Why is it that a magazine will have a cover/newstand price mucher higher than what the a subscription price is?
Example, and I’m just pulling this from thin air, the cover price of a Playboy is $5. I can subscribe to it for 1 year for only $12. Thats a dollar an issue. So why the huge difference in pricing?
My WAG is that at the newsstand, you pay not only for the copy you’re buying, but also for all the other copies that didn’t sell.
Subscriptions are guaranteed revenue. Newstands are not, since the vendor gets credited for unsold copies. The lower subscription prices are enticements to commit you to paying for 12 issues at a reduced price and getting you to send them money, instead of you only buying 3 or 4 issues throughout the year at a newsstand.
Magazine business manager here.
To get a magazine onto a newsstand, you must go through a distributor. The distributor gets bulk copies of the magazine at a discounted price, 40-50% off the cover price. The magazine is also responsible for freight or mail charges to get the copies to the distributor. You do get paid for issues that sell, however, months and months and months later.
Subscription copies go out at a specialty mail rate. (The USPS keeps changing the name.) This costs only a small amount per copy. Not only that, you have the subscription payment upfront, either before any issues go out or in a few payments. You do have the cost and time that goes into sending out renewal forms, sending replacement copies, keeping the database and the like.
Bottom line.
On the one side you have all your money for a year’s worth (or two years or three years or more) sitting in your bank account making money for you while you send out issues cheaply. And can charge ad rates based on guaranteed viewers.
On the other side you get wildly varying issue to issue sales (some of the big name mags can vary as much as a million copies in newsstand sales per issue) with any money you see coming into to you months later (or, with smaller distributors, never).
Now you know why even subscription copies come to you with a dozen subscription forms inside. Newsstand sales are like slow death. The only good reason to have them is that they act as advertising to entice people to, yes, get a subscription.
Thanks guys.
I’m not sure why no one has mentioned this important fact: magazines don’t make money (or very little) from selling copies. They make money by selling ad space. In turn, advertisers only care how many eyeballs see their product. By having a large number of subscribers (by keeping the subscription price artificially low) magazines can more easily sell their ad pages by telling companies how many guaranteed eyes are looking at the ads each month. They also quote newstand sales of course, but you can’t get any demographic info out of them. With subscriptions, they can say that the average New Yorker subscriber makes, say, $100,000 and buys a new car every three years. All this put together means that is very much in the magazine’s interest for you to subscribe instead of schlubbing yourself down to the news agent.
While on the subject of how magazine pricing works, and where that money goes: magazines make very little money for the stores that sell them. The mark-up for magazines is only about 15%, which may or may not pay for employees, shipping, and lost/stolen merchandise. I work in a bookstore, and even though magazines make up about 1/3 of our stock at any given time, they certainly don’t help pay the bills the way books do. I have no idea how magazine-only type newstands/shops make any money at all.
While we’re on the subject, a slight tangent for Exapno Mapcase: Is it standard practice to charge more for renewal than for initial subscriptions?
I just noticed this on one of my magazines after many years and, while it pissed me off that they would punish repeat customers, it appears to make business sense since folks probably don’t pay too much attention to the renewal rate (I didn’t!).
I plan on letting subscriptions lapse from now on, followed by sending in a new-subscription card.
The business sides at major magazines are above all obsessed by advertising. Ad rates are proportional to circulation. So magazines go to desperate lengths to drive up circulation.
And the best way to quickly inflate circulation is to give out artificially low subscription rates to new subscribers. That’s why you get all those magazine ads in Publisher’s Clearing House sweepstakes and similar organizations.
The problems with these are many. First, the prices are ridiculously low, at cost or below. Then the magazine has to give PCH a cut for any subs it pulls in for them. And the renewal rate is pitiful, sometimes as low as 10%. So they have to go out and desperately recruit more new suckers, or else deluge their current subscribers with a million costly mailings about renewals.* This puts the magazines onto a deadly treadmill. If they ever stop selling discount new subscriptions, their circulation plummets, the ad agencies refuse to pay the current rates, and they go out of business if they can’t belt tighten properly.
So renewal subscriptions tend to be priced at more realistic numbers. They are still much lower than newsstand, for the reasons I explained above, so they’re still a bargain, but they’re not artificially low. And people get attached to magazines. Regular subscribers miss their magazines when one doesn’t come, which is why the “let the sub lapse and sign on new” ploy isn’t used more often.
*As a tiny magazine, I can’t afford to send out all those renewals. I send out one to let people know that the sub is about to expire and one after that last issue has come out. But people have been trained that no matter how many renewal forms they throw any, another will soon appear in the mail so they ignore them altogether.
Jonathan Chance: Director of Circulation and Publisher here.
Yes, in almost all cases extra incentive is needed to get people to make the initial subscription decision than to get them to renew. Sometimes but several factors in terms of dollars/sub vs dollars/renew.
Yes, you can do that and I wouldn’t turn you away. But I’d know that you were doing it. Hell, when I was working phones I’d encourage people to do it when they brought it up.
Exapno-
We should talk shop sometime. Where are you based and what’s the largest magazine you’ve worked on?
Not that I’m trolling for potential employees or nothing. Nope.
Not me.
Also, once you subscribe, they have your name and address, and some idea of what kinds of magazines you might be interested in. This quickly gets you on mailing lists for the publisher’s other similar magazines, and perhaps sold elsewhere too. This is another reason for them to make it cheap for you to subscribe, as an enticement.
Yeah, f’ing Reader’s Digest is a brilliant example of this. I never, ever had problems with my Popular Science, MacAddict, Newsweek, or U.S. News and World Report subscriptions. The postal spam was quite low. I get a subscription in my wife’s name to “Reader’s Digest Selecciones” and suddenly we’re deluged by crappy junk mail* of all types addressed in my wife’s name. There was never any option in the subscription process for “opt-out,” although I called and they agreed to remove us from their “marketing list.” It’s too late, though, it seems; they’ve already sold that bloody first version of the list and now it seems like it’s out there everywhere.
*And by “crappy junk mail” I mean for either religious donations or the same crap that’s advertised on the Spanish-speaking channels. I guess they think the entire Spanish-speaking demographic in the USA is *naco[/] or corriente.