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.
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.
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 wait weeks or months to get copy sales revenue as it trickles back from readers, through the retailer and distributor.
Printers often want 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.
Revenue lag explains why publishers like selling direct to readers through subscription sales.
With subscriptions, publishers get their money before printing – subscribers usually pay a year in advance. Some publications offer two-year and even three-year subscriptions. That’s money in the bank.
Publisher keep all subscription revenue – there’s no retailer cut, although they pay the cost of mailing out subscriptions.
Publishers sell ‘space in their titles to earn Advertising sales revenue.
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. Collecting money from direct clients can be harder.
Publishers issue rate cards. Historically they used card, but now they are usually available online. Rate card prices are often negotiable.
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.
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?