• by Erik Sass  @eriksass1, July 28, 2008

As their print circulation falls, big metro dailies are charging more at the newsstand. They are hiking prices to offset the growing costs of production--including ink and paper--and distribution, where they are feeling the squeeze from high gas prices. This paradoxical strategy may shore up revenues for some companies, but it's a risky proposition.

Most recently, The New York Times announced last week that it will raise its newsstand price by 25 cents for the second time in as many years from $1.25 to $1.50, effective August 18, along with a 4.5% increase in the home delivery price. The last newsstand hike, from $1 to $1.25, came in July 2007. After no increases from 1999-2006, the decision to raise prices two years in a row is testimony to the rapid slide of the newspaper industry.

In the first half of 2008, total circulation revenue at NYTCO rose about $9.6 million--or 2.2%--to $450.8 million, despite an ongoing decrease in daily circulation. According to the Audit Bureau of Circulations, daily circulation fell 4% to 1,077,256 in September 2007-March 2008, compared to the same period a year ago. And the gain in circulation was small compared to an $85 million drop (5.4%) in total revenues.

The price hikes at the Times have come in lock step with The Wall Street Journal. Earlier this month, The Wall Street Journal announced it will raise its price by 50 cents to $2, effective July 28. Like the Times, this follows an increase from $1 to $1.50 in July of last year. Before the 2007 increase, the Journal had no price increases since April 2001. Daily circulation at The Wall Street Journal remained basically flat, according to the ABC, increasing slightly to 2,069,463.

On July 6, the Chicago Tribune raised the newsstand price of its Sunday edition 20 cents to $1.99 in the Chicago metro area. Like the New York papers, Tribune cited the rising costs of production and distribution. It also said home delivery rates will rise an unspecified amount in 2008. According to ABC, in September-March, daily circulation fell 4.5% to 541,663. Second-quarter figures for circlation revenue aren't yet available.

At the beginning of the year, The Washington Post raised its daily newsstand price 15 cents to 50 cents, inside the Washington metro area. This was the first price increase since 2001, when it rose from a quarter to 35 cents. In September-March, its daily circulation fell 3.5% to 673,180.

A little further back, in 2006 USA Today raised its newsstand price from 50 cents to 75 cents. Now, newsstand prices are also set to rise at 20 of Gannett's local newspapers, beginning with The Burlington Free Press, where the newsstand price rose from 50 cents to 75 cents.

This is a crucial area of difference, according to Ken Doctor, a newspaper analyst with Outsell Inc. "I think The New York Times, The Wall Street Journal and the New York Post can get away with it, because they are big products. But I'm more dubious about the local papers having price increases."

According to Doctor, many smaller papers are also cutting their newsroom staff, so the amount of content is decreasing. Coming alongside a shrinking print product, a newsstand price hike may prove to be a deal-breaker for local papers.

As for the big three metro dailies he mentioned, Doctor said he expects the newspapers to push their newsstand prices as high as they can to maximize revenue from older readers loyal to the print product: "Their readership could last another 20, 30, or 40 years. It's definitely intended to be an ongoing strategy." But he warned of the strategy's risks: "These people will pay more, up to a point. The question is, how much circulation are you going to lose, in addition to what you're already losing?

"If a price increase hastens the amount of circulation loss, not only will they have declines in circ revenue," Doctor warns, "they'll have a smaller rate base for advertisers, too."