The publishers of the Sun and Daily Mirror will not embark on a drastic tabloid price war with Richard Desmond, as the first newsagents stop selling the Daily Star in protest at the planned 50% price cut.
Trinity Mirror, publisher of the Mirror titles and the Sunday People, and News UK, publisher of the Sun, are understood to have “zero” intention of matching such deep price cuts at their own titles.
“Neither the Mirror or the Sun can survive economically at half the price they are now,” said one senior newspaper executive. “Even if the Star gets a 10% to 20% uplift in sales, the loss of revenue from the cut will mean it could be costing Desmond as much as £400,000 a week.”
The plan to slash the price of the Star’s weekday and weekend editions from Monday has sparked outrage among retailers, who will see their per-copy fee drop from 9.68p to 4.84p.
The National Newsagent Network, a group of 12 newsagents, is the first to publicly announce that the Star will be pulled from its members’ outlets until further notice.
N3, as the group is known, says this is an “unprecedented” decision to take and follows Northern & Shell, parent company of the Star’s publisher, refusing to reverse the planned price cut.
“We are not a cash cow for publishers who want to use retailers to fund price wars on their competitors,” said Ray Monelle, chairman of N3. “Whilst this action is not our preferred choice of doing business, it was not a difficult decision for the N3 board to delist titles offering uneconomic terms of trade.”
Desmond’s tabloid rivals may consider smaller price cuts, but the main focus will be on using marketing strategies, including building subscriptions and reader offers.
News UK responded swiftly to the news of Desmond’s planned price cuts by launching a major campaign offering readers 12 weeks’ free home delivery.
The offer was first launched with the Sun last year and has now been extended to include the Times and Sunday Times.
“We’re very proud of our work with the independent retail channel and hope this further demonstrates our commitment to putting customers into their shops and money in their pockets,” said Chris Duncan, chief marketing officer at News UK. “Many retailers, especially independent retailers that rely on cash margins, will be reviewing their stocks today and we’d be delighted to increase stocks of the Sun for those looking to replace the Star.”
Desmond’s move has been viewed as an attack on Trinity Mirror following the failure of talks to buy the Daily Express.
“It is hard to avoid the conclusion that this is a way to harm the profit performance of Trinity on the back of the abortive deal talks between the two companies,” said Alex DeGroote, media analyst at Peel Hunt. “It remains to be seen if this is a short term tactic, and whether it [will] extend to the Express titles as well. However, it is bad news for the sector at large.”
A number of observers believe that the price cut is a tactic, albeit bizarre, to haul Trinity Mirror back to the negotiating table – or perhaps to entice News UK.
Last month, Trinity Mirror confirmed it was in talks concerning a £200m takeover of regional newspaper group Local World.
“If News UK or the Mirror respond, it will wipe out their profits,” said one senior newspaper industry executive. “It is a clever move because what Desmond is saying is that it could be cheaper, and more sensible, to buy him than compete in a war of attrition. It feels like a ‘no one wants to buy me so I want to be a pain in the arse’ reaction.”
