There is an interesting discussion in the UK at the moment on newspaper prices and margin for local newsagents. This story from the Press Gazette sums it up.
Newsagents ‘could review selling’ some titles after price rises and margin cuts
The Federation of Independent Retailers has raised the prospect three times since December.
The Federation of Independent Retailers has again raised the prospect that its members may stop stocking some newspapers after The Guardian raised its weekday cover price to £2.80 but lowered the margin kept by newsagents.
It is the third time since December that the trade body, which represents more than 10,000 businesses including newsagents, off licences and post offices, has made the suggestion in public statements.
Newsagents receive between a sixth and a quarter of the cover price of each newspaper they sell. However, almost all national newspaper publishers have lowered these proportions over the past decade as they have simultaneously raised cover prices.
Press Gazette research in January revealed how UK national newspaper cover prices have sharply increased in the last decade as publishers have sought to counter the impact of falling advertising and increased newsprint/distribution costs.
The most recent warning from the FIR was prompted by news that Guardian News and Media plans to raise the price of the daily and weekend Guardian, as well as The Observer, by 30p per copy to £2.80 and £3.80 respectively while cutting the percentage margin for newagents to 21.5%.
The federation’s national president Jason Birks said: “Neither retailers nor their customers will take this news well. For retailers, this could mean reviewing the profitability of selling the Guardian against other product categories and for customers, it could mean buying the paper on fewer days of the week.
“Given the low circulations of the Guardian and Observer, this is a risky strategy indeed, which is why I have written to [GNM chief financial and operating officer Keith] Underwood.”
The Guardian has responded by encouraging stockists to enrol in its “Enhanced Margin Uplift” scheme, which boosts the amount they earn when selling papers to Guardian and Observer subscribers. The company said it believes the scheme “will mean that we pay one of the highest margins in the market to retailers”.
In March, DMG Media announced that the retail margin for the Daily Mail would drop to 21.8%, prompting Birks to say he believed that “some members may consider delisting the product and, indeed, whether they continue selling newspapers because their hard work that has kept the news industry afloat for years is neither recognised nor appreciated”.
And in December the Fed criticised both DMG Media and Reach over margin drops. DMG Media decreased the retail margin for the Mail on Sunday and the Saturday edition of the Daily Mail to 20.5%, while Reach lowered the margin across its titles to “an all-time low” of 18.5%.
“Reducing margins to a measly 18.5% will simply speed up the decline of the industry, as news retailers downgrade newspaper displays in their stores and look to other categories that demand less work but where there are greater rewards,” Birks said.
In 2013 three weekday newspapers – the i, The Times and the Racing Post – offered 25% margins to newsagents. Today the highest margin offered, by the i, is 22%.
The only paper not to have lowered its retailer margin over the past decade is the Financial Times, which still offers stockists 20% of the cover price.
As newspapers’ cover prices have risen, so have the amounts of money retailers earn per paper sold. However, the decreased margins mean they earn less than they would have otherwise.
For example, the Racing Post, which nets newsagents the most pence per copy of any weekday daily newspaper, used to earn retailers 50p a copy. It now generates 88p a copy. If the newspaper had kept its 2013 margin of 25%, each copy of Racing Post sold would earn a retailer £1.13.
Some regional publishers have kept margins steady, with National World for example announcing cover price increases in December without dropping retail terms. And in August last year, the Fed praised DMG Media for (at the time) keeping its retail margins the same while increasing the Daily Mail cover price.
While I feel for UK newsagents, we are far worse off here in Australia with margins close to half what they get in the UK. Yet, most newsagents here are publicly quiet on the appalling, disrespectful and socially selfish commercial treatment of retail newsagents by newspaper publishers.
The result of declining value of newspapers to newsagents because of falling sales and falling margins is that the products are moved to less expensive space. Senior management in newspaper publishing companies are not bright enough to understand that a different approach could reduce sales decline. But, as they show us, they know best.
Their ignorant treatment of the Aussie retail newsagency channel by newspaper publishers could make an interesting business studies for universities in years to come.
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Thank you for bringing our story to your readers in Aussie mark. I am sick and tired of these publishers treating us like this. Our costs go up and up and they keep reducing what we make. It’s as if we live is two different worlds.
Taking “The Times” in isolation.
A UK newsagent received 25% or 25p for selling a single copy in 2013. In 2023 the newsagent received 20% or 50p. Sure, the margin is down from 25% to 20%, but the profit per copy sold has increased from 25p to 50p ie a 100% increase in profit per copy in a period where inflation was about 30%.
So, to answer the question. No, UK newsagents will not be ditching newspapers anytime soon. Newsagents in the UK have benefitted and are better off from the shift in pricing of papers, where publishers have increased the cover price ahead of inflation to make up for diminished advertising.
The same question in Australia might reveal a different answer as margins are well short of 20%.
Colin your thesis is incomplete and it lacks current local knowledge. While the price per copy has gone up sales have plummeted while the cost of managing the products has gone up measurably. Some newsagents have already stopped selling papers for the reasons outlined in the article.