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Friday, September 08, 2006

Can Subscriptions replace Trade Sales

A very senior and seasoned business to business media executive, lets call him Dick, told me recently that he wasn’t worried about the decline in his news trade sales. “I’ll replace them with subscriptions,” Dick boasted.

What Dick hasn’t realised is that in the last twelve months business magazines have seen their copy sales through newsagents drop a massive 10%. With rates of decline at half that level, National newspapers think the sky is falling in. Business publishers don’t even appear to have noticed.

I checked the latest ABC returns for the first eighteen business magazines I could think of. I discovered that every title I reviewed but one had posted a year on year trade sales decline. That should make every business advertiser and business publisher (except Dick), need to have a lie down and a think.

The price of the industry’s failure to tackle this issue is enormous.

I estimate that business to business magazines generate gross news trade revenues of around £30m a year from around a quarter of a million magazine sales a week. If this revenue can’t be replaced some £15m of profit gets wiped from business media companies results. If advertising is sold at an average of £100 per thousand circulation and there are ten advertising pages in every magazine, add a further revenue loss of £10 million as advertisers demand lower rates for less circulation. If circulations are propped up with controlled circulation add around £10 million to the cost base of business magazines.

Any way you look at it, an educated guess says that the total loss of business magazine news trade sales will wipe at least £25m from business media company profits. That’s the equivalent of wiping a company the size of Centaur off the face of the earth, twice. Perhaps a thousand people will lose their jobs.

So why not be a Dick and sell more subscriptions? Selling 250,000 new subscriptions may not be possible at all. If it was wouldn’t we be doing it right now? The average acquisition cost of a new subscriber is around £75 and if we are all Dicks, a replacement subs strategy will cost the industry nearly £20 million in the first year and £5 million a year for every year after that!
This is the most pressing crisis to face every business publisher except Dick. The rate of news trade sales decline is accelerating. Dick tells me he isn’t that interested in the issue. Let’s hope he keeps his job.

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