they are supposed to work on people who see them.  Consider two newspapers that have the identical audited circulation of 100,000.  Should they have the same number of readers?  The answer is no.  And even if they do, that does not mean that they are the same type of readers.

I will use three examples to illustrate how readers-per-copy can vary (which is the ratio of the number of readers divided by the circulation).

Example 1.  Consider the case of The Asian Wall Street Journal compared to South China Morning Post.  The first is a financial newspaper, while the latter is a general newspaper with multiple sections.  If both these newspapers are delivered to a nuclear household where the husband is a professional/manager, the wife is a homemaker and there are two small children.  The Asian Wall Street Journal will get one reader, while South China Morning Post will get at least two readers.  Qualitatively, though, The Asian Wall Street Journal will be more attractive to advertisers who are looking for finance-savvy readers.

Example 2.  Consider the cases of the New York Times in New York City, Oriental Daily in Hong Kong and El Mercurio in Santiago de Chile.  The New York Times gets somewhere between 2 and 2-1/2 readers per copy.  What should the others get?  Remember that the average household size in New York City is 2.6 persons, it is 3.1 in Hong Kong and 4.5 in Santiago de Chile.  It should be no surprise to see the readers-per-copy go up from New York City to Hong Kong to Santiago de Chile.

Example 3:  A newspaper can be delivered to a home or office via subscription, or bought at a newspaper stand or convenience store, or distributed free in public places.  A newspaper brought into the office (e.g. via subscription) may be read by all the officer workers as well as visitors during the day.  A newspaper brought into the home may be read by all the family members.  A newspaper distributed free at the MTR station will be read during the journey and then discarded in the recycling bin at the exit.  Thus, the readers-per-copy will be higher for an office-directed newspaper than a home-delivered newspaper than a free newspaper.

If you want to assess the advertising values of newspapers, then a readership study is the proper thing to do as opposed to pure circulation figures.  The readership study should be conducted by an independent research company not beholden to any special interest (e.g. a newspaper).  Even so, you should bear in mind that readership research methodology is not neutral, and that becomes a battlefield.

Follow-Up Post: Newspaper Competition in Hong Kong