Sunday, August 3, 2008

Op-Ed: Outsourcing Circulation Management-A Vital Industry Service

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.

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