The Burlington Free Press is raising its daily cover price a whopping 50%, to 75 cents, the Vermont paper said today -- the first in a wave of similar hikes across the company, my readers say.
Related update: As media shares plunge, Gannett stock tanks 4%
How will these price hikes satisfy already unhappy customers? Your replies, in the comments section, below. To e-mail confidentially, use this link from a non-work computer; see Tipsters Anonymous Policy in the green sidebar, upper right.
Friday, July 11, 2008
46 comments:
Jim says: "Proceed with caution; this is a free-for-all comment zone. I try to correct or clarify incorrect information. But I can't catch everything. Please keep your posts focused on Gannett and media-related subjects. Note that I occasionally review comments in advance, to reject inappropriate ones. And I ignore hostile posters, and recommend you do, too."
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Twenty Gannett newspapers will go up in price four weeks from Monday. Some of the bigger ones are: Louisville, Indianapolis, Rochester, Brevard, Des Moines, Shreveport, Sioux Falls, just to name a few.
ReplyDeleteOur CD said he thinks single copy volume will tank 30% after the increase.
Can upper management make anymore foolish decisions? It's time to break Gannett up and let ownership return to the local communities.
The timing's bad, because of the weak economy, but I dunno -- most newspapers have been 50 cents for years and years. I'm sure single copy sales will take a hit at first, but it seems like these price increases are overdue.
ReplyDeleteGannett's internal studies years ago projected that dailies would ultimately become niche products in their respective marketplaces...moves like this will just bring that prophecy into reality even faster.
ReplyDeleteRelying on the methods of old seems to confirm that Gannett is still more than willing to squeeze every pub to its last drop, at any price. And, it also seems to confirm that if any creativity was left to build this segment of the company that it is now gone.
Hopefully, analysts will pounce all over this in the upcoming conference call as it’s not a good, long-term strategy.
Lets put this in perspective. The contributors to this blog have legitimetly complained about the lousy milegae reimbursement with the increasing cost of gas. Single copy routes are predominently run by independent contractors who are threatening to drop the routes if compensation isn't increased. Newsprint and energy prices are up so Gannett is faced with the following options with Single Copy.
ReplyDelete1) Do nothing and have hundreds of Single copy routes go dark when carriers or IC's quit thus losing the circulation.
2) Increase the compensation to the IC's without an increase and lose even more money on every SC paper sold.
3) Increase the price and pay the IC's more and limit the loses on SC
Another point... If they lose 30% of SC sales with a 50% increase they are still ahead in the short term.Classic Gannett economics.
The newspaper industry is faced with a perfect storm of rising energy prices that impact just not gas and mileage but electrical and natural gas as well. It takes a lot of energy to heat and cool newsrooms,cool IT centers and run presses and mailrooms. Natural gas prices are up 4-5x in the last few years. Newsprint has skyrocketed, ink and press chemicals are up, aluminum plates and all outside services are up. Obviously revenues are down, some of the decrease due to the state of the industry and product and a big portion due to the state of the econony.
The revenue has to come from somewhere and if you look at the cost of single copy and the price increases in paper, ink and delivery something has to give. The advertising isn't there to cover the increased costs.
Local ownership would be forced to deal with the same issues and would probably have to do the same things in todays environment.
Any rack sale is discretionary; the consumer will decide if it is still worth it. It is just overall the worst time for print in 30-40 years and as long as the product is a slave to Wall Street margins; the shakeout will continue.
ReplyDeleteRaising single copy prices and therefore putting fewer paper copies on the streets is a strategy ahead of its time.
ReplyDeleteLike it or not, local advertisers still expect to pay based on the number of copies in distribution. If circulation is down (paid or otherwise)they expect to pay less for their ad.
They don't yet get the results they want from online advertising. (Who knows if they ever will.)
Instead of raising circulation prices, Gannett should be lowering them, so they can put out more papers. Then charge more for advertising to pay for the additional costs.
The strategy of charging people more for single copy -- something that is often an impulse buy for many people -- is going to result in more trouble, not less.
I'm glad I sold all my Gannett stock while it was still worth something.
I will buy stock in the first newspaper company that offers free, rack-controlled circulation for their daily product. If readers want home delivery they can pay for that as they do now. Dailies need more readers, not fewer. Free circulation is the only thing that can accomplish that. And that is the type of bold move that will lift the newspaper industry out of the dark ages.
ReplyDeleteSorry, but I still believe the paper is making a profit on the newspapers they do sell so why on earth would you just give away that money? Gannett is still a profitable company, they just need to figure out how to stay that way. All is not lost just yet.
ReplyDeleteWhy on earth would you give the product away for free on the news rack when there's still a substantial cost associated with printing and distribution?
ReplyDeleteI'm not enamored with the idea of giving the product away for free via the Internet, but at least the cost of production/distribution is negligible by comparison.
I watched a chain of local weeklies try the free distribution route (on the premise that they could cover their costs and turn a profit via ad sales) and nearly go belly-up.
u are in a dying industry, wake up and start looking for jobs.
ReplyDeleteWith the way the market is going, you will see lots of cuts in advertising budgets. With the prices of oil on the rise, more people going to select what they buy very carefuly. Raising the prices is not a smart idea, but it is not bad either.
Just keep in mind, when you are dying, vitamins are not going to save you.
In order for Gannett to stand out, they will need a strategy that leverages all their assets.
Gannett needs to market itself. It should sit with all the market players (Advertisers) and find out what are their missions and goals.
Gannett need to come back to the markets they serve and check what their readers want.
It is like going back to the basics, but the most important thing here is that Gannett needs to build an intelligent system that can connect the advertisers with their targets while providing consumers with valuable information that keep them coming back. Gannett needs brand loyalty, needs vision that is based on supply and demand. It needs something to set it apart from everyone else.
The problem is the company moves very slowly to adapt and accept changes. We should give them the credit with Gannett Digital, but this is not going to bring Gannett back to where it was. Unless they implement changes and executes them fast, whatever they do will not help them.
Gannett might be better off going private and restrcute itself. It can be done....... But you need the right people to do it.
Please "splain" to me, Lucy.
ReplyDeleteSo, Gannett's raising the price on people who actually are buying a newspaper. This will drive even more people to read news online for FREE.
Am I missing something here? And how is Gannett going to make money with this kind of business approach?
With minds like these, Enron's execs look like geniuses.
This has to be the dumbest move I have seen Gannett management take _ ever. August and September are the key months for circulation, leading to the annual ABC report on newspaper circulation. Ad rates are set on the basis of these ABC figures, and national advertisers decide whether a paper is big enough to bother with on the basis of ABC figures. So if forecasts of a 30 percent decline in circulation in the weeks following a price hike are in line, then these papers are going to pay for this dearly both in terms of declining circulation records, and fewer ads sold at lesser rates.
ReplyDeleteWow.
If McLean is going to order it, October makes more sense. Also 75 cents is too greedy. People notice when things go up by a quarter. They might accept a nickel, but a quarter is going to cost GCI a mint.
im an ic in florida if when these increases go through, we actually got increases too, it wouldnt be so bad. but how do you expect to keep people when gas keeps going up, you raise single copy and h.d. rates but dont pass anything on to those of us who ensure your product gets on the street on time????
ReplyDeleteFolks, Gannett has given up on the print product...wake up. We are taking money from print and puttibng it in digital. We have been doing this for years.
ReplyDeleteNot saying it is right, but Gannett does not care about the print product.
SCJ shared her retirement when? And, since Dickey, what’s been done?
ReplyDeleteHmm. Shrink to four groups like three years ago, yet add corp. suits. Shuffle a few publishing roles (though fall short in throwing more bullies out) and now, a broad circ price increase.
Yes, the math yields revenue gains…for circ. But, this age old move yields costlier CPM’s for struggling advertisers too. And, let’s not forget that most if not all print news is now online for free. This will drive subscribers – who are also looking to save, out faster to a medium where they can turn off the ads. Genius.
At this fast pace, Gannett will have newspapers fixed…well, after the opportunity has passed. Looking forward to analysts next week ($17.77 a share already speaks volumes) and especially the spin on why Gannett endlessly chews the company’s bones versus implementing a broader plan that gets people focused on the future instead of who’s next to go – which should be Dubow at a minimum.
Above poster is right, GCI wants the print product to go away fast. Best way to lose more customers is to make them pay more for less. According to the link below the plan will backfire.
ReplyDeletehttp://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=1003826892
I've delivered papers for over 10 years and each increase went straight into Gannett's pocket. Not mine... SO don't pull this bullshit of we're raising the cost of the paper for the carriers. I finally quit because it got to be where it wasn't worth my time and gas... For the last 10 years I delivered we NEVER got ANY increase in pay and with the way they wrote their contracts on multiple ad delivery we got even less... The only thing this is doing is saving Dubow's butt for just a little longer...
ReplyDeletePoster 7/11/2008 4:12 PM offers a lot of wisdom.
ReplyDeletePlease look at what this person has posted.
Gannett expects growth without devoting resources to marketing.
I learned in college in Marketing 101 that if you have the best product and do not market it you will not sell it. I work for a mid-sized paper and we do exceptional things to serve our community but we do not market it. Most of our community are unaware of the product that is available to them. Take a hint from our local TV competitor, a competitor that buys ad space on a competing cable channel, and advertises during CNN headline News.
I get up at 5am each day. I get my morning news from our local TV provider and CNN Headline news. Newspapers should look at the Nielsen ratings and market their fine local products, and beat the local TV stations to the punch. Gannett newspapers know how to do great things. If our potential audience does not know the depth of what we can provide to them and in what format we are a sorry company. I take a lot of calls at my newspaper and readers are surprised that we have a website.
How sorry is that for this corporation.
AAARGH!
ReplyDeleteIf anyone uses "perfect storm" to describe the market forces stressing the newspaper industry my head is going to explode!
RE: 12:48 post, you make some valid points. However, regarding your last paragraph: " Local ownership would be forced to deal with the same issues and would probably have to do the same things in todays environment" misses an important point.
ReplyDeleteSure, a local management/ownership structure would face the same economic realities, but they would not have to suffer corporate fixed costs. These create a huge drag on local operating unit's bottom line and resources. I believe most of the local markets would do much better if the millions of dollars were not siphoned off and swept to Tyson's Corner each night. If you calculate the cost of Dubow's salary/bonus, plus the dozens of VP's, division presidents, jets, crystal palace, executive stock rights and the list goes on and on, the final price would be amazing.
It would be most interesting to know what the true cost of the corporate Gannett structure is to each newspaper in the company. It has to be millions annually to each property.
For those who defend the current Management Committee, please expain to us in the rank and file what value the chosen "122" bring to GCI???? I don't see it.
You are a bunch of whiney asses. What most of you are saying is that your newspaper is not worth an increase in price! You value your work so much that you think it should be given away for free?
ReplyDeleteYou guys will complain about anything. You should praise the folks in Burlington for raising prices (instead of firing more people).
Perhaps everyone on this blog shold start praising the work of each other and stop the complaining
Way to go Brad!
Do you really think that raising the circulation prices will preclude firing more people? Yes, newspapers have for years been sold too cheaply. But to try to increase the price by this much at this time is nuts. My guess is this was not Brad's decision. It's another one of corporate's famous mandates. Let's see when Burlington next lays someone off or fires them. It will happen sooner rather than later.
ReplyDeleteI have a ton of respect for Brad and wish him well. You can celebrate lots of his successes, but I don't think this will be one of them (thru no fault of his own).
To Anon 9:26
ReplyDeleteCheck out what private ownership led to for the Daytona Beach News Journal. And how about the Seattle Times? Blethen is running that paper into the ground as well. I can go on about other examples. Many private companies run very good papers and many run very poor ones; same goes for publicly held papers.
I think it's a smart move. The old print readers who haven't switched to free online are loyal-to-death print readers. Most will pay more to keep the print editions from being lost altogether.
ReplyDeleteAnd I agree with the comment Gannett is still a profitable company, and the most profitable among all the newspapers. All newspapers are out of favor with Wall Street stock brokers, but that doesn't mean they don't make a liveable profit -- just not the exploitive profits greedy investors grew to demand, unrealistically.
It would be great if these media companies sold all the newspapers to individual owners. Then we could get back to the business of covering news in our community instead of worrying every minute about how to prostitute journalism to make another penny for each investor sitting on his/her ass and profiting from our sweat.
In my experience, I had it better as an employee when we were privately owned before Gannett, before we had to start sharing our daily profits with "preferred investors."
Anon 10:08
ReplyDeleteDoesn't look like customers are offering the same kind of congrats.
Read what they're posting.
Are you going to call them whiney asses?
Cincinnati has been hanging on to at least part of its single-copy sales by cutting the price to 25 cents at certain outlets, like a large local convenience-store chain. It will be interesting to see the next round of ABC numbers; they should give a clue as to whether this works.
ReplyDeleteAt 25 cents plus whatever the advertising in it is worth they won't be making money on the distribution of single copy. It will be interesting to see what happens in Cincy.
ReplyDeleteDon't assume that many advertisers even want SC. They will take it if the rate is really good but for the more sophisticated buyers SC is not on the radar especially if a mail delivered TMC is available.
One of the problems with SC for Advertising is many of the preprint advertisers don't want it because they don't know who buys it and if the preprint reaches their targets. In most papers it's been a struggle to keep the major preprint advertisers in SC. To make the price cut wothwhile SC #'s would have to increase substantially. I'm assuming this is on a limited distribution. Does anyone know how widespread this is?
The Internet paper is FREE. Print costs money.
ReplyDeleteDoesn't take a genius to figure out what choice readers will make, especially in hard times.
Raising the price will only push more people to the Internet, lowering print circulation and readership even faster.
Corporate must be in denial or delusional. No one pays for anything as long as he or she can get it for free.
It's the basic principle for marriage and marketing.
The internet is free and readers are starting to use that more and more to get thier news. The problem is that the advertsiers are not sold on the internet, or at least not sold on advertising on the local newspapers website. Advertisers do prefer print advertising, but as the publicly traded companies abandone their print readers advertisiers are pulling out.
ReplyDeleteSo we cut knowing it will impact revenue and then when it does we wonder what happened and we cut more....knowing the impact on revenue. We need to re-invest in our print products. This will improve quality and service, volumes losses will slow down, stops and in some cases reverse as people start to see an improvement in their newspapers. Then the advertisers will start to come back.
Don't you all see? This is a test to measure what's lost in single-copy sales / revenue and what gains are made in Online traffic. Gannett is trying to drive its occasional reader base to the internet more, to drive unique visitors, page views and time spent. In turn, Gannett then hopes it can raise its rates for Online ads.
ReplyDeleteWill it work? Doubtful. But remember this: Gannett doesn't do anything for free or to lose money. Gannett sees profit in this move, but is unsure of the tradeoff, thus the controlled rollout.
This coming week's call with Wall Street will be interesting. From it will come new grades / ratings / long-range price forecasts from investors. And let's be honest, Wall Street doesn't have much faith in Craig and Gracia, let alone the newspaper industry.
Let's not forget the two other things that Cincinnati has going for them in circulation:
ReplyDeleteThe Scripps JOA termination at the beginning of this year. Though, not sure if they've figured out who's paying for the added copies of the KY Enquirer.
And, MB's Bonus Issue gambit. If people won't buy them, then current Enquirer subscribers are basically unknowingly up-charged (it’s a great system) so the free copies that their neighbors receive count as free...last count, more than 60,000 copies at 50 plus times a year.
This comment has been removed by a blog administrator.
ReplyDeleteSo the way to the future is to cut newsroom staff and diminish the journalism product, and to pretend that we still don't make 80 percent of our revenue from the print editions, and start tearing that piece down. Brilliant!
ReplyDeleteJust so yous know...
ReplyDeleteThere is no marketing director in Burlington. Ain't been one there since Scary Jim Carey chased the entire department out of Dodge, screaming expletives one minute and getting in his car with a "No Jesus, No Peace. Know Jesus, Know Peace" bumpersticker the next.
How the above poster can attack the new guy is beyond me.
But so, too, are a lot of things in this company.
Here's the math:
ReplyDeleteFor every 10,000 copies in the newspaper's single copy base (and assuming a 25% sales loss and 90/10split with the dealers), the newspaper's annual incremental revenue is about $230,000 from the increase. So a newspaper with a 30,000 single copy base, the incremental revenue is about $700,000.
The newsprint savings from printing fewer copies due to lost sales is conservatively estimated at $40,000 a year for each 10,000 copies in the base.
Combined revenue and newsprint savings is about $270,000 a year for every 10,000 copies in the single copy base.
There would be some amount of incremental promotion expense to minimize sales losses, e.g., discounted home delivery subscriptions.
Likewise,going the other way would be lost preprint revenue from distribution of fewer copies.
If 20 GCI papers increase prices in the near future, this is some serious money on the total-company basis. And the 2008 impact would be about 40% based on Q3 effective dates, which leave a nice carryover into 2009 for Q1 and Q2...and then they have 60 or 70 more newspapers waiting in the wings for subsequent quarters.
This would appear to be a "back pocket idea" for GCI whose time has come.
I ran the numbers, too, and mine are slightly different from the preceding poster's, but still show Gannett can make more money with a 50% price hike despite a potential 25% loss in single-copy sales.
ReplyDelete10,000 50-cent papers a day ($5,000), 313 days a year, grosses about $1.56 million, less 10% for dealers ($160,000), and nets $1.4 million.
7,500 (25% sales loss) 75-cent papers a day ($5,625), 313 days a year, grosses about $1.76 million, less 10% for dealers ($176,000), and nets $1.58 million.
The company comes out $176,000 to the good despite seeing a 10,000-copy base erode to 7,500.
I think the $40,000 estimate on newsprint savings is way too conservative. 30-lb. newsprint is already at $685/ton and by year's end probably will be $740-$760. Assume an average edition is 32 pages and a metric ton yields around 6,600 copies. NOT printing 2,500 papers per day saves $90,000 per year.
Combine more revenue and less expense: $266,000 per year (by my calculation) to the good.
That won't all happen at once. The circulation losses will happen over time at a rate that's hard to predict. Which is a good thing, however, because it will be awhile before advertisers (and especially preprint advertisers) catch on that their messages aren't reaching as many eyes.
As a short-term tactic to help weather the recession, however, Gannett's plan for price hikes makes sense, especially facing rapidly rising newsprint prices.
Previous blooger,
ReplyDeleteYou're right. My newsprint savings calculation was too low. But I think you're too low as well.
I used 50 cents a copy (Sunday cost per copy) and was off by one decimal place.
I think the average newsprint price of a daily newspaper copy is 20 to 25 cents.
Using 22 cents a copy and losing/saving 2,500 copies a day, the annual savings are $172,000.
Your average newsprint cost per copy is 11.5 cents based on $90,000 savings and 2,500 copies a day. I think that's too low. Maybe your calculation failed to consider there are 2 pages on a sheet of newsprint?
Is there a 3rd opinion or newsprint calculation out there?
In any event, the SC price increase is an effective way to reduce newsprint expense.
BTW, the SC losses are likely to be immediate versus staggered, and they likely won't come back in 12 months.
Bottom line is this is more short-sighted, I need money now, thinking by corporate. They will save money. Expense reduction is the only solution they ever have for any situation. It is what has sent them into the death spiral and it is what will push them toward their final resting place faster.
ReplyDeleteDubow and Gracia will laugh all the way to the bank. After all, they developed a brilliant strategic plan, but the perfect storm blah, blah, blah...
I'm LMAO!
ReplyDelete"NOT printing 2,500 papers per day saves $90,000 per year"
Better yet, NOT printing 100% of papers saves 100% of the company's expense! Lets try that!
Not building a car will save GM a lot of money too. But then again, there's revenue assocated with BUILDING it and selling it. That's why they do that.
You CAN'T just count the production expense savings. You have to factor in lost ad revenue from fewer copies on the street unless you plan on going the free-distribution route. You've got to have copies out there if you're going to sell ads. The websites just don't cut it.
There was a time not all that long ago that I would have paid $1.00 a pop for information (from a Gannett newspaper and $1.50 for USA Today). Nowdays, I can barely stand to read any of them on-line for free. Seems stenography has replaced reporting and aggragated content has replaced news. Makes me want to yell "Where's the News?"
ReplyDeleteI visited Vermont right after I got married last year. I made a point of asking people about the Free Press as my wife and I wandered around the state.
ReplyDeleteHere's what I found: No one had anything good to say about the paper. Most said they gave up reading it years ago, when the news content became so shallow that they realized they weren't missing anything by not reading it.
The consumer is neither as dumb nor as die-hard committed to newspapers as some of you think. You're asking them to pay a quarter more for a product that has steadily diminished in size and quality year after year. For many people who still subscribe to newspaper, this may be a straw that breaks the camel's back.
Think about it. Many people who read and subscribe to newspapers do so out of habit more than anything else. Charging a fairly steady subscription rate helps subscription rates because people aren't suddenly jolted by a price increase to reconsider the quality of what they're paying for. If you said to 100 average American homes tomorrow, "Hey, we're gonna charge you $50 to $100 more a year to buy the paper," I think the immediate reaction would be a big, "Hey, wait a minute..."
And think about it - what the hell is the consumer getting for the extra money paid? Less news hole? More wire copy? Spotty local coverage written mostly by young college grads - the only idiots willing to put up with what Gannett pays? Why would anyone pay MORE money for that? It doesn't make any damn sense.
Will Greenville also have a price increase?
ReplyDeleteWill Hattiesburg? I think the other Mississippi Gannett paper, Clarion Ledger, went to $.75 a while back.
ReplyDeletewho cares! It's a quarter more for crying out loud! You pay $3 or more for coffee. You shell out over $4 for a gallon of gas. I will say it again it is a quarter. Is there anyone here who really worries about spending 25 cents more? 43 comments about a quarter. I wish I had a quarter for every wasted post on this blog. Now that would be worth something.
ReplyDeleteI want a quarter for every reader (information center client or whatever you're calling them these days) ya'll lose when the price gets jacked up.
ReplyDeleteAnon 10:27 PM, have you kept up with the comments from readers? Do that and that will answer your question.
Also a factor is Gannett wants to put more distance between the single-copy and home-delivery price, since home delivery ends up costing less and provides consistent circulation and readership. Magazine advertisers, mostly, want subscribers more than single-copy sales; this is similar. I'm not saying raising the single-copy price is right, but it's not as obvious a decision as you might think. In any case, I don't think it makes much difference in the long run. Newspapers are toast. Given today's quarterly report combined with the tanking economy, it's clear some major cuts are coming. Yeah, most papers are still quite profitable, but that's not the point.
ReplyDelete