WHSmith has banished the Daily Telegraph from its outlets in railway stations, escalating an industry-wide battle over shrinking margins for newspaper retailers.
After ordering managers to move the Telegraph titles to the magazine section on Friday, the UK chain this week refused to stock the daily newspaper in about 120 railway stores.
The dispute arose after the Telegraph raised the cover price of its newspapers by almost a quarter this month — the daily edition to £2.50 and the Sunday Telegraph to £2.80 — but did not increase the amount paid to retailers by the same proportion.
Telegraph Media Group and WHSmith declined to comment on the dispute. An insider at the publisher said it hoped that the “unfortunate” situation could be swiftly resolved so sales of the paper would resume.
The disagreement reflects years of frustration among newsagents, whose sales income has fallen along with tumbling circulation of print copies. While Britain’s national papers have steadily raised their cover prices over the past decade, the increases have been offset by cuts to the retailers’ share.
Newspapers are sold at about 54,000 outlets across the UK, with supermarkets and WHSmith playing a dominant role in the market. Retailers are constantly evaluating the shelf space devoted to low-margin newspaper and magazine sales, but banning a national publication is extremely rare. Aldi, the supermarket chain, stopped stocking newspapers last year.
One executive at a rival publication said the Telegraph should be “very careful” not to put further pressure on a business model for newsagents and retailers that is “extremely fragile”.
Under the Telegraph’s new pricing plans, retailers have been told they will until August receive the same 43p per copy sold for the Daily Telegraph, even though its cover price will increase from £2 to £2.50. After August they will be paid 51.2p per copy sold, which reduces their share of the cover price from 21.5 to 20.5 per cent.
While in cash terms newsagents will receive some of the highest per-paper rates from the Telegraph titles, the publisher will have some of the slimmest percentage margins for retailers in an industry that has been systematically squeezing their share.
Stuart Reddish, national president of The Federation of Independent Retailers, said the Telegraph margin changes were “disappointing” especially when its members were “operating under such financially challenging operating conditions”.
A study in 2016 by Deloitte found that the industry, on average, paid 23 per cent of a newspaper’s cover price to retailers and 5 per cent to wholesalers. Today, the national newspaper average for retailers is closer to 22 per cent, according to Financial Times calculations.
While accurate estimates are difficult, a government report last year said that net revenues from all print newspaper sales were about £1.7bn in the UK in 2017. Most newspapers make a loss on their print editions.
The Telegraph price rises have come as the owners of TMG explore whether to sell the newspaper titles, whose profits fell 94 per cent to £900,000 in 2018. Frederick and David Barclay began reviewing their business empire in the autumn but bankers have yet to be appointed.
Like much of the industry, the Telegraph has struggled to cope with plummeting print circulation over the past decade. Since 2017, the Daily Telegraph print circulation has fallen 34 per cent, from 484,000 to 317,000 copies a day, according to data from the Audit Bureau of Circulations.
The Telegraph withdrew from the ABC system last month, saying that the figures did not “accurately reflect the success” of the group’s digital business.