The Telegraph’s controversial subscription programme, which it began last June, helped boost circulation by 26 per cent but has caused profits at parent Hollinger International to crash to $1.6m (1m) in the year to the end of December from $27m (17m) in 1995.
Hollinger’s report, published this week, shows the subscription discounts have cost the group 19.9m with a further hit to come next fiscal year. Observers say total losses could be as high as 35m.
Lindsay Nuttall’s departure highlights the trouble behind the scenes at The Telegraph. Nuttall was appointed as the paper’s first direct marketing director but just two months later she was dropped. Telegraph deputy managing director Len Sanderson says that when his role was expanded to include management of the subscription programme, she felt disgruntled and left. Outsiders say she took the rap for Chris Haslam, Telegraph deputy managing director and the scheme’s instigator.
One source says: “The offer was not targeted enough. Existing readers got to hear about it and thought ‘I’ll have a bit of that’. The offer has not been taken up by enough new people. Another problem is that it was just too attractive – 1 for seven issues was always going to shoot down profits.”
Sanderson admits to “teething troubles” with the subscription scheme. But whatever observers say about the scheme’s failings it has done what it was set up to do. The Telegraph is now ahead of The Times by more than the entire circulation of The Independent. And The Times is very obviously aware that the programme has been successful.
The Times general manager Chris Maybury thinks the circulation hike has come at the unacceptable price of lower revenues. However, he felt so threatened by the scheme that he forced the ABC not to record the discounted copies with full-price sales.
The paper has not been so put off by these problems that it has dropped the idea of a subscription altogether. This contrasts heavily with the speed at which it dropped plans to launch Telegraph-branded financial service products (MW February 23 1996). However, there were more pressing financial reasons for dropping that scheme, as large financial service advertisers were threatening to pull advertising.
No national newspaper has yet hit upon the ideal formula for subscriptions, although nearly every title has experimented with discreet offers. The Times is running one at the moment.
Independent ad sales controller Jeremy Halley argues that although there are obvious benefits to subscriptions, having a large proportion of readers on subscription could perversely be a turn-off for advertisers.
He says that if people buy a paper on impulse, they will be more receptive to its contents, whereas if it lands on their doormat every morning not only does it become a passive process but they are turned off by seeing the same products advertised time and time again.
Likewise, The Guardian shuns subscriptions although it, too, experimented with a programme on a limited basis in the North-east last year. Tim North, account director at Guardian agency Leagas Delaney, says: “Subscriptions are not what The Guardian is about. It is about improving the product not cutting prices.” However, it is believed the paper is looking very closely at the area of loyalty schemes.
Sanderson’s task now – and it is a hard one – is to take the good idea and execute it more efficiently. The idea behind subscriptions remains a fundamentally sound one. As Andrew Neil famously said, it is a ridiculous situation that loyal readers are penalised because they have to pay for their pre-ordered newspaper to be delivered.
Magazines run subscription programmes with success. But magazines can be circulated by post, thus cutting out the wholesale and retail middlemen. If you distribute discounted copies through newsstands you are effectively paying for customer loyalty twice. Not only are you taking a hit on the cover price but you are also paying to get the product to the customer.
One national newspaper marketing director says: “What you need is to strike up some kind of a deal with the wholesaler and retailer. You could pay them less to deliver subscription copies because they know they will be getting regular business, and you could compensate them by paying more for impulse sales.”
Zenith Media press director Damian Blackden says: “If subscriptions become too heavily focused on price, there is a danger of getting people interested because they want to save money and a couple of months down the line lose them when they go off the product.
“But if one newspaper gets it right, you can be sure the others will follow pretty quickly,” he adds.