Tuesday, February 06, 2007

Economics vs Business in the magazine market

It's very odd the way that economics and business so often don't go together.

Most people would accept the basic economic premise that lowering the price of a product is liklely to increase demand for it, and thus increase sales. But a well argued piece in Media Week points out that lowering the price also decreases the Retail Sales Value (RSV) - which means that each sale generates less money - and that supermarkets don't like this.

As we know, supermarkets have become increasingly important to magazine sales over the last few years. It has been posited that the growth in the weekly market has been driven as much by this kind of retail pressure/opportunity as by consumer demand, but clearly supermarkets would prefer weeklies to fetch a premium price to justify their presence in the store.

Does this matter to journalists? Well, yes, obviously it does. If your magazine is delisted by Tesco because of a low RSV then a large proportion of the retail sales opportunity disappears, the magazine loses circulation, the advertisers drop out and you lose your job.

Could this be one reason why Real has just closed, as reported by Press Gazette and MediaGuardian? Halving your frequency and cutting your cover price never really looked like a recipe for increased income, and both moves would fall foul of the RSV-police

The three worlds of publishing (journalism + advertising + management) should maintain working firewalls but journalists should be aware of how the world they work in is evolving.

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