The full-year PIB counts for magazine ad pages have been released. In 2009, total ad volume dropped 25.6%, an unprecedented decline, but apparently not enough to convince some industry experts that the times, they are a-changing when it comes to circulation pricing.
Last week, Audience Development posed the question, “Are ultra-cheap magazine subscriptions good or bad for business?” to two people with somewhat different views. Samir Husni (sort of) said “bad”, citing examples of magazines that had invested in content and bonded with readers.
John Klingel (sort of) said “good”, claiming that subscription price elasticity is pretty much uniform for all magazines. In Klingel’s world, you raise price, you lose subscriptions, you’re worse off.
While this deterministic perspective makes me wonder why outsourcing circulation is worrisome to Klingel, he really failed to address the underpinning of Husni’s point. Even if most magazines have the same elasticity, they don’t all have the same prices.
On a per-issue basis, some magazines charge much more than others. One need look only at subscription pricing for People, the Economist or Harvard Business Review for examples.
Husni could have been clearer in acknowledging that effective pricing for most magazines follows a predictable pattern – most magazines set a basic price and discount a consistent amount. The basic price varies widely, something Husni hints at in his post but really doesn’t quantify.
In studies we have done, the median basic rate is typically 39% of the newsstand price, with a standard deviation of 15 percentage points. The median yield (what people actually pay) is about 25% of the newsstand price, with a standard deviation of about 12 percentage points.
So the pricing structure is consistent, but the price is not. When we looked at a sample set of weeklies and bi-weeklies, the highest-priced title had a yield (actual price) that was almost four times the yield for the least expensive title. That’s not a function of circulation economics; it’s a measure of perceived value.
What Husni hints at and Klingel misses: people pay for perceived value (something I think book publishers could learn before wondering why prices on DRM-restricted e-books are so low). Circulation economics may feel “fixed”, but only if you can’t or won’t change the product. It’s not John Klingel’s fault that the magazines he served were not able to shift the demand curve to a higher price, but it’s folly to argue that all content is created equal.