If you love something, charge for it

The New York Times had an interesting article over the weekend discussing a new trend in magazine land towards charging more for the product. For a long time, major magazine publishers fought to increase their rate base — the number of regular readers that advertisers pay to reach — at the expense of circulation revenue. So it was not unusual to get a magazine like Vanity Fair with thousands of words of great content for less than a dollar an issue with freebies along the way. As the Times explains:

"In the last six months of 2008, subscribers paid an average of 47 cents an issue for Newsweek, 77 cents an issue for BusinessWeek and 89 cents an issue for Fortune, according to an analysis of their filings with the Audit Bureau of Circulations.

Even Condé Nast's magazines, filled with luxury ads and dispatches from far-flung locations, are cheap: 87 cents an issue for The New Yorker, 89 cents for Allure and just over a dollar each for Condé Nast Traveler and Bon Appétit.

'Obviously, you can hardly even mail that particular issue for 80 cents, but what makes up the difference is the advertising,' said John Fennell, an associate professor of magazine journalism at the Missouri School of Journalism. It is a 'model where magazines essentially try to gain as many subscribers as they can and allow advertising to pay the bills.'"

While this strategy may have made sense for the few mass market magazines like Time and Newsweek (where a larger rate base allowed them to compete against other forms of mass media like network television), it was often the wrong strategy for premium titles. Advertisers pay higher CPMs to be in luxury magazines so they can reach a higher valued audience. But ultimately if you make it cheap enough for anyone to subscribe to a magazine, anyone does. What you make in higher rate base, you lose in CPM.

I have first hand experience with this trade-off from my days at Wired magazine in the mid 1990s.  Wired had a high cover price ($5) and wouldn't discount its subscription rate ($40 per year). We did that exactly because we only wanted the serious Wired types to buy the magazine and we sold advertisers on the very high value of that audience. As a result, we ended up with a substantially higher percentage of CEOs reading Wired than read WSJ or any other title. And we earned great CPMs for our ads.

The Times article has the requisite counter arguments about maximizing revenues and I don't mean to suggest that a higher price strategy is right for every magazine (or web site). But as we survey the wreckage of the Web 2.0 world and the need to create alternative revenue streams to advertising, there is a lot to learn from the trade-offs the magazine industry has developed over many decades. I'm at Six Apart — the only major player in the blog world to charge for its products — for reasons which include my tenure in the magazine industry. People will pay for things they value and often times weeding out those who don't is the best way to grow.

Comments

[mosjef]

As a media property you have to 'know your place'. Are you a Hit with the potential to reach tens of millions of Americans? If so then Free might be your optimal pricepoint to quickly establish that mass. Or are you Niche? (most likely). If so then you cannot expect mass media advertising value, and pricing becomes much more important. But if you're Niche then your incoming pricing assumption must be 'how high can I go before I leave money in the table' not 'how low can I go to ensure the widest reach' niche pubs need an audience that's just big enough... It all starts with knowing your place.

[David Jacobs]

From the Wired web vs. print thread: (1)

"As Brian notes above, it's all about money and resources. The site has far, far fewer resources than the magazine. It's basically run by bums and hobos. It makes money, but it's a fraction of what advertisers will pay for a glossy spread in print. Yes, the site attracts 11 million uniques a month -- a very big audience -- but ironically, the more people the site attracts, the less its pageviews are worth."

http://gadgets.boingboing.net/2009/05/18/welcome-wired-we-cal.html#comment-495859