People magazine has started charging different newsstand prices in different parts of the country — with prices in affluent areas getting hiked and those in others areas getting cut.
The ground-breaking move rolled out by Time Inc. CEO Joe Ripp is being tested on a limited basis.
The move is part of the newly spun-off company's plan to grow its profits, Ripp told Wall Street analysts on Tuesday when discussing the publisher's first quarterly report as a standalone company.
"Magazines are one of the few products that have one price nationally," he said. "That makes no sense to me."
"There are certain counties where we can raise the price of People magazine and certain counties where we should probably consider lowering the price," Ripp said.
People generates about 20 percent of Time Inc.'s revenue.
"I agree that there's not a good reason for the price to be the same in Arkansas as it is in Connecticut," said John Harrington, a circulation expert who publishes "The New Single Copy."
Ripp might want to go even further and try different prices in different types of retailers — say higher in airport and train terminals where the buyer is captive, Harrington said.
The move could inspire others to follow suit.
When People boosted its cover price to $5.99 many rivals in the weekly celebrity category — including Star and Us Weekly — followed suit within weeks.
While volume fell, newsstand revenue for People was actually up 4 percent, the company said.
"We want to use price as a lever that we have not used before," said Ripp.
Time Inc. reported second quarter revenue fell 1.6 percent from a year ago, to $820.4 million. Earnings before interest, taxes depreciation and amortization fell 30.2 percent, to $100.6 million . Excluding one-time events, Ebitda came in at $113 million.
Time also revised its revenue and earnings outlook downward for the rest of the year.
Digital revenue, reported as a separate line for the first time, rose 12 percent to $60 million.
Excluding one-time items, digital revenue was up about 15 percent.
Chief Financial Officer Jeff Bairstow revealed the company within the next week is going to hire a new senior vice president to look at mergers and acquisitions.
Ripp said that acquisitions will be only one consideration of how to use the company's ample free cash flow — with share buybacks, debt repayment and dividends also getting some thought.
The company revealed it took $150 million in severance-related charges in the first quarter as 500 employees were laid off and another $55 million in the second quarter.
While Ripp said that there are no major restructuring charges expected for the rest of 2014 — but that may not be the case in 2015.
There are 250 people working in Bangalore, India, and the company anticipates hiring more people there next year.
Ripp said that information technology, advertising operations, and consumer marketing are all areas where some functions could end up getting outsourced to India.
Time Inc. is scheduled to move to Downtown Manhattan next year — and the previously announced plan to have editors reporting to business-side executives will result in a radical change in the floor plan for the newsroom, Ripp noted.
An "open floor plan" will be employed to enable the company to accelerate its "cultural transformation" for "closer collaboration between the creative and business sides of the organization and for greater sharing of resources across brands, the CEO said.
Time Inc. shares closed Tuesday up 0.3 percent at $24.37.
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