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NEWS HOLE SIZING POLICIES AT NONDAILY NEWSPAPERS









A manuscript submitted to the
Media Management & Economics Division 
for possible presentation at the AEJMC Conference in Phoenix





April 1, 2000






Ken Smith
Associate Professor
Dept. of Communication & Mass Media
University of Wyoming
P.O. Box 3904
Laramie, WY  82071-3904
(307) 766-5437
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ABSTRACT


NEWS HOLE SIZING POLICIES AT NONDAILY NEWSPAPERS


Ken Smith
University of Wyoming


        This study examined the methods used by nondaily newspapers to determine the sizes of their news holes. The results indicate that a large majority of nondailies (77.8%) base their news holes on a percentage of their advertising inches. In most cases, the type of advertising used to determine the sizes of the news holes was ROP advertising. Most nondailies did not take preprint advertising into account in sizing their news holes.
NEWS HOLE SIZING POLICIES AT NONDAILY NEWSPAPERS


        A commonly held perception in the newspaper industry is that the amount of news that appears in a newspaper is a function of advertising. As Fink wrote, "news hole size varies widely, but not in direct response to news availability; it is determined by the advertising department."1
        Yet the advertising base at newspapers has changed. In recent years a trend has developed among larger advertisers in which they have moved away from the traditional ROP advertising that is printed on the newspapers' pages alongside the news and toward preprints, free-standing circulars that are inserted into the newspaper and distributed with each copy.
        In the United States, advertising accounted for about 75-80% of newspaper revenues industry wide in the 1980s,2 and this percentage may now be higher than 85 percent.3 Thus, any changes in the advertising base can have a profound effect on other operations as well. One area that could be affected is the news hole.
        This study will examine the news hole at nondaily newspapers. Specifically, it will examine how the size of the news hole is determined, if preprints have affected the size of the news hole, and if the method of sizing the news hole varies by circulation or type of ownership.

Background
        The historic view of newspapers is that they produce two products. They produce news that they sell to readers, and they produce advertising space that they sell to advertisers. A more accurate description of a newspaper's two products is provided by the dual product thesis (also called joint commodity thesis).4 The dual product thesis agrees that a newspaper produces two products, news and advertising, but it assumes an interrelationship between the two. The newspaper provides news to readers who pay a token fee for the news with their subscription fees, but a more important form of payment is their time and attention. While advertisers may pay for space in the newspaper, what they are really buying is the attention of this audience. In return, advertisers provide the newspaper with most of the revenue that is used to produce the news product. Figure 1 depicts the dual product thesis. The dashed line at the top indicates that the newspaper is merely a conduit that provides the time and attention of the audience to advertisers. The second dashed line represents the relationship between the advertising dollars and the editorial product because of the idea that the size of the news hole may be determined by the amount of advertising inches. Figure 1 shows that readers contribute subscription fees to the operating revenues, but it also emphasizes the greater share contributed by advertising fees by showing the advertising dollars in boldface type. Ironically, the size of the news hole is not believed to be influenced by the number of subscribers.
        Even though advertising provides the bulk of the revenue to most newspapers and may even determine the size of the news hole, society considers the editorial product as the more important of the two because of its role in informing the public that is considered essential in a democracy. Thus, any change in advertising may be especially important because of its impact on the news.
        Whether advertising determines the size of the news hole is the subject of some speculation. Casey and Copeland5 determined in 1957 that most dailies no longer based the amount of news solely on advertising. Rather, dailies were using a "fixed minimum" news hole. Under this policy, dailies would set a minimum amount of space below which they would not allow their news inches to drop. The amount of space was not simply "fixed" in that it could vary upward, but it could not drop below a certain minimum.
        A later study also found that most dailies no longer base the amount of news on advertising alone.6 In 1976, 41 percent of dailies used the fixed minimum system. Another 26 percent used a sliding-percentage system in which the percentage of space allocated to news was based on the number of pages in the newspaper on any particular day.
        This relative independence of news from advertising was supported by a more recent study, which found that as total pages decreased during a period when newspaper revenues flattened in 1990-91, news pages did not decline as rapidly as ad pages.7
        A more recent report indicated that most dailies continue to guarantee their readers minimum news holes.8 The size of the news hole is now based on "complex space-planning and reporting procedures, frequently called budgets."9 These planning procedures include such methods as the use of seasonal ads/news ratios, the banking of news space debits and credits, and ratios that convert preprint ad space to ROP equivalents. If the amount of advertising alone does not determine the size of the news hole at dailies, the relationship depicted in Figure 1 between advertising and the editorial product should still hold true. The methods may be more complex, but the amount of advertising, either in inches or dollars apparently helps to determine the size of the editorial product to be produced.
        Despite this change in the relationship between advertising inches and the news hole at dailies, a change in the advertising base away from ROP and toward preprints has raised new concerns. Some newspapers began using preprints in the late 1960s, and by 1985 they accounted for about one-fourth of advertising revenues.10 Despite predictions that preprints would eventually represent as much as one-third of newspaper advertising revenue, by 1995 they passed display advertising as the leading source and accounted for slightly more than one-half of retail ad revenue.11
        The impact of this change in the advertising base on the news hole is not certain. A 1989 survey of 15 leading media companies concluded that preprints could result in a reduced news hole.12 At the very least, some respondents believed that traditional news to ad ratios would be discarded. A 1996 poll showed that the news hole at dailies had shrunk in actual size, but had increased as a percentage of the space occupied in the ROP pages.13
        Even if newspapers abandon traditional news to ad ratios, a reduced profitability of preprints may also affect the news hole. One study of nondailies found that preprints are less profitable to newspapers than ROP advertising.14 It concluded that this reduced profitability was due primarily to lower revenues resulting from preprints that from ROP.
        This study will examine whether preprints affect the size of the news hole at nondaily newspapers. It will also examine the methods used to determine the size of the news hole at nondailies.
        The research questions that will be examined are:
        1. What methods do nondailies use to determine the size of their new holes?
        2. Does the method of sizing the news hole vary by the nondailies' circulations?
        3. Does the method of sizing the news hole vary by the type of ownership?
        4. Does preprint advertising affect the size of the news hole at nondailies?
        5. Would the news hole change in size if preprint advertisers used the more
        traditional ROP advertising instead?


Method
        Personal interviews were conducted with the publishers of 117 nondailies from the Midwest and West.  Nondailies were selected as the focus of this study because many are the only medium to cover their local governments. If preprints have any effect on the news hole, it could affect the flow of information to residents of smaller towns. In addition, if research has indicated that traditional news to ad ratios are being abandoned at daily newspapers, no studies have yet examined how nondailies determine the size of their news holes, or if they are also following this trend.
        The interviews were conducted between January and April 1999 at the press association conventions of five states. Respondents were selected based on their attendance at the press conventions and their willingness to participate in the interviews. However, no potential respondent declined to participate. Despite the lack of randomness that resulted from this convenience sample, respondents represented a good cross section of the newspaper circulations and the geographic areas in their states.
        Respondents were asked to provide a detailed explanation of the method used in sizing their news hole. They were also asked if preprints had any effect on the sizes of their news holes or if they adjusted the sizes of their news holes because of preprints. In addition, they were asked if a switch by preprint advertisers to ROP would affect the sizes of their news holes. Respondents also provided the circulations and type of ownership for their newspapers.

Results
        Respondents identified five different methods that were used to determine the size of the news hole at the nondailies in this study (no significant difference was evident among the states in the methods that were used).15 The method used by the vast majority of nondailies based the news hole on a percentage of advertising (Table 1). Using this method, a newspaper predetermined an ad/news ratio, tallied the advertising inches, and then calculated the number of pages that resulted in this ad/news ratio. While the final size of the news hole depended to some degree on the constraints of the press (whenever additional pages are added, they must be added in minimum increments of two broadsheet pages), the primary determinant of the news hole was the amount of advertising. This method is sometimes called a "fixed percentage of news" since the amount of news is based on a predetermined percentage.
        The second-most utilized method was based on the amount of news. Under this method, the newspaper determined the amount of news it had in a given week and added this amount to the advertising inches. While both the news and advertising were used to determine the size of the newspaper, the size of the news hole was independent of the ad inches.
        Three other methods of sizing the news hole were used by less than 10 percent of respondents and included a fixed amount of news, a fixed number of pages, and a fixed minimum amount of news. With the "fixed amount of news" method, a newspaper predetermined the number of inches allocated for news. Respondents who used this method reported that the amount of news in their communities did not vary much on a weekly basis, so they were able to predict the amount of space it would require. The "fixed number of pages" method meant that a newspaper used the same number of pages in every edition. The size of the news hole was dependent of the amount of advertising in that the news was allocated to the space remaining after the ads had been placed on the pages. The "fixed minimum" system is the same in nondailies as in daily newspapers except that it appears to be utilized much more commonly by dailies.
        The method of sizing the news hole did not vary significantly based on circulation (Table 2). When newspapers were divided into four groups based on circulation, the smallest newspapers did rely somewhat less on the "percentage of advertising" method, but a crosstab analysis showed any differences in sizing the news hole resulting from circulation were not significant at the p<.05 level.
        The method of sizing the news hole also did not vary significantly based on the type of ownership (Table 3). While nondailies with out-of-state group ownership did tend to utilize the "percentage of advertising" method somewhat more than others, a crosstab analysis indicated that any differences in sizing the news hole due to ownership type were not significant at the p<.05 level. 
        While most nondailies used a "percentage of advertising" method to size their news holes, apparently the percentage was based primarily on ROP advertising since only 12 percent of the respondents indicated that preprint advertising was added to the equation used to determine the size of their news hole (Table 4). Another 12 percent said they would factor in preprints irregularly, but only when their postal percentage was jeopardized (newspapers must have at least 25 percent non-advertising content in at least 50 percent of their issues during the course of any given year to qualify for reduced second-class postal rates). At the majority of newspapers, preprint advertising played no role in determining the size of the news hole, although at 18.8 percent of these newspapers, the size of the news hole was independent of advertising.
        While most nondailies do not use preprints in sizing their news holes, apparently their news holes would be larger if preprint advertisers were to switch to the more traditional ROP advertising. A substantial majority of respondents indicated that the size of their news holes would increase if preprint advertisers were to run ROP advertising in the newspaper instead (Table 5).

Discussion
        If daily newspapers have moved away over time from a strict "percentage of advertising" method of sizing the news hole and toward methods that set minimums on the amount of news appearing in any given edition, apparently nondailies have not followed this trend. More than three-quarters of the nondailies in this study still use a "percentage of advertising" method to determine the sizes of their news holes. Unlike dailies, that suffer the traditional slow ad days such as Mondays and Tuesdays--days that would not warrant a sufficient amount of news if based on advertising, nondailies have a more predictable cumulative total of ads in any given week. Most can include a sufficient amount of news based on a "percentage of advertising" formula and do not find it necessary to increase their page counts beyond what the advertising dictates. In fact, traditional thought says that nondailies are timed to come out on the days most desired by advertisers, so they may be maximizing their news holes in this manner. While nondailies experience seasonal variations in advertising lineage (the high-volume Christmas or back-to-school seasons versus the low-volume post-Christmas season, for example), these variations are not as regular and probably not as marked as the variations occurring among days of a week.
        The relatively recent growth of preprint advertising apparently has not worked to the advantage of nondaily readers. Even though preprint ad programs are typically used by many of the largest advertisers, preprint inches are not taken into account by most nondailies when the size of the news hole is determined. If these same advertisers used the more traditional ROP advertising instead, these ROP inches would be used in sizing the news hole.
        The question then becomes how newspapers use preprint ad revenue if not to support the editorial product. Since nondailies realize lower overall profits from preprints than from ROP,16 perhaps they are able to realize the same net profit by not increasing editorial inches as preprint inches are added when accounts switch from ROP to preprints. And perhaps the money saved by not increasing the news hole in response to preprint inches may even help to compensate for the income lost when other advertisers abandon the newspaper and run their preprints with competitors.
        The impact of preprints is not the same as that at many dailies, where some relationship apparently exists between preprints and the news hole. This relationship at dailies is not as direct as that between the news hole and ROP ad inches, but at least preprints are taken into account. Thus, the dashed line in Figure 1 representing a relationship between all advertising and the editorial product still holds true. However, at nondailies the dual product thesis must be amended to account for the lack of a relationship between the news hole and preprints. Figure 2 depicts this difference. In Figure 2, the editorial product is still related to the amount of ROP advertising, but the income from preprint advertising simply flows into a pool of operating revenues that has no direct relationship to the size of the news hole.
        The important implication of the change represented by Figure 2 is that if preprints continue to grow in proportion to other advertising revenues, the amount of local news available to readers in smaller communities could decline. This study  did not examine whether the actual size of the news hole at nondailies has declined over time as some larger ROP advertisers have switched to preprints, and this provides one important area for further study. Another area of further study is the impact of preprints on the news hole at dailies. Some evidence exists that dailies do not base their news hole on advertising inches, but with the large influx of preprints into daily markets, new research is necessary to confirm this.
Notes

1. Conrad C. Fink, Strategic Newspaper Management. New York: Random House, 1988, p. 168.

2. Fink, op.cit.; Robert G. Picard, Rate Setting and Competition in Newspaper Advertising. Newspaper Research Journal, 3 (3), April 1982, pp. 3-13.

3. Robert G. Picard and Jeffrey H. Brody, The Newspaper Publishing Industry. Boston: Allyn and Bacon, 1997.

4. Stephen Lacy and Todd F. Simon, The Economics and Regulation of United States Newspapers. Norwood, New Jersey: Ablex Publishing Corporation, 1993; Robert G. Picard, Media Economics: Concepts and Issues. Newbury Park, California: Sage Publications, 1989.

5. Ralph D. Casey and Thomas H. Copeland, Current "News Hole" Policies of Daily Newspapers: A Survey. Journalism Quarterly, 34 (1), Spring 1957, pp. 175-186.

6. Dan Drew and G. Cleveland Wilhoit, Newshole Allocation Policies of American Daily Newspapers. Journalism Quarterly, 53 (3), Fall 1976, pp. 434-440, 482.

7. William B. Blankenburg, Hard Times and the News Hole. Journalism & Mass Communication Quarterly, 72 (3), Autumn 1995, pp. 634-41.

8. Nancy M. Davis, News Holes, Inch by Inch. Presstime, 18 (4), April 1996, pp. 26-29.

9. Davis, op.cit., p. 28.

10. Rebecca Ross Albers, Conquering Preprint Peaks. Presstime, 20 (10), October 1998, pp. 45-49.

11. Albers, op.cit.; Davis, op.cit.; Ann Lallande, Navigating the Microzone Maze. Presstime, 18 (1), January 1996, pp. 29-33.

12. Erik L. Collins, Robert L. Jones, and Eugene P. Corrigan, Newspaper  advertising preprints: New player, new game, new rules. Paper presented at the convention of the Association for Education in Journalism and Mass Communication, Washington, D.C., August 1989.

13. Leo Bogart, The preprint predicament. Presstime, 19 (9), September 1997, p. 42.

14. Ken Smith, Preprints Versus Display Advertising: Which is More Profitable for Nondaily Newspapers? The Journal of Media Economics, 12 (4), 1999, pp. 233-245.

15. X2=20.70, df=16, p>.05

16. Smith, op.cit.
Table 1:     Method of sizing news hole at weeklies

        #       %
Method of sizing news hole
% of advertising (fixed % of news)      91      77.8

Amount of news  13      11.1

Fixed amount of news    7       6.0

Fixed number of pages   5       4.3

Fixed minimum amount of news space      1       0.9

Totals  117     100.0

Table 2:     Method of sizing news hole by circulation

        Circulation
        218-    1,450-  2,150-  3,500-
        1,449   2,149   3,499   7,500
Sizing method
% of advertising        69.0%   86.7%   82.8%   72.4%	

Fixed minimum   0.0%    0.0%    0.0%    3.5%

Fixed amount    0.0%    0.0%    10.3%   13.8%

Amount of news  20.7%   10.0%   6.9%    6.9%

Fixed # of pages        10.3%   3.3%    0.0%    3.5%

Totals  100.0%  100.0%  100.0%  100.0%


# of newspapers 29      29      30      29
X2=18.442, df=12, p>.05
Table 3:     Method of sizing news hole by ownership type

        Locally In-state        Out-of-state
        owned   group   group
Sizing method
% of advertising        79.4%   70.3%   88.2%	

Fixed minimum   1.6%    0.0%    0.0

Fixed amount    6.4%    2.7%    11.8%

Amount of news  6.4%    24.3%   0.0%

Fixed # of pages        6.4%    2.7%    0.0%

Totals  100.0%  100.0%  100.0%


# of newspapers 63      37      17
X2=13.578, df=8, p>.05

Table 4:     Impact of preprint advertising on news hole

        #       %
Impact on news hole
No impact on news hole  67      57.3

Preprints added to % of advertising     14      12.0

Preprints only used for postal purposes 14      12.0

Not applicable  22      18.8

Total   117     100.0








Table 5:        Change in news hole if preprint advertisers
        changed to ROP advertising

        #       %
Change in news hole
Increased news hole     83      70.9

Decreased news hole     1       0.9

No change       33      28.2

Total   117     100.0