Newspaper cover pricing: Low cost or profit margins?
Intense competition has kept newspaper cover prices extremely low in India, with none of the players ready to make the first move towards a more sustainable pricing strategy. Industry experts feel all publications need to collaborate to arrive at a threshold level of cover price.
Newspaper pricing strategy in India came up for some intense debate at the INMA conference held at Bangalore on November 7-8, 2011. There were two sharp views on this – one that believed that the price of a newspaper should be really low so as to allow more penetration, while another view was that a certain amount should come in as subscription.
Dr Bhaskar Das, President, Times Group, remarked, “Cover price strategy, when it was initially conceived, many publishing houses had opted for penetration pricing because it was relevant at that time. Subsequently, inputs costs have gone up significantly. Cover price today covers a maximum of 10 per cent of the topline of most of the companies. Regional publications are slightly better off at 15 per cent, but fundamentally, cover price doesn’t cover the cost of a newspaper. While this has allowed penetration, it has created a mindset among readers that content is, more or less, free.”
With input costs going up and the economic slowdown, there is also pressure on advertising. The business model of most newspapers and publishing houses is skewed towards advertising. In a volatile market situation, discretionary costs are cut and advertising expenses fall under this category. Overdependence on this kind of business model is creating pressure. Therefore, the time has come to re-evaluate the cover price strategy.
Shahrukh Hasan, Group Managing Director of Pakistan’s Jang Group, pointed out that in Pakistan, newspaper prices fell in the band of Rs 18-25. Compared to that, India had one of the lowest subscription rates.
Das noted, “In the neighbouring countries in South Asia, the cover price is more than what it is in India; the cover prices in India make newspapers as good as free. So, there is a need for recalibration of the same. I personally feel that all publications must collaborate to arrive at a threshold level of cover price. As a beginning, it can be a minimum of Rs 5. This collaboration is important today because everyone is thinking their competitors won’t charge and they will lose out. Especially challenger brands, in existing markets, would like penetration pricing to dislodge the No. 1. When this happens, the market leader also cannot increase the cover price. So, the industry has to collaborate on this, because newspapers add value in terms of analysis and the width of coverage. Newsprint costs are very volatile, so if input costs go up and volatility in the advertising environment remains, managing the bottomline will be extremely challenging.”
Language publications are better off than English papers with cover prices going up to Rs 3.5-4. The understanding is that since they are dominant players in the market, hence they can afford this move. English papers are increasingly becoming 2-3 newspaper cities now. So, there is intensity of competition in terms of penetration cover price. According to I Venkat, Director, Eenadu, “Newspaper pricing has not evolved; if it had, then there would have seen better pricing, a healthy pricing. In existing markets, there have been various cases where a paper has entered a new market and the other papers, if they haven’t reduced prices, have lost out. One instance is what happened 10 years ago in Bangalore itself. But, there have been exceptions to this such as when The Times of India launched in Coimbatore and Madurai, The Hindu didn’t drop their prices. We also didn’t reduce our prices when our competitor Sakshi was launched.”
The speakers stressed that it was important to strike a balance between the best cover price and yield in terms of advertising. With the cover price being much lower than the cost of production, newspapers have to make up for the incremental loss from advertising. Therefore, it is imperative to maximise revenues so that the reach is higher, and good content is offered at affordable rates.
Many media houses believe that even a marginal increase in cover prices leads to a fall in readership figures. However, there is also a strong belief that readers will accept a hike in cover prices if they realise the intrinsic value of the product. Suresh Srinivasan, Vice President-Advertising, The Hindu, elaborated, “When TOI was launched in Coimbatore, Trichy, and Madurai a few months ago, they were offering a lower annual subscription rate along with other offerings. We increased our cover price during this period by 15 per cent and saw no difference in our readership numbers. This just goes to prove that people are willing to pay more if they get good content.”
Earl J Wilkinson, Executive Director and CEO, INMA, shared his views about the general scenario regarding newspaper pricing in the international market and said, “The low cover price model is unique to South Asia. With the exception of free commuter newspapers in certain urban markets worldwide, newspapers derive 15-70 per cent of their revenues from circulation. The general trend is toward maximising revenue from consumers.”
As for an ideal pricing strategy, the general consensus was that there was no ideal strategy as such. Earl was of the view, “If you can derive sufficient advertising from the market, it allows you to keep the cover price low. That is the ideal situation, and Indian newspapers have excelled at this situation. Circulation pricing strategies are based on business model and competition. India remains very competitive, and advertising is robust. When that business model changes or evolves, circulation pricing will rise. There is no need to frequently re-look at subscription strategies. Again, subscription pricing is a function of an overall business model. If the business model changes or competitive circumstances change, then re-look at subscription strategies. A high cover price is not inherently correct.”
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