Optimum Distribution Formula What is the probability of selling the next copy distributed? How much did it cost to distribute/produce that copy?

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Presentation transcript:

Optimum Distribution Formula What is the probability of selling the next copy distributed? How much did it cost to distribute/produce that copy?

Variables Affecting Title Economics Publisher Discount Retailer Discount Cover Price Sales Variability from Issue to Issue Operational Costs (Metro) Average Cost per Unit: $0.21 Variable Cost per Unit: $0.14 How Much Does it Cost to Distribute One More Unit? $0.14 (Marginal Cost)

Marginal Revenue per Copy Marginal Efficiency $ Optimum Distribution Formula

Marginal Cost per Copy $ Marginal Efficiency Optimum Distribution Formula Marginal Revenue per Copy

Marginal Loss Breakeven Point $ Marginal Efficiency Optimum Distribution Formula Marginal Profit

A Lower Cover Price Requires a Higher Efficiency

A Higher Retailer Discount Requires a Higher Efficiency

A Higher Publisher Discount Allows a Lower Efficiency

Higher Operating Costs (Metro) Require a Higher Efficiency

Disparity Between ANC and Publisher Economics ANC Gross Profit ANC Variable Cost Publisher Gross Profit Publisher Variable Cost

Disparity Between ANC and Publisher Economics The difference between ANC’s profit maximization point and the publisher’s represents ANC’s leverage

Variable Costs Distribution$0.11 / Copy Distributed Returns$0.03 / Copy Returned Gross Profit per Copy Sold Discount from Publisher 43% Discount to Retailer-26% Gross Margin% 17% Cover Price $3.50 Gross Margin $3.50 * 17% = $0.60 Motor Trend Optimum Distribution Formula

Marginal Revenue = Marginal Cost Gross Profit * Efficiency = Distribution Cost + Return Cost * (1-Efficiency) $0.60 * Efficiency = $ $0.03 * (1-Efficiency) $0.60 Efficiency = $ $ $0.03Efficiency $0.63 Efficiency = $0.14 Efficiency = $0.14 / $0.63 Optimum Marginal Efficiency = 22% Motor Trend Optimum Distribution Formula

Motor Trend 10 Copy Average Accounts

Motor Trend 10 Copy Average Accounts

Motor Trend 10 Copy Average Accounts

Motor Trend Optimum Distribution Formula

Motor Trend Optimum Distribution Formula

Motor Trend Net Impact