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Drop in newspaper circulation continues: But not fast enough!

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A ways back my father did some very interesting economic research into what happened to the price of drugs when a generic entered a market previously owned only by branded drugs. His findings? The entry of generics actually caused prices of brand prescriptions to rise as people who insisted on the branded prescription were willing to pay a higher price.

I was reminded of that research in reading today about the continuing decline in circulation of the big papers. The only one that managed a circulation gain was the Wall Street Journal. The hand wringing continues over this horrible state -- but this is a sign to the papers to make lemonade rather than lemons.

At Piqqem.com, newspaper stock sentiment is about as bad as it can get with all stocks showing bearish sentiment except for McClatchy which is only moderately bearish. The big guns, New York Times (NYS: NYT), and Gannett (NYS: GCI) are both showing very negative crowd sentiment.

So what should the newspapers do to fix the problem of declining circulation? They should accelerate that decline by raising subscription prices substantially, perhaps by 30% of so. This would separate the wheat from the chaff among subscribers, allowing newspaper advertising sales teams to definitely state that these readers really want a newspaper experience and they are willing to pay a premium for it.

Such a move would also force newspaper editorial teams to move away from commodity content (earnings reports, going through the motions journalism, etc) and focus only things that are unique and exclusive -- a much harder task, but one that will bear fruit over the long haul by reestablishing the papers as journalism powerhouses.

The reality is, 70% to 80% of what appears even in the top newspapers could easily be found elsewhere online in multiple sources. Very knowledgeable bloggers in a variety of topics can offer commentary that is often superior to that of the newspaper reporters. These two types of news articles are therefore of little to no value anymore. Charge a higher price and force the papers to perform, force the readers to choose, then re-size the business model to fit the new reality.

Alex Salkever is Director of Research at Piqqem.com, a stock sentiment measurement and voting site. He currently subscribers to two newspaper print editions.

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Last updated: November 08, 2009: 06:16 PM

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