The New York Times, whose subscriptions are far from cheap, reports that magazine publishers are starting to realize that they have been selling subscriptions at pennies on the dollar. The Economist, among the priciest consumer magazines, is cited as a title that raised prices and raised circulation levels over the last few years.
The Economist has grown because it focused on building a relatively small rate base (currently about 500,000 in the United States) and it doesn’t employ circulation techniques that devalue its content. Its promotional packages are rich, expensive and directly tied to the magazine’s editorial content. Subscription prices start high, and the magazine avoids gimmicks that might attract an audience that really won’t stick with the publication.
Unfortunately, the publishers and consultants quoted in the story seem to be learning the wrong lesson from the success of The Economist, which has always sought to charge subscribers enough to cover the actual cost of producing and delivering a subscription. In practice, that led to prices that were twice the average of other weekly publications.
Rather than accept that the circulation levels of many magazines have grown too large and overly dependent on advertising revenues, the publishers are hoping to have their cake and eat it too. With average rate-card discounts approaching 70% and ad pages down double digits this year, publishers continue to operate with a mass-audience perspective.
When we looked at circulation pricing for weekly magazines, we found that subscription list prices – the basic rate – came in at an average 63% off the newsstand price. The actual yield, how much people paid for a subscription, was 30% less than that. And people wonder why it’s so hard to sell magazines on the newsstand these days.
The article also picks up the McPheters study of public place copies, noting that a consumer who pays $5 for a subscription “perceives” the magazine much the same as someone who pays much more. Constructed as a defense of so-called “public place” copies, the study tried to convince advertisers that giving copies away to maintain circulation levels was good business. Not surprisingly, advertisers used the disclosure of low-revenue, public-place copies as an opportunity to negotiate deeper discounts in ad rates.
Rather than trying to maximize ad revenue, magazines should be working diligently to reduce their dependence on it. As I wrote in a recent post about magazine births and deaths, circulation revenue per issue is a much better indicator of industry health. In the future, we’re going to have to serve a wider variety of smaller audiences. Now is the time to start preparing. Continuing to chase ad revenues through greater scale will work rarely, if at all.