Byline: Gideon Spanier
FORGET the World Cup and the iPad. The media industry is bracing itself for an old-fashioned price war among the red-tops. Richard Desmond, owner of the Daily Star, will slash the price from 20p to 10p from next month.
He began this battle in November 2008 with a cut from 35p to 20p. Now he wants the Star, which sells around 823,000 copies a day, to hit one million and catch the Daily Mirror, which has kept its price at 45p and seen sales slip to 1.24million. A decade ago, when Desmond bought the Star, it sold about 630,000 and the Mirror was selling 2.2 million. A gap of 1.5 million has become 400,000.
"We're a minute away from defeating the Mirror and the Mirror is in freefall," Desmond told Radio 4's Today Programme.
"The Mirror is aimed at Andy Capps," he added, referring to the flatcap-wearing cartoon character, "and there aren't many Andy Capps around now, so there's no reason to buy your newspaper any more."
Rupert Murdoch's Sun, which remains dominant with almost three million sales, is watching closely. The Sun has cut its price from 30p to 20p in many areas since last summer in response to the Star. In his Today interview, Desmond cheekily suggested he could buy the Sun and run it more efficiently.
This is a battle about pride, of course.
But it is also about canny marketing and fighting for advertising in a market which is ripe for consolidation. The total sale of paid-for red-tops has been shrinking by around 4% annually for years. And yet print, not the internet, still brings in the vast majority of revenues -- well over 80% in most cases. So can price-cutting boost circulation enough to offset the loss in cover revenue? And how do increased sales translate into ad revenue? Ultimately, can price-cutting be more than a short-term fix? Steve Hatch, managing director of Mediaedge:cia, part of Britain's biggest media-buying agency Group M, says price can be "a pretty powerful promotional tool" for papers and can make a difference in established markets.
"It gives you that trigger to reconsider," he says, but it is "not a massive driver" without other promotional activity such as TV marketing. Hatch adds that advertising revenues are unlikely to rise in the short term until any circulation gain proves permanent. Price-cutting can certainly work. Some London papers which created Scottish editions in the Nineties have quadrupled circulation north of the border by grabbing share, before putting up the cover price gradually. But such tactics have their limits, as The Times found when it went down to 20p and failed to overtake the Daily Telegraph in the Nineties.
The Mirror also knows how costly such battles can be. When it last initiated a price war in 2002, the Sun cut for longer and harder. That price war cost the Mirror [pounds sterling]20 million in marketing and price cuts; the Sun sacrificed [pounds sterling]40 million in six months. Those sums are not insignificant when the Mirror national titles turn over about [pounds sterling]460 million and the Sun and News of the World around [pounds sterling]620 million a year.
Sly Bailey, chief executive of Mirror publisher Trinity Mirror, now refuses to match the Sun and Star on price. She made clear her view at this year's annual results, attacking rivals for "chasing short-term circulation volume through cover price discounting and levels of marketing spend which do not provide a return on investment".
The view from the Mirror is that its core readers are loyal precisely because they are willing to pay more for the paper. …