Print publishers make money from copy sales and advertising. Some publishers rely mainly on advertising, others on copy sales, but most newspapers and magazines make money from a mix of the two.

The balance between advertising and copy sales revenue is important. Advertising driven publishers approach their business in a different way to copy sales driven publishers.

Copy Sales

Publishers rarely keep all copy sales revenue. Newspapers, magazines and books usually sell through newsagents, bookstores and other retailers. Retailers keep between 30 and 40 percent of the cover price.

Sometimes distributors take a slice of copy sales revenue. Usually distributors charge a fixed fee per copy delivered.

Sell-through rates

Retailers rarely sell all the copies they get of a title. Publishers talk of sell-through rates – the percentage sold.

Most publishers, particularly those chasing advertising sales regard a sell-out as failure. It means they didn’t maximise their circulation – which is what they sell to advertisers.

Long established, popular, frequently published titles often have better sell through rates than new or irregular publications.

Revenue lags sales

Publishers have to wait weeks or months to get copy sales revenue as it trickles back from the reader, through the retailer and distributor.

Printers often require payment – or a guarantee of payment before they print. So a publisher needs to carry the costs of at least three editions of a monthly title before seeing a penny of sales revenue. The investment is more in the case of weeklies, less in the case of bi-monthlies and quarterly publications.

Subscriptions

Revenue lag explains why publishers like selling direct to readers through subscription sales.

With subscriptions, publishers get their money upfront – usually a year in advance. Some publications offer two-year and even three-year subscriptions.

Publisher keep all the revenue – there’s no retailer cut, although they pay the cost of mailing out subscriptions.

Advertising

Publishers make Advertising sales revenue by selling ‘space’ in their titles.

Most publishers set aside a number of pages or parts of pages for advertisers. They have an advertising ratio.

Paid for publications usually have a lower advertising ratio than free publications – although this is not always true.

There are different types of advertising. Display advertising means larger and more colourful ads – often with creative text and images. Classified advertising is often text-only with a minimum of graphics.

Magazines typically sell advertising by the page, although they offer double page spreads, half pages and other formats. Newspapers will sell pages, but they also sell column centimetres (or column inches).

The more you buy the cheaper it gets

The more an advertiser buys, the cheaper the rate per column centimetre (or page if they are buying magazine advertising).

A full-page is cheaper than two half pages and so on. Publishers offer advertisers discounts if they commit to buying a series of advertising over a longer time. So, booking a year’s worth of advertisements in a monthly magazine is cheaper than buying 12 single advertisements.

Some advertising positions attract a premium rate. On newspapers this is the front page and maybe the front pages of sections such as business.

Magazines typically charge extra for the back cover and possibly the inside front cover. Successful titles can charge a premium for early right hand pages or other attractive sites.

Agencies and commission

Specialist media buying companies buy most advertising. They develop strategies for their clients and negotiate with publishers. Publishers pay media buyers a commission. Typically this is 10 to 20 percent of the booking’s value. In return for commission, media buyer agree to pay invoices on a set date.

Advertisers who buy their own space are known as direct clients. They often haggle over prices, but unless they are large-scale buyers, they have less clout than agencies. It's often harder to collect money from direct clients.

Rate cards

Publishers issue rate cards. Historically they used card, but now they are usually available online. Rate card prices are often negotiable.

Advertorial

Advertorial is when publishers offer advertising linked to editorial features. In some cases editorial integrity is up for sale.

Advertorial deals come in different flavours. Many publications are entirely advertorial – if an advertiser pays for space they have a say over the publication’s editorial content.

More credible titles wall off areas of content for advertorial. These might be clearly marked with terms like “advertising supplement” or “special advertising feature”. This isn’t always transparent to readers.

Some publishers run editorial-style material provided by advertisers and charge for it. Others allow advertisers to send copy for inclusion next to advertisements.

Publishers may or may not allow advertisers control over advertorial content. Some publishers have journalists write advertiser-friendly copy for these sections, others keep a strict demarcation between editorial and advertising.

Business model

Free publications are more likely to run advertorial and compromise editorial integrity for commercial consideration than paid-for titles.

Paid titles are less likely to take this approach. Some paid titles have little in the way of advertising and charge a hefty premium for quality editorial content. This works best if they can manage a high circulation.

Have I missed anything here? Do you have any questions about how this works?

In the golden age of print publishing, copy sales were an important source of revenue.

With publishers like Rupert Murdoch building online pay walls for news sites, selling publications to readers, not giving them away, could enjoy a renaissance.

Here's how copy sales fit in the old school print publishing business model I grew up with.

Print publishers rarely keep all the money from copy sales.

Newsagents, book stores and other outlets sell newspapers, magazines and books. They earn a margin of around 30% of a magazine or book's cover price.

Margins are lower for newspapers, but newsagents make it up with volume plus they can sell customers extra items with better margins.

In some cases distributors take a second slice of the sales revenue. Either a percentage or a fixed fee per copy.

Sell-through rates

Retailers rarely sell every copy of their newspapers and magazines.

Publishers talk of sell-through rates – that’s the percentage sold. Retailers usually send unsold magazines – usually just the masthead – back to distributors to get a refund on unsold copies. Newspapers are similar. We call the copies sent back ' returns'.

Poorly managed titles have a low sell-through rate. Others can have a higher rate.

Some publications sell out – but this is rare. Publishers regard selling-out as a failure because it means they don't get maximise sales. Newsagents like this because they don’t have to worry about returns.

Returns are controversial with newsagents and retailer because they often have to carry the cost of holding stock on behalf of publishers.

Long established, popular, frequently-published titles typically have better sell through rates than new or irregular publications. That's largely because publishers have more information to help them plan print runs and know where to send copies.

Revenue lags sales

Copy sales revenue for monthly titles usually takes a month or two to trickle from the reader, through the retailer and distributor back to the publisher.

Printers want payment – or a guarantee of payment before the presses role. So a publisher needs to carry the costs of at least three editions of a monthly title before seeing a penny in copy sales revenue.

This would cost more for weeklies, less for bi-monthlies and quarterly magazines.

Revenue lag explains why so many publishers are keen to sell their titles direct to readers through subscription sales.

Subscriptions are lucrative for publishers.

First, the money arrives upfront – usually a year in advance. Some publications offer two-year and even three-year subscriptions.

Second, a publisher gets to keep all the revenue – there’s no retailer cut – but mailing out subscriptions has a cost attached and there's a small management fee paid if an external company handles subscriptions.

Have I missed anything here? Do you have any questions about how this works? Please add your comments and questions below or get in touch through my contact page.

Updated

You can read opinions about Apple's iPad elsewhere. Here I ask if it is the eBook reader to lead the way from print to a brighter, possibly greener, maybe paperless digital future.

It's a serious contender and likely to displace Amazon's Kindle from pole position. While the iPad in its current form is still short of ideal, it nudges ebooks nearer the goal.

Of course, this barely matters. Consumers will buy the device regardless of its suitability as an ebook reader. So the iPad could be the breakthrough ebook. My comments relate only to Apple's iPad as an ebook reader.

How I rate the iPad as an eBook reader:

Its size is about right. The iPad is lightweight, slim and big enough for comfortable reading.

I've some doubts over the way Apple will sell ebooks – in my view the company clips the ticket too hard. Publishers will feel they have little choice but to conform. It's an ironic lock-in given Apple's historic market strategy of being the anti-Big Brother computer maker.

Ten hours battery life is at the low-end of acceptability. It may handle a long-distance flight, but other readers do better.

At 9.7 inches, the display size is right. Colour is good. The screen resolution at 1024-by-768-pixel is less than ideal for long-term text reading - I've seen reports of either 100 or 115 dots per inch (dpi). I'm indebted to Bruce Hoult (@brucehoult) who twitters a simple calculation sqrt(1024^2+768^)/9.7 shows it's 132 DPI.

While this is way better than the 72 dpi on a standard PC display, it's going to mean tired eyes. Likewise the LED-backlit display is less than ideal.

Apple's price is respectable for a multi-function device able to handle many applications, but at US$499 plus, it's a hefty tag for an eBook reader.

My first impression is it needs a lower price, better display and improved battery life if the iPad is to become a serious threat to the printed book – these are all matters Apple may address in coming months.

Scorecard (out of ten):

Physical size and weight:	9
eBook sales and distribution:	7 (with reservations)
Battery life	6
Display characteristics	8
Price	5
Overall	7

Finally

These opinions are based on media reports – I haven't yet touched the device.

Writing in APC (Australian Personal Computer) David Flynn asks Will 2010 be ‘The Year of the e-Book’?. His report looks at material from tech analyst firm Gartner which says ebooks will boom next year so long as they; "overcome hurdles in price, availability and lack of popular mainstream content".

All these points are valid, but there also needs to be a great leap forward in display technology for ebooks to displace printed books. The current crop of electronic books are tiring to read when compared with print.

Higher resolution, large format, non-flickering, non-backlit displays are available, but not in the numbers needed and not, yet, at a realistic price. After years of looking at other forms of electronic books, I'd say once ebook makers overcome this hurdle, they'll be mainstream.

Australian Reseller News, Computer Reseller News, New Zealand Reseller News and The Channel serve readers working at the sharp end of the information technology industry.

While many of the stories they cover are similar to those in other technology media, their specialised audience means  journalists need to filter information through a channel-oriented lens.

In most cases this means asking “what does this mean for the channel” and sticking the answer at the top of the story.

People who sell or distribute technology read these titles, they are ahead of market trends. That's because companies need to speak to resellers and distributors before speaking to the public.

When these publications work well, there's a flinty realism to their approach. They tend to deal with the nuts and bolts of the business and not airy-fairy possibilities.

New Zealand's The Channel is mainly advertorial – that is companies pay the publisher for stories written about their offerings. And all three other titles run sign-posted advertising supplements – they also pad out local coverage with overseas stories of variable worth.

Otherwise the publications are news-oriented.

You need to show the publishers of these titles you are a bone-fide computer industry person to get a subscription to the print publications, but all four run free access web sites.

Australian Reseller News

Computer Reseller News (Australia)

New Zealand Reseller News

The Channel (New Zealand)

Advertising sales revenue is the money publishers make from selling space in their titles.

Most publishers set aside printed pages or parts of printed pages for advertisers. The number of pages compared to the total number of pages in a publication  is known in the business as the advertising ratio. Paid for publications have a lower advertising ratio than free publications.

Advertisements fall into two categories:

• Display advertisements are larger and more colourful – they can have highly creative text and images.
• Classified advertisements are smaller and usually only text with a minimum of graphics.

Magazines typically sell display advertising by the page, although they offer double page spreads, half pages and other formats.

Newspapers sell pages, but they also sell column centimetres (or column inches). Classifieds sell as column centimetres, as lines of text or in some cases by the word.

The more you buy the cheaper it gets

The more advertising an advertiser buys, the cheaper the rate per column centimetre (or page if they are buying magazine ads). So a full-page is cheaper than two half pages and so on.

Publishers offer advertisers discounts if they commit to buying a series of advertising over a period such as a year or six months. So, booking a year’s worth of advertisements in a monthly magazine is cheaper than buying 12 single advertisements.

Some advertising positions attract a premium rate. On newspapers this would be the front page and maybe the front pages of the internal sections. Magazines typically charge extra for the back cover and possibly the inside front cover. Successful titles can also get away with charging a premium for early right hand pages or other attractive sites.

Agencies and commission

Advertising is often placed by specialist media buying companies who develop strategies for their clients and negotiate with publishers. These companies earn a commission. Typically this is between 10 to 20 percent of the booking’s value.

In return for commission, media buying agencies contract to pay their invoices by a set date after publication – typically a month or so after the advertisements appear.

Advertisers who buy their own space are known as direct clients. They can haggle over prices, but unless they are large-scale buyers of advertising, they have less clout than agencies who can buy in bulk. It is often harder to collect money from direct clients than from agencies.

Rate cards

Publishers issue rate cards which show the prices or rates for each type of advertisement. Historically they were cards, but now they are usually available online, try Googling the term to see some. Rate cards prices are often, but not always negotiable. They also describe available advertising formats. Depending on circumstances rates shown on rate cards are negotiable.

When an advertiser or a buying agency buys advertising they are usually buying reach that is a publication's ability to reach so many potential customers.

Advertorial

People in the business use the term advertorial when publishers offer advertising linked to editorial features, or in some cases when a publication's editorial integrity itself is up for sale.

Advertorial deals come in many flavours. Many publications are more or less entirely made up of advertorial material – if an advertiser pays for space they are given a degree of say over what appears in the publication’s editorial content.

More credible titles wall off areas of content for advertorial projects. These might be clearly marked with terms like “advertising supplement” or “special advertising feature”, but it isn’t transparent to the reader.

Some publishers run editorial-style material provided by advertisers and charge for it. Others allow advertisers to send copy for inclusion alongside paid advertisements.

Publishers may or may not allow advertisers to sign off on their advertorial content. Some publishers will have journalists write advertiser-friendly copy for these sections, others keep up a strict demarcation between editorial and advertising.

The advertising business model

As a rule, free publications are more likely to run advertorial and compromise editorial integrity for commercial consideration than paid-for titles. Paid titles are less likely to take this approach. Some paid titles have little in the way of advertising and charge a hefty premium for quality editorial content. This works best if they can manage a high circulation.

Have I missed anything here? Do you have any questions about how this works?

Other articles in this series:

Where the money comes from: - an introduction to traditional print publishing business models
Copy sales: – how traditional print publishers make money from selling copies

Online news sites are building pay walls. Which means copy sales revenue is fashionable again. Here's how it fits in the print publishing business model:

Print publishers don’t usually keep all copy sales revenue.

Newsagents, book stores and other outlets sell newspapers, magazines and books. These retailers earn a margin of around 30% of the publication's cover price – which may or may not also include sales tax, GST or VAT depending on local tax rules.

In some cases distributors take a second slice of the sales revenue. It can be a percentage or a fix per copy fee.

Sell-through rates

Retailers rarely see every copy of a publication they get. Publishers talk of the sell-through rate – that’s the percentage sold. Retailers usually send unsold publications – usually just the masthead – back to distributors to get a refund on unsold copies.

Poorly managed titles have a low sell-through rate. Others can have a higher rate. Sell through rates can fall anywhere between 20 percent and 80%.

Some publications sell out – but this is rare. Publishers may regard selling-out as a failure because it means they don't get maximise sales.

Long established, popular, frequently published titles typically have better sell through rates than new or irregular publications. That's largely because publishers have more information to help them plan print runs and know where to send copies.

Revenue lags sales

Copy sales revenue for monthly titles usually takes a month or two to trickle from the reader, through the retailer and distributor back to the publisher.

Printers want payment – or a guarantee of payment before the presses role. So a publisher needs to carry the costs of at least three editions of a monthly title before seeing a penny in copy sales revenue.

This would cost more for weeklies, less for bi-monthlies and quarterly magazines.

Revenue lag explains why so many publishers are keen to sell their titles direct to readers through subscription sales.

Subscriptions are lucrative for publishers.

First, the money arrives upfront – usually a year in advance. Some publications offer two-year and even three-year subscriptions.

Second, a publisher gets to keep all the revenue – there’s no retailer cut – but mailing out subscriptions has a cost attached and there's a small management fee paid if an external company handles subscriptions.

Have I missed anything here? Do you have any questions about how this works? Please add your comments and questions below or get in touch through my contact page.

Also in this series:

Where the money comes from

This is a look at the print publishing business model. It is oversimplified, but the big picture is more important than the details.

Revenue

Historically print publishers earn revenue from copy sales and advertising. Some publishers, mainly in the trade press, rely solely on advertising.

Others, such as book publishers, rely solely on copy sales. Most newspapers and magazines make money from a mix of the two.

The balance between advertising and copy sales revenue usually determines a title’s editorial strategy.

The revenue part of a publication’s business model is simple:

Revenue = copy sales + advertising sales

Publishers who rely mainly on copy sales for their income typically spend more on producing quality editorial to attract readers.

Advertising-focused publishers put less emphasis on editorial. In extreme cases, they do away with editorial all together producing publications which closely resemble catalogues.

In part 2, we'll look at print copy sales.