How much is advertising worth to the magazine companies?


When the latest copy of the MPA - Magazine Publishers of Australia came along today that advertising is up by 7%. My first thoughts were cool as it helps the industry.

My next thought was recently a director of a magazine publisher came to see me about getting sales data. He told me that circulation dollars are not worth much. So I asked, “If advertising is so important to you and since advertising dollars depend on circulation, as you can increase circulation by just giving it away, why charge for the magazine?”

He just looked at me, then gave me a strong hint that I should not ask this question and that we should back to the subject.

So while scanning the MPA newsletter as I am a curious person, I would like to get an answer. Since newsagencies rarely deal with un-audited magazines the figures here are perfect for me to get an answer.

The MPA newsletter stated, “Magazines increased ad revenue in 2006 by 3% to $749.2 million.”

Okay, so what is the circulation dollars. So I went to the MPA website where it states “Australians spent an estimated $1.06 billion in 2005 on ABC-audited consumer magazines.” Say about a 3% increase for inflation which every business got but POS Solutions that has not increased its fees in ages. We now have 1.09 billion dollars in 2006. There is a slight increase in magazine sales so say the same so we have about 1.12 billion dollars about in 2006.

The magazine business model in Australia is the magazine publisher gives it to the magazine distributor and the magazine distributor gives it to the newsagent and the newsagent sells it to the public. I don’t know where printing costs come into the equation.

Since everyone in the chain gets a slice. If the magazine distributors are given newsagencies and other retailers 25%, I presume that they are talking about as much. This I don’t know. It is a guess but it sounds about right. The problem here is that they are public companies and these companies do not release their cost of good sold figure.

So as a punt, I would say that circulation sales in 2006 would be about .6 billion dollars to the magazine company. Much probably goes into other indirect costs involved in production and distribution.

Since advertising is giving than about .75 billion dollars a year, I suspect the magazine publisher are correct when they say that they make more from advertising then circulation. It also explains why magazine publisher are interested in the number sold rarely the circulation dollars and rarely bother with newsagents. It also explains why the MPA concentrates so much on advertising dollars and little else. It would also explain their strong interest in the internet.