Monday, December 1, 2008
Single Copy Sales Are Likely to Come Back
But The Newsstand Will Feel the Impact of a Broadly Challenged Magazine Business for a Longer Time
By John Harrington
Business trends have a cyclical quality to them. Most economists expect the troubled national and international financial system to rebound, although they may argue on how rapidly the recovery will take place. That is also likely to be the case with the currently distressed newsstand. Retail conditions will improve, soon we hope, and impulse item retail sales will rise with them. However, magazine newsstand sales are one facet of a more complicated publishing economic model; and some fundamental constructs of that model may be shifting. The eventual form of a refitted magazine business will impact the newsstand marketplace in ways very difficult to predict.
Newsstand 2008: At times it may seem we have reported on it endlessly: "it" being the troubled state of the mass market magazine distribution channel. The first half of 2008 was the worst for newsstand sales in at least five years, after a period of relative stable performance. Sell-through figures, which had been the focus of retailers, publishers and national distributors, and most emphatically wholesalers, slipped, after several years of improvement. The losses were particularly frightening for an already financially stressed wholesaler level of the channel, especially since there were indications it had been adopting some more rational strategies.
It has not gotten any better since then. Virtually at every level of the distribution system, leaders have acknowledged that the third quarter was, if anything, even more discouraging. Magazine Information Network (MagNet), the wholesaler data base of magazine and book retail sales, provided The New Single Copy with figures estimating a year-to-date double-digit decline in units and more than 5.0% in retail dollars. It may be some solace, that almost universally, the dire numbers are attributed to the national, and even international, economy that is clearly recessionary, and, in some ways, bordering on a depression.
The situation is more serious than a business struggling through a sluggish economy. The economic model of magazine wholesaling has been broken for more than a dozen years. Some band-aids have relieved conditions, but not in a structural fashion. Of the four large, surviving wholesalers accounting for over 90% of the business, only the smallest one with an estimated 15% market share, was even marginally profitable going into 2008. What does anyone think the catastrophic numbers cited above have done to these companies' bottom lines?
On top of that, only within the last month, the market for magazine waste paper, which has been for some time a key source of income for wholesalers, has virtually collapsed. Most waste paper was being sold through brokers to the China market, where it was used to manufacture construction materials. In a constricting world economy, there is not a lot of construction going on. Some wholesalers thought they had a level of protection on this issue through price-protection contracts they had with paper brokers. Sorry, however, last week, one of the largest brokers notified its customers it was exercising a force majeure clause in its contracts and cancelling them.
The Good News: Still, even after this dreary recitation of bad news, it is worth recalling Mark Twain's comment about Wagnerian opera, "It's not as bad as it sounds." Really? How so? To start with, there are some national distributor initiatives moving forward designed to deal with some of channel's structural liabilities. Both have been previously reported on here, but each are getting closer to the operational stage. Comag Marketing Group's Impact II program, which will establish primary distributors in most markets, will be, according to the company's management, signing contracts with wholesalers in the next few weeks. Early this fall, Time/Warner Retail announced a plan to implement pass-through pricing for all Time Inc. publications, eliminating the cumbersome display allowance collection process. TWR management confirmed its plan will be implemented in January, even where it is meeting resistance from retailers, service providers, and even wholesalers. Although both plans have critics, many others, including most wholesalers, think the programs will lend some rationality to a troubled distribution network.
In terms of sales, the celebrity category, which had lost some of the buzz of the past five years, was looking at phenomenal sales for current issues with covers featuring the United States President-elect, Barack Obama. People may end up with its best issue ever, outside of those covering the death of iconic figures, such as Princess Diana and John Kennedy, Jr. Us Weekly is expected to top one million on the newsstand, a figure it has exceeded on only a few occasions. Additionally, the newsweeklies are looking at 500,000-plus copy sales of not only their regular issues, but also for specials about the first African-American elected President. Across the publishing spectrum, there is a sense, and certainly a hope, that the Obama effect will boost newsstand sales for several months, at least through his historic inauguration in mid-January. Always optimists, channel members are hopeful that the excitement over these publications will improve the entire category. It is not an unrealistic thought.
Additionally, magazines generally remain friendly to price increases. Although some checkout titles have recently experienced substantial losses following large price hikes, the results may have been exaggerated because the cover prices had been kept artificially low for too long. On the other hand, The Economist recently jumped its cover a dollar to $6.99, less than two years after going to $5.99, also a dollar raise. Sales continued to grow for the newsweekly, which is priced two dollars higher than its primary competitors.
Some executives have expressed concern that depressed magazine sales are driving retailers to squeeze the category, perhaps reducing space, even at checkout. A skeptical view from here is "What will they replace publications with?" Consumers are not, perhaps slightly hyperbolically, buying anything right now. Sales of all discretionary products are down, most by significantly higher numbers than magazines. The public is going to the supermarket less often, and with a parsimonious mindset. If it's not on the shopping list, it doesn't go in the basket. That attitude doesn't just hurt publications, it hurts most of the products magazines and books compete with equally. Perhaps cold comfort, but some comfort.
The Publishing Background: Publishing revenues have often been described as a three-legged stool: advertising, subscriptions, and single copies, or newsstand. The latter has always been the smallest leg, on a broad scale, estimated at 16% or a sixth, with subscriptions at around a third, and a little more than 50% coming from ads. However, our analysis of some of the largest titles puts ad income considerably higher, and newsstand around 10%*. Even before 2008, The New Single Copy has stated that newsstand, even with all its well documented struggles, was probably the most reliable leg of the stool. Advertising pages were down and had been for most of the decade. Subscriptions were about even, but that was deceiving, because the cost of obtaining them had grown dramatically ever since the late 1990's collapse of the subscription clearing houses. In contrast to newsstand, which has been friendly to cover price increases, the average subscription price today is lower than it was 10 years ago.
As 2008 draws to a close, newsstand is not only the most reliable source of publisher income, it may be the only reliable one. The problem is it is also the smallest, and is not easy to expand. Advertising sales, the engine that drives American publishing, may not have collapsed, but some publishers likely think it has. The CEO of the largest magazine company recently said, "It was looking like 1931." For non-historians, 1931 was not a good year for anything. One of the most famous former magazine editors, Tina Brown, was quoted on Portfolio.com (11/1/08) saying "I'd hate to be a magazine editor now." The most recent figures from Publishers Information Bureau (PIB) showed ad pages down so far this year by nearly 10% and revenues by half that. MIN Media Industry Newsletter (11/17/08) reported third-quarter pages off by 10% and estimated the fourth-quarter number would be minus 14%. Since much advertising is discounted, the revenue figures are generally acknowledged to be much worse than reported.
Unlike newsstand declines, advertising malaise is caused by much more than the sorry economy. That just makes it even worse. All media advertising is in turmoil, as it adjusts to the impact of the internet and expanding media outlets in general. For publishers, that means there is a pervasive fear that much of the lost advertising will not come back when the broader economy does. In a general publishing economic model where the function of circulation, both newsstand and subscriptions, is to support advertising rate base guarantees, low ad sales downgrade the role of circulation.
A few weeks ago, Hearst Magazines announced that, because of poor ad sales, it was closing CosmoGirl! Certainly a sound publishing decision. Yet, CosmoGirl! sold over 300,000 single copies every issue. In 2007, it generated $11.3 million at retail, ranking it 44th among audited titles. That's out of more than 5,000 titles. For wholesalers and retailers, those sales will not be replaced, and there are no meaningful cost savings for either of them by not delivering, merchandising, and accounting for the title. Many magazine industry analysts think that, even after the worst of the present ad condition is past, more than a few magazines will close, and not be replaced. The impact on wholesalers and retailers is clear. Large mainstay titles of the newsstand are likely to recover, but the total pie will, quite likely, be considerably smaller. And there are not commensurate cost savings.
The prospect of an already severely damaged wholesaler level of the channel being rendered even more financially distressed has to be troubling to publishing senior management. Unfortunately, at the moment, it is not as demanding of their attention as the catastrophic ad business. When they have tweaked their business plans and adjusted to the new realities of advertising, the internet, and some other things as well, hopefully they will still have a newsstand distribution channel to make better.
* These figures represent total moneys generated, calculated on published ad rates, subscription and newsstand cover prices. They do not represent publisher income.
Monday, October 20, 2008
Publishers Claiming Digital Circ on Rise
By Dylan Stableford
Driven by environmental concerns and the high cost of international distribution, publishers are claiming digital circulation is on the rise.
The number of publishers claiming qualified electronic editions-i.e. digital copies-on their most recent BPA circulation statements increased 28 percent, according to the company. There were 286 in June, up from 224 in December. (The jump, in part, can be attributed to a rule amendment requiring just a single pre-audit per publisher, BPA CEO Glenn Hansen said.)
Cimarron Buser, SVP, marketing and business development at Texterity, added that "the increased use of laptops in a paperless world" has also helped spur on the increase of digital.\
Despite the increase, digital still accounts for a small percentage of the overall circulation mix. On average, electronic editions made up 13 percent of total circulation for all BPA members. In fact, of the top 20 magazines in terms of digital circulation tracked by BPA, just one-Renewable Energy Focus-claims a majority of its circulation digital-only.Oracle claimed a digital distribution of 146,545-a 19 percent increase-during the first half of the year, topping all BPA titles in digital circulation. Electronic editions now comprise almost 30 percent of Oracle's total subscriber base.
BPA's Top 20 Titles in Digital Circ First Half 2008
Magazines Wrestle with Future Business Model
By Tony Silber
SAN FRANCISCO-The magazine industry can't afford to have a "protectionist" strategy about businesses that are not growing, and instead should manage them for profit and apply resources to growing areas of the business, IDG CEO Bob Carrigan told attendees at the American Magazine Conference here Monday. In a wide-ranging conversation under the banner "Reshaping the Model for Magazines," Carrigan-who unlike fellow panelists Amex Publishing CEO Ed Kelly and Meredith EVP Andy Sareyan is an executive in b-to-b and in the tech sector-seemed to be more e-centric than either Kelly or Sareyan. Asked what the ideal revenue mix would be in the next few years, Kelly and Sareyan both said they want to reach a 40 or 50 percent mix between e-media and print. Carrigan said IDG is already there. "We're already in a space, in digital, where the advertising is bigger than print ever was," he said. "We're seeing an expansion in digital. We'll manage print as best we can." "We'd like 50 percent," Sareyan said. "But ad pages remain very important and they often lead an integrated buy." But how do you build a business when you're putting in more money than you're getting out? Carrigan said it's about creating programs that drive leads, rather than sell eyeballs. "There's no reason why worldwide magazine brands shouldn't drive very high CPMs," he said. And a strong database is critical for that, he added. "Marketers are willing to pay dearly for qualified leads." Kelly pointed out that Amex Publishing is owned by American Express-which has one of the largest databases in the world-and is partnered with Time Inc. "I spend a lot of my time trying to tap into that database, and tying into all the things we can do for marketers," he said. "The whole 360-degree approach is an area where we've had a lot of success." Social networks remain a distinct challenge for publishers. "There are things to generate revenue directly and there is indirect revenue," Carrigan said. "We try to get people to do one more thing on our Web sites and then sell against that." "We're only dipping toes in the water," Sareyan admitted. Kelly said: "I'm letting American Express figure it out and share their learnings with us."
Tuesday, October 7, 2008
Deciphering a Conundrum: First-Half 2008 Newsstand Sales
By Baird Davis
Record price increases unleashed a precipitous unit sales drop while overall revenues managed to climb.
The conundrum, which is the newsstand, was never more apparent than the first half of this year. The unit sales of audited publications dropped a staggering 5.9 percent, undoubtedly the largest year-over-year decline in history. Yet revenue grew by a record 3.0 percent to over $1.6 billion.
This apparent contradiction was caused by record price increases. The average price of newsstand-sold publications rose by 9.6 percent-from $3.42 to $3.75. To understand the magnitude of this historic price escalation consider that during the preceding four-year period newsstand prices only rose 2.6 percent, an annual average of a little over a half of one percent.
Pricing alone can't explain what transpired at the newsstand in the first six months of this year. But it's fundamental, I believe, to understanding the depth of the changes that have occurred.
The End of the Low Cover Price
The sound you just heard was the end of the low cover price checkout title era tumbling off a wholesaler's conveyer belt. It was an era personified, and dominated, by the gigantic sales of digest-sized TV Guide, selling for decades at prices less than a dollar, and the price-friendly tabloids. Now TV Guide is a sales laggard, cover-priced over $3, and the major tabloids are priced at $3.40 and selling at a fraction of the level they achieved just a decade ago. In the last few years Bauer titles In Touch and Life & Style (priced at $1.99) temporarily filled the low price niche vacated by TV Guide and the tabs. But in October of 2007 the low price era, effectively, came to an abrupt end when market leader Bauer not only raised the prices on the aforementioned celebrity titles to $2.99 (a 50 percent increase), but also increased the cover price of their other seven audited titles, including a 19 percent increase for unit sales market leader Woman's World. By all accounts the Bauer price increases were precipitated by strong pressure from wholesalers who argued that the economics of distributing super low priced publications (less than $2) were no longer economically feasible. Yes, there are still a few holdouts. They include Family Circle, All You and Woman's World, which despite a 19 percent price increase, is still priced below the $2 line. But the low cover price era has receded into history.
The Bauer Factor
Although Bauer operates outside the glare of Manhattan media attention, and is not an advertising sales behemoth, they have been the newsstand unit sales leader for most of this decade. Prior to this year, they accounted for over 20 percent of all unit sales of audited publications, outselling Time Inc., the number two newsstand sales company, by nearly two to one. To some great extent the newsstand market dances to the beat of the Bauer drum. As previously mentioned, Bauer raised prices on all their publications-up an average of 35 percent. Sales losses were certainly to be expected given the magnitude of the price increases. In the first half of this year, the price sensitive market weighed in with its decision. Bauer's sales declined nearly 19 percent. However, their sales revenue rose 8 percent. Does this represent a reasonable trade-off for Bauer? I'm not sure, but I suspect the unit sales decline was greater than they anticipated. In the aggregate, Bauer unit sales decreased 20.6 million copies in the first half of this year. To put the scale of this decline in market perspective it should be noted that their unit sales decline was only a little less than Conde Nast's 23.6 million unit sales during this period.
The Market Effect of Bauer Price Increases
When the sales of 20 million copies are sucked out of the market it's bound to have an effect on the sales of other publications.
The six major celebrity titles (People, Us, In Touch, Star, Life & Style, OK!) experienced unit sales losses of 10.3 percent and offsetting revenue gains-to $459.3 million-of 9.9 percent. The unit sales decline in this category can largely be attributed to Bauer's two celebrity titles (In Touch and Life & Style). But a funny thing happened to the other four publications in this category-two gained unit sales (People and OK!) and the other two (Us, Star) lost sales ground. Interestingly People's unit sales rose in the face of an 11 percent price increase. OK!, on the other hand, was the only title in this group that did not raise cover price. People's sales increase can be partially attributed to several very successful covers (several of which involved payment to the cover subjects), but it also appears as if People may have benefited by the sharp decline in In Touch and Life & Style sales. OK!'s unit sales increase appears to be a result of holding steady on price (relatively low $2.99) and, perhaps, because of a perceived market quality distinction. Overall the celebrity category suffered some serious unit sales price shock, but they added to their sizable share (30 percent) of the newsstand revenue market.
Top 25 Checkout Titles
In this period they accounted for more than 75 percent of the checkout unit sales and revenue. They represent 60 percent of total magazine unit sales and 52 percent of the revenue pie. There are 535 audited publications that reported newsstand sales in the first half of 2008, but it's the sales of the top 25 publications that really define the newsstand market. During this period their unit sales declined by 24.9 million, which accounted for nearly all of the 26.7 million unit sales losses for the entire audited publication market. To understand the newsstand market it's seldom necessary to look very far beyond the sales performance of the top 25 publications.
The Bauer price increases appear to have had a broad market affect. The unit sales decline of Bauer titles not only accounted for a large percentage of the total market fall, but its pricing changes, particularly for their two celebrity titles, appears to have altered title preferences-note the sales increases for People and OK! and the market declines for Us, Star, the tabs, Cosmopolitan and O, The Oprah Magazine.
Checkout Sales are Mixed, Mainline Sales Continue to Fall
The sales of checkout titles were scrambled in the wake of the Bauer price increases. Overall the unit sales of checkout sales declined 6.3 percent, but revenue rose a robust 4.7 percent. Mainline unit sales also declined (4.6 percent), but the 4.2 percent increase in average cover price was not enough to lift revenue above last year's level.
The six-year trend reveals checkout unit sales annually declining 1 percent and revenues rising about 2 percent. This contrasts with the mainline whose unit sales have been declining steadily-an average of 4.4 percent and revenue falling about 2 percent annually. The spread between checkout and mainline sales continues to expand-an indication, I believe, that a growing proportion of industry sales are being made in the mass merchandiser, supermarket and drugstore channels of trade-where checkout sales predominate. This trend has been accentuated by the growing reluctance of wholesalers to distribute low-efficiency publications.
Newly Audited Publications
A total of 23 publications with newsstand sales were added to the auditing ranks in the last year. They contributed substantially to overall sales-adding 13 million unit sales and $40 million in revenue. Five of these titles contributed more than $2 million in sales for the period. They included People StyleWatch, which continued its strong performance first reported in the second half of 2007. All You reported average sales of 406,000 per issue, which is very impressive considering that it's distributed only in Wal-Mart stores. Quick and Simple, published by Hearst, reported seemingly high average per-issue newsstand sales of 321,000. However, their sales might be a little disappointing considering that the cover price was a super-low $1.63. O at Home (also published by Hearst) reported sales for the first time-nearly a 300,000 average for their two published issues. The fifth title reporting more than $2 million sales was American Curves, published by newcomer Canusa. Its 77,000 average sales per issue is good considering its high $6.99 cover price. This title joins Oxygen - Women's Fitness, also published by Canusa, which made its audit debut in the first half of 2007.
The relatively strong performance of these titles demonstrated the continuing importance of new publications in sustaining a viable newsstand industry.
Sales of the Top 10 Newsstand Publishing Companies
The top 10 publishing companies dominate the newsstand-combined they account for 79 percent of unit sales and 75 percent of revenue. The top six newsstand companies (Time Inc., Bauer, American Media, Hearst, Conde Nast and Wenner) further separated themselves from the pack. They accounted for over $1 billion in revenue in the first half of this year. These are the companies that have, by far, the most significant effect on newsstand sales.
In a difficult market Time Inc. sales leaped dramatically. Unit sales were up nearly 12 percent and revenue increased more than $40 million-a lift of almost 19 percent. Contributing to this strong sales performance were two titles new to the auditing ranks (People Style Watch and All You). Even if the sales of those new publications are excluded, their revenues would have been up 12 percent. The sales revenue of People (up 19 percent) and Sports Illustrated (up 34 percent) were the major sales increase contributors. However, nearly all titles, except Southern Living (down 12 percent) and Money (down 15 percent), displayed steady sales performance. As a result they extended their revenue sales lead and made big inroads on Bauer's unit sales lead.
As previously discussed Bauer performance was decidedly mixed. They surrendered a major portion of their unit sales lead, but they also expanded their revenue, advancing their share of revenue above all their primary competitors, except Time Inc.
American Media, Hearst, Conde Nast, Wenner
The newsstand revenue of these four companies remained relatively flat in the first half of this year, although three of them (American Media, Conde Nast, Wenner) suffered unit sales falls. American Media was hurt by the continuing sales slide of their two tabloid publications, which accounted for the bulk of their unit sales decline (8 percent). Hearst posted unit sales and revenue increases primarily because of the addition of two newly audited titles (Quick & Simple, O at Home). However, Hearst unit sales would have been off 11.5 percent and revenue down 7.5 percent without the benefit of those two titles. Disappointing sales from O, The Oprah Magazine (units down 17 percent and revenue off 6 percent) and sales drops of 18 and 23 percent respectively from Cosmo Girl and Seventeen contributed to a surprisingly weak six-month period for Hearst.
Conde Nast's performance was more stable than Hearst, but still far short of satisfying. They had some sales difficulties with Glamour (down 9 percent) and Vogue (down 13 percent), but they were helped by Vanity Fair's 6 percent sales rise. Wenner raised the price on Us and experienced an 11 percent unit sales decline. This accounted for nearly all of their unit sales losses, but they still eked out a 1 percent revenue increase on the strength of Us' cover price increase.
Source Interlink Media
It was a very rough six-month period for Source Interlink Media at the newsstand-unit sales down 19 percent and revenue off 12 percent. The major culprit was the sales fall of their two soap opera titles (Soap Opera Digest and Soap Opera Weekly). Combined the two soap titles lost 22 percent in unit sales and dropped nearly 16 percent in revenue. Their other 43 titles (all special interest publications) didn't fare too much better. They were down 16 percent in units and 10 percent in revenue. This company is rapidly losing newsstand sales. They appear to be a victim of the large cover price increases they have imposed over the last few years, as well as the downturn in the automotive industry, which has adversely affected most of their large cadre of auto-oriented publications.
On the surface it appears as if Meredith bucked the sales decline trend that's plagued the industry. They reported increases in unit sales and a 6 percent revenue gain. However, their sales were artificially helped by distribution to Dollar Tree stores, where publications are presumably sold for a dollar or less. Meredith has rescinded the Dollar Tree agreement, but the remnants of this agreement are reflected in the sales they reported in the first half of this year. It's believed that both BH&G and Ladies Home Journal were particularly helped by the inclusion of Dollar Tree sales. Without the Dollar Tree benefits it's assumed that Meredith's sales for the period would have been flat or down a little.
Northern & Shell
The sales of OK! continue to surprise. Their unit sales and revenue jumped nearly 20 percent. They were one of only five publications among the top 25 newsstand publications not to suffer a unit sales decline. It's now obvious this title is going to remain a formidable entry in the highly competitive celebrity title category.
Another strong period for Rodale. Increased sales from Men's Health and rapidly rising Women's Health more than offset Prevention's nearly 10 percent sales decline. Runner's World also impressively increased sales even though its cover price was raised.
Assessing Reasons for the Sales Decline
Conventional wisdom would seem to indicate that the hefty first half sales declines are attributable to higher gas prices, less supermarket visits and a declining economy. I have no doubt those factors have contributed, but I don't believe they're the major contributors. My sense, after reviewing the data, is that the major contributor was the record price increases, particularly those initiated by Bauer. To a lesser extent, but still a more significant contributor than a weak economy, are the wholesaler initiated draw reductions.
The newsstand market has always been very price sensitive. Publication pricing that got too far ahead of the reader demand curve was nearly always punished. That's why cover price increases have traditionally been very conservatively employed. However, in the last year many publishers have thrown pricing caution to the wind. The Bauer price increases, which we've discussed, have had a particularly large sales impact. The Bauer titles were joined in the price increase parade by a host of other checkout titles (11 of the top 15 titles increased price in the last period and all 15 titles increased price in the last two years). Price sensitivity is most acute for checkout titles, those publications trying to appeal to a broad audience. Special interest publications and those sold primarily on the mainline, I believe, are slightly less price sensitive because they are less of an impulse purchase.
Price increases, if they are in the extreme, are also likely to change buying behavior and product preference patterns. In this period we witnessed this phenomenon as the mega-price increases employed by Bauer for their two celebrity titles appeared to affect the sales pattern of all celebrity publications.
Wholesaler-Initiated Draw Reductions
The wholesaler-initiated draw reductions, started in earnest more than a year ago, are also having an adverse effect on sales (although they have helped produce the first industry efficiency rise in many decades). The rapid spread of scan-based trading (SBT) applications and the reduction in wholesaler distribution centers have accentuated the impact of these arbitrarily initiated draw reductions. It's difficult to hazard a guess as to its magnitude, but if efficiencies have improved, as reported, by 3 or even 4 percentage points it's a good bet that sales have been adversely affected by at least 1 percentage point.
The newsstand is not one-dimensional. It's driven by a set of interactive factors that conspire to make it one of the most confounding segments of our business. In the first half of 2008 the influence of pricing-especially the mega-price increases, which have had such an impact on sales-has been well demonstrated and so has the crucial market impact of wholesaler operations. The market affect of the economy, often used as a scapegoat, is less well understood.
For publishers it seems the lessons are clear-to maximize newsstand sales, pay careful attention to pricing strategy and develop a sound understanding of wholesaler operations, including their expanding SBT initiatives.
Monday, September 29, 2008
To Postal Workers, No Mail Is 'Junk'
With revenues falling, the post office owes its future to stuff we throw out.
BY Caitlin McDevitt
From the magazine issue dated Oct 6, 2008
These are tough times for the U.S. Postal Service. It's being pummeled by high fuel costs. The soft economy is crimping the overall volume of mail, which fell 5.5 percent in the past year. Its business is also falling as Americans opt for e-mail over birthday cards and thank-you notes. Now comes another threat: consumers like Colleen Plimpton of Bethel, Conn. Earlier this year Plimpton became tired of the credit-card offers, catalogs and advertising fliers that clogged her mailbox. So in February she paid $20 to GreenDimes, a firm that helps consumers reduce their inflow of "junk mail" by contacting businesses on their behalf. "[Junk mailers] are cutting down trees willy-nilly, and that has got to stop," says Plimpton.
To the post office, consumers like her are a serious threat. "Efforts to convince people not to receive mail are really going to hurt," says Steve Kearney, a Postal Service senior vice president.
The Postal Service lost $1.1 billion in its latest quarter. That number would be even larger if it weren't for direct mailings, which now constitute 52 percent of mail volume, up from 38 percent in 1990. Revenue from direct mail "is the financial underpinning of the Postal Service-it could not survive without it," says MichaelCoughlin, former deputy postmaster.
But 89 percent of consumers say in polls that they'd prefer not to receive direct-marketing mail; 44 percent of it is never opened. That's why 19 state legislatures have debated Do Not Mail lists, which would function just like the federal Do Not Call list. But partly due to opposition from postal workers, not a single bill has passed. When Colorado state Rep. Sara Gagliardi held a public meeting on a bill she was sponsoring, she was surprised when a crowd of postal workers showed up to express vehement opposition.
Both the Postal Service and the Direct Marketing Association say direct mail is a key source of customers for small businesses. "Advertising mail is a very valuable product to many consumers," says Sam Pulcrano, Postal Service vice president for sustainability, who points to two-for-one pizza coupons as especially welcome surprises. To blunt opposition, the DMA recently launched the Mail Moves America coalition to lobby against the restrictions.
GreenDimes founder Pankaj Shah isn't sympathetic. Not only is his company providing a service to consumers, he says, but it has also used its fees to plant more than 1 million trees. "We're all about giving consumers choice, not about bringing down the post office," he says. Still, as more consumers opt out of junk mail, rain, sleet and gloom of night may seem like the least of mail carriers' problems.
Tuesday, September 23, 2008
Cover Prices: First Half 2008
More Publishers Raise Prices. But Success Rates Are Less Encouraging
By John Harrington
Significantly more publishers increased their cover prices during the first half of the year than has been the trend of recent years (see chart below). On the other hand, the results were less encouraging. Those are the findings of a special analysis of recently released semi-annual circulation figures of audited magazines conducted by Harrington Associates, publisher of The New Single Copy.
The 25% rate of titles whose unit sales rose during the same six-month period in which they also increased their newsstand cover price is not only the lowest figure in the past three years, it is the lowest figure since Harrington began measuring the performance in 1998. Likewise, the percentage of magazines whose dollar sales rose at all, and whose dollars rose by more than the inflation rate was also the lowest during either period. For 355 titles not raising their cover price, 109 of them experienced unit increases, a performance in line with past experiences. As has generally been the case, few magazines lowered their price (only 12), and seven of them had unit jumps, but only two large enough to increase retail dollar sales.
Until this measuring period, we have maintained that the newsstand is generally friendly to cover price increases. As we stated in reviewing the overall sales in an earlier issue (8/11/08), one six-month period does not indicate a trend, but the soft numbers are certain to influence future publisher decisions.
In any discussion about pricing, it is noteworthy that four major newsstand titles - Bauer Publishing's Woman's World, First for Women, In Touch, and Life & Style - all instituted major price hikes during the period. Each of them were previously priced under $2.00, a level nearly all other publishers had pushed past quite some time ago. A factor that made newsstand price-increase-friendly has been the low key approach most magazine publishers have generally taken to marketing price. Few publishers make price easily identifiable for consumers. It might be hidden in the barcode, camouflaged in small print on a corner, or tucked away on the spine. The only place these publishers drew any attention to their newsstand price was on subscription insert cards buried in the pages. Bauer was the leading exception to this practice, promoting their low prices in starbursts or balloons on the cover (some competitive titles followed suit). Hence, when Bauer raised their prices (the two celebrity weeklies, In Touch and Life & Style went up 50% to $2.99; Women's World and First were less aggressive), potential buyers were much more likely to recognize the magazines now cost substantially more. The results, particularly for the celebrity weeklies, which had both been on growth curves, were dramatic. In Touch units were down 28.7% and Life & Style's fell 30.2%, although retail dollars rose for each, 7.2% and 4.8% respectively.
Women's World and First, whose increases were gentler, experienced unit fall-offs, 10.5% and 4.7%, but their dollar growth figures were more comforting: plus 7.5% for Women's World and an impressive 19.2% for First. Some observers have noted that since most Bauer titles are newsstand-revenue driven, with limited advertising pages, the overall performance was at least tolerable for the publisher.
A few performances worth noting. Large newsstand magazines combining price hikes with unit sales increases included People, price up 12.9%, units up 5.2%; Cooking Light, price up 8.5%, units up 3.8%; and Men's Health, price up 10.9%, units up 2.0%. Among larger newsstand titles not raising their costs, some had strong unit growth, and they might be considering price hikes: Popstar!, units up 29.4%; Twist, units up 27.0%; Fitness, units up 20.0%; and OK!, units up 19.4%.
A major publisher on pricing: In an interview in Circman.com (9/17/08), the email newsletter of Circulation Management, Paul Caine, president of the Entertainment Group at Time Inc., offered the following: "Our pricing approach has always been to price appropriately for the market based on what we believe the consumer is willing to pay, and the value we are providing to them...For those reasons we exceeded $4.00 for the first time on our average newsstand price [for People]."
Thursday, August 21, 2008
Where Publishers Are Thriving
Germany's papers are doing fine despite the ad flight to the Web. What's their secret?
by Jack Ewing
Here's a scene you don't see at many U.S. papers these days. The publisher settles into his office sofa, glances over his shoulder at the bustling metropolis below, and says casually: "We're doing good!"
True, there are definitely some aspects of the business model at Bild, a Berlin daily with 12 million readers, that might not fly in the U.S. (the photos of nude women on page 1, for example). Still, it's worth asking publisher Kai Diekmann how, when U.S. newspaper revenue is going off a cliff, Europe's largest paper managed to have its most profitable year ever in 2007.
It's not as if Bild hasn't been hit by the same problems as U.S. papers, including advertisers lost to the Web. So it's tempting to credit Bild's double-digit profit margin solely to sensationalism. The day I met Diekmann, Bild's lead story concerned managers of public health-insurance funds helping themselves to free Viagra. One of the top online stories asked: "Which female celebrity has the nicest breasts?"
But Germany's prestige papers are doing reasonably well, too. National-affairs daily Die Welt, a chronic money-loser that, like Bild, is part of the Axel Springer empire, made the first profit in its 60-year history last year. "I wouldn't say we don't have challenges, but we are not nearly as hard-hit by the advertising crisis as the U.S.," says publisher Peter Wurtenberger.
Even accounting for the quirks of the local market, Bild and other German papers are doing something right. For an American print guy like me, it was a bracing experience to visit a newsroom where the journalists don't look like they're ready to jump out the window. The lesson seems to be that there are ways for papers to survive the shift to digital if they're willing to take risks.
Germany's newspaper industry had its own existential crisis in 2001 when that country's economy tanked. Ad revenue slumped, and papers did all the painful things their U.S. counterparts are doing now, such as cutting staff and getting used to new owners. In retrospect, the crisis had its upside.
It forced German papers to take a hard look at their businesses before the Web started to hurt big time. Staunchly gray Frankfurter Allgemeine Zeitung risked alienating readers by printing color photos on the front page and launched a sassy Sunday edition. The measures helped stop a slide in readership. Die Welt created a tabloid edition that helped lure younger readers. And the papers dared to raise prices. Even Bild, aimed at a working-class audience, in July boosted its newsstand price by 20%, to about 90 cents in most markets. The hikes, along with digital revenue, helped offset the loss in ads.
German papers also took advantage of how slowly Europeans embraced the Web, which gave editors a chance to learn from U.S. mistakes. Bild used a partnership with Deutsche Telekom, Germany's biggest Internet provider, to gain a foothold online at minimal cost. Now most of Bild's Web readers go straight to the site rather than via a search engine or portal. Diekmann says YouTube is sufficiently impressed to mull working together.
I'm impressed by the way Bild is staking out the mobile Web. Via a partnership with Vodafone Group , Bild became a mobile-phone provider, selling prepaid airtime at the same newsstands that sell the paper. Bild Mobile gives customers unlimited surfing and downloads as long as they stay tuned to bild.de. That's a compelling way to keep users glued to your site, and it has made Bild Germany's No. 1 mobile Web news destination.
I suspect the real reason German papers still thrive is their embrace of competition. Unlike so many U.S. papers, Bild was never part of a quasi-monopoly that allowed complacency. It's telling that Bild doesn't deliver -it depends on newsstand sales. "Bild has to prove itself at the kiosk every day," says Deputy Editor-in-Chief Michael Paustian.
That pressure helped Bild maintain its focus on original content. It uses almost no wire copy and brags that every story is an exclusive. Even during the crisis years, Bild kept its 800-strong editorial staff intact. What advice does Diekmann have for American newspapers? "It's too late."
Sunday, August 3, 2008
BoSacks Speaks Out: Last week I had the flip side of this story. Now it is your turn to decide on the merits of each business philosophy.
I don't think necessity is the mother of invention - invention, in my opinion, arises directly from idleness, possibly also from laziness. To save oneself trouble.
Agatha Christie (1890 - 1976), An Autobiography, 1977
Op-Ed: Outsourcing Circulation Management-A Vital Industry Service
By Greg Wolfe
[Ed. note: In CM's continued coverage of an emerging trend of outsourcing turnkey circ operations, we've heard from the publisher's perspective on keeping functions in-house. Now, we hear from the vendor perspective, addressing signs within the industry that are pointing toward, at the very least, a re-examination of the in-house circulation process.]
Outsourcing circulation is an activity that has, in some form or other, been successfully practiced for many years. The industry, for example, has always leaned heavily on circulation consultants for advice as well as selected services. Now, there are numerous circulation consultants working in the industry. It was from this consulting base that a more advanced form of outsourcing-full service circulation management-developed over the last two decades. Today full service circulation management has joined the established lexicon (fulfillment, list brokerage, newsstand/national distributor) of industry outsource service providers.
It's a business that is built, and sustained, on the principle that circulation can be more efficiently managed working for many publishers simultaneously (on a relatively larger number of publications) on an outsourced basis, than by in-house staff working on a relatively small number of titles. Outsourcing circulation is beneficial primarily because it offers publishers the compelling advantage of access to an experienced circulation staff, broad based purchasing scale and, for some publishers, the prospect of reducing overhead expense. Furthermore it includes a management process, refined over time, that allows for careful attention to the strategic aspects of circulation.
Despite its many advantages circulation outsourcing, until recently, has been a relatively slow growing business with shallow market penetration. For instance the number of small/medium sized publishers (the prime candidates for outsourcing) is substantial, but only lightly penetrated by circulation outsource providers. In the ABC/BPA audited category there are 205 publishing companies (with less than 1 million paid/verified circ), publishing 260 titles, accounting for 40 million paid/verified circulation. It's estimated that there are nearly twice as many small/medium sized publishers of unaudited titles. Currently only a small percent (estimated to be less than 8 percent) of these publications are being serviced by outsourcing circulation management companies.
If the benefits are so great why hasn't circulation outsourcing grown more decisively?
The reason is partially rooted in the culture of the publishing business. A core belief is circulation is central to the publishing process-the so-called third leg on the publishing stool. It has often been deemed so critical that it couldn't be outsourced. Others have indicated that outsourcing represents bad short-term thinking. But make no mistake about this-circulation remains mission critical for publishers (arguably it's never been more important). However, a revision in industry thinking is emerging in regard to how best to maximize circulation performance. There have been a number of market changes which have precipitated this modified thought process. The magazine industry, as we all know, has been adversely affected by the massive Internet-imposed changes in the media landscape. The publishing industry is experiencing reduced advertising and circulation revenue and profitability. Furthermore publishers have discovered, to their detriment, that it's becoming much more difficult to hire and retain experienced circulators. These changing market circumstances have forced publishers to think differently (more creatively) about the entire publishing process.
All of this, of course, is effecting how publishers view the process of circulation. Although circulation is still considered mission critical, many publishers are now searching for alternative methods, including outsourcing circulation management. Recently IDG and Ziff Davis outsourced their circulation. The decisions by those publishers, both with more than 1 million paid/verified circulation, are, to date the strongest indicators that outsourcing circulation management is now being considered as an important alternative, even for publishing companies with relatively large circ levels. Other publishing companies are coming to the same realization that circ outsourcing is a good strategic alternative for protecting and enhancing circulation integrity and profitability.
The concept of circulation management outsourcing has been rigorously tested, and improved, over the last two decades. It's now a strong alternative for small/medium sized publishers to consider for enhancing circulation performance and cutting expense. It's ironic, but as the publishing industry struggles with the difficulties posed by altered market conditions it's expected the circulation outsourcing business will dramatically expand. Circulation management outsourcing has come of age as a vital industry service.
Greg Wolfe is President of Circulation Specialists, Inc., a Connecticut based circulation outsource company.
Tuesday, July 29, 2008
ABC Board Cuts Audit Costs for Newspapers, Freezes Rates for Magazines
Magazines may also see audit rate reductions as early as November.
By Chandra Johnson-Greene
In response to the newspaper industry's ongoing revenue struggle, ABC announced that it will reduce audit costs by almost half for some U.S. and Canadian newspapers, while freezing costs for other newspapers and most magazines.
ABC previously announced in March that U.S. newspapers with paid circulation below 50,000 would have the option to be audited every other year beginning in April 2009, raising the eligibility ceiling from its current 25,000 level. This week, the ABC board agreed to advance this timeline by six months, to Oct. 1, 2008, and expand the option to Canadian newspapers.
The board also gave its initial approval to rules allowing all U.S. and Canadian newspapers with paid circulation between 50,000-75,000 to have this same biannual audit option next year, beginning April 1. To take advantage of this, a newspaper's most recent audit cannot contain an adjustment of more than 2 percent and its third-party circulation cannot exceed 5 percent of its total paid circulation.
Newspapers with circulation between 50,000-75,000 will also be required to participate in ABC's Preprint Projection Center, a free online tool that allows publishers to provide confidential circulation forecasts to help advertisers better plan media purchases and insert-printing requirements. All newspapers are still required to file six-month publisher's statements, with top-line numbers reported in ABC's FAS-FAX report.
The ABC board also approved a new flat-rate billing model for field audit services for fiscal 2009, effectively freezing audit costs for most other ABC newspapers and magazines.
"ABC has typically billed publishers based on an hourly rate," said Michael J. Lavery, ABC's president and managing director, in a statement. "Our new structure uses a flat rate based on the most recent ABC audit. By streamlining some aspects of the audit and automating more processes, most publications will be able to accurately forecast and control their costs."
According to Teresa Perry, SVP, publisher member audit and report processing services, ABC, titles that have "too much versatility" during their auditing periods will be continued to be billed at the hourly rate. The bulk of those titles would be found in the non-paid category, she told CM.
Audit Rate Reductions for Magazines Too?
While the forecast for the magazine industry doesn't appear to be as bleak as it is for newspapers, will the board consider reducing costs for them as well? According to Perry, the answer is yes.
"The liaison committees, which are so frequently developing ideas [to address the concerns of the magazine industry], have been reviewing options for some time now," Perry told CM. "They've been taking a look at what reporting elements are important and are required by the advertising environment, as well as which ones are aged or no longer relevant. All of this is being reviewed on a cost-benefit ratio."
Perry says that such reviews have been taking place for the past four months and that changes could be seen as early as November, but most likely in early 2009.
Other Board Actions
The ABC board also agreed to allow consumer magazines to test new circulation marketing programs while working with ABC to determine the appropriate audit procedures. Circulation generated during the one-year test period would be reported as verified or analyzed non-paid, as appropriate.
"We trying to encourage publishers not to shut the door on new marketing opportunities just because the audit process is unknown upfront," says Perry. "Traditional sources, such as direct mail, may not be as available, so it's wise to explore non-traditional sources and to partner with others they may not have the audit structure."
The board also voted to adopt a new multimedia publisher's statement for business magazines. The new optional report, available for the Dec. 2008 reporting period, allows publishers to report print circulation, Web site activity, e-newsletter activity and pass-along receivership in a single ABC statement. The board also agreed that, effective immediately, paid Web site subscriptions could qualify as paid digital editions of business magazines.
The board elected five new directors at its recent meeting, which took place on July 23-26: Irene Grieco, manager of media investment and strategic partnerships at Unilever US; Suzanne Silber, group director of strategy at OMD; Bill Stabile, senior director of brand and marketing communications at Siemens Corp.; Lindsay Valk, senior vice president of analysis and planning, consumer marketing, Hearst Magazines; and Brenda White, senior vice president, Starcom Worldwide.
Thursday, July 10, 2008
Digital Editions' Growth Spurt
E-editions are gaining ground in the mainstream market.
By Gretchen A. Peck
This spring, Barnes & Noble announced that it would offer both print publications and digital editions of more than 1,000 magazine titles to visitors of BN.com. The e-editions will be fulfilled by Barnes & Noble partner Zinio. Indeed, it's just one more indication that, despite some debate on their future, digital editions are becoming a viable alternative to print for a growing number of readers.
Cambridge, Mass.-based The Gilbane Group recently published a study, "Digital Magazine and Newspaper Editions: Growth, Trends, and Best Practices," showing that the number of business-to-business publications offering digital editions increased by more than 300 percent in a two-year span (2005 to 2007), and the number of consumer publications offering digital editions has increased by more than 200 percent.
For publishers, clear economic and environmental benefits exist: Digital editions don't kill trees, and the cost to produce a digital edition is much less than a printed publication.
Beyond the environmental and economic considerations, many publishers also have found digital editions to be an effective medium for enhancing the editorial and advertising experience with the use of rich media.
Today, even businesses that have for generations been dedicated to printing publications are looking at digital distribution as a new way to serve publishing clients. For example, Brown Printing Co.-one of the nation's largest magazine printers-announced that it would assist publishers with their digital publications by partnering with iMirus Digital Solutions, the e-edition division owned by parent company Riggs Heinrich Media Inc. Many other printers are now offering digital-publication services to their publishers as well.
Digital editions also can be an effective way for publishers to expand into new markets, and increase their circulations without the additional printing and mailing costs.
It was the opportunity to launch a new global title that prompted the publisher of Recycling Today to venture into e-editions. The global edition of the magazine debuted in April exclusively as an e-edition, with the help of Advanced Publishing Corp.
"We are extending an existing North American title into a global market position," explains James R. Keefe, executive vice president and group publisher, GIE Media, which publishes Recycling Today. "The launch of the new product, which is different from a content perspective, was easier to achieve in an electronic format, as delivery to a reader base around the world is more reliable and immediate. Therefore, the distribution issue becomes much easier to solve. As well, the platform we selected allows a lot of powerful multimedia and interactive applications."
The monthly, controlled-circulation title already has 30,000 subscribers, but with reader feedback already very positive, Keefe expects continued circulation growth.
Digital editions are also proving to be a valuable strategy for publishers looking to breathe new life into previously published issues. For example, Wenner Media contracted Bondi Digital Publishing to convert Rolling Stone's entire printed history into digital format and republish it as a searchable DVD, "Rolling Stone Cover-to-Cover: The First 40 Years."
Whether the mass market will adopt digital editions as their preferred format for reading magazines in the future remains to be seen-and debated by industry pundits. But with recent triple-digit growth rates and one of the nation's largest magazine retailers giving space to e-editions on its Web site, the future certainly seems promising for the digital magazine.
Solutions on the Market
As the number of publishers providing digital editions of their publications has grown, so has the number of digital editions solutions providers. Today, publishers have their choice of a wide range of products and services to fit their and their readers' expectations for a digital publication. Here are a number of today's top solutions on the market. Many printers of all sizes-such as Publishers Press, RR Donnelley and Sheridan Magazine Services-also now offer solutions to help publishers provide digital editions of their publications (but are not listed here). Many of these solutions are available to non-customers, so they may be worth investigating in your search for the best solution for your needs.
Advanced Publishing Corp.
Solution/Service: RIDE (Rich Interactive Digital Edition) is designed to enable publishers to create digital publications based on Microsoft's award-winning Silverlight platform. Publications are fully searchable and may be complemented with rich media features. A secure subscription system is provided. Publishers also have access to real-time reports on pages viewed, time spent, click-thrus and more. Advanced Publishing digital-edition service includes conversion, hosting, subscriber access management, customized registration and data capture, e-mail notification delivery, BPA/ABC audit assistance, cross-publication search, archive issues access, and added capabilities for online ads, sponsorships, online video and more.
Pricing: All-inclusive, consisting of a one-time setup fee and a per-page fee based on the number of magazines and the overall volume of pages. For paid consumer magazines, it may also include a per-subscriber fee for each issue.
Magazine customers include: Composites Manufacturing; International Figure Skating; Vertical Magazine; GIE Media Inc.; Western Design & Interiors; Madavor Media LLC
Contact: (866) 785-4400, AdvancedPublishing.com
Solution/Service: alQemy is an Adobe Partner that pioneered the first interactive PDF magazine and catalog format with the launch of Magazooms. Today, all digital editions are built in Adobe Flash format, transformed using the company's Internet-based Flash application and hosted on alQemy servers. Publishers also can present their e-editions, including archives, on their own Web sites via customizable portals, and have access to content feeds to supply their Web sites and RSS feeds with articles from their Magazooms publications. Magazooms offers a "Search and Save" feature, which enables users to conduct global cross-issue searches and save resulting pages to the desktop as a new, customized PDF. AlQemy has announced plans to offer special Magazooms versions for the Apple iPhone.
Pricing: Available as a Free Basic Service, which includes conversion and hosting to qualified publishers (some restrictions apply), or a Full Feature Service, based on cost-per-page with enhanced options such as video insertions, custom hyperlinks, reader graphs and analytics with reader maps, customizable Web portals, shopping-enabled pages and an integrated Shopping Cart.
Magazine customers include: Electronic Retailer; Online Strategies; Dog Fancy; Freshwater and Marine Aquarium; Texas RV Park and Travel Guide
Contact: (864) 284-9918, Magazooms.com
Solution/Service: BlueToad's page-flip technology is designed to enable publishers to create and deploy an enhanced online version of print publications. Publishers can upload and convert print files to create a one-of-a-kind online publication with streaming audio and video, and as many as 20 direct Web links per page. Publishers can put a publication on BlueToad's Web site, or distribute it from their own sites with a BlueToad Icon and a self-contained, online viewing system.
Pricing: No fees for setup, and no contracts required. Pricing is based on a per-page fee, which may be as little as $2.
Magazine customers include: Not available for publication.
Contact: (407) 992-8744, BlueToad.com/publisher
Bondi Digital Publishing
Solution/Service: Bondi Digital Publishing designs, creates and publishes complete print-magazine-archive box sets in searchable digital editions.
Pricing: Not provided.
Magazine customers include: The New Yorker; Playboy Enterprises; Wenner Media
Contact: (212) 405-1655, BondiDigital.com
Content Data Solutions, a div. of Thomas Publishing Co.
Solution/Service: Content DSI converts print-ready publication files into digital replicas that are searchable by keyword or full text, and can include live links, and statistical reporting on editorial content and advertising. Content Data Solutions can also host digital publications on the publisher's behalf.
Pricing: Not provided.
Magazine customers include: Not available for publication.
Contact: (800) 872-2828, ContentDSI.com
Solution/Service: EditionDuo enables publishers to create digital replicas of print publications, enhanced with rich media, and stored and hosted by DMG. Publishers can present the publications on their Web sites; animated GIFs can be sent to subscribers via e-mail; or publishers can distribute a Flash file of the e-edition via removable media. Accessed via standard Web browsers. Among EditionDuo's features: simple text feeds (an Article Link will open a text version of the article in a new window); article translation; link building through bookmark sites such as Digg, del.icio.us, Google and more; article commenting; and an Adverts Menu, which acts as a table of contents for all of the publication's advertising features. Links can direct readers to advertisers' specific Web landing pages. Reader activity is tracked and reported.
Pricing: $229 setup fee plus $3 per-page fee. $0.50 per page for removing all EditionDuo branding (optional). Additional charges include $35 for an animated GIF, and $95 for a compiled Flash file.
Magazine customers include: Golf Georgia; Grape Anticipation; I Do for Brides; Clemson University; Designs Direct Publishing
Contact: (770) 992-5078, EditionDuo.com
Solution/Service: Dirxion's solution replicates printed publications, and supports restricted or open access. Standard features include: database-driven searches (by keyword, phrase and category); banner ad space; hot links to Web sites and e-mail addresses; customized table of contents; "sticky" notes; cross-reference links; Flash ads; audio/video linking; usage tracking and reporting; and support for multiple languages.
Pricing: Not provided.
Magazine customers include: PennWell; Harrison Group
Contact: (888) 391-0202, Dirxion.com
E-Book Systems Inc.
Solution/Service: E-Book Systems' FlipBook Publishing System's Digital Flip technology is designed to replicate the page-flipping experience. With FlipBook Creator, a Wizard-based program, online magazines can be enhanced with video, animations, music, embedded links and search functions.
Pricing: Not provided.
Magazine customers include: FHM; Primedia; MediaCorp
Contact: (408) 625-8000, FlipViewer.com
iMirus, a div. of Riggs Heinrich Media Inc.
Solution/Service: iMirus enables publishers to create digital editions-online or downloadable-of their print titles. The iMirus Reader may be customized to match the publisher's branding and deployed via the publisher's site (no software download is required), or served up as a client application for readers who wish to download a publication "to go." iMirus also provides advertising and marketing programs, including banner ads, sponsorship programs, custom-published content, and sales of the outside front cover of the e-edition.
Pricing: iMirus operates as a "software as a service" model. Pricing is based on a package, which includes all services, or a la carte, which start at as low as $600 (including hosting).
Magazine customers include: Business Traveler; NWA World Traveler; Dental Economics; Rhode Island Monthly; Giant
Contact: (918) 492-0660, Imirus.com
Solution/Service: NewsStand takes a consultative approach to developing solutions for publishers of magazines, books, newspapers and more. NewsStand's services and solutions include archiving, content management and repurposing, electronic editions, subscriber management and custom publishing. In addition to its public-facing NewsStand.com site, the company also works with b-to-b and corporate publishers to develop e-editions and Intranet-based content portals, enabling more robust advertiser-publisher programs.
Pricing: NewsStand.com's e-editions are created based on flat fees dependent upon circulation. For pricing of other services, contact NewsStand.
Magazine customers include: Barron's; Harvard Business Review; Laptop Magazine; Flight International; Nature Publishing
Contact: (866) 837-4567, NewsStand.com
Solution/Service: Nxtbook Media's e-edition solution features include: bookmarks and page notation; word searches (current issue and archival); "forward content to a friend" capabilities; hyperlinks and e-mail links; and permalinks. The e-edition may be enriched with toolbar ads and sponsorship programs; Flash ads; audio and video ads; gatefolds, bellybands and inserts; and Gravicon surveys. Reader behavior is also tracked.
Pricing: Not provided.
Magazine customers include: Advanstar Communications; Reed Business Information; Weaver Official Publications; EContent Magazine; Primedia
Contact: (866) 268-1219, NXTBookmedia.com
Solution/Service: Olive Software is designed to create exact print replicas, through a centralized data-storage system and a single workflow, and to enable publishers to use the software to produce and host the digital edition-or, via its outsourced model, have Olive produce and host the title.
Pricing: Not provided.
Magazine customers include: Time Inc.; ESPN; Reed Business Information; Hearst Business Media; Newport
Contact: (866) 654-8387, OliveSoftware.com
Solution/Service: PageSuite is an online, interactive, page-turning software application that enables publications to be presented in a digital edition deployed via the Internet.
Pricing: From $500; depends on page count and frequency.
Magazine customers include: Condé Nast; Cambridge Style; City Living; Working Mother; Clarity Media Group
Contact: Info@PageSuite.co.uk, PageSuite.co.uk
Pressmart Media Ltd.
Solution/Service: Pressmart converts publishers' digital prepress pages into digital editions, using a patent-pending technology, and delivers them via the Web, mobile, podcasts, RSS feeds, social networks and content-aggregation services. Publications are promoted to subscribers via Pressmart.net, as well as by online advertising, new-edition notifications, news alerts and e-mail campaigns. E-editions are pre-
integrated with social-networking sites and content-
aggregation services, and are search-engine ready.
Pricing: Not provided. No upfront investment; fees based on a per-page rate.
Magazine customers include: Not available for publication.
Contact: (212) 351-5090, Pressmart.net/eedition.html
Solution/Service: Qmags' electronic issues, delivered via the Internet, can be exact copies of the printed magazines, or digital publications created with the QuVu format, which enables the publication to fit readers' computer screens, requiring no page manipulation. E-magazines can be enhanced with audio and video, hyperlinks and electronic search capabilities.
Pricing: Not provided.
Magazine customers include: Animation Magazine; Armchair General Magazine; Computer Magazine; IEEE Security & Privacy; Waste Management World
Contact: (212) 947-6050, ext. 11, Qmags.com
Solution/Service: Texterity converts publishers' titles into the Published Web Format (PWF) from PDF files. PWF replicates page-turning, and enables cover wraps, bellybands, etc., to be transformed into overlays, pop-ups or animation. Buyers' response cards appear as blow-ins (layered on the publication), and direct readers to specific advertiser locations. Texterity's Lead Management System enables publishers and advertisers to offer premium content, such as white papers, within the digital edition, prompting readers to opt-in. PWF reader reports may also be used for BPA and ABC circulation statements.
Pricing: Not provided. Costs include a per-page conversion fee; a monthly maintenance fee for document hosting with customer-branded URL, search engine visibility, archive issues, and availability across all platforms without a plug-in or application (Windows PC, Macintosh, and iPod Touch or iPhone), among others; and a delivery fee. Other services also are available.
Magazine customers include: Make Magazine; Game Developer; Internal Auditor
Contact: (508) 804-3000, Texterity.com
Solution/Service: YUDU Publishing Pro features include video, audio and Flash file insertion; a digital rights management system; contextual and archival search; bookmarking and notations; advertising components, such as tabs, gatefolds and bellybands; statistics capture; and more. It offers crisp vector text (which eliminates pixelation) and infinite zoom.
Pricing: Not provided.
Magazine customers include: Not available for publication.
Contact: (888) FOR-YUDU, Yudu.com
Solution/Service: Zendition's a base model application is designed to enable page flipping, print capabilities, search functions, zoom, table of contents and more. Add-on modules include audio, video, pop-ups, back-end integration, BPA auditing, and registration and user tracking.
Pricing: Not provided.
Magazine customers include: Strategy & Business; Relix; Global Rhythm; Trader Monthly; Corporate Leader
Contact: (646) 278-0621, Zendition.com
Solution/Service: Zinio's Publisher Growth Services Group collaborates with publishes to help integrate and tailor online marketing programs to a publisher's circulation, ad sales, brand extension or other audience-building goals.
Pricing: Not provided.
Magazine customers include: Primedia; Reader's Digest; VNU (now Nielsen); Disney; The Hearst Corp.; Rodale; National Geographic; TV Guide
Solution/Service: Zmags Publicator is designed for creating and editing electronic versions of print publications. It is designed to enable creation of e-editions in as few as five minutes, on average. The solution is Web-based, requiring no software downloads. Available in two levels-PublicatorExpress and PublicatorPro. PublicatorPro also features advanced editing; archives management; high-resolution zooming; advanced analytics; and automatic linking to internal and external sources.
Pricing: Starting at $45/month per publication.
Magazine customers include: Not available for publication.
Contact: (613) 627-4101, Zmags.com PE
Gretchen A. Peck is a freelance author who writes about the international printing and publishing industries.
Wednesday, July 2, 2008
Are Free Magazines the Future of Publishing?
Will consumer go controlled?
By Chandra Johnson-Greene
CHICAGO-During a session at this week's CM Show, Jennifer Armor, audit manager at Verified Audit Circulation, argued that free magazines are the future of the business.
She riffed off a quote from Wired editor-in-chief Chris Anderson: "From the consumer's perspective there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you're already in an entirely different business."
Armour thinks this idea can, and will, eventually extend to the magazine industry. (Broadcast radio and TV have been offering it since their inception, after all, and the music industry is moving in the same direction, she noted.)
Because of the increasing price of paper and postage, Armour said, the cost of acquiring and keeping paid circ is becoming too high compared to the revenue it generates, and therefore, consumer publications will eventually move to a controlled circ model. Only magazines with premium content that can't be found elsewhere will be able charge their readers.
True, other types of media are free or becoming free, and it is becoming quite expensive to run a paid title. But the idea that consumer magazines will be corralled into a free model due to spiraling costs is unlikely.
Advertisers are still grappling with accepting that public-place copies of paid titles are valuable because the publishing industry's audience measurement system isn't as finite as TV or radio. To them, there's no real way to measure how many eyes have viewed the copies. Circulators know differently, of course, but the debate rages on. And until that issue-and a few others-have been hashed out, Armour's view of the future is out of reach.
Maghound offers magazines a la carte
By Lauren Bell
Time Inc. will launch Maghound.com
- a membership-based magazine purchasing site - in September.
Maghound users pay a monthly members' fee, depending on the number of titles they would like to receive. The program currently has 280 titles from a variety of publishers, and members can order different titles every month.
"The goal, simply, is to expand print circulation, and we feel, based on testing, that we can bring incremental readers to each brand," said Dave Ventresca, president of Maghound Enterprises Inc. "In addition, Maghound can bring in the right types of readers; we feel confident that it will deliver younger readers, who are more likely to be married, more likely to have children, have higher levels of education and higher household income levels than the general US population."
Though Maghound is a Time Inc. venture, other publishers have been invited to join the service, with the rationale that more choice makes more loyal consumers. Time titles will, however, benefit from merchandising and special promotions on the site - as will other high-performing titles. Ventresca said he expects to have 300 magazines signed up for Maghound by the end of September and 400 by the end of the year.
Marketing for the September Maghounds launch will be largely through online channels, such as banners and e-mails. Once the brand gets better established, marketing efforts will expand to print, events, search, viral and gift programs. Time Inc. lists and outside lists are being used to target direct efforts.
"The key metrics that we're looking at are: costs per acquiring new members, how many magazines people are buying, how much they're paying and how long they're going to stay with the service," said Ventresca. "We think people will stay Maghound readers longer because if you are subscribing to three titles [in the traditional way] and get bored with title C, you just cancel or let it lapse. If you're paying for three titles on Maghound and get bored of the third one, you're more likely to switch to another title since you're already paying for three."
Three titles from Maghound cost $3.95 a month, five titles $7.95, and seven are $9.95. For more than seven titles, members pay an additional dollar per title. Around 10% of the titles on Maghound have been designated "premium," based on their higher-than-average subscription pricing; premium titles charge an extra fee.
Magazines purchased through Maghound will be classified as single-copy sales in ABC and BPA audits.
Sunday, June 1, 2008
Striving for Zero Returns on the Newsstand
By Steven W. Frye
Publishing Executive Magazine
In today's electronic age, it's becoming harder and harder to justify our magazine business model anymore. We can longer claim that we are a cheap source of dispensing information.
We cut down trees, transport them to be ground into pulp, use energy and water to create paper, transport the stock to printing plants, print with inks (which go through a similar process in a petroleum-based market), mail magazines in an increasingly more expensive "snail mail" system, and/or ship them in a series of delivery trucks to every newsstand in America.
These magazines have a self-imposed average expiration date of 30 days (with the month of "relevance" printed right there on the cover), and thereafter are destroyed. We then rate their success on how many we sell, which currently averages around only 30 percent to 35 percent.
This is a huge waste of resources. And it always bothers me that once the next issue comes out, the current one is perceived as worthless. In most cases, however, that editorial and advertising is still relevant and has value. With sold copies it's called "pass-along" readership. Yet, unsold copies are deemed worthless and destroyed.
It's different in China though. They have zero returns on newsstands. That's right-zero returns. Almost every magazine placed on the newsstands in China has a 100-percent sell-through. So if they can do it, can we?
There are obvious differences between our two systems, one being China's censorship of all media, but mainly, they do not have national distribution of any kind. Also, readers have a much smaller choice of publications than we do, but more importantly, they perceive magazines as a luxury item-not a cheap source of information.
Historically, many U.S. magazine publishers have thought they needed to keep the cover price as low as possible, believing that with every increase, they lost a proportional amount of subscribers.
But this conventional wisdom, like so many parts of our business model, doesn't seem to be working anymore. When I look around, the most successful magazines seem to be breaking all the rules.
While, with every postal and paper increase, many magazines got smaller with lighter paper, others grew in size and used very heavy stock. While some fretted over the inefficiencies of the postal, newsstand and advertising sales systems, as well as required auditing, others are distributing small, unaudited, but highly targeted, quantities and have no trouble selling ads.
So, I ask: Do we need to continue further wasting resources with our current newsstand distribution system or can we, too, sell nearly 100 percent of our newsstand copies?
How do the Chinese sell every magazine placed on their racks? It is simple, really. When the January issue (for example) expires and the February issue comes out, any unsold January copies are discounted in price. If, by chance, there are still January copies in March, they are further reduced until every copy is gone.
The Chinese understand that even though the issue is one day, one week or even one month old, it still has value. Magazines are a luxury item in China and are sold as such. Maybe it's time we think of magazines as a luxury item, too.
The Industry's Shift
If you think about it, our related industries may already be moving us toward that model by demanding high material costs. The paper mills shut plants and equipment to create a supply shortage with premium prices. Ink, packaging materials and energy are all on the rise.
Those titles that are successfully breaking the rules get it. They understand that their readers will pay $15 or more per issue, and advertisers are clamoring to get in. They make their book different, valuable and desirable.
Printed magazines cannot compete with cheap electronic media. We have become a luxury item whether we like it or not, and I suggest we grasp that concept and start remarketing ourselves as such. I believe our readers already see us as luxury item, or they wouldn't have bought the magazine in the first place. Our readers also use the Internet, yet they purchased our printed product for whatever reason . . . other than a source of timely information.
It's common knowledge that publishers lose money with every issue they place on the newsstand. And now newsstand racks are shrinking because retailers aren't getting the revenue they earn with other products. Wal-Mart announced earlier this year it was eliminating 1,100 "nonperforming" titles. Grocery stores rather sell canned peas than magazines. Yet, except for mailed subscriber copies, newsstands are still the only place one can buy most magazines.
Potential in Dollar Stores?
Do we need to change our current system to survive? Can we learn from the Chinese?
In China, publishers, both Chinese and foreign-leased, produce for a regional market. Beijing publishers distribute within the northeast part of China, and Shanghai and Hong Kong publishers distribute within their respective regions. Publishers individually work out distribution with newsstand vendors to sell their products.
Readers in China are not used to mass amounts of printed media at their disposal, and all magazines are in great demand. Sales are expected to continue at an unprecedented rate.
Changing the perception of a magazine as a luxury item is one thing, but it is quite obvious we do not have the rack space available to put outdated copies on sale. The management of those issues would be complicated, time-consuming and expensive for a relatively small return.
I wondered if the series of "dollar" stores, which are in every town in America, could become our new newsstands. We could place magazines in the stores, and all expired copies could be sold for a dollar. It would save waste, allow a longer life for the magazine's advertisers, and allow more titles to be made available.
What I found was that selling magazines in dollar stores is not a new concept. As a matter of fact, the Wal-Mart cuts have been reportedly linked to a successful program in which Meredith Corp. (though Meredith denies any link to the Wal-Mart cuts) was selling magazines and annuals through Dollar Tree stores at a lower rate than at Wal-Mart. A spokesman at Dollar Tree declined to elaborate on that deal, but stated that details were widely available on the Internet. He also said that Dollar Tree's partnership with Meredith was highly successful for both companies, and the company would be interested in discussing deals with other interested publishers. In an April 16 article in the New York Post, however, Andy Sareyan, president of Better Homes and Gardens and a corporate executive vice president for Meredith, is cited as saying the Dollar Tree program will be shut down at some point in the first half of the year. "It was a testing program," Sareyan told the Post.
The Chinese system of selling "old" copies at a discount until they were gone didn't seem to be attractive to Dollar Tree. They have the same issues with rack space as everyone else. But, they can offer a means for publishers to put out affordable magazines. Ad sales will benefit from these newsstand numbers.
Then maybe we can turn our current conventional newsstand racks into a premium source of purchasing luxury items. Travelers buy magazines in the airport because it is convenient-where and when they want it. I propose we price our conventional newsstand copies at a premium. Consumers already accept the fact that milk is more expensive at a 7-Eleven than at a larger grocer, but they'll pay the difference for the convenience.
Being in this industry for 30 years has allowed me to see the industry from many different perspectives. One that I didn't like, as a production manager, was the constant belief that the magazine had to do whatever it needed to get an advertiser in. We'd hold up deadlines just to accommodate late advertisers, and salespeople would promise the world to them. I tried to point out that it was the advertisers who needed us, because if they weren't in the issue, their competitors were. In other words, our magazine had value.
It's time we all realize that our magazines have value for what they are. We have to stop trying to be something we no longer are. Our readers see us as a luxury item, and our suppliers are selling at the highest historical rates.
We need to cut the waste that is inherent in our newsstand system. We need to charge a premium for the luxury of having the magazine delivered to the home, we need to charge a premium for the convenience of newsstand offerings, and we need to open new avenues of distribution.
If you are not already doing so, it is time to think outside the box. Challenge old methods. Dare to try new ones. Make a statement for the environment and minimize our old acceptance of material waste. The magazine market is changing. The question is, are you progressive enough to change, too?
Steven W. Frye is owner of Frye Publication Consulting in Hailey, Idaho. He is an expert in production processes, and has negotiated printing, paper and distribution contracts for dozens of publishers. He can be reached at Steve@SteveFrye.com.
Friday, May 16, 2008
Magazines: Ad Pages Slip First 4 Months Of '08
by Erik Sass
Most big magazine publishers saw total ad pages decline in the first four months of 2008 compared to the same period last year, according to the most recent Group Publisher's Report from TNS Media Intelligence. While some losses can be attributed to the closing of various titles since last year, the broad nature of the declines, cutting across a number of categories, looks ominous for the magazine industry.
(None of the magazines named in this article are necessarily the sources of declines at their respective publishing groups; they are simply some of the leading titles published by those companies.)
Among the "big three" publishers, Time Inc. is definitely faring the worst, with ad pages down 8.2% in the first four months of 2008 to 8,467. Conde Nast and Hearst experienced more modest declines. Conde Nast--which publishes Vogue, Vanity Fair, Glamour, GQ, Details and Portfolio--saw ad pages fall 2.9% to 11,961. Hearst--publisher of Good Housekeeping, Harper's Bazaar, Cosmopolitan and Esquire--saw ad pages slip 0.6% to 5,614.
Enthusiast and lifestyle publishers were not spared. Bonnier Magazine Group--which purchased a number of enthusiast titles from Time Inc. in 2007, including Field & Stream, Popular Science and Parenting--saw ad pages fall 9% to 4,759 in the first four months of 2008.
Hachette Filipacchi Magazines (publisher of Elle, Woman's Day, Home, Car and Driver, and American Photo, among others) fell 7% to 4,083. Hachette closed the print version of Premiere, an entertainment news title, in favor of online-only publication in March 2007; the decline in ad pages may reflect this move, at least in part.
Meredith Corporation--publisher of women's interest titles, including Better Homes and Gardens, Ladies' Home Journal and Family Circle, saw ad pages tumble 13.4% to 3,359.
American Express Publishing Corp., which publishes Travel + Leisure and Food & Wine, is down 5% to 1,280 ad pages. Source Interlink, which publishes Motor Trend, Automobile, Hot Rod and Soap Opera Digest, is down 17.1% to 1,828. Finally, Wenner Media, publisher of Rolling Stone, Men's Journal and Us Weekly, is down 9.1% to 1,186.
Rodale Builds Muscle with Men's Health
By Amy Wicks
LIFTING THE VEIL - SORT OF: On Wednesday, Rodale Inc. gave a glimpse into its performance so far this year, which included an increase in print advertising revenues of 8.8 percent, although ad pages declined slightly by 0.6 percent. There's a limit to its openness, however - the company doesn't actually provide profits and sales, or dollar figures of any kind.
Men's Health recorded a 12.1 percent jump in revenues compared with the first quarter of last year; however, ad revenue decreased by 5.6 percent and ad pages were down 11.4 percent, according to the Publishers Information Bureau. The January/February issue of the magazine sold a record 750,560 copies on the newsstand, coinciding with a cover price increase to $4.99 from $4.50. Men's Health editor in chief David Zinczenko's book, "Eat This Not That!" has sold more than 400,000 copies since December and is currently the best-selling health and fitness title in the U.S., according to a spokeswoman.
Meanwhile, Women's Health continues to build on its early success, up 50.8 percent in ad pages and 133 percent in ad revenue. On Tuesday night, the magazine held its first major event in New York, hosted by Chloë Sevigny, and Jessica Stam was one of the DJs. The event showcased a new partnership between the magazine and the Environmental Media Association.
Over at Best Life, ad revenues and pages were both up, at 25.6 percent and 8 percent, respectively. Runner's World Media Group had mixed results, with a 6.1 percent revenue increase but Runner's World magazine had a 2.3 percent dip in ad revenue and pages were down 6.7 percent. And Bicycling magazine's ad revenue was up 2.4 percent, while pages fell 3.5 percent.
Sunday, May 4, 2008
Why Consumer Magazine Circulation Levels Are Still Too Bloated
By Baird Davis
Despite a stable newsstand-to-subscription ratio and declining paid-verified circ levels, a strict weight-loss plan is still in order.
[To view the accompanying charts to this article, please click here]
In the second half of 2007, the audited paid and verified circulation of consumer magazines fell 1.7 percent from 282.0 million to 277.2 million. The decline is fairly representative of a trend that began seven years ago, which has seen the industry's paid-verified circulation decline nearly 11 percent since its peak in 2000.
To examine why circ levels are too high it requires an in-depth look at several categories of information: The declining universe of audited publications; circ level increase/decrease trends; newsstand contribution to circ levels; and verified, sponsored and other paragraph 6 circ sources.
Number of Audited Titles Continues to Fall
The number of audited paid consumer magazines in the second half of 2007 declined 5 percent to 550-down from 579 a year ago, 590 two years previous and 653 in the second of half of 2000. In the last seven years, the number of audited paid consumer titles has fallen nearly 16 percent.
It should be noted, however, that 99 audited publications (reporting 130 million paid/verified circ) with primarily "association" and/or verified/sponsored circ have not been included in this analysis. (By the way, the number of audited titles in this category, as well as their aggregate circulation, has, unlike audited consumer magazines, remained stable for the last seven years.) Also not included in this review are publications with less than 5,000 paid/verified circ and those titles with primarily foreign circ.
During the second half of 2007 a record total of 50 titles discontinued publication or ceased being audited. There were six major casualties (more than 400,000 circ) in the group-they included: Teen People (1,545,000), Child (740,000), Jane (713,000), Success (667,000), Nick, Jr. (639,000) and Junior Scholastic (439,000). Those six titles accounted for a loss of 4.7 million circ, a little less than half of the total 10.3 million circ attributed to all 50 discontinued publications.
A total of 27 titles were added to the auditing ranks in the last year. The most notable was Taste of Home, a title published by Reader's Digest that was previously published by Rieman. This publication, with paid/verified circ of 3.2 million, is believed to have reported one of the largest ever paid circulations for an initially audited consumer magazine. In fact, it joined a very select group of thirteen publications that have more than 3 million paid/verified circ. In addition there were 7 publications that debuted with circ levels greater than 300,000. This group included All You (785,000), People Stylewatch (642,000), Cookie (435,000), Siempre Mujer (394,000), Men's Vogue (336,000), Quick & Simple (325,000) and Giant (314,000). Together these eight titles accounted for 6.4 million paid/verified circ a substantial portion of the 8.9 million circ accounted for by the 27 newly audited titles.
The circulation level contribution from the newly audited publications, although substantial, still fell 1.4 million short of the circulation attributed to departing titles.
Pace of Circ Level Adjustments Slows
In the second half of 2007, there were 101 publications whose circ decreased by 5 percent or more, compared to 123 a year ago and 131 two years prior. The pace of circ levels increases also slowed-84 titles, down from 91 a year ago, reported circ level increases of 5 percent or more.
There were 23 titles that reported circ level decreases of 50,000 or more. These included seven titles showing level reductions of 150,000 or more. Reader's Digest and Time headed this group with their massive decreases of 771,500 and 714,600 respectively. This group also included Playboy (301,400), Sunset (258,900), Ladies Home Journal (258,200), Home (207,400) and Star (176,400). In the aggregate, these 23 titles reported circ level reductions of 4.2 million.
On the increase side of the equation there were 27 titles that reported paid/verified circ levels that were up more than 50,000. Everyday with Rachael Ray reported a huge 670,100 increase in circ level. This is one the largest, year over year, circ level increases in recent memory. Another relatively new product, Woman's Health, also reported a big (258,800) circ rise. And OK! Weekly, reporting rising newsstand sales, was a major circ level increase contributor with an increase of 177,900. This group of 27 titles contributed a total circ level increase of 3.5 million. This, however, did not fully balance the 4.2 million level loses of the titles whose circ fell by more than 50,000.
Newsstand Contribution to Circ Level: Stable
The newsstand to subscription circ ratio is a good guide for measuring optimal circ levels and for deriving a general sense of the industry's relative degree of circulation balance.
In the second half of 2007, the newsstand circ contribution fell 1.6 percent from 50.8 million to 50.0 million. But the subscription circ level decline was also 1.6 percent. Therefore, the newsstand to subscription circ ratio remained at 18 percent. The stable ratio is an extraordinarily good indicator that the industry has begun to be more prudent in its circ level management practices.
Fluctuation in ABC Verified and Other Paragraph 6 Source Usage
The total amount of verified circ usage (which accounts for both ABC verified circ and BPA sponsored circ) decreased slightly in second half of last year from 12.4 million to 12.0 million-a decline of 3.2 percent.
In the first half of 2007, it became apparent that publishers were generally trying to temper their use of verified circulation, often choosing to substitute paid sponsored, partnership and combination circ sources in its place. In the second half of the year, this trend continued.
To help facilitate a better understanding of this source change trend, I've compiled ABC paragraph 6 data (data from BPA audited titles has not been used in this comparison) for the top 22 circulation companies (See chart on page 20). National Geographic and Smithsonian, which most industry observers consider consumer publications, are not included in this comparison because the vast majority of their subscription circulation is acquired using the "association" source. This data is a representative industry sample, accounting for 77 percent of the industry's total ABC paid/verified circ.
Since its reporting inception, in the first half of 2006, paragraph 6 source usage has fluctuated. This reflects the circ practice adjustments made by publishers to meet audit bureau rule changes. First was an ABC rule change regarding the definition of partnership non-deductible circ. This source was re-designated from partnership to verified. The other major ABC rule change regarding the reporting of paragraph 6 data will take effect in the first half of next year. This one is rather significant and it involves re-designating circ previously labeled as "sponsored paid-public place." Starting in 2008, circ in this category will be reported as verified circ. Many publishers, anticipating the effect of this change, have been revising their circ acquisition strategies to lessen the impact of having to report significant increases in verified circ. The result of those changes can be seen in the paragraph 6 source usage reported in the second half of last year.
The data reveals that five sources represent 98 percent of all reported paragraph 6 circ for the 237 ABC audited titles published by the 22 leading circ companies. The chart below demonstrates how the circ usage of these 5 sources has changed in the last year:
2nd H 2nd H %
Source 2006 2007 Change
Verified 10,247 8,838 -13.8
Partnership 3,876 5,595 +44.3
Loyalty 4,946 5,170 +4.5
Paid Sponsored 3,973 4,155 +4.6
Combination 2,907 3,476 +17.9
Total 25,899 27,189 +4.7
(Numbers in 000)
Note that the volume of verified circ declined (13.8 percent), but the use of the other 4 major paragraph 6 sources grew 18 percent. Loyalty and paid sponsored circ usage has remained relatively steady, but both the partnership and combination circ sources demonstrated strong growth. Overall, it should be noted that the amount of total paragraph 6 source circ grew about 5 percent in the last year.
The rising paragraph 6 circ use trend will continue. Publishers appear to be concentrating their efforts on expanding the partnership source. Combination circ use should also continue to grow because it's a very good source of subscriptions. But, for the most part, this source is limited to larger multi-title publishers. Note that its use is confined primarily to the eight publishers with multi-titles that are supporting at least one title with more than 1 million subscription circ.
Partnership circ, on the other hand, is broader based and more accessible to a larger range of publishing companies. Although partnership circ agreements can be difficult to obtain (and renew) I believe this circ source will continue to grow and eventually become the chief ingredient in the gradual expansion of paragraph 6 circ.
Eight Reasons Why Circ Levels Remain Too High
The good news is the consumer magazine paid/verified circ level declined in 2007 and the newsstand to subscription circ ratio appears to have stabilized. But there are other factors that indicate the industry circ level still remains precariously high. I believe the optimal industry paid/verified level is approximately 250 million, or 27 million (about 10 percent) lower than it is currently.
Below are some of the reasons why the consumer magazine industry's tubby circulation should remain on a strict weight loss plan:
1. Paragraph 6 Circ Usage Is High and Rising: Paragraph 6 circ usage in the second half of 2007 is estimated to be about 37 million, or 13 percent of the industry's total paid/verified circ. This is a clear indicator that the industry is continuing to push circ beyond what can reasonably be described as "natural circulation levels." Conversely it should be noted that some of the industry's most successful, and profitable, publications (i.e. People, Cosmopolitan, O the Oprah Magazine) maintain low (less than 5 percent) paragraph 6 circ ratios.
2. Direct to Publisher Subscription Source Usage Falls: The industry's subscription source mix continues to skew away from direct-to-publisher subscriptions toward agent sold subscriptions. The decline in direct-to-publisher subscription source volume is another sure sign the industry circ levels are too high.
3. Subscription Pricing Elasticity Is Eroding: Publishers have increasingly been forced to lower price to attract a sufficient number of subscribers to maintain circ levels. This is a sign that circ levels are too high in comparison to reader demand.
4. Newsstand Circ Continues to Fall: Newsstand circ has fallen continuously for many years (despite a stable newsstand to subscription circ ratio in 2007). It's conceivable that newsstand sales, for many publications, will continue to diminish at an even faster pace in the next few years. The number of titles distributed, especially to chain retail stores, is declining as both retailers and wholesalers become more rigorous in their title selection process.
5. Internet Influence: Greater exposure of edit material on the Web and the advent of more information alternatives on the Internet are having a slow but steady negative effect on reader demand for print products. This has also contributed to reducing subscription pricing elasticity (described earlier).
6. Smarter Advertising Buyers: Advertising buyers are more adept at evaluating circ "quality" and more alert to determining when publications may be "over-circulated". This trend will only continue to accelerate.
7. Tightening Audit Bureau Regulations: The audit bureaus (ABC, BPA) will, more than likely, continue to modify their rules and regulations in favor of greater circ source transparency.
8. Impact of Super-Circ Publications: The super-circ publications (over 2 million paid/verified circ), despite major recent reductions by titles like Reader's Digest and Time, are still major culprits in supporting the industry's bloated circ levels. There are 28 titles in this category and they represent over one third (34 percent) of the industry's circ. There are many titles in this group that have paragraph 6 circ ratios that are greater than the industry average of 13 percent. A 10 percent reduction in circ levels among this group of titles could go a long way toward helping ease the industry's bloated circ level condition.
Five Things You Can Do
When it comes to the circ levels of mature publications, less is more. This is cliché, but in this case, less (but higher quality) circ levels could be good for the consumer magazine industry.
1. Closely Evaluate the Use of Paragraph 6 Circ: Consider reducing paragraph 6 circ usage by 15 percent if circ from these sources exceeds 8 percent of total paid/verified circ.
2. Increase Percentage of Direct Sold Subscriptions: Improve the subscription source mix by increasing the amount of direct-to-publisher sold subscriptions.
3. Work with Advertising Buyers in Developing Better Ways to Evaluate Circ Quality and Engagement: Demonstrate to advertising buyers the value of subscription files that have a large percentage of direct sold subscriptions.
4. Faster Decisions on Sub-Profitable Publications: Publishers often extend the life of sub-profitable publications beyond the point of economic reasonableness. Faster decisions regarding the publishing status of sub-profitable publications could help ease the industry's circ glut.
5. Improve Newsstand Sales Performance: Publishers, by concentrating greater effort on improving newsstand sales, will not only improve "reader quality," but put themselves in better position to reduce circ levels.
Reducing paragraph 6 circ usage by 10 percent, increasing the number of direct-to-publisher sold subscriptions by 10 percent, improving newsstand sales performance by 2 percent and making faster decisions on sub-profitable publications are the key ingredients for lowering the industry's circ level by 10 percent. An industry with a leaner, meaner, higher quality circ level will be able to more effectively compete for readers and advertisers in an environment with a growing number of media alternatives.