Several major advertisers are looking for rate cuts on display advertising in the Los Angeles Times because of the swoon in the daily newspaper’s readership.

Buyers for Macy’s, one of the Times’ largest advertisers, and some big local auto dealers confirmed that they will try to leverage the lower circulation figures when they cut their deals for 2007.

Despite the 8 percent daily readership falloff over the past year – and 15 percent from when the last ad rates were set – advertisers are expecting tough talks because newspapers don’t always see circulation drops as a reason to trim ad rates.

“Papers, as general rule, are reluctant to identify the exact relationship of circulation to rates,” said Mike Monroe, vice-president of media and advertising operations at Macy’s. “As a general rule, newspapers don’t offer decreases in rates. So, whatever rate is paid eventually is something the publisher and the advertiser will agree upon.”

Still, several advertisers said they’ll be looking for a rate drop.

“The circulation has dropped and based on that, we hope to get a break on our rates for next year,” said a media buyer at one of the largest auto dealerships in the county. He declined to be identified, as did other ad buyers, citing the sensitive nature of the talks.

The Times, which issued a statement but refused to be interviewed for this story, has yet to publish its rate card, or what it plans to charge for next year. Major advertisers typically negotiate those rates, and those talks will be held next month.

When analyzing media options, agencies compare their cost per thousand readers, known as CPM. To calculate CPM, take the cost of a standard ad size – say a full black and white page, which costs about $117,000 in the Times’ main section – and divide it by the circulation. According to data in the 2006 rate card, such a CPM for the Times works out to $129. Based on the new preliminary circulation numbers, the Times’ CPM would rise to about $150. Alternately, the price per column inch would have to drop from $908 to $776 – a 15 percent decrease – to hold the CPM steady at $129.

Since the Times’ advertising rates for this year are based on figures from the March 2005 audit, advertisers are now reaching 15 percent fewer readers than they paid for this year. (From September 2005 to September 2006, circulation dropped 8 percent.)

“The circulation decrease on the face of it looks dramatic – 8 percent is a big number,” said Dale Travis, chief strategy officer for the Novus Print Media Network, a division of advertising conglomerate Omnicom Group Inc. “We’re very curious, asking questions of the Times to find out how much of that 8 percent is a true loss of qualified readers and how much is ‘scrubbing’ (an industry term for shedding free subscriptions).”

Travis said CPM “is important, but there are other factors. What I’m looking for is value, and that’s a function of price and effectiveness. I can ramp up that effectiveness through editorial adjacency, prime placement, day-of-the-week strategies or extension of the campaign onto LATimes.com site. So I have to weigh that price against all the other factors.”

Capturing readers

Several ad professionals said they are hoping the paper can find a formula to engage readers and promote local businesses.