Editor & Publisher, Oct. 10

Soaring Gas Prices Hit Carriers and Distributors Hard

By Lesley Messer

With the recent spike in gas prices, newspapers across the country have been forced to reevaluate their spending on delivery.

John Murray, vice president of circulation for the Newspaper Association of America, says the spike will affect newspapers in two ways: in the costs of maintaining independent contractors, and internal operation expenses.

"There's no question that newspapers' physical distribution function is growing in the delivery not only of newspapers, but also of other publications in many markets," says Murray. Many publishers, he adds, "are looking at structuring in the higher expenses as they budget for 2006."

Kim Marcille, vice president of circulation for The Miami Herald, says that distributors and carriers at her paper are given subsidies partly based on the length of individual routes, so the circulation department keeps an eye on gas prices. The paper increased mileage pay at the end of 2004 and then again recently, and is now carefully watching the prices soar.

In some cases, however, the subsidy isn't enough to keep individual contractors with the paper. Right now, jobs are relatively easy to find in the Miami area, she notes, so "when you add the cost of gas, it makes it more difficult to keep carriers."

Charles Beeching, director of circulation and distribution for The Atlanta Journal-Constitution, says employees deliver his paper but they are compensated with a mileage rate, which the paper is looking to raise.

Conversely, Joedie Spence, distribution manager for The News & Observer in Raleigh, N.C., says his delivery contractors currently do not receive a subsidy -- although the paper is looking to boost its mileage rate for employees driving to work-related functions. Turnover among contractors is getting higher, he adds, due to the rising price of gas.

And for the News & Observer itself, the gas budget has skyrocketed. Spence says the newspaper buys its fuel under contract, and costs are up 40% this year.

"It's a concern," he says. "We have to look at what we're going to have to do to curb the turnover but not give away the store. It's easier to deal with on an employee basis because as the price goes down, you can drop the rate -- whereas with an independent contractor, it's difficult to do that."

At The Courier-Journal in Louisville, Ky., Linda Pursell, vice president of market development, notes that the paper's single-copy delivery is handled by independent contractors who must pay for their own gas, without compensation. "We're just looking at it right now, but no decisions have been made," she says. "We're tracking gasoline prices, and we recognize the impact on contractors."

Last month, a local television station in Kentucky carried a story about contractors from the paper complaining about the price spike. In that piece, reporter James Zambroski said drivers are compensated with 7 cents per newspaper delivered, with a little more on Sundays.

Pursell responds by saying that drivers have always known that paying for gas was their own responsibility, and that there haven't been any major problems.

Across the country, circulation director Mark Henschen at the North County Times in Escondido, Calif., reports that the recent rise in price hasn't affected his paper drastically because his paper has been facing and dealing with volatile gas prices for years.

"We have an index for gas prices set on a survey of about 100 gas stations in our market," Henschen explains. "And the index monitors the average cost of gas, so we know precisely what the cost is every week. We've been doing that for years now." The newspaper even publishes the index on a weekly basis, and is considering running it daily.

Henschen adds that when gas prices rise or fall, the independent contractors -- who deliver the paper to both stores and homes -- sign a new contract that adjusts their subsidies accordingly, and that turnover has not been a problem. He notes that this strategy has worked very well, both for the contractors and consumers who can read the paper each week to learn where to get the cheapest gas.