Saturday, August 23, 2008

Open Your Wallet

In the last couple of weeks, newspapers around the country have bumped up their prices to combat rising production costs, including newsprint. It's debatable whether that's a good idea, but here are some examples.

  • Last week, the newstand price for the daily New York Times rose to $1.50 from $1.25. Home delivery charges are going up 4.5 percent. It's the second year in a row that the NYT has pushed up prices.
  • The Wall Street Journal hiked its price to $2 in late July, following an increase to $1.50 per issue last year. Since 2007, the WSJ newstand cost has gone up 100 percent.
  • The Chicago Tribune recently boosted the price of its Sunday edition to $1.99, up 20 cents. You have to love the old 99-cent trick that avoids round-numbers and gives buyers a penny back.
  • Earlier this year, the Washington Post went up to 50 cents per issue for the daily edition.
  • The San Francisco Chronicle quietly raised its price to 75 cents from 50 cents.
  • The Cleveland Plain Dealer is reportedly mulling a price increase.

Raising the price of a produt for which demand is declining is not a good idea -- unless you want to accelerate the decline. If the price goes up and circulation goes down, what are newspapers going to tell their advertisers? More important, what are they going to charge their advertisers? Rest assured, advertisers will ask for an adjustment to compensate for fewer eyeballs scanning the paper.

Earlier on, in the newspaper paleolithic era, newspapers were thought to be immune to price increases. The catchword phrase was "price insenstive." The thinking was, readers with a habit would be unwilling to go without a morning fix, a quaint idea that reflects the days when newspapers had the "news" mostly to themselves.

Newspapers that continue to think this way do so at their own peril, because they have more competition today than they can count. And new forms of competition are evolving every day. Just an example: If you wanted to know who Barack Obama's running mate was, you didn't have to wait for the newspaper (or TV or radio) to "inform" you. Inquiring minds signed up on Obama's Web page to receive a text message directly to their phones. Who foresaw that text messaging would compete with media for headline-grabbing news?

Don't think that raising the newstand or home delivery price of a paper is the only way to squeeze more revenue from readers. Each time a newspaper cuts its page count, as the Orlando Sentinel and other Tribune papers did, that's a price increase. Each time a newspaper reduces coverage or content, as the Orlando Sentinel and other Tribune papers did, that's a price increase. Each time something like this happens, the reader is getting less for the same price. That's a price increase.

Perhaps national newspapers such as the NYT, WSJ and Washington Post can withstand a price hike. They are a cut above the rest, although they, too, are not immune to circulation declines. (As a buffer, the Washington Post owns Kaplan and other education business, which generates more revenue for the Post than the Post itself.)

Local papers that promise more local coverage while slashing away at page count and content, may experience a stronger backlash as readers begin to see through the empty promises and realize that the "new and improved" paper is actually less so and more expensive, to boot.

No comments: