A major shift underway in attitudes about magazine pricing and value

Some magazines are realizing that they have consistently undervalued their products, to the point where readers could be forgiven for being confused about the value proposition. In another context, I have said how bizarre it is to price a magazine for less than it costs to buy a high-end greeting card.

It has made less and less sense to give the whip hand to advertising revenue. A recent article by Stephanie Clifford in the New York Times talks about how publishers are wrestling with raising their prices without losing subscribers.

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 47 cents an issue for Newsweek, 77 cents an issue for BusinessWeek and 89 cents an issue for Fortune, according to an analysis of their filings with the Audit Bureau of Circulations.

Even Condé Nast’s magazines, filled with luxury ads and dispatches from far-flung locations, are cheap: 87 cents an issue for The New Yorker, 89 cents for Allure and just over a dollar each for Condé Nast Traveler and Bon Appétit. [To give but one Canadian example, a subscriber can get a copy of Chatelaine for $1.15 and until recently used to be able to get it for $1.]

"Obviously, you can hardly even mail that particular issue for 80 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 50 largest and most expensive magazines showed that in the last four years, as overall prices rose 14 percent, subscription prices dropped an average of 9 percent.

The article points out the paradoxical fact that some of the most successful magazines, like The Economist and People, enhance the perceived value of their brand and content by increasing single copy and sub prices.

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 60 percent since 2004, and newsstand sales have risen 50 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 article also says that, whether consumers pay $5 or $50 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 A. 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.”