The Financial Times (FT) is sold at the newsstand for $2 per issue. For 52 weeks per year, the FT prints 6 issues per week. Assume the cost to produce and distribute the FT is $0.75 to both newsstand customers and subscribers. Let the applied discount rate be 0.03055 percent for the inter-issue period.

a. How many issues per year does the FT produce?

b. What is the total period price of purchasing every issue of the FT published that year at the newsstand?

c. For newsstand readers, assume that the marketing expenses are allocated such that, on average per customer, $0.10 is allocated for both acquiring new readers and retaining existing readers. Furthermore, let the effective reader retention rate be 99 percent between issues. What is the one-year customer period value of a newsstand reader?

d. For subscribers, assume that the marketing expenses are allocated such that, on average per customer, $20 is allocated to acquiring new readers and nothing is spent on retaining existing readers. Furthermore, assume that the retention rate of subscribers is 100 percent over the course of one year. What subscription price would leave the customer period value for a subscriber equal to that of a newsstand reader?

e. From this analysis alone, what range of prices would you expect to see for an annual subscription to the FT?

f. The FT offers an annual subscription at $99. Does this price lie within the range predicted from this analysis? If not, how would you account for the difference?

Hint: Consider the effect of two-sided markets on subscription prices.

Answer rating: 100% (QA)

a How many issues per year does the FT produce ANSWER The FT produces 312 issues per year WORKING The FT produces 6 issues per week There are 52 weeks ... View the full answer