Celebrity Mag Giant Bauer Publishing Ponders Cover Price Hike
It was revealed this week that Bauer, the company that pioneered low newsstand cover pricing, is planning to modify its cover pricing strategy, effective the fourth quarter of this year, in what could be the largest company wide pricing experiment in the history of magazine publishing.
Reportedly these changes were partially precipitated by wholesaler concern with Bauer’s low cover prices (average $1.99 in the 1st half of this year). Wholesalers generally believe that distributing publications with cover prices lower than $2.99 do not provide enough revenue to cover handling costs under the current industry pricing structure.
Bauer is Big at the Newsstand
These proposed price changes are significant to the industry because of Bauer’s enormous newsstand scale. It annually sells 220 million copies (much more than any other publisher) of its nine audited publications. This represents 25 percent of the total audited publications sold at newsstand.
Bauer is the checkout sales leader and their success has helped spawn several, not yet successful, low priced women’s service titles from super publishers—Time, Inc and Hearst. It is a major newsstand force. Its product portfolio includes two weekly celebrity titles (In Touch, Life & Style), two women’s service titles (First for Women and Woman’s World), three monthly teen publications and two fortnightly soap opera titles.
Influence of Bauer’s Celebrity and Woman’s Service Title Pricing
It’s Bauer’s proposed price increases for its two celebrity titles (from $1.99 to $2.99) and its two women’s service titles—First for Women (from $1.99 to $2.49) and Woman’s World (from $1.49 to $1.79)—that could make this a seminal industry event. These four titles, all currently priced under $2, represent 85 percent of Bauer’s estimated $430 million in retail revenue.
The price increases planned for its teen and soap opera titles, currently priced at $2.99 or higher, are important within their respective categories, but are unlikely to have much industry impact. It’s the proposed pricing changes to the power house celebrity and woman’s service publications that could have real industry significance.
Industry Impact of Bauer’s Price Changes
Because of Bauer’s enormous newsstand scale it’s difficult to gauge the industry effect of its proposed changes. However, there are many reasons to think they would benefit the industry. They could help reduce consumer pricing resistance and potentially allow economically weakened wholesalers to improve their shaky financial condition.
On the other hand there is the real concern that the unit sales falloff, which will inevitably occur, will create a permanent industry unit sales loss. This loss is potentially very large. For example if Bauer experiences a “unitary” (revenue gain equals units sales decline) drop of 35 percent it could result in the loss of 70 million annual units.
More likely the unit sales decline will be in the 15-20 percent range. Still this could mean a Bauer loss of up to 40 million annual units, but a $17 million gain in revenue. A 15-20 percent unit sales decline would not be dissimilar to what was experienced by the Globe and Enquirer in the four year period between the 1st half of ’03 and the 1st half of 2007. During this period the average cover price of these two publications increased from $2.39 to $3.14, unit sales dropped 38 percent and revenue fell 11 percent.
Will a prospective Bauer unit sales loss adversely modify buyer behavior and create a permanent market hole or will Bauer’s prospective unit sales loses be replaced by increased sales from other publications? I think it’s a good bet that a Bauer unit sales loss will eventually result in comparable sales gains for other titles. But this is only a prediction—not a sure bet.
We’ll have to wait and see how it all plays out.