The steeper the subscription discount, the lower the sales at the newsstand. It’s pretty simple logic. But there’s a lot more to it than that.
When publishers offer steep discounts off their subscription prices, sales at the newsstand go down. So says a new report from MagNet. This report is not eye-opening news; it’s basic industry economics, as explained by Greg Dool in Folio:.
“Not surprisingly, the study found a direct correlation between deep subscription discounts and lagging newsstand sales, as the less money consumers will save with a subscription, the more apt they are to purchase a frequency title one issue at a time,” Dool notes. “What is surprising, perhaps, is the extent to which this idea has manifested itself in the marketplace.”
“Titles that offer per-issue subscription discounts of less than 50 percent off the cover price saw, on average, newsstand declines of between 3 and 5 percent over the two-year period. Titles offering subscription discounts of 50 to 70 percent, however, experienced declines around 11 percent. Titles taking the aggressive stance of offering subscription discounts greater than 70 percent saw newsstand sales slip over 16 percent, on average,” Dool continues.
What is even more surprising to us is MagNet’s plea to publishers to “reconsider” their deep discounting, as noted by D. B. Hebbard in Talking New Media.
“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,” said the report, which Hebbard quotes in his piece.
Hebbard predicts that this plea will fall on deaf ears.
“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,” Hebbard explains.
Taking into account MagNet’s numbers that show only about 10% of print circulation is newsstand based, clearly publishers have decided that their subscription numbers are more important – for many reasons – than their newsstand sales. It’s an interesting dilemma. Should publishers cut deep discounting to sell more in a distribution channel that is becoming ever less important, at the risk of losing ad revenue? Seems like a tough sell.