Newsies strike of 1899

Factual Questions
1

Hi SD,

I am a fan of the Newsies musical, and did some research on the Newsboys Strike of 1899. Apparently, Joseph Pulitzer and others raised the price for the newsies from 50 cents per hundred papers to 60 cents per hundred. After the newsies went on strike and shut down much of the city, Pulitzer and the newsies reached a compromise. While Pulitzer was unable to reverse the price increase, he did agree to buy back all unsold papers at the end of each day. That way, the newsies would always come home with a profit. In other words they would not be stuck with useless unsold papers that were worthless by the next morning. This apparently satisfied the newsies and they disbanded their “union.” My questions are:

  1. Why would Pulitzer have been unable to reverse the price increase?
  2. Would this buyback compromise from Pulitzer end up benefiting the Newsies more than the price increase hurts them? Over the long term, assuming all else is equal, is this a good deal for the newsies?
  3. Conversely, does the buyback compromise from Pulitzer damage his bottom line more than the price increase helps him? I am curious to know who really made out better here?

Thanks for any information. Is there math that can help here?

Thanks,

Dave

2

Did he buy them back at the price sold on the streets or what the newsies paid to buy the papers?

3

What the newsies bought them from him for. In general, that’s a ‘guaranteed sale’ and happens all over the place in the retail industry. Also, it’s still goes on with newspapers and magazines.

4

A little thought would show how impractical it would be to buy them back at the retail price.

5

Newspapers cost more than the cover price to produce and distribute hence all the ads. They certainly cost more than the wholesale price. In recent times it was 3-4 times the retail cost. So it may cost him money to buy them back, but if he then knows he can print less the next day, it may be worthwhile in the long run.

Allow 2 dollars per hundred to print and distribute.

A 1000 papers will cost him 6 dollars to buy back plus the 20 dollars to print. But then if he prints 500 less the next day at a saving of 2 dollars per hundred he’ll be in profit in 3 days.

6
  1. Newspapers had increased their price the previous year due to increased demand for news about the Spanish American war. It is possible that workers and vendors for Pulitzer had increased wage demands during that time and Pulitzer could not decrease wages back to pre-war levels without disrupting the company.
  2. The Newsies had margins of 50% before. Their margin went down 20% to 40 cents per hundred. So they would have to overbuy by 40% to lose all their gross profit. The big advantage is inventory management. Since they could sell any leftover copies they could order more papers every day. If they could sell 20% more then they could make up the difference.
  3. Newspapers are what is known as a double sided market. You are selling to customers and to advertisers. The more papers you sell the more the advertising is worth so it makes sense to sell as cheaply as possible but if you sell cheaply the less money you get from customers. Buying the extras back would allow the papers to sell more since newsies could be more aggressive with inventory but if the newsies sold other papers they would be higher margin items and be sold more aggressively. My guess is that each Newsy probably only sold one morning and one evening paper so it would have been hard for them to change newspapers mitigating any loss to Pulitzer.