A Note to Rupert Murdoch and the Newspaper Barons on Pricing

Newspapers must have idiots running their business departments. Newspapers price their product in ways that no other retailer would even consider. The current system penalizes long-term subscribers and rewards new ones. For example, the News Corp.-owned (NWS) WSJ offers a $119 annual rate to new subscribers and then tries to charge existing customers a $398 renewal rate. That's like Macy's (M) charging its best customers more money for a dress while offering a new, unproven customer a discount. Either give everyone the same price, or offer a discount to the proven subscribers.

If I ran the show, I'd charge a higher initial subscription, say, $200 to $400 a year. Then, each year, the rate would become progressively lower until reaching a minimum of say, $50 a year. However, to get the discounted rate, subscribers would have to agree to disclose some basic personal information useful to advertisers, like gender, age, education, and marital status (not political affiliation or financial information) and to return one advertising survey a year (either online or regular mail). My system would benefit everyone: advertisers, who usually look to target a particular audience, would have better information; newspapers, which are begging for ad dollars, would be able to effectively market to specific advertisers; and subscribers would pay less money for the same product.

Also, newspapers wouldn't have to hire those annoying marketers who call at 9:01AM trying to forcefeed their product to someone who's already received six renewal offers by mail and two by email. Entire telemarketing teams would disappear, as well as the waste that occurs from multiple renewal offers. Newspapers would only have to send one renewal notice with the following message: either subscribe and pay within three weeks, or lose the discounted rate.

Isn't it shocking no one has tried this yet? What am I missing?

Comments

[hankscott:]

Interesting idea. But unfortunately the analogy to Macy's isn't apt. Newspapers have to get someone to try the product before committing to it. Macy's isn't likely to let you wear that shirt for a couple of weeks to decide if you like it. That's why there's an initial low price for a newspaper or magazine subscription. Decades of research has validated this approach.

What newspapers have done is offer various bonuses to subscribers who pay in full for the year or remain subscribers for a lengthy time. Some, for example, have plans that offer discounts at local restaurants and other establishments. Some offer invitations to newspaper events.

Jun 22 08:46 AM

[jay fredric...:]

Anyone that renews at a high rate is an idiot. Just tell the company you like the product and will stay on their subscriber list if they keep the rate the same. Work your way up the chain until you find someone who understands the value of a long term customer.

Jun 22 09:42 AM

[User241885/...:]

The writer fails to grasp the fundamental economics of the print media. It is the advertisers, and not the subscribers or newstand buyers, who pay the bills. To get the advertisers' attention, and money, you need to show proven circulation.

The only question is how much can you charge advertisers, which referred to as the cost per thousand or CPM. The greater the proven circulation, the greater the CPM. Under that model, the new reader is understandably worth more than the current one.

Since it is easy enough to fudge readership by giving away a newspaper or magazine, a subscription is proof positive that someone really did pay, hence "proven circulation". It's not a stretch to see that you will get more new subscribers with a cut rate than the full rate, but the advertiser doesn't really care how much the subscriber paid, just how many subscribers there are.

This entire spectrum of the publishing media is built upon this model. That's why a superbowl ad costs more than any other tv ad, why a banner on google costs more than any other banner on the internet. The only people who don't seem to understand this in publishing is the record industry. They will soon learn that it is the advertisers and not the buyers who pay the bills. Free down loads, funded by ads and banners, are coming quickly and they would be smart to adapt rather than keep heading in their money losing trajectory.

Jun 22 11:46 AM

[Larrysyr:]

Consumers have a LOT more power than this article indicates. The key is the willingness to cancel. No subscription service wants to lose customers, but they do want to maximize their revenues. If you're willing to pay the stated price, the providers are willing to take it. If you ask for a lower price, you'll often get one. If you cancel, after all, you go back into the "new subscriber" category, once again eligible for the initial teaser rates.

Jun 22 12:44 PM

[a fat panda:]

Here is what you are missing : you are always a new customer in the newspaper business. I have been on the introductory rate for Barrons for years. My current subscription runs out in 2011. I have come to believe that the subscription is $52 a year, and $278 is simply a marketing tool to remind me to renew.

I am surprised that you didn't direct your commentary to the auto insurance business where they reward you with loyalty with a 20% increase in price.

Jul 01 11:58 PM