Yesterday's report that the Chronicle's 25-percent circulation drop was the biggest of any top-25 daily newspaper over the past year has spurred today's article in the Chronicle touting the fact that its "strategy shift" is starting to "pay off."

It's the business model at work, writes David R. Baker, and the circulation drop is part of the plan. Said publisher Frank Vega, the circulation drop was the "expected result of moving away from a business model that depends mainly on advertising and instead relies on readers for a greater share of revenue."

What this means is that the Chronicle is now relying more on reader-based income, which is steadily climbing -- at least on a per-capita basis. The weekly subscription rate has climbed from $4.75 to $7.75 over the last 18 months, and the paper has scaled back on cut-rate subscription offers geared mainly toward boosting circulation in the name of ad revenue.

Is it working? Vega said the Chronicle actually turns a profit, at least occasionally, after bleeding money for years. (The story fails to mention the part of the strategy shift that involves a thinned staff after multiple rounds of layoffs over recent years.)

It’s not a bad strategy, writes Peter Kafka in Media Memo -- print fewer copies, and charge more for the ones you sell. The New York Times, for example, saw a 7-percent drop in daily circulation, but almost a 7-percent increase in circulation, due to price increases. (The single-copy price has jumped from $1.50 to $2.00, and the Sunday paper now costs $6.)

Still, readership for SFGate is up; the Chronicle's combined print and online editions reach about 1.9 million people in the Bay Area in any given week.