The strange case of the $846 subscription offer to the Kansas City Star

October 19, 2018
Category: Business & Work

Retiree Rob Black lives in an upscale but not wildly affluent suburb of Kansas City and has subscribed to The Kansas City Star since he moved to town in 1970. So it was a rude shock in July when he received a bill raising his renewal rate by 27 percent to $846.66 a year.

Surely that was a mistake, Black recalls telling the sales rep he reached by phone. Could he negotiate a lower rate? At least to the $600-something his neighbor was paying? No and no, the rep replied, and home delivery stopped within days.

It took some checking over a period of a month, but three sources confirmed to me that Black was on the receiving end of a peculiar new circulation strategy, which one called "reverse redlining."

At the Star and 29 other McClatchy papers, longtime core subscribers, especially in higher income ZIP codes, are being hit with big renewal rate increases.

Some will cancel, the theory goes, but many will shrug and send in a check. So the practice works out to a net revenue gain for the company.

Rewarding your best customers with a higher rate than everyone else's seems a dubious consumer relations strategy, especially for an industry now focused on wooing audience revenue support as print advertising quickly erodes.

Dan Schaub, corporate director of audience development at McClatchy, declined through a spokesperson repeated requests for an interview.  But he did offer a brief email comment:

"We market different discounts and offers to our customers to incentivize them to become subscribers….Over time, and as our subscribers engage more deeply with our content and come to rely on the local journalism that we produce that is essential to them, subscription fees are raised incrementally towards what we calculate as a fair market value."

Which I take to be a confirmation of the practice.

Different rates for different customers are based on the growing volume of data newspapers gather about individual subscribers.

Algorithms then drive a range of subscription pricing offers, Damon Kiesow, a former digital executive at McClatchy, told me. Kiesow recently left the company and became the Knight Chair of Digital Editing and Production at the University of Missouri School of Journalism.

Like many companies and individual papers, McClatchy is in the midst of what it calls "digital transformation" on both the news and business sides.

So one might guess that the aggressive rate increases aim to create an incentive for print loyalists to become digital-only paid subscribers. Kiesow said that is not the case. Rather there has been a "finding that for some readers, a subscription is very price inelastic. “

A long history of renewing and being in a prosperous ZIP code along with other variables like remote geography or method of payment may go into the equation that identifies households for the highest rates. He added that the system was developed in consultation with Mather Economics, an industry leader on circulation pricing, both digital and print.

I spoke with Matt Lindsay, Mather's president, who said that he could not discuss individual clients, but confirmed that at least some are pursuing top rates for some customers but not others.

American circulation prices, which hovered at a giveaway 25 cents a day in the 1990s, are finally catching up with what is charged in the rest of the world, Lindsay said. Still, the big increases may create some sticker shock.

"A lot more consideration and strategy is going into portfolio management," Lindsay said. "There are core, predictable subscribers," who are likely to renew even in the face of a big increase, he continued.

A recurring theme in his work, Lindsay said, is that "consumers like the products, and there is a willingness to pay … We are moving away from one-size-fits-all" pricing.

However, not everyone in the industry is embracing variable rates as became common long ago for airfares and hotel rooms.

At Gannett's 109 regional papers, an annual print+digital subscription costs roughly $375 with minor variations according to the size of the market. Introductory offers are much lower, spokesperson Amber Allman said, and the company does use "an econometric model" for so-called optimization to bring along those subscribers gradually to full price.

However, "optimize does NOT equal charging super loyal customers more," Allman added in an email. 

With or without variable rates, higher pricing for print subscribers seems to be a trend. The Boston Globe, long the highest-priced regional paper, lists its full rate as $750 a year. For the Houston Chronicle, it is $525 a year.  At the Philadelphia Inquirer, $611.

Family-owned in Spokane, Washington, The Spokesman Review raised its yearly print+digital rate to $750 in August. In a note to readers, publisher Stacey Cowles explained that the burden of supporting the work of a newspaper was shifting to readers, as retail advertising declines and the cost of newsprint went up. He offered this summary:

"We have no choice but to cut content or shift more cost burden to print subscribers. At The Spokesman-Review, we recognize two enduring truths: Great newspapers are still built on great content, regardless of how it’s delivered. And we can offer digital 'couch delivery' (with an internet connection) of every page at a much lower rate than physical home delivery."

I do not have enough information to say that the $846 rate is universal at McClatchy papers. That price conceivably could have been experimental and subject to change.

But the practice isn't isolated to suburban Kansas City. A dissatisfied reader in Columbia, South Carolina, where McClatchy publishes The State, wrote me that there is progressively less and less local news in the paper but that the rates still are increasing every year.

He asked not to be quoted by name but emailed,

I am attaching a photo I took of today's State newspaper which clearly states the subscription rate is $25 per week. What makes it worse is the response I got from a letter that I sent the publisher asking what the actual subscription rate was. His assistant wrote me that WAS the rate and that the only way I could get another quote was to phone The State asking for a subscription.
 
We get 3-month renewals mailed to us with a rate of more than $100. Then we have to call the newspaper to wheedle our way down. I got mine down to $80 something for 3 months. My neighbor scored with a $66 rate. Frankly, it's a hell of a way to run a railroad.

Reader Black in Kansas City experienced a variation on negotiating a better rate. A couple of months after he declined to pay the $846, a representative of the Star called and asked if he would consider coming back.

The offer was three months at 50 cents a day or six months at $1.25 a day. Black declined, fearing that the rates would jump right back up.  Finally he suggested 75 cents a day for a year, Black said, which works out to $262.50. The salesperson agreed to that, and home delivery has resumed.

But Black remains watchful for higher prices to come and is not nearly as loyal a reader as he used to be.

After letting the subscription lapse, he and his wife adjusted fairly quickly to not having a paper to read with their morning coffee.  "It"s like smoking cigarettes," Baker told me. "You miss it until the addiction is over."