13 Financial Models–Second Perspective

Elizabeth Morrissette, Grace McKeon, Amy Luther, Alison Louie, Alexis Fagan

Financial Models of Books

When looking at financial models for books in modern times, most publications rely heavily on sales to make their money. Many believe that the print world is slowly dying. Yet Chris Lavergne says in his article Book Publishing in the Digital Age, that books have become a more premium way to read. As e-books emerge more and more, they are creating a cheaper way of production (Lavergne).

Sales in the book industry continue to rise and fall slightly each year. In the long run, the sales of a book need to offset the price of editing, designing, printing and distributing. The more copies that are sold, the more money that is produced.  Producers often look for “best sellers” in order to boost their revenue for the year (Pavlic and McIntosh, 80–81). Different categories of books do better than others at different times. The categories determine how producers, write, sell and market their books to their audiences (Baran, 57). These are the categories that define the book industry.

Textbooks : Often the largest selling category, selling books to college students, elementary and high schools as textbooks.

Trade Books: Hardcover and softcover books that can be fictional and non-fictional as well books that you keep or pass off when you’re finished reading or using.

Religious Books: Bibles and other religious books such as prayer books and religious music books.

Subscription Reference Books: Most often encyclopedias, and dictionaries that are bought directly from publications instead of from a retail store.

Book Clubs: This type of books is sold and distributed by books club instead of through retail stores

Mail Order: Books that are advertised on tv or through the internet and are delivered by mail.

Mass Market Paperbacks: Paperback books that are produced cheaply and designed to attract the general public. They can be bought at drugstores and newsstands.

Professional Books: Books that cater towards business professionals, doctors, engineers or lawyers, written to keep their educations current.

University Press Books: Most often include scholarly text.

Standardized Tests: Guides and practice test for standardized tests. (Pavlic and McIntosh, 80, Compaine, 8–10, Baran, 57)

These books are all sold through wholesale on a national and international basis or independent distributors on a more local level (Compaine, 12). Print books rely on retailers and other sellers to drive their sales, though they sometimes advertise their books at bookstores and online as well as promoting a book on a book tour. Purchasing print books provides a more romantic aesthetic to the reader, with the feel of the paper, the physical turning of pages and writing notes in the margins. However, E-books are taking over, allowing instant and cheaper versions of books. Though this seems ideal, more books actually have to be sold to make a better profit, versus print books which cost more for the luxurious splurge they have become (Lavergne).

In the long run, finances are the driving factor for all books that are produced. If there is no money to be made, then it will not be produced. This is the motivation for business’s with all forms of print media.

Financial Models of Magazines

The magazine industry isn’t dying, its changing. Even though more and more magazines are deciding to make the move to go digital, most things like advertisements and subscriptions services are still running.  Looking towards the future, we are going to see exponential growth in the digital editions of magazines. Although companies have seen downsizing due to the decision of going digital, subscription is not the main source of revenue anymore, advertising is still required and used in digital versions of the magazines.  Publishers that are deciding to continue printing magazines while also running digital editions are reaching broader audiences due to younger people generally reading their magazines articles on Snapchat, Facebook and other online resources, while older audiences still rely on the print version.

The success of a magazine can be measured in many different ways. These include circulation, digital replica circulation, revenue, and annual growth. By looking into these categories individually and as a whole you can determine the success of a particular magazine.

Circulation: The amount of copies a magazine company will distribute per issue. This is used mainly to determine how much they should charge for advertisers to place ads in their magazine.

Digital Replica Circulation: The printed version formatted identically to a digital version. And how many are sold and seen through a digital format.

Revenue: The revenue of a magazine is the collected amount of money the magazine has made over the year, through subscriptions, sales, and advertisements.

Annual Growth: Annual growth is how much the company has grown over the course of one year. This will help to show success by allowing the business to see if they are shrinking or growing in comparison to profit from past years. (Fuller)

Although many magazines are switching to digital form, the majority of spending for magazines are still invested in print. For advertising, companies are still looking to place more ads in paper magazines, rather than in digital. For print, the expected spending amount on advertising is expected to be 15.23 billion dollars, whereas for digital it is expected to only amount to 4.34 billion dollars. (Fuller).

In order to make money in print there has to be an audience, and as time goes on and our audience is becoming more media literate, print is becoming less and less popular. Looking to the future we are going to see more magazines going digital in order to stay relevant. Even with many magazine companies going digital to keep up with the times, advertisers are willing to pay more to advertise in print magazines. Seeing how it is more expensive to create print magazines, more companies will continue to go digital in order to keep cost low and interest high.

Financial Models of Newspapers   

The newspaper has been around for more than three centuries. Over the years, the newspaper industry has significantly evolved, and the newspaper has played a key role socially and economically. In fact, according to Robert Picard, newspaper sales account for about $50 million in sales annually (Picard109). Though the industry is one of the oldest, it is having no issues generating money.

Advertising itself, generates a solid two-thirds of U.S. newspaper revenue. The other third of revenue comes from subscriptions. (Pavlik & McIntosh 91).  There are three main types of advertising; retail, national, and classifieds. Retail advertising has to do with advertisement for the retail business. It is used by merchants, retailers, and businesses to sell goods or services explicitly to consumers. Retail advertising focuses on bringing immediate attention to certain stores to increase their sales and commerce quickly. National advertising is conducted by a marketer of a brand name product or service sold through various outlets in the distribution channel. It usually focuses on one specific target audience and endeavors to create an image for the product, which in long term creates revenue for a continuing cycle. Classified advertising is most common in newspaper. It is much cheaper than other broad display forms of advertisement used by businesses because they are small messages sorted by their own certain heading, which is classified and are usually no larger than one column wide and do not include graphics.

National advertisements also deal with nationally handled goods and services distributed through local outlets. Newspapers can make more money off of national advertisers for they are often times willing to pay more for a page of advertising in areas with higher incomes and larger, densely populated areas. Newspapers get a significant amount of their financial support from advertisers, and in the 20th century, they had become completely dependent on advertising (Picard).

The newspaper’s business model sells two things to get money; newspaper products to the readers, which would be the actual newspaper itself, and the access to those readers to advertisers. The more readers there are, the more advertisers will want to spend money to put out an ad. Similarly, another revenue stream includes circulation. If a newspaper is in major circulation, many people are buying and reading it, the more desirable that paper will be to advertisers, and the more that newspaper will make on advertising.

The newspaper industry is reliant on readers and advertising. In the end, the newspaper must attract readers, so that the advertisers would want to buy advertisement space. The newspaper business is not dying. It is continuing to attract readers in order to keep circulation up, despite the recent spike in online readership.

Works Cited:

Baran, Stanley J. “Books.” Introduction to Mass Communication. 8e ed. N.p.: McGraw-Hill Higher Education, 2015. 57. Print.

Compaine, Benjamin. The Book Industry in Transition, An Economic Study of Book Distribution and Marketing. N.p.: Knowledge Industry Publications, 1978. 8-12. Print.

Ferguson, James M. The Advertising Rate Structure in the Daily Newspaper Industry. Prentice-Hall, 1963.

Fuller, Steve.“Topic:Magazine Industry.”Www.statista.com, Statista. www.statista.com/topics/1265/magazines/.

Lavergne, Chris. “Book Publishing in the Digital age.” TechCrunch. TechCrunch, 10 Apr. 2017. Web. https://techcrunch.com/2017/04/10/book-publishing-in-the-digital-age/

Pavlik, John V, and Shawn McIntosh. Converging Media: Introduction to Mass Communication. Plymouth State University Custom Edition ed., Oxford University Press, 2017.

Picard, Robert G. “The Economics of the Daily Newspaper Industry.” Media Economics: Theory And Practice, Routledge, 2003, pp. 109–115.

 

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Introduction to Media Studies by Elizabeth Morrissette, Grace McKeon, Amy Luther, Alison Louie, Alexis Fagan is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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