CTA

Datawatch: Price vs volume and why newspapers should put their prices up faster

View comments

Financial Times, Jasper Jackson, Newspaper circulation, Revenue, Sun, The Daily Mirror, TheMediaBriefing Experts' Blog, Evening Standard, Newspapers


When it comes to media economics – which is more powerful? Price, or volume? Should you sell more stuff or raise prices?

Both the Guardian and the Daily Mirror put their cover prices up in January and we’ll no doubt see more such rises this year. This has been happening for decades: the average Monday-Friday national newspaper price has more than doubled from £0.45 to almost £0.94 since 2001.

What’s the motivation? Falling circulations, of course. In December 2012 total circulation across the market was down 36 percent compared to 2001. And once one titles increases price, it emboldens its rivals to do the same – a far cry from the price wars of the 1990s. Newspapers are simply responding to a shrinking readership by asking those readers who remain loyal to pay more.

But is it working?

As analysts such as Simon-Kucher & Partners have argued, pricing is a newspaper’s most powerful economic lever. Newspapers are raising prices to protect circulation revenue, when in fact they should be using price hikes to grow it.

Our analysis of pricing and circulation data for ten national newspapers shows there is some truth in this. We’ve estimated circulation revenue by multiplying the full cover price by circulation from December each year. What we saw was that the two papers which have made the most aggressive prices rises – the Financial Times and The Sun – have gained the most benefit.

The Financial Times’s circulation revenue in December 2012 was 43 percent more than in 2001, despite its circ declines – equivalent to around £215,000 extra each day. For the Sun, circulation revenue was up 38 percent over the period – an extra £250,000 daily.

As you can see from these tables, in terms of increasing circulation revenue, the two titles significantly outperformed their counterparts over the period.

The FT didn’t increase its £1 price tag between 2001 and 2004, but from 2005 it began ramping up its price regularly, often asking its readers to fork out more twice in the space of a year. As the graph shows, that has had a huge impact on circulation revenue over the period.

Though the Sun also showed major improvement over the period – circulation revenue showed a sharp upturn in 2012 when it raised its cover price by 25 percent to 40p, ending a period of aggressive, regionally focused price-cutting campaigns.

So here’s the key point: when newspapers increase price, they have increased revenue and price rises haven’t significantly accelerated declines in the number of people buying the newspaper. Newspaper managers will of course say the opposite is true – on a day-to-day basis competition is fierce an 10p matters. But in the long term? Not so much.

During the four years when the FT cover price stayed at £1, circulation fell steadily at a rate of about four to five percent a year. Yet in the first two years after it began ramping up its cover price, circulation was either flat or rose. Similarly, circulation at The Sun went up by more than four percent between December 2001 and December 2002, despite a 10p price hike to £0.30.

Again, that’s not to say print newspaper buyers aren’t sensitive to price – just that price rises have a far more significant impact on revenue than they do on circulation.

As you can see from the below graphs – all newspapers are seeing a similar rate of decline in circulation – but the amount of money they make from that circulation has been far more volatile – and that’s down to one thing – price.

There’s not a great deal newspapers can do about declining print circulation (bar perhaps following the Evening Standard’s example and going free). However, they can still influence how much money they make from their remaining print readers simply by charging more. Upmarket, pricier print products look to be a good bet for the future

Notes: Newspaper cover prices vary region to region – and occasional price wars have produced variation throughout the year – especially among the tabloids. Our analysis is based on end of year prices and December circulations to provide a picture of the trends. We have also assumed that all copies included in circulation figures were sold at full price and have not taken into account bulk copies or subscription discounts.


comments powered by Disqus

Agile web development by Byte9