MEDIA FORUM: Are newspapers risking loyalty by raising prices? Certain newspapers have recently increased their cover prices. A good idea given falling ad sales? Or very bad timing? Alasdair Reid asks

One of the most irritating things about newspaper price rises is

the lack of advance warning. There you are with 45p in your hand when

suddenly the man behind the counter is asking you to put your hand in

your pocket again.



It's at this point that you might toy with the idea of giving a

different title a try, one that doesn't abuse your loyalty. But just

recently, there hasn't been much point in switching allegiance, because

- either by cunning plan or suspicious coincidence - prices on several

titles have risen simultaneously.



First there was the Financial Times, whose readership is perhaps more

immune to price increases than most. But then The Independent also went

for it and suddenly The Guardian and the Daily Mail were at it too.

Others are almost bound to follow suit.



You can see the reasoning. The advertising slowdown is biting and

newspapers are likely to be hit severely, with the ad market looking

vulnerable right up to the autumn and possibly beyond. Rising newsprint

prices don't make the situation any easier.



And, though the advertising market is in severe recession, the economy

at large isn't. We all have money to burn. Who will notice 5p a day, for

heaven's sake?



On the other hand, the last thing newspapers want is to alienate their

buying public. That really would put the business as a whole into a

tailspin and the long-term trend for newspaper sales is not good. So is

this really a wise time to be hiking cover prices?



Guy Zitter, the managing director of the Daily Mail, now 40p, is

confident that it is: "We are in a strong position at the moment. The

last time we put up cover price was in 1995 when we were selling

1,832,000 and had a mid-market competitor. Our May 2001 ABC figure was

2,415,000, up 32 per cent, our previously mid-market rival had gone

downmarket and its sales have fallen off a cliff. We are left in a

battle with The Times and The Telegraph, whose cover prices, if you

ignore their subscription offers, are 40p and 45p respectively. The

Daily Mail brand is stronger and our product is better."



Zitter reveals that sales for the week ending 16 June averaged

2,429,000, showing no loss on the previous comparable week and up year

on year by 33,000 copies. He adds: "The ABC results for June will

vindicate the cover price decision and its timing. If they don't, does

anyone want to employ a balding, overweight ex-MD? We believe we can

continue to grow circulation at 40p, delivering reach and increasing

value to our advertisers. Maybe it is for this reason that July and

August are up in forward booking terms against last year."



Of course, you expect that level of confidence from the Mail, arguably

the strongest newspaper across the whole of the market. But is that

confidence justified? More importantly, is it shared? Tim Kirkman, the

press buying director of Carat, argues that there may well be a strength

in numbers here: "It must be the first time in history that they've all

- or just about all - seemed to agree on something.They had no choice

really and it would have been far worse if they'd not responded to

declining ad revenues in some way. It's not just display advertising

that's suffering, just about everyone has a freeze on - the recruitment

side, for instance. The only one not feeling that as badly as the others

is The Guardian, which tends to carry a lot of public sector

recruitment."



Kirkman adds: "But the fact is that they all have to find more revenue.

If you have circulation of one million and you add 5p to the cover price

that will deliver around pounds 5 million by Christmas. So everyone has

done it and I don't think it will affect circulation too much. The

Telegraph hasn't, but that's because it is hovering around the

psychologically important one million mark and only a small shift could

push them below it. They don't want to risk it. Yet. Realistically

though, they too will have to follow suit. The other one that hasn't,

The Express, believes it is going to get a big surge in circulation. We

shall see."



But what of the theory, supported by evidence of what happened to The

Times during the circulation wars of a decade ago, that the newspaper

market is far more price-sensitive than was previously believed? Kirkman

says: "If one had gone up by 10 per cent and the others hadn't, then

there would probably have been an effect. I think everybody is

price-sensitive to a greater or lesser degree - even ones like The

Guardian who believe they aren't."



So is The Guardian really that secure? Marc Sands, the marketing

director of The Guardian and The Observer, agrees that the company isn't

exactly at the stage of tearing its hair out because of ad revenue

fears. And he points out that he's already been through this process in

the Sunday market with The Observer, which raised its price back in

November.



This proves, he says, that price hikes have nothing to do with fears of

an advertising recession. "There wasn't even the hint of a downturn when

The Observer price rise went though, and the reassuring thing is that

its circulation has continued to rise. In circulation terms, the

election was fantastic for The Guardian. So The Guardian price rise has

been on the agenda for a long time, and similarly, ad revenue wasn't a

factor. We regard The Guardian as a premium package and believe that

this should be reflected in the price - we have never competed on price

and have never had a history of price cutting."



But will advertisers be concerned? Phil Horton, the marketing director

of BMW, certainly isn't. He states: "From a business point of view you

can understand why they've done this. And when you think about the size

of the increase we're talking about - it's only 5p. I've always thought

that newspapers represent excellent value for money on a unit basis. I

presume they have reams of data on price elasticity, but from my point

of view - as custodian of the BMW brand - I would much rather they were

charging the right price for a quality product."



Horton is not surprised to see the market moving in step. After all,

that's generally what happens, one way or the other, in the car

business.



He concludes: "No one wants to see circulation fall any further than it

has been and we are certainly delighted to see that papers like the

Financial Times and the Mail are holding steady.



"Everyone wants to be associated with winners. The newspaper industry as

a whole will be stronger for these price increases."



Topics