The Thinking Behind the Post's Price Hike

Rupert Murdoch must be as confident of winning Newsday as he claims to be. Why else would he be ceding the New York tabloid circulation war when victory is so tantalizingly close?

In yesterday's News Corp. (NWS) earnings call (see transcript), Murdoch made a surprise announcement that the New York Post will increase its cover price from 25 cents to 50 cents. Of course, this is not unprecedented, but the precedent is exactly what makes it surprising: A year ago, the Post raised its price, but reversed course 10 days later, apparently after suffering major sales declines. (Of course, the Daily News did its part to maximize the pain by halving its own 50-cent price for the duration of the Post's hike. I'm told the News has no plans to do it again this time, though.)

But last time the Post increased its price, it had just topped the News in the semi-annual reporting of weekday circulation. This time around, the News edged the Post by a scant 649 copies -- hardly an insurmountably lead, but one that will surely widen when the Post no longer costs a quarter.

Murdoch says the move is about reining in the Post's losses, estimated at around $50 million annually, but it's widely thought that putting the paper into a joint venture with Newsday would wipe out its red ink overnight by virtue of reduced back-end costs and joint ad sales.

So why now? My guess: because Murdoch has his sights set on a higher target. He thinks a Post-Newsday tag team might eliminate the News from the picture altogether. And it just might.

Comments

[Henry Scott]

Still, it's an odd move. Why wouldn't Murdoch wait until the Newsday deal (with him) is done? A big part of the Post's appeal is that it essentially is free (given that many New Yorkers wouldn't stop their busy stride to pick up a dropped quarter). And in fact, in the afternoon in Midtown, it is literally free, with distributors handing it out like day-old bread.

One thing Murdoch doesn't have to worry about is losing readers to the Daily News, even if the DN were to cut its price to a quarter. The two papers have such radically different content and very different audiences. The Post is the guilty pleasure of the typical Times reader. And the DN? Well, I don't know anyone who reads it (and yes, I know that makes me sound like a member of the media elite).