Monday, April 13, 2009

The micro of magazines

Basic microeconomics 101, when you’re competing on price, you are now in a commodity market. That’s great if you sell copper, it is not so great if you sell content.

If a magazine is trying to attract subscribers (and therefore advertisers) by slashing prices, it is a commodity magazine. Basically you’re telling the world that your content can be replaced by any other content out there, but so you’re willing to offer it cheaper.

This race to the bottom may explain part of the media’s ills. Positioning your product as a commodity is a terrible message to send to advertisers.

But it seems that people think they can rely on commodity pricing but still position themselves as a differentiated produce.

Interestingly, whether consumers pay $5 or $50 for a subscription does not affect their perception of the magazine, according to a study conducted four years ago by the media consultant Rebecca McPheters for publishers including Time Inc., Condé Nast, Hearst and Meredith.

“There was no difference between the engagement of those who paid less and those who paid more,” Ms. McPheters said in an interview.

I guess the debate will come down to how you define the word “engagement”. Maybe lining your birdcage with BusinessWeek is considered “engagement”.

Given those findings, the price a consumer pays should not matter to advertisers, since it does not affect the reader’s attitude toward the magazine, said Robert A. Sauerberg Jr., the group president for consumer marketing at Condé Nast. Mr. Sauerberg said that prices were constantly tested, and “the fact is, the pricing comes as a result of what the consumer is willing to pay.”

Or, in other words, how much they value your content. If you’re attracting subscribers only on price, there is clearly a problem with how readers value your content.
This lesson on the perils of a commodity existence isn’t lost on all publications however. One would hope that one called “The Economist” would get it right.

Even though The Economist is relatively expensive, its circulation has increased sharply in the last four years. Subscriptions are up 60 percent since 2004, and newsstand sales have risen 50 percent, according to the audit bureau.

Although, apparently you don’t really need to be that smart to figure this all out:

The subscription price for People has risen about 5 percent, to $104 a year, in the last four years. The cover price has risen 21 percent, to an average of $4.09 (including special issues, which cost more). In that time, People’s subscription and newsstand sales have both increased slightly.

In Switch, Magazines Think About Raising Prices -

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