With circulation declining in large part due to the huge amount of free content available on the internet, some magazine publishers are adopting what seems like a counter-intuitive approach to competing: raising prices.Magazines like Time, Newsweek, Business Week and even the upmarket New Yorker have long relied on low subscription prices to attract large numbers of subscribers, which in turn attracts advertisers. But the New York Times reports that The Economist has raised its price substantially of late and is still continuing to buck the trend of declining circulation. That has other publishers taking notice, and many are planning to increase their subscription and newsstand rates, after years of falling prices.
In a way, it makes perfect sense. People who are price-sensitive have probably already shifted to reading the magazines online. Anyone who is still buying Newsweek at the convenience store is either oblivious or so rich that they wouldn't notice if it cost $6.99 per issue. Periodicals can't compete with the internet on price, so they might as well raise their prices.
We've seen the same phenomenon with CD stores that have been losing huge amounts of sales to illegal downloading and iTunes. Faced with that, retailers like Trans World Entertainment (NASDAQ: TWMC) have been raising prices, figuring that anyone who cares about high prices already stopped shopping there a long time ago anyway.
With ad revenue and circulation in what is probably a permanent state of decline, raising prices is one way that magazines can keep the quality up for what is left of their subscriber base.
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