The Case Of Metro Monthly

BackgroundBackground

City magazine that has won national City magazine that has won national awards.awards.

Hard-hitting journalism, humorous Hard-hitting journalism, humorous features, personality profiles of features, personality profiles of important community members.important community members.

Won several national awards in 1Won several national awards in 1stst 10 years.10 years.

BackgroundBackground

Profits declining in last 3 yearsProfits declining in last 3 years 3 of original founders fell out over 3 of original founders fell out over

content.content. Remaining 2 founders sold the Remaining 2 founders sold the

magazine company.magazine company.

TaskTask Prepare a budget that would increase Prepare a budget that would increase

profits by 10% over estimated level for profits by 10% over estimated level for current year’s budget.current year’s budget.

Explain process of creating budget.Explain process of creating budget. Explain possible impact of any price Explain possible impact of any price

changes or budget cuts suggested.changes or budget cuts suggested.

The Problem #1The Problem #1

Competing magazine, Metro Competing magazine, Metro Magazine started 4 years ago. Magazine started 4 years ago.

Free publicationFree publication Contains ‘good’ news – public Contains ‘good’ news – public

relations tool for businesses.relations tool for businesses.

Problem #2Problem #2

Rising prices for paper and ink.Rising prices for paper and ink. Increasing printing costsIncreasing printing costs

Problem #3Problem #3

Decrease in advertising dollar due Decrease in advertising dollar due to economic recession.to economic recession.

Expected to continue over 1 year.Expected to continue over 1 year.

The Three Legged StoolThe Three Legged Stool

Content Advertising

Readership

Effects of Effects of ProblemsProblems Readership: - Readership: - competition from Metro competition from Metro

Magazine. Leads to fall in readership, then Magazine. Leads to fall in readership, then fall in advertisingfall in advertising

Advertising: - Advertising: - direct competition for direct competition for

advertising with Metro Magazine.advertising with Metro Magazine. Content: - Content: - Change in management could Change in management could

affect outlook of magazineaffect outlook of magazine External: External: - Rising costs and recession- Rising costs and recession

Goals & Goals & ObjectivesObjectives

Increase profits by 10% over Increase profits by 10% over estimated level of current year’s estimated level of current year’s budget.budget.

Strategy Strategy Increase revenue through: Increase revenue through:

• Increasing advertising revenueIncreasing advertising revenue• Increasing readership revenueIncreasing readership revenue

Decrease costs Decrease costs

Possible SolutionsPossible Solutions

Increase/reduce subscription/single Increase/reduce subscription/single issue rates.issue rates.

Make magazine free.Make magazine free. Increase/reduce ad prices.Increase/reduce ad prices. Reduce salaries.Reduce salaries.

Possible SolutionsPossible Solutions

Replace regular staff with Replace regular staff with freelancers.freelancers.

Dismiss regular staff.Dismiss regular staff. Bring back 3 founders who left. Bring back 3 founders who left. Change type of coverage.Change type of coverage. Reduce number of pages.Reduce number of pages.

Page Figures for Metro Monthly

912 940 980 960 912

425 480 445 415 384

0

200

400

600

800

1000

1200

Time

Pa

ge

s

Total number ofpages

Advertising pages

C o s t a n d R e v e n u e F ig u re s fo r M e tro M o n th ly

1 0 0 01 2 0 01 4 0 01 6 0 01 8 0 02 0 0 02 2 0 02 4 0 0

T im e

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ure

s in

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ou

san

ds

($)

T o ta l A d ve rtis in gR e ve n u e

P ro d u c tio n C o s t

C irc u la tio n R e ve n u e

Appraisal & Appraisal & ChoiceChoice

Production costs have increased Production costs have increased despite cut in pagesdespite cut in pages

Price does not have a significant Price does not have a significant impact on circulation ratesimpact on circulation rates

Appraisal & Appraisal & ChoiceChoice

Conclude that falling ad revenue is the factor Conclude that falling ad revenue is the factor with the most impact on profit margins.with the most impact on profit margins.

To increase profits, we decided to To increase profits, we decided to concentrate on maintaining advertisers’ concentrate on maintaining advertisers’ sentiments despite recession.sentiments despite recession.

This will be done by lowering ad rates.This will be done by lowering ad rates. Advantage to us since competitor survives Advantage to us since competitor survives

solely on selling advertising.solely on selling advertising.

Demand for Magazine in Advertising Market

Dd

P1

P2

Q1 Q2

$

Qty