Newsstand Price Hikes In A Competitive Market Can Be Bad For A Newspaper’s Health

Philip M. Stone March 10, 2009

There probably is no more competitive newspaper market than the UK that has 11 national newspapers competing for daily eyeballs and another 11 on Sunday, plus all the metropolitans (regionals) – big and small – across the nation. In these days of economic crisis some publishers have tried raising newsstand prices but the readership has sent a strong message – do so at your own peril!

Several newspapers raised their newsstand price in January and have suffered. Yes, nearly all newspapers saw declining numbers but it was mostly those that raised prices that saw their numbers down more than the others. The message seems clear – in a competitive market with readers worried over every expenditure, there seems little brand loyalty if the price rises.

And  apart from recent price increases, Rupert Murdoch’s Sunday Times has yet to recover from its last price increase in September, 2006, making it the UK’s first £2 pound (€2.30, $2.80) newspaper. The market-leading quality Sunday newspaper, then with circulation above 1.4 million, had imposed a 20 pence increase in February 2006 from £1.60 to £1.80 with nary a reader stir, but when it went from £1.80 to £2 in September of that year readers left in droves with circulation three months later dropping to barely above 1.2 million. And in the February 2009 audit results The Sunday Times still languishes with circulation just over 1.2 million, even with some major redesign and some serious promotional money spent at the end of last year.

And remember this was not the publisher getting rid of uneconomic readers in far outlying regions – this was readers dumping the newspaper everywhere.  Year-on-year the newspaper has recorded a 0.66% sales increase, and February was up 1.27% over February a year ago (memo to US publishers:  “promotion really does work!), but it is still down some 200,000 circulation from before that newsstand increase to £2.

Even Murdoch admits that The Sunday Times profitability is being hit hard in today’s economy.  The newspaper used to boast a thick section of large job display ads – the real license to print money – but that has now almost disappeared. That hurts News International’s overall UK operations because profits from the Sunday Times  more than covered the losses at the daily Times. As Murdoch said on a call to analysts and journalists following News Corp last quarterly results, “We have in the Sunday Times a totally dominant newspaper in the quality market, with the circulation a lot greater than the combined circulation of its competitors, yet, what could be broadly called classified, whether it be jobs or travel or whatever, we have lost out on. I would say we are getting all the business at full rates that is available, but the profit of the Sunday Times is down quite seriously.”

And in such a market newsstand revenue becomes ever more important. But British readers seem to have little sympathy with the revenue plight of publishers. Raise the price and they show little loyalty.

In the tabloids market the Sunday Mirror raised its price to £1 in January.  Results were that February’s circulation was down by more than 2,000 copies – a 1.44% decrease from January – and its February year-on-year numbers are down more than 9%.  Murdoch’s Sunday News of the World, with the UK’s largest circulation at just over 3 million, also raised its newsstand price in January to £1 and its February sales dropped by a little over 11,000.

On the daily front, the quality Independent newspaper increased its price to £1 last September -- only the Financial Times costs more during the week -- and it didn’t take editor Roger Alton long to say that increase was a mistake. How much of a mistake? In February alone it lost 4.5% of its circulation – down some 9,540 copies from January.  A year ago, well before the price increase, it sold 252,435 daily copies; today it is down to 205,964.

On the daily tabloid front, The Daily Mirror in January increased its newsstand price to 50 pence from 45 pence and its February numbers were down 40,263 from January – that’s a 3% drop to 1.37 million.

Having just made the case that price increases don’t help in a highly competitive market in a rotten economy,  then one can’t help but be stunned by the figures for The Sun, the leading tabloid that sells at just 30 pence a copy and has more than double The Mirror’s circulation. In February The Sun for the third time in the past year again fell through its psychologically important 3 million barrier with the February audit putting it at 2,954,298 copies daily, a massive downturn of 191,708 copies daily from January -- a 6.1% fall. But then one must remember that for around four months at the end of last year The Sun cut its newsstand price in southeast England (including London) by 15 pence down to 20 pence; now it is at 30 pence, so it could well be that readers, no longer getting a fantastic deal but now just a good deal, have left in droves which does, after all, say something about a newspaper’s newsstand price and brand loyalty.

Rebekkah Wade, The Sun’s editor, puts the fall down more to a decreasing number of vendors and competition from free newspapers. Some British analysts have said they think it is just a matter of time before The Sun and The Mirror themselves become free newspapers, but Wade, in testimony to a Parliamentary committee in January said, “We would never give away The Sun for free.”

Perhaps the most interesting pricing experiment going on now is with The Times for its Saturday edition. It did cost £1.50 but after a redesign that gained a good press it reduced the price down to £1 last month while at the same time embarking on a major promotional campaign budgeted at more than £2 million. Apart from its price, which puts it well below its Saturday competitors, it’s an interesting move by News International because Saturday newspapers are becoming ever more popular in the UK, ever thicker, too, and are offering some tough competition to the Sunday titles. And let’s not forget, after all, that it has been The Sunday Times that for years has been paying off The Times losses and any increased Saturday numbers could well be at the expense of reduced Sunday figures.

No sacred cows there, apparently.