NI’s battle scars start to show

The newspaper price war is far from over. The Telegraph and The Times’ 5p increase in cover price this week is not the end of hostilities, but an admission by the aggressor, News International, that the damage is becoming unacceptable.

And the casualties are serious. Stockbroker Smith New Court believes that before The Times originally cut its price to 30p in September 1993, its net cover price revenue was 34m.

At its current circulation and old price of 20p, The Times’ gross cover price revenue was 39m. But per-issue handling charges have not been renegotiated with newsagents and wholesalers since before the price cut, so News International is left with net revenue, according to Smith New Court, of only 9m.

That means that The Times’ price cut alone was costing NI about 25m a year just in lost revenue.

Add to that the cost increase of publishing almost 90 per cent more newspapers at a time when paper prices have jumped by 50 per cent and you have an idea of just how much the price war is hurting NI.

On the other hand, The Times is supposed to be able to increase its ad revenue on the back of its circulation increases.

“The Times has in some cases been able to achieve a boost in rates,” says Media Business Group director of press Steve Goodman. “But there has been no pro-rata increase in rates compared to the rise in circulation. Buyers need to see where the increase is coming from and if it is the sort of readers they want.”

The concern of media buyers was that The Times’ increased circulation would drag in more downmarket readers from the Daily Mail and Express. This seems unfounded. The Times’ average readership has increased by 323,000 since the price cut, of which 297,000 are ABC1 readers. However, press buyers will still moan that many of them may be C1s.

The other problem for The Times’ ad team would have been that readership increases – the preferred trading currency – lag behind rises in circulation because a price cut first attracts readers who previously shared a copy.

Another block on converting circulation increases into ad-rate hikes is the fact that large advertisers have long-term contracts at fixed rates. “For those clients new to press, it’s the entry-level costs of The Times that have really increased,” says Paul Mukherjee, head of press at O&M Media. “Those with long-term deals are OK for now.”

NI is not the only combatant feeling the pain. The price war has cost The Daily Telegraph more than 30m and the Independent, which cut a further 40 jobs last week, is thought to be losing 1m a month. They are both desperate to see the price war end completely.

“The Telegraph has always been a reluctant price cutter,” says David Pugh, the Telegraph’s marketing director. “I fundamentally believe that if we had spent the money on editorial quality and brand image we could secure the long-term future of the broadsheet market.”

NI believes it is securing the health of the broadsheet market by returning its surplus to readers and finding an optimum unit price for newspapers that had been in long-term decline.

Pugh makes the salutary point that a look at the comparative National Readership Survey figures will tell you that for all this pain – more than 100m to the broadsheet industry since the price war began – the number of people reading quality newspapers has actually fallen by 145,000 since September 1993.

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