A costly day in the life

When papers reduce the cover price, it effects the retailers' margin
When papers reduce the cover price, it effects the retailers' margin

The CSNA is concerned that retailers are losing out on much-needed margin due to newspapers cutting cover prices

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19 October 2011

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In May of this year, Independent Newspapers announced its intention to reduce the recommended retail selling price of the Monday edition of the Irish Independent from €1.90 to €1, commencing on Monday 9 May.

This reduction was continued through May, and a further communication from INML stated that the reduction would be in place for the 6/13/20/27 June editions. The announcements were greeted with dismay in many news retailing outlets due to the substantial reduction in cash margin that was accompanying the INML–imposed reductions.  

INML reversed this plan in June and returned to €1.90 on 27 June.  Prior to the reduction, retailers received a 25.4% discount off the ex VAT RRSP for the Irish Independent.  The actual cash margin was 42.52 cent per copy.  With the product being flashed and promoted at €1 the retailer was now selling the Monday edition of the paper for 22.38 cent, a reduction in cash terms of 20.14 cent per copy sold.

Clearly, unless there were unheard-of increases in sales of the Monday Irish Independent, retailers would be significantly out-of-pocket for a promotion over which they had zero input, and very little marketing support.

Price promotions in the newspaper industry are not uncommon.  Invariably, when a publisher wishes to gain market share, or cause people to try (sample) their paper, they reduce the cover price for a period of time.  Almost every publisher in Ireland has used cover price reduction over the years; the only (but very significant) difference is that all other publishers have acknowledged their duties to the retail trade and increased the level of discount attributed to the wholesale price of the paper to compensate the retailer against possible losses.  Most recently The Irish Daily Mail, The Sunday Mirror, The Irish Mail on Sunday and The Sunday Times have all instructed their wholesaler (distributor) to increase the discount whenever they promoted the newspaper in the marketplace, and have therefore insulated the retailer and secured their goodwill.

The CSNA was interested to analyse the circulation figures, published by ABC this week that incorporated the May/June period in question.  Whilst UK newspapers publish their sales and circulation figures each month for the preceding month, Irish publishers supply figures for publication on a six-monthly cycle (Jan-Jun, July-December).  We are fortunate that the period for which we were interested was in the latter part of the cycle!

It is astonishing to note that the reduction by 90 cent of the Monday edition of the Irish Independent for a seven-week period did not cause significant additional sales to that title. In fact, the analysis of the figures shows that the May/June average figure of the Irish Independent was less than the average daily figure for either Jan/Feb 2011 or Mar/Aril 2011.  It was also lower than the corresponding sales figure for either 2009 or 2010.  There were 52 Irish Independent publishing days in the May/June period, of which seven were discounted in cover price by 47% (from €1.90 to €1).

Therefore, almost 13.5% of the entire sales period had a product that was very significantly reduced in price.  It would not be unreasonable to expect that there should have been an increase in sales for the product from a variety of sources; customers that did not ordinarily buy any paper, occasional “Indo” readers, value seekers, readers of other Irish papers and people prepared to buy an “Indo” in addition to their own daily paper.

The figures are most disappointing, from a retailers’ perspective.  The May/June sales of the Irish Independent were lower than the previous two sales periods, were lower than the previous comparative 2009 and 2010 figures and, when placed against the industry sales figures for the period, do not seem to have made any appreciable “gains” against other newspapers, in short, the seven week campaign was a disaster, costing retailers over 20 cent for each copy sold at €1, without any lift in sales. With seven week sales of 823,536, the retail trade was as much as €165,860 poorer due to this ill-conceived folly.  At a time of difficult challenges facing all of us, it is hoped that this style of promotion will not be repeated in this format.

The above figures are taken from the newstrade, single copy and subscription sales total figures published by ABC.  They include copies sold at basic cover price, below BCP and overseas copies, but exclude multiple copy/bulk sales and issue specific bulk sales.

 

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