Splitting hairsThe Citizen takes on The Star |
Makes a bold push for market share but cover-price and ad-rate drop is also risky.
EAST LONDON - Caxton's The Citizen has embarked on an incredibly bold - and high-risk - move that has got publishers and editors throughout the country talking and it's bound to shake up the Gauteng newspaper market.
As of January 1 this year, The Citizen dropped its cover price 33% from R4.50 to R3 and took its advertising rates down by about 20%. The cover-price drop comes after the paper's "Freaky Friday" campaign in October and November last year, when a cover-price drop on Friday street sales saw a surge in circulation. In October, when the Friday cover price was R3.50, there was a 10% increase in sales. The November cover price of R2.50 netted the paper a 25% increase in sales.
This, says The Citizen's publisher, Greg Stewart, was evidence that there was price sensitivity to the cover price. On dropping the paper's ad rates, Stewart says: "We look at media inflation and circulation every year and we made the decision this year that, in fact, we can't be bullish with rates. First of all, look at what's happening in the market place and, secondly, look at what's happened to circulation. Some of the advertisers have responded very positively and have increased their ad spend with us."
The Citizen is the only newspaper in South Africa to drop their ad rates this year, says Virginia Hollis, joint managing director of The MediaShop media-planning firm, though some made the increase conservative.
This is a remarkable turn of events and clearly an aggressive long-term strategic push to gain market share in Gauteng, the paper's core market. It will also see the paper go after readers of Avusa's The Times (which is delivered free to Sunday Times subscribers) but particularly Independent Newspapers' flagship daily, The Star.
Stewart, however, says he doesn't view The Star as competition as it no longer offers quality content and it just looks so terrible because of the old Sauer Street press. These are bold words but then it's quite possible that Stewart would like to provoke The Star into dropping its cover price and ad rates.
Independent Newspapers' executive director: operations, Nazeem Howa, says The Star has seen off threats by many new entrants such as This Day, Nova and The Weekender.
"None of these titles have cracked the market despite being printed on newer presses and offering more competitive advertising rates," says Howa. "It comes down to one simple issue: advertisers want quality audiences and most importantly, want a return on their investment. The Star does just that and will continue to do that through quality journalism on a sustained basis, rather than one-off investments around marketing gimmicks. In 2010, the toughest year facing newspapers, Independent has launched an Investigations unit, restaffed the leadership structure of the Sunday Independent and opened its own training academy, with 12 cadets joining us on February 1."
The Citizen of today is a far cry from the stolid newspaper of record it used to be. After Media24's Daily Sun came in and won the low-income readers from newspapers across the country, The Citizen has been redesigned and has become a serious daily paper despite its tabloid format. It has introduced motoring, entertainment, gaming and soccer supplements and, yes, being printed on the modern press Caxton has invested heavily in recent years which means the paper looks very clean and bright.
Stewart also says the paper is investing in editorial staff, recently replacing a pictures editor who retired two years ago and bringing in a new head of news.
If it was the Daily Sun who threw the cat among the pigeons a few years back, The Citizen's latest move is not unlike the Daily Sun's winning strategy when it first launched, selling for a bargain basement R1. "They gained market share and now they're gradually pushing up cover price," says Stewart. "While we're not going for the same market as they are, we needed to broaden our market base."
The Citizen's core audience is LSM 6-10 - what Stewart calls the "economically active".
Hollis says: "It's a very brave move... whether it will work, I don't know but I hope it does. What they're doing here is addressing a problem (declining circulation decreased ad spend) and they are taking steps to address the problem."
The risks are also high. Newspapers anywhere in the world can't sustain a cut in revenue and upping costs for too long (Stewart says the strategy will be reassessed in a year) and in South Africa we have a relatively small reading public. Quite apart from the ad-rate drop, if you just take the cover price, a 33% drop on an average 60 000 sales a day (The Citizen's last available ABCs were 61 274, for the third quarter of last year) would equate to a loss of R90 000 a day - about R1.8m in a month (calculated on 20 printing days a month). You would have to find 30 000 mores sales to make up the cover-price shortfall. That's a big circulation leap for anyone to make - even over a year.
Stewart says the January sales are looking "very positive" but we will have to wait for the first-quarter ABC circulation sales to see where this is going. The ABC figures for the last quarter of 2009 will come out this week.
Howa says that price-reduction strategies have been tried in the mature UK market without any real effect either way and South Africa's newspaper industry is a very mature and settled one. "We have a five-year plan for The Star and we will not be deterred from this plan by any entrant into the market. That plan contains elements of special editions, footprint extensions, etc, which meets the ongoing needs of our advertisers and continues to build our readership base.
"Several of our competitors have chopped and changed their target markets but we will not be drawn to respond to these short-term strategies to make short-term gains. Our business plan is about sustainability. The Star has been around for over 120 years and our plan is to be around for another 120 years."
But with The Citizen rolling out in new areas in Gauteng soon, a recently relaunched Saturday edition, which is sports focused, and the launch of a new website by the end of February, it's clear that this is a big play in the toughest, most uncertain media market this country has had in years. It will most likely force the other newspaper publishing houses to play hardball too as The Citizen's strategy is potentially game-changing, the like of which we haven't seen since Deon du Plessis launched the Daily Sun for Media24.
"The tree needs to be shaken," says Hollis. "Those apples need to fall on the ground and get bruised."
*Media columnist Gill Moodie spent 14 years as a salaried hack in print media in South Africa and the UK before escaping to the blogosphere and freelance journalism. She is the publisher of Grubstreet http://grubstreet.co.za/ in between unpacking and packing the infernal dishwasher and bringing up a four-year-old with attitude.
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