Magazines in crisis over rising paper costs

Publishers of news, novels and `glossies' face squeeze on profits. Maggie Brown and Rhys Williams report

Prices of magazines and some books will rise this year as publishers respond to sharp increases in the cost of paper.

Two of the country's leading magazine publishers, Conde Nast and National Magazines, are also being forced to reduce the size of leading titles including Vogue, Tatler and Good Housekeeping.

Newspapers are being forced to cut down on supplements after years of expansion. Yorkshire on Sunday is to close, while several free newspapers have already shut down. Magazine editors, many of whom are locked in fierce circulation wars, say the situation is disastrous.

With the cost of paper increasing by between 30 and 40 per cent this year, Terry Mansfield, chief executive of National Magazines, said the industry now faced a situation "as serious as the 1973 oil crisis, which grounded airlines".

Unwilling to cut the number of pages and risk losing advertisers and readers, National Magazines is shaving a quarter of an inch from the top of magazines, as is Conde Nast.

Cover prices will also increase. National's Good Housekeeping, Britain's largest circulation monthly, will rise 5p to pounds 1.95, She will cost pounds 1.90 (pounds 1.85) and Cosmopolitan pounds 2 (pounds 1.90).

Mr Mansfield said the growth in supplements was expected to stop and he predicted greater hesitancy over new launches.

The coated paper which glossy magazines require now comprises 18 per cent of total costs but is expected to rise.

Conde Nast is resorting to similar measures. As well as having to "down- size" titles such as Vogue and GQ, Nicholas Coleridge, managing director, said the company was also having to contemplate cover-price hikes, with World of Interiors to rise by at least 10p from its current pounds 2.90, Tatler by 10p ( pounds 2.40) and House & Garden by 20p (pounds 2.40).

Last week, the price of the Sun newspaper rose 2p to 25p, which analysts believe could raise pounds 30m for its parent company, News International. But Dougal Nisbet-Smith, director of the Newspaper Society, which represents regional and local newspapers, said the price rise was having a disproportionate impact on freesheets, which have larger print runs than paid-for papers. Paper costs for newspapers vary from about 8 per cent of budgets for weekly papers, to between 18 and 30 per cent for daily newspapers.

He said: "In the past few years there has been enormous work on redesigns and the introduction of new features, to counteract the 2 per cent annual drop in sales. Now this happens. It's horrendous."

While paper accounts for a far smaller proportion of their overheads (about 5 per cent on average), book publishers are also feeling the strain, with even a marginal rise in costs likely to leave a significant hole in their thin profit margins of about 5 per cent. "It enormously serious," said Stephen Essen, of Random House.

A senior executive of one leading publishing house said: "The margins are so low, that whipping a bit out means something has to give somewhere and that's got to be price." He predicted that educational books, in which paper accounted for a greater proportion of costs, would be hit hardest.

But Tim Healy-Hutchinson, group chief executive of Hodder Headline, said his company would continue to discount heavily. "We will be driving for volume by encouraging discounting. If you can get significant sales increases, although the percentage margin will be lower, overall profits go up."