Reports sees the same trend for magazines as eBooks: ending discounts cuts newsstand sales
MagNet report finds ‘strong correlation’ between the subscription discount percentage and the newsstand unit sales, asks publishers to ‘reconsider their aggressive rate bases’
It is an incredibly easy concept to understand: discount something and sales may increase. The trick is to balance the need to drive sales, with the need to drive profits (or margins, if you will).
Amazon was saying this back when they were fighting the major book publisher over the price of their eBooks. Amazon wanted a $9.99 price point, but this meant that the price would be substantially below the cover price of many hardbound books.
“Many eBooks are being released at $14.99 and even $19.99,” Amazon said in 2014. “That is unjustifiably high for an eBook. With an eBook, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market — eBooks cannot be resold as used books,” Amazon said. “EBooks can be and should be less expensive.”
“It’s also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less,” Amazon said in explaining their reasons for pushing for lower eBook pricing. But it didn’t matter, publishers not only want to control their pricing – understandable from the perspective of a publisher – but wanted a higher price point, something Amazon said would hurt publishrs in the end.
Were they right? The AAP sales reports seem to say so. They have reported lower eBook sales many quarters in a row. And as the AAP represents the larger book publishers, their reports leave out eBooks from Amazon and other sources, that have not followed along with higher prices. And so there is much debate about whether eBook sales really are falling, or only falling for the major publishers.
Now MagNet has found the same applies in the magazine world, as prices go up, sales fall.
“A strong correlation was found between the subscription discount percentage and the newsstand unit sales trends,” the company said. “For those titles that maintained a lower subscription price discount, the overall newsstand sales trends were much more positive, suggesting that consumers will purchase from the newsstand more often if the subscription price is more in line with retail pricing. These correlations are detailed in the chart below. As an example, titles that discounted their subscription prices less than 10% off of the newsstand price had sales declines of a little over 4%, while titles that discounted their subscription prices by over 70%, declined by over 16% at newsstand.”
“While there are more detailed analyses that could be conducted, our findings clearly indicate a correlation between discounted subscription pricing and newsstand sales trends. Moreover, half of the top 100 titles, which include many weekly frequency titles and major monthly titles, that represent a majority of newsstand sales have increased their subscription offers to over 70% off the retail price. This has significantly incented newsstand buyers to no longer purchase copies at retail,” MagNet said.
MagNet points out something that few publishers like to admit publicly, and the trade press constantly ignores: subscriptions are often heavily discounted.
“Print circulation in the US is about 90% subscription and only about 10% newsstand, caused mainly by highly discounted subscription offerings because of publishers’ strategy of overly aggressive rate bases in an attempt to drive print advertising revenue,” MagNet said.
MagNet’s plea to publishers to “reconsider” their rate bases, though, may fall on deaf ears, as the business is more complicated than that.
“We ask publishers to take a step back and reconsider their aggressive rate bases, their deeply discounted subscription offerings and to again refocus on the newsstand, which we believe is, or could again be, their most profitable circulation revenue source,” MagNet said in its conclusion for the study.
Of course, rate bases are generally tied to advertising rates and so cutting them is not so easy a decision to make. Some have, indeed, decided to go in this direction, calculating that the cost savings will more than offset the loss of any ad revenue. But others have returned to discounting print subscriptions in order to sustain their circulation levels.
This may be when a few publishers return to the idea that digital editions could save production costs. But many publishers have long ago given up on digital editions, and so have returned to the seemingly endless cycle to selling discounted subscriptions, relying on verified circulation, then selling discounts again. The one alternative that many no longer have much faith in is that newsstand sales will recover any time soon.
One sign of that may have been the shuttering of Harris Publications, a magazine publisher heavily reliant on newsstand sales.
“It seems to me that Harris was always something of a “newsstand first” type publisher,” Joe Berger, the marketing and circulation consultant said on his blog last week. “While that may not be impossible to do even in today’s market, it is certainly a risky way to run your publications in the first year of “Off Invoice RDA” and POS sales reporting. In 21st century publishing you need a lot of revenue buckets to make things work. I could be wrong, but Harris titles never seemed big on subscriptions or advertising and I wonder how big their digital efforts really were.”