Raising cover prices for print media – the beginning of the end

By April 21, 2009 7 Comments

The only print media I buy regularly is the Financial Times, and as they have increased their cover price from 80p maybe seven years ago to £2 as of earlier this month I have kept buying.  However this latest increase (from £1.80) has really got me thinking whether it is worth it.

That coupled with a post on techdirt this morning title Magazines Looking to Raise Prices? which details similar moves by the Economist and People led me to think that what we are witnessing is probably best understood as a reaction to falling circulation and declining advertising revenues, but the wrong reaction.

It is an understandable reaction in that the fixed costs of these publications have remained the same in the face of declining revenues and that increasing prices will hopefully improve profitability.  However, in the face of increasingly good free alternatives via the web my bet is that any increase in revenues that follows from increasing prices will be shortlived as the medium term result will be a decline in the number of copies sold.  The micro-economics of supply and demand tells us that.  I can maybe buy that the FT has a strange demand curve, but I very much doubt that is the case for all print media, espescially in the face of increasingly good free substitutes.

So my guess is that these cover price increases will come to be seen as the last roll of the dice for the print media industry.  Further, like the Seatle PI I think they would be better off trying to radically re-invent themselves as web companies.  Even though the risks of transition are high and there is a substantial short term opportunity cost my guess is that a risk weighted discounted cash flow analysis would value the long running cash flow potential from a web business to be worth more than a couple of years worth of depressed profits from a printed paper.