Making Sense of Magazine Subscription Economics

When Outlook was launched in 1995, I took up a subscription for 5 years. The cover price was Rs. 10/- and the 5 years subscription was priced at Rs. 1600/- (you can usually find the words “Best Offer” and Discount % written next to longest tenure of the subscription). This advertising pattern is fairly standard across all Indian and International magazines.

The free gift I got was a Kodak no-frills camera (worth about Rs. 800?). The camera was suitably nicknamed ‘soap-box’ camera by my sis. The fact that the magazine negotiates bulk discounts with companies like Kodak enables the magazine to procure such gifts at a throwaway price. Even assuming that the camera is worth Rs. 500, it makes lot of sense to subscribe using these offers. The magazines are home delivered using a low cost courier, which might cost them atleast Re. 1 per issue. I always keep wondering how the magazine ends up making money on this sort of a pricing plan.

The magazine locks in the subscriber by collecting the money upfront and hence they save on the commissions / margins which they need to pay to the vendors and the newsstands (There is only one ‘cost of sale’). The magazine can use the subscription money (virtually interest free loan) to fund investment plans as well. If more and more people take up subscriptions, the magazine gets a clear idea of the weekly demand.

The gifts offered by most of the current affairs magazines are mostly targetted at the male population. Popular gifts include pen sets, wallets, digital diary (few years ago), torchlight, radio cum alarm clock. I noticed that this trend has changed little bit. The current subscription promotion of Outlook offers some books as subscription gifts.

The subscribers will normally fall under one of the following categories :-

1. The first set consists of the ones who are genuinely interested in the magazine and want to subscribe (the free gift might be an additional reason but not the primary reason for subscription).

2. The second set consists of people who don’t like the gift, but would still like to subscribe to the magazine because of the content. This group would actually prefer a monetary discount rather than a gift.

3. The third set consists of people who subscribe primarily for the free gift.

Which set do you belong to?