Publishers Debate: Low Subscription Prices Good, or Bad for Business?

By: Lucia Moses/Mediaweek At a time when getting consumers to pay more for content has become Job One at media companies, you might expect magazine publishers to be abandoning rock-bottom subscription prices. Not so. While some like The Economist and Discover quietly notch up circulation prices, blow-in cards offering 12 issues for $10 or less for other titles still abound.

One side effect of the paid-content craze has been to illuminate the longtime use of cheap subs to prop up the circulation guaranteed to advertisers. And with ad revenue dwindling, print buyers are increasingly using the tactic as a negotiation point.

?Low sub prices result in equally low possibilities for earning business,? said Scott Daly, executive VP/executive media director, Dentsu America. Publishers ?absolutely should do a better job of getting money from their subscribers.?

Kelly Foster, head of Mindshare?s print unit, said low sub offers like those from Meredith and Hearst are ?certainly something we?re thinking about more and more.?

A rep for Hearst Magazines maintained that its average subs are no cheaper than its competitors?, and that it gets more money from its customers overall versus its rivals when newsstand ? a relatively large percent of Hearst?s circ ? is taken into account.

But magazine prices are, in fact, getting cheaper. From 2003 to 2008, the average net paid sub price declined 8 percent, to $19.44 for an annual sub, according to Audit Bureau of Circulations data covering 400 titles. Some argue that if magazines can?t get consumers to pay more, they should consider cutting their rate bases. Newsweek and TV Guide have done so in recent years to improve circ profitability.

?In this advertising economy, magazines have to say, ?If we can?t charge a price to the reader that will help us sustain the quality of the magazine, then maybe the thing to do is reduce circulation?,? said Roberta Garfinkle, senior VP/director of print strategy at TargetCast.

?For this industry to survive, it?s going to have to be smaller, and frequencies are going to have to be less if we continue to drive circulation at low price points,? said David Leckey, a vice chair of the Audit Bureau and executive VP/consumer marketing, American Media Inc. ?You cannot make money selling a subscription for five bucks.?

Leckey has followed his own advice, cutting rate base at AMI titles Star, Men?s Fitness and Natural Health. Lowering rate base reduces the audience on which advertising is based, but can rid a pub of money-losing circulation, leaving a more loyal audience.

Yet some publishers are reluctant to do so because of the longstanding perception that cutting rate base is a sign of a faltering magazine. And, subscription prices only tell part of the story, publishing execs said.

Low entry-level prices can hook customers who will pay higher renewal prices over time. Once in the database, they can be sold other products such as DVDs, books and other magazines over the years, comprising a so-called lifetime value. ?We?re no longer a single point of contact world,? one publishing exec said. ?Capturing an email is worth a lot.?

Low sub prices could pay off in circ volume, some publishing execs argued. ?A $5 offer might bizarrely make sense,? said Tom Masterson, senior vp, consumer marketing and manufacturing, Hachette Filipacchi Media. He has reason to hope so ? he?s testing some lower sub prices at Woman?s Day and others.

Meredith?s prices for titles like Ladies? Home Journal, Midwest Living and Parents are among the lowest in the industry. Tom Harty, chief revenue officer there, contended the company?s circulation business is the most profitable it?s ever been. ?Our circulation business has never been better,? he said. Meredith is also benefiting from the fact that mass-reach titles, which it offers, are back in vogue with advertisers.

Perhaps the better question is whether magazines are moving product for advertisers. Robin Steinberg, senior vp, director of print investment and activation, MediaVest, said publishers need to go beyond discussions of price and circulation. ?Our conversations should be more about audience, engagement and consumers? action, or impact, not just circulation,? she said.

-- Nielsen Business Media