Thursday, August 21, 2008

Today, I Only Have Questions


Today, I Only Have Questions
Posted by BoSacks
http://www.pubexec.com/pubtalk/pubtalk.bsp?sid=118726&var=story
Today, I only have questions. What is the difference between Europe and the United States when it comes to publishing and newsstand sales? Why are the newspapers in Europe not only doing well, but on the whole thriving and growing, while ours are gasping for air, with plummeting revenue and circulations? What does the "old" world know about publishing that we here don't?
Why? How? What is the difference?

A "cub reporter" of this newsletter, who is actually a worldly and knowledgeable publisher, recently argued with me on-line on a similar subject that seems relevant to my vent today:
"Professional circulators analyze reader acquisition costs in excruciating detail, with mountains of real-world data. No one can tell why a publisher picked a price, set a rate base, or chose a sales channel by looking at magazines on a newsstand . . . especially in today's incredibly complex and competitive marketplace . . . Publications with good strategies will prosper and magazines with bad strategies won't."

I generously offered to send him to Europe to find out the answers to these questions, but doubling his T&E budget from last year didn't seem to be enough to send him on the important investigative journey. (Last year his BoSacks T&E budget nearly topped $000,000.00)

So I'm forced to ask more questions:

Why are the last U.S. ABC figures reporting such dire domestic results while European magazines are on the whole doing better than we are? Why do European magazines charge almost the same for a subscription magazine as a newsstand title and we practically give away our subscriptions? Is this a holdover from better bygone days or a real, bona fide science that can actually work in the 21st century?

Let's remember that we are talking about the very same product, manufactured in the very same way, but clearly with a different business model. Why are the European sales numbers for magazines hovering around a 60-percent sell-through while we struggle with a low-to-mid-30-percent sell-through?

Let me move on. Why are the reading scores of our domestic youth plummeting? Is there any connection with the fact that text messaging is on the rise while writing skills are plummeting to unconscionable lows? Why is the biggest expense for so many businesses remedial writing for new employees?

None of these questions address the on-going digital dilemma the publishing world is facing. Clearly, we are going to have to remake our industry and redesign our business models including the circulation paradigm. These questions seem to me to be a great start and a part of that process.

There you have it: a dozen questions and not an answer in sight. These are the things that make me, well, wonder just what the heck is going on with our business-and reading in general?

1 comment:

kathy kahng said...

the newspaper biz in Europe didn't start out as the same economic model in the US, that is why it is doing better than the US now. in the US, newspapers were generally 80% ad revenue to 20% circulation revenue. In Europe, most newspapers are 60% ad revenue to 40% circulation revenue. To sustain the circulation numbers necessary to generate ad revenue, US newspapers turned to large home delivery operations to essentially guarantee the rate base.

Home delivery was heavily discounted and sold, and consequently studied and sold to advertisers as trackable high demographic circulation. Most newspapers thought os single copy as an afterthought, something to cover the market, but not generate large sales. In general, the newspaper business used to sell single copy readers as less demographically valuable to advertisers, so it was a catch-22 situation there.

However, in Europe, newspapers always relied heavily on single copy sales in most markets as home delivery is a non-entity in many countries. Single copy is most European countries is a monopoly distribution system, so to a certain extent all newspapers in the same market have pretty much the same fixed distribution cost, so to marekt themselves they rely heavily on newsstand promotion.

Also, because European newspapers are more reliant on newsstand sales, the cover prices are generally higher than newspapers in the US and there is generally much less discounting.

The good news in the US, if there is any is that US newspapers are moving to a more similar revenue split as European newspapers. Generally, these days most newspapers are 70% ad revenue to 30% circulation revenue. Circulation departments are being asked to of course cut costs but also generate more revenue. Easiest way to boost revenue is through single copy sales, as the market potential at many newspapers has not peaked.

Many US newspapers are reducing their costs and increasing revenue by adding distribution of other products to their home delivery operations, such as the NY Times and the Wall Street Journal. This idea of delivering "competitor" products on a newspaper's home delivery operation would have been considered traitorous as little as ten years ago. These days, newspaper people are realizing that newspaper readers are a demographic coverage area, not just a geographic one.

The European newspaper model started out as a predominantly newsstand driven circulation operation because of the nature of the market. Most European cities have excellent public transit systems and walkable and liveable downtowns. Many people live and work in the same area, which is not very common in the US. Europe is geographically smaller, so newsstand sales can cover most of a market, which would be virtually impossible in the US.

Europeans in general have the habit of visiting the newsstand on daily basis to pick up the paper and see what else is worth buying. We don't have this tradition in the US and probably never will.