More money for magazines? Great idea

Rico says that, since he's starting his own magazine, the issue of how much to charge has come up. The New York Times has an article by Stephanie Clifford about the problem:

Fifty-eight cents. For that, you could get one-eighth of a Starbucks latte. It is also what subscribers paid, on average, for each issue of Time magazine last year. This is the Time magazine that sends foreign correspondents into Zimbabwe, assigns photographers to capture the war in Afghanistan, and fact-checks and edits every word before issues are printed. And that is before its costs for ink, paper, and postage.
Time is in good company— most big magazines’ subscriptions cost on average little more than a dollar an issue. But now, as they consider the decline in advertising and the success of magazines that have increased prices recently, some publishers are wondering whether they can raise their prices without losing subscribers.
“We’re realizing that the product is undervalued,” said Michael Clinton, the chief marketing officer of Hearst Magazines, which raised cover prices on more than half of its magazines last year and plans to raise subscription prices this year. Publishers have long set low subscription prices and have even lost money doing so, assuming that the real money came from ads. Subscription revenue was gravy.
In the last six months of 2008, subscribers paid an average of forty-seven cents an issue for Newsweek, seventy-seven cents an issue for BusinessWeek and eighty-nine cents an issue for Fortune.
Even Condé Nast’s magazines, filled with luxury ads and dispatches from far-flung locations, are cheap: eighty-seven cents an issue for The New Yorker, eighty-nine cents for Allure and just over a dollar each for Condé Nast Traveler and Bon Appétit. “Obviously, you can hardly even mail that particular issue for eighty cents, but what makes up the difference is the advertising,” said John Fennell, an associate professor of magazine journalism at the Missouri School of Journalism. It is a “model where magazines essentially try to gain as many subscribers as they can and allow advertising to pay the bills.”
Most major magazines have cut prices recently as part of an effort to increase subscriptions. A New York Times analysis of circulation data for the fifty largest and most expensive magazines showed that in the last four years, as overall prices rose fourteen percent, subscription prices dropped an average of nine percent. (Lower subscription prices do not necessarily mean less revenue for the publisher, however. When publishers reduce their reliance on subscriptions sold through agents, the subscription prices can fall, but the publisher earns more because it is no longer sharing the subscription revenue.)
Decreases at individual magazines were more substantial: Parents magazine’s price dropped 51 percent, Elle’s 41 percent and Fortune and Fitness’s 34 percent.
“Think about the cost of a movie ticket. Think about the cost of your subscription for cable television. Think about the cost of going to a sporting event,” Mr. Clinton, the Hearst marketing chief, said. Those industries, he said, “have kept pace in passing on more of the cost to the consumer, and the consumer’s willing to pay for it.”
The Economist is leading the charge on expensive subscriptions, and its success is one reason publishers are rethinking their approaches. It is a news magazine with an extraordinarily high cover price— raised to $6.99 late last year— and subscription price, about $100 a year on average. Even though The Economist is relatively expensive, its circulation has increased sharply in the last four years. Subscriptions are up sixty percent since 2004, and newsstand sales have risen fifty percent, according to the audit bureau.
“We get more money out of our readers than advertisers, and that’s a very different model,” said Alan Press, senior vice president for marketing in the Americas at the Economist Group. “We’ll never discount the kind of content we have.” The Economist’s readers, it could be argued, are professionals who can afford price increases. But one of the most popular and expensive mass magazines, People, has also been raising its prices without losing readers. The subscription price for People has risen about five percent, to $104 a year, in the last four years. The cover price has risen twenty-one percent, to an average of $4.09 (including special issues, which cost more). In that time, People’s subscription and newsstand sales have both increased slightly.
“Our strategy right now is to maintain a premium price on both sides of the equation,” said Paul Caine, who oversees People as the president and group publisher of Time Inc.’s style and entertainment group.
Many publishers argue that these magazines are the exception, not the rule, and say they would lose too many readers if they raised their prices. “Sports Illustrated could theoretically charge one hundred dollars a year and have a much smaller circulation, but we wouldn’t be maximizing what the enterprise could make,” said John Reese, the vice president for consumer marketing in the Sports Illustrated group.
“It’s amazing how price-sensitive people are,” said David Ball, the vice president for consumer marketing at Meredith, which owns magazines like More and Fitness. “Honestly, we’ve tested raising it fifty cents and we see a drop-off— sometimes startlingly high.”
Interestingly, whether consumers pay five dollars or fifty dollars for a subscription does not affect their perception of the magazine, according to a study conducted four years ago by the media consultant Rebecca McPheters for publishers including Time Inc., Condé Nast, Hearst, and Meredith. “There was no difference between the engagement of those who paid less and those who paid more,” Ms. McPheters said in an interview. “Since then, we’ve done a lot of work around public-place readership, and we find that public-place readers who pay nothing are almost as engaged as those who pay.”
Given those findings, the price a consumer pays should not matter to advertisers, since it does not affect the reader’s attitude toward the magazine, said Robert Sauerberg Jr., the group president for consumer marketing at Condé Nast. Mr. Sauerberg said that prices were constantly tested, and “the fact is, the pricing comes as a result of what the consumer is willing to pay.” Still, he has raised prices on renewal subscriptions for The New Yorker and Vanity Fair recently, and Vanity Fair raised its cover price from $4.50 to $4.95 with the April issue. “When we can do it, we do it,” Mr. Sauerberg said.
More magazines may follow as they watch others that have done it. Real Simple, for example, has raised its subscription prices seventeen percent in the last four years and had an eighteen percent rise in subscriptions. In the same period, Cosmopolitan has raised its subscription rate eight percent and orders have risen nineteen percent.
Given the economy, it may not be “a propitious moment to launch this”, said Victor S. Navasky, chairman of The Columbia Journalism Review, but “to the extent that the publication is aimed at a segment of the population that can afford it, why not?”

Rico says that, since Civil War: Weapons & Tactics will not have any advertising (yet, anyway, but if someone demands to advertise, he'll let 'em), he's charging a hell of a lot more than these folks; nine bucks an issue, to start, and more as the magazine gets bigger...