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Conculsion on pricing in the UK National PressPublic Document
C H I S H O L M
Conclusions on pricing in the UK National Press.This document concludes:
 
 Newspapers are unnecessarily losing both readership and advertising revenues, from over-aggressive, un-strategic cover pricing policies.
 
Circulations are declining faster, in part because of price increases.
 
These are impacting on advertising revenues, perhaps destructively for some titles;
 
Price is having less of a tactical role in terms of cross title competition.Following the previous note explaining international comparisons on pricing, this notereviews the issues for UK national press. I have confined my circulation analysis to UK daily press. As explained there are two measures of price elasticity:
 
The first relates to the overall market, where there are other factors affecting overall sale,such as the structural and cultural changes we are facing. So we are examining a market,within which there is a general context of slow decline. Since consumers, particularly inthe UK, move from product to product, their impression of cost plays an important role.
 
The second relates to the impact that individual titles pricing strategies have on thecompetitive framework and in particular market share. So if one newspaper increases or decreases price this historically has a strong impact on shifting of loyalty and purchasefrequency and therefore share within the market.I’ve analysed the ABC data back to the 1970’s and drawn the following conclusions:
The Macro Market – Consumers’ overall response
The newspaper market continues to be price elastic, and the UK specific analysis confirmsthat UK newspapers are generally suffering circulation loss due to a more aggressive pricing policies in the last four years. This is shown in the graph below:
 
Conculsion on pricing in the UK National PressPublic Document
C H I S H O L MHere you can see the wiggly line of price in red, is inversely related to that of circulation. The points are the actuals; the curves are the trends. Note how the price line has been steadilyrising since the price wars of the ‘90’s, and circulations declines have been accelerating.(Ignore the sudden drop recently that is partly a function of the modelling software).This second chart compares the two, in a different way:It shows price horizontally and sales variance vertically. The results are very similar to thosein the previous International chart, though not as extreme. But you can see the impact of the93/94 price war on the top left, compared with the more recent years. Note that 07, 08 and 09are below the line, suggesting that things are worsening. 06 was a particularly aggressive year in terms of price, and sales fell in line with the expectation.
Affect of pricing policies on individual titles, and their market competitiveness
However one thing has radically changed. Price is no longer a primary tactical tool for impacting on sale.In the ’90’s, as the Times in particular demonstrated, there was a clear correlation between pricing and circulation. But as is always the case with UK newspapers, the tool was overused.In this decade there is little evidence that pricing per se has had a demonstrable effecttactically. There is little notable correlation between newspapers short term pricing policiesand their impact on circulation. Of course other factors are at play, both positive and negative.
 
Firstly both The Times and Telegraph, have aggressive and successful subscription programmes;
 
Secondly bulks have been removed from the system;
 
Thirdly other forms of promotion and good content do have an effect. The Telegraph havehad a great run re the MP’s expenses. When the Times went tabloid, I calculated thatevery additional figure on their ABC, cost around
 €
1,000 in TV airtime.
 
Conculsion on pricing in the UK National PressPublic Document
C H I S H O L M
Winners and losers
So who have gained value over the last twenty years through their circulation pricing policiesand business strategies? Here another whacky graph….. The size of the circles reflects thatincrease in circulation revenue – market value – over the past ten years.The undoubted winner has been The Times, which has successfully grown both circulationand cover price over time, and increased its share of market value significantly. Next is the Daily Mail, which has also increased value, largely through circulation growthrather than pricing. Both the Telegraph and the Guardian have also shown good increases,largely through pricing.The losers have been the Express – which has been weak in both pricing and circulation, andthe Mirror which has held it’s own in price, but not in circulation.
Impact of circulation pricing on advertising revenues
The final point, as previously speculated, is whether the aggressive cover pricing policieshave been counter productive in terms of their consequential impact on advertising share. Myconclusion is that the picture is mixed but they undoubtedly have had an impact on sometitles. Just as the pattern of price acceptance from title to title has changed, so, I believe it hason advertising. It is also the case that newspapers decline in share of advertising isaccelerating. However I believe that for every pound National newspapers have gained fromcover price revenues, they have taken a consequential loss of up to £4 of advertisingrevenues.
PLEASE NOTE THE WORDING “UP TO £4. Some will have taken more.Others none at all.© Jim CHISHOLMDecember 2009.
 
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