Risky Circulation Price Increases Becoming Increasingly Popular
Important Details: It may seem counter-intuitive: cut the size of the print newspaper and the amount of news within it — and raise the prices. However, this seems to be a rapidly growing trend at US daily newspapers.
- The Wall Street Journal announced that, effective this week, it is increasing in its single-copy price from $1.50 to $2, a whopping 33% increase. That comes on top of 2007’s increase from $1 to $1.50, so the paper has doubled in price in about a year having previously been set at $1 since April 2001. One of its rivals, the Financial Times, increased its newstand price from £1 to £1.30 a year ago.
- The New York Times Co. , which began by ramping up home-delivery prices last year, is increasing its daily newsstand price to $1.50 from $1.25 on August 18, and boosted the daily price of the Boston Globe by 50%, to 75 cents, from 50 cents, in February.
- Other big dailies have also joined the parade, including the Washington Post (now 50 cents on the newsstand, up from 35 cents), and the Chicago Tribune ($1.99 for Sunday, up 20 cents at the newsstand, with unspecified home delivery prices coming).
- Many smaller dailies are moving in the same direction. The Toledo, Ohio Blade recently announced it is going up to 50 cents from 25 cents daily and to $2 from $1.75 for the Sunday edition, both newsstand prices. Gannett said its Burlington, Vt. daily is moving from 50 to 75 cents daily, with as many as 20 Gannett dailies to follow with similar increases. Many other companies are publicly or privately talking about increases.
Implications: US dailies have long been low- or -under priced, depending upon your perspective. Many European dailies cost more, which is one of the reasons that US dailies have been dependent for roughly 80% of their revenue on advertising, while their European counterparts count 25-40% of their revenues from circulation and Japanese dailies more than half. That’s meant that the the combination of Internet-redirected advertising and cyclical economic downturn have hurt US dailies to a greater degree.
Outsell believes that the price increases will have several impacts:
- Nationally oriented papers, like the Times and the Journal, are apt to weather price increases well. Early indications of the Times’ success is that its 2Q circulation revenues were up 2.5%. These are still robust products whose price may be more inelastic.
- Regional and local dailies may weather them less well, becoming smaller papers. Already, companies across the board are seeing circulation revenue declines, from Gannett (at -2.1%) to McClatchy (at -5.2%). The problem is that they’ve cut back newsprint usage as much as 15% in a year, delivering less news, fewer ads and given readers more reason just to turn their (or others’) websites to get the news. Of course, all dailies want to cut costs, and with newsprint running 30% higher in pricing year-over-year, it’s tempting to charge more for the product. Analysts will be watching to see whether companies already absorbing 2-3% annual circulation decreases fall into a spiral of fewer readers, fewer reporters, fewer ads and faster falling revenues. Hastening the online transition — with its lower costs — sounds good. However, US local newspaper companies derive less than 10% of their revenues from online; turning up the spigot of print-related revenue loss makes transition all the harder. We can better make an argument that products of constant — not declining — value are better suited when pricing up.
- Hefty price increases reinforce the notion that print is becoming niche while the web-delivered news is becoming mass. It makes sense that print would become niche, with its older demographics able to be charged a comfort premium. For media companies, it’s not whether, but how, and these experiments in pricing will soon provide data on successful — and unsuccessful — methodologies.