Newspaper price rises and carriage charges

When I launched myself as an independent newsagent in March 1989, I was gratified to discover my business was invoiced on the same terms as my previous employer, WHSmith. The percentage gross profit margin on national newspapers was 28% and magazines 25%.

Total national newspaper daily circulation was around 14.5 million copies, it really was an enormous business to be a small part of. The top five titles for my newsagent’s in a West Sussex village were the Daily Telegraph, Daily Mail, Daily Express, Times and Sun.

Daily sales of the Telegraph were more than double the Daily Mail. When in August 1992 the Telegraph increased the price of the Saturday edition and reduced the retailer’s percentage gross margin, I was alarmed as the Daily and Sunday editions of the paper represented a third of my net profit.

Smiths News protects stores with 12 month carriage charge freeze

I learnt that over-reliance on newspapers was not going to be the best strategy for my business and diversified.

The Telegraph’s action on price and margin started a cascade that has brought retailer gross profit margins down to an average of just over 21%. Retailer margin has been only part of the publisher’s ‘value’ strategy. Cover price has also been used to gain market position and maximise income as circulations fell.

In 1989 daily newspaper cover prices ranged from 20p for the red tops, up to 45p for the Financial Times. Today, the Daily Star is 50p and the Financial Times £2.90 on Monday to Friday. On Saturday the Daily Star is also least expensive at 80p, with the costliest again being the FT at £4.

Telegraph delivery surcharge doesn’t reduce sales

The most recent Audit Bureau of Circulations (ABC) numbers* suggests that around 3.3 million newspapers are sold Monday to Friday and 5.3 million on Saturday.

During the week the Times has retained about 62% of its 1992 circulation and the Daily Mail has 51%. Excluding the FT, which has been successful at taking its readership online behind a paywall, the Daily Mirror and Daily Express have lost over 80% of their print circulation.

Monday to Friday

* Note Telegraph Media Group and News UK no longer provide circulation data to the ABC. The numbers used for the Daily Telegraph, Times and Sun are our best estimate for illustrative purposes of this article

30 years ago the ABC* did not report Saturday sales separately from the other weekdays. Comparing the latest Saturday with the available data from three decades ago reveals the Times and Mail have retained a substantially larger proportion of their sales than other titles over that period. The Daily Mirror and Daily Express are again the worst performers.

Saturday

Since 1989 price inflation (RPI) has risen by 271%. Of the Monday to Friday editions, the Daily Star is the only title to have not kept pace with cover price inflation. The Sun has increased 11% faster than RPI inflation and the Mail and Express 17.5% faster.

The most aggressive newspaper on cover price has been The Guardian, which now costs 733% more, compared to the Daily Telegraph’s increased of 714%.

Digital revenue is key for survival of newspapers and magazines

Both of these newspapers, plus the Times, have used subscriptions to offer regular readers a discounted price. Retailer margins of four titles have not kept pace with inflation, with the Daily Star being the worst offender.

The ‘broadsheet’ titles have all increased the retailer’s pence-per-copy margin much faster than inflation over the past 30 years, with the Guardian offering a cash margin of more than double the rate of RPI.

Monday to Friday

The Saturday editions all offer a higher-than-RPI increase, with the Guardian again being top of the list and the Daily Star being at the bottom.

Saturday

There has been a marked difference in cover price and retailer margin strategies adopted by the newspaper publishers, segmented by their target readership. The only title to have increased the retail estate total gross profit, adjusted for RPI inflation over the past three decades for its Monday to Saturday editions, is the Times.

What the long view suggests is retailers need to build their own strategy for how newspapers work within their business. Many have already done this and look for other categories to replace lost profit. Others see the opportunity newspaper delivery offers when gaps appear in the market.

Newsteam has confronted the latest margin squeeze and added a surcharge to recoup the gross margin reduction following the recent Saturday Telegraph cover price increase. Are you developing a strategy to protect your profit margin? If so please let us know.

Note the Telegraph Media Group and News UK no longer provide circulation data to the Audit Bureau of Circulations on the numbers used for the Daily Telegraph, Times and Sun are our best estimate for illustrative purposes of this article

EXCLUSIVE: Newsteam Group suspends new Telegraph orders over margin cut