KissFM's New Daily: What Most People Don't Know About Circulation And Advertising

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Yesterday one of our regular readers, I believe her name is Mumbi wa Gikuyu, gave us a very interesting analysis of the advertising revenue possibilities of the much-anticipated new daily newspaper from one of Kenya's most popular radio stations.

The analysis was accurate and reflected very much the direction I think the management team at KissFM will take in structuring their brand new newspaper. Already there is plenty of evidence to support this, including the fact that the radio station has aggressively been airing spots advertising for sales representatives that are especially gifted.

But all this ignores an all-important structural truth about newspapers. And hat is the fact that it all depends on how an organization's revenue structure positions circulation.

In America the newspapers have traditionally relied heavily on advertising and that is why when Life magazine was first launched by Time Inc. (in those days. Today it's called Time Warner, after the merger with Warner Brothers), it almost shut down the media house because of it's higher than expected circulation and a decision taken to print enough copies to meet the huge unbudgeted-for demand. Structurally, the magazine was profitable assuming a certain level of circulation. But as circulation mounted and bearing in fact that the first photo magazine in the world was losing a certain amount per single copy printed, you begin to see the kind of problems that success can cause. Incidentally one solution would have been to raise the already high ad rates, but contracts had already been signed and besides it would not have been enough to cover the colossal unexpected circulation costs.

In Britain the newspapers are generally less bulky than in the US and are worked around the more traditional newspaper publishing business model of printed copies being able to pay for themselves and advertising coming in as an extra but also vital profit center. Meaning that it would be impossible for the Life magazine scenario to be played out in Britain.

The question here, is what makes more money? Advertising or circulation? This is a question that has been argued over for decades. However if we put the career of the most successful publisher in the world, Rupert Murdoch under a microscope, the answer is clear. The money is in circulation. It comes in cash and it comes every day, meaning that a successful newspaper must also have a very competent finance department that knows exactly what to do with a cash windfall to enhance profits. There are even those who believe (including this blogger) that a successful high circulating newspaper is also a financial company. Murdoch's largest cash cows that at one time accounted for more than 60 per cent of the News Corp revenue have for many years been The Sun, News of the World And The weekly American magazine that periodically carried stories on space alien and flying saucer sittings, The National Star (later renamed The Star). All three relied so heavily on circulation that the editor's job in one of them The Star was described as a "revolving chair" because Murdoch had no patience for editors who did not deliver massive circulation. It is hard to believe that the same publisher owns the highly prestigious Times newspaper in London and The Australian in his native country. In fact most of Murdoch's media empire as we know it today was financed by "sex story profits" from The Sun and News of The World.

The Daily Nation was founded on a policy of high circulation to the masses at a time when all the alternatives in Kenya were colonial mouthpieces like the Standard. In fact the Nation media group that you see today has over the years been built and financed mainly on circulation as The Standard enjoyed superior advertising revenue well into the late eighties. But a significant change of direction decision was made in the early 90s when the Nation started investing heavily in full color printing presses and emphasized on advertising while downplaying the circulation side. Accordingly circulation fell and today the Nation revenue strategy still leans heavily on advertising.

It is instructive that the highest copy sales in history ever achieved by a Kenyan newspaper happened in 1991 when the Nation carried a splash about the arrest of Nicholas Biwott and the late Hezekiah Oyugi. Around 330,000 copies were sold that memorable day. Today the Daily Nation usually struggles to break the 200,000 copies mark. Looking at demographics, including increased population and literacy, this is a big drop in circulation, but most of it is mainly self-inflicted. You cannot be both a good circulation newspaper and a good advertising newspaper. You have to have one as your main strength because many times some of your stories will upset advertisers (as clearly happened in the CNN Niger Delta instance that I talk about in my main post today. The difference is that this organization is in the kind of broadcast journalism where virtually all profits come in from advertising.)

But the very valid point raised by another Kumekucha regular (Taabu, I think) is the fact that hungry people hardly have the inclination to read or engage in national gossip. So would an emphasis on circulation work in this case? Actually, it probably would because this is an election year. The year in which newspapers always make windfall profits and mainly from copy sales, therefore having a circulation strategy and going very aggressively for circulation would be a good strategy for the new KissFM newspaper.

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