Why is there such a difference between subscription and news-stand prices for magazines? I understand that they will sacrifice some profit for a customer that will consistantly buy their magazine (subscription), but the difference seems too much. I can get a subscription for 12 magzines for $12 ($1 an issue), but if I go to buy the same mag in a store, it costs $4.95!
Educated WAG:
Subscription sales are garaunteed sales - they know how many they’re going to sell, so they don’t have to print more subscription copies than they sell. So they can make a guaranteed profit selling for only a little above cost.
Newsstand sales, on the other hand are not. They might print 1000 copies, and sell none. Therefor, they make the newsstand prices significantly more than cost, to increase any profit, or minimise any loss.
Also keep in mind that subscriptions only have to pay the publisher and (Maybe) distributor. Newsstands have to pay, well, the ‘newsstands’. So, for everybody involved to make a profit (and therefor have a reason to be selling the magazine) the prices need to be much higher.
Tengu is right. I publish a magazine (the SFWA Bulletin – http://www.sfwa.org/bulletin Subscribe today!) and can confirm the situation.
When someone subscribes (directly; it’s different if they go through Publisher’s Clearinghouse), you keep all the money. If it’s sold on newstands the money is split.
Let’s say the cover price is $5. The person at the newstand might get $1 of that. You also have to work with a distributor (since you don’t have the network to get it into enough newstands to help). They might take another $1. So you get $3 for ever issue sold.
Those last three words are the key. You don’t sell every issue on a newstand. You may sell none, which means you printed issues and got nothing for them. If half your newstand copies sell (a very high percentage – 25% is more like it for most magazines), you get $1.50 a copy. And if the copy cost $2 to produce . . . not good for your bottom line.
So, if you’re getting subscribers at $3 a copy, you’re in better shape if you’re getting people to buy the magazine on the newstand for $5 a copy.
Of course one answer would be to raise the newstand price so that your expenses are covered. But that’s not a option, since the price people are willing to pay for a magazine is kept down by glossy magazines like Time or Cosmopolitan. They’re highly subsidized by advertising, so they can keep their newstand price artificially low (though they, too, do better with subscriptions). A true newstand price for your quarterly might be $10, but no one’s going to pay that when they can get other, fancier looking magazines for far less. Not to mention the fact that any increase in price is going to reduce customers.
Quite a few magazines actually lose money on newstand sales. So why do it? Promotion. Someone might see your magazine, pick it up, and decide to subscribe. If they don’t see it, they may never know it exists.
Publisher’s Clearinghouse, BTW, takes a BIG cut out of any subscriptions going through them (how do you think they pay for the Prize Patrol?). The magazines don’t get enough from them to pay expenses. The goal for a magazine is to get those subscribers to renew at the regular rate (renewal notices are the most efficient way to raise income for a magazine, BTW). Also, those subscribers count for setting ad rates, for those magazines that are advertising-driven (which are most of the big ones – see how many ads they have).
The economics of publishing isn’t very pretty.
“What we have here is failure to communicate.” – Strother Martin, anticipating the Internet.
Sometimes, though, the price isn’t too different. I gave up on the Wall Street Journal subscription because, although I love some of the articles, I can simply buy it when I want it at a newsstand/vending machine, whereas the subscription price is usually damn near identical to the newsstand price.
All very good answers, but from my standpoint in newspaper publishing, you’re leaving out one fundamental concept – advertising. Newspapers point to the number of subscriptions they have in order to justify their rates to advertisers, and advertising is where all the money is. In fact, many newspapers don’t make a profit on subscriptions, with the price you pay covering pretty much the money it took to print it and mail/deliver it. (We do, however, try to make a little on rack sales.) Newspapers want more subscribers because they can then charge more for advertising. Of course, the economics of newspapers and magazines may differ, but I doubt by very much. After all, with most magazines you pick up these days, you have to wade through 20 pages of ads before you get to the table of contents.
I concur with paintsville. If you look closely at the fine print in any magazine you will see that they list the number of subscribers. That’s what the ad rates are based on. So while they may only break even on your subsciption, by increasing the subscriber rate they actually make more from the ads.
“In this life you must be oh so smart, or oh so pleasant. For years I was smart. I recommend pleasant.” -Elwood P. Dowd in “Harvey”
That’s fine if you have a subscriber base of 200,000 or above (or lower, if you can guarantee a targeted audience that advertisers drool over). But most smaller magazines don’t get enough advertising for it to be a major income flow.
Even though the ads subsidize newstand magazines, they still make more money if you subscribe. There are no middlemen and no returns. No matter how much money from ads you get, it’s to their advantage to have you as a subscriber.
The WSJ is a special case, since it’s a newspaper, not a magazine. Newspapers are different, and they don’t usually have that great a discount for subscriptions, since they have to pay someone a cut of the cover price to deliver them.
“What we have here is failure to communicate.” – Strother Martin, anticipating the Internet.