U.S. DAILY NEWSPAPER CIRC DOWN 1.9%; ONLY 29% ADDED NEW READERS Latest ABC report says Sunday circulation even worse: down 2.5%.

Monday's release of the Audit Bureau of Circulation's semi-annual report on newspaper distribution indicated that U.S. daily circulation dropped 1.9 percent and Sunday circulation dropped 2.5 percent, year-over-year, for the six months ending March 31, among the 814 daily papers listed in the report.

The general press and many in the industry wrung their hands over the fact that these numbers were almost twice as high as any previous declines in decades.

The Schaumburg, Ill.-based publishing industry watchdog known as the ABC doesn't analyze its own figures, but the Newspaper Association of America broke with its recent tradition of down-playing the FAS-FAX report over its own readership report and said the losses reflect "the impact of a number of recent changes in newspapers' individual marketing strategies, regulatory changes and ABC reporting methodology."

The Vienna, Va. NAA pointed out with hope that 29 percent of papers in the FAS-FAX report gained circulation, trying to spin the fact that 71 percent lost circulation.

John Murray, the NAA's vice president for circulation marketing told the New York Times, "The smallest newspapers did a little bit better than the average."

This is the first full FAS-FAX reporting period since last summer's one-two-three punch of Long Island, N.Y.'s Newsday and Hoy, Hollinger International Inc.'s Chicago operation (including the Sun-Times) and the Dallas Morning News all revealing that their circulation figures had been inflated by as much as 10 percent.

None of those papers were listed in this FAS-FAX because the ABC is carefully auditing their results.

And while most papers had losses, there were some interesting anomalies:

* The New York Times said that it had gained two-tenths of a percent, to about 1.1 million copies daily, reported on the strength of its national editions.

* USA Today held steady at about 2.8 million copies daily, even in the face of the fact that it raised its newsstand price by 25 cents -- to 75 cents -- during the reporting period.

* The Star Tribune in Minneapolis said its circulation was up three-tenths of a percent daily, to 378,316 copies. The paper attributed its growth to focusing "more intently on growing circulation through home-delivery."

Nonetheless, most publishers were shell-shocked. "This is an industry problem, as well as our problem," Roger Oglesby, publisher of the Seattle Post-Intelligencer told a reporter from his rival, the Seattle Times. "Those numbers don't make any of us happy."

The Times was down 1.7 percent, to 233,268 daily, while the Post-Intelligencer was down four percent, to 144,836. The papers' combined Sunday edition was off 1.9 percent, to 457,010.

"Compared to what is going on with newspapers in the rest of the nation, we're doing fairly well," Kerry Coughlin, the spokeswoman for the Times told her paper. The latest circulation results were, she was quoted as saying, "a little better than we anticipated."

Analysts tended to agree with John Sturm, the NAA's president and chief executive. "During this six-month period, changes in strategy among some publishers to focus on certain categories of higher-readership paid circulation rather than total net paid circulation had an impact on the industry totals."

Sturm also said that "a variety of new changes in reporting methodology" being used by publishers in their ABC reports was a factor, as well as the fact that the six months "also reflects the first full cycle of regulatory changes such as the new telemarketing rules."

While many were laying blame on the impact of the federal and state "Do Not Call" laws that cramped telemarketing efforts that had heretofore allowed publishers to "buy" circulation, to the impact of the Internet with its free news business model and to the impact of the general proliferation of media sources, few actually understood the real cause of a big piece of the decline. In a call with newspaper industry stock analysts last fall, Jack Fuller, then-president of Tribune Publishing -- the newspaper arm of Chicago's Tribune Co. -- said the company was being "very, very conservative" in counting circulation at its newspapers, as part of the fallout from the circulation scandal at its Newsday. That case -- supplemented by those in Chicago at the Sun-Times and in Dallas at the Morning News -- most certainly scared the entire industry enough to follow Tribune's lead, and this is the first FAS-FAX where everything was being counted in a "very, very conservative" manner. If I had to guess, I'd say that the normal one-ish percent circulation decline really happened last fall and winter and that another one-ish percent came from the new way of counting copies sold. I'm not saying there aren't circulation problems out there, I'm just saying that over the last five years the industry lost circulation that it forgot to count and all those lost copies came home to roost on March 31.