[shingivyas]

“Since a competing lower-priced newspaper, The Bugle, was started five years ago, The Mercury’s circulation has declined by 10,000 readers. The best way to get more people to read The Mercury is to reduce its price below that of The Bugle, at least until circulation
increases to former levels. The increased circulation of The Mercury will attract more businesses to buy advertising space in the paper.”


Analysis of an argument

The above argument states, a decline in readership of newspaper, “Mercury”, as a result of a Competition from low priced newspaper, “The Bugle”, and consequently suggests a reduction in the price of newspaper “Mercury” as the best option for increasing its readership. I don’t entirely agree with the argument:

Firstly, the argument is based on the assumption that the only criterion of choosing a newspaper by the readers is “its price”, which is not entirely true. Rather a newspaper is rated on several aspects -the quality/ exclusivity of the news it provides or some additional feature- whether it is the standard of its editorial/ guest column or the business news. So unless we have an idea about the difference in the quality of news provided by both the newspaper, we cant say why “Bugle” has an edge over “Mercury”.

Secondly, as the argument only recognizes “Low price” to be the reason for high readership of “Bugle” it suggests that reducing the price of Mercury would solve the problem. But what it fails to answer or explain is the feasibility of such lowering of Price. Can Mercury actually afford such a decline in Price? As Bugle and Mercury are working on different production scales(with Bugle enjoying the economies of Scale) can Mercury sustain such a low price and yet cover the production cost?

Thirdly, The argument also fails to throw any light on whether the newspaper are actually “comparable”, in the sense that are they both General Newspaper/ sports daily/ economic/ financial papers. If the two belong to different streams of news, then comparability of their readership is completely ruled out.
Further Bugle is five year old, sufficiently old to build a good reputation but the argument doesn’t provide for how long Mercury has been in the Market. If Mercury has been recently introduced, then definitely in ordinary/ usual circumstances it can’t beat a newspaper which has a standing of 5 years

Therefore in light of the above , I believe that lowering of price is not the Best way of meeting out the competition. At the same time, even if it is assumed that the advertising revenue so generated will cover for the costs and Mercury can comfortably reduce the price, what cannot be denied is that advertising as the revenue resource would only be possible if the Circulation increases, which is a hypothetical situation and cannot be blindly accepted.

Only after seeking some more information on the news quality provided by both the newspaper/ the specific kind of news the two(bugle & mercury) provide and only after considering the publishing/ Producing Costs for both the newspaper can we form a conclusive picture as to whether “Price reduction” will help Mercury? Or whether Advertising revenue would be adequately generated.