Circulation Notes

Chaos - The newsstand supply chai

2009-03-15T19:03:00.002-04:00

Chaos
The newsstand supply chain is in the midst of one of the most dramatic upheavals in recent history. Here's what's happened and how some publishers are coping.
BY BILL MICKEY
There were some high hopes for the newsstand last year at this time. The wholesalers and retailers were force-feeding some tough medicine into the supply chain by cutting titles from retailer lists and reducing the number of copies shipped-extreme measures designed to produce very optimistic 50-percent sellthrough results. These days, however, the burdens of the supply chain mixed with financially strapped wholesalers and an economy in a nosedive have finally crippled the distribution system-at least for now.

Who knows, by the time you read this, the story of the newsstand could be radically different than what is presented here. Such has been the scene since mid-January when Anderson News and then Source Interlink-together representing upwards of 50 percent of the distribution market-introduced a 7-cent surcharge on all copies shipped, plus an additional demand from Anderson for publishers to pick up a $70 million tab on scan-based trading inventory.

We've witnessed the wrath of publishers at what they characterized as unilateral demands of the two wholesalers; a mixed bag of cooperation and downright hostility from various supply chain players; accusations of conspiracies; an anti-trust lawsuit; and the exit of Anderson News from the market.
In the meantime, single-copy sales executives at publishers were at defcon 5 on a daily basis, trying to stay on top of a distribution system in complete disarray while wholesalers, national distributors and even printers scrambled to rework logistics and routing.
Meanwhile, retailers, ever in a position of leverage, remained firm in their desire for status quo, which in the end might have helped the supply chain heave itself back into place again.

How Did We Get Here?
Back in the mid-nineties, there were an estimated 325 wholesalers serving their own little regional fiefdoms. "They were all making good money," says Baird Davis, a newsstand and circulation consultant and contributing editor to this magazine. "They had little geographic monopolies."

Then, fed up with dealing with scores of wholesalers and their different systems, Safeway kicked off the "retailer revolution," as Davis calls it, and pushed for national deals which resulted in a massive wholesaler consolidation, going from hundreds to four in the space of three or four years: Source Interlink, Anderson News, Hudson News and The News Group. "In effect it broke the geographic monopolies that local wholesalers had enjoyed for about 40 years," says Davis. "After that, other major retail chains began bidding their work out, 'awarding'-on more favorable terms-their work to several wholesalers, rather than using the network of local wholesalers.

The new supply chain introduced new layers of pricing, discounts, store allotments, and so on. The average cover price of a magazine was sliced and diced into a confusing array of portions. Importantly, Safeway ushered in a new powerplay from the retailer community. "Now under new deals, the retailer demanded more money and they didn't care what the publisher offered the wholesaler. The retailer negotiated directly with the wholesaler, they didn't involve the publisher," says Davis.
The new supply chain hierarchy also put an increasing financial burden on the wholesaler. "Publishers gave in a little with their discounts, but not to the extent that the wholesalers had to give to the retailers up front," adds Davis.

The 7-Cent Shot Heard Around the Industry
Economic conditions finally forced Anderson News Company's hand and the wholesaler, which represented more than 20 percent of mass-market magazine distribution, announced in mid-January a program detailing two demands: Publishers must pay a 7-cent, per-copy price increase on all copies distributed and they must take on a $70 million inventory cost attached to scan-based trading (SBT). They gave a deadline for signed agreements of February 1st. Non-compliers would be refused distribution.

The demands came from Charlie Anderson, Anderson's CEO, in a conference call moderated by newsstand analyst John Harrington. "The business has not been profitable and has not been for a very long time," Anderson said.

Indeed, Anderson noted that since the major consolidations in the wholesaler market began 10 years ago, profits had been dwindling ever since. "What we are trying to do is give some stability to the channel. Short of that, there will be an implosion in the business," he said. Boy, was Anderson right, just not in the way he hoped.

The 7-cent figure represented about a 3.5 percent increase and was arrived at by examining all the variables in retail pricing and efficiency costs. Anderson believed the increase was a "fair rate."
Publishers were not so convinced. Most were angered by Anderson's sudden demands, citing economic woes themselves.

"To expect publishers to make the decision of spending hundreds of thousands or millions of dollars at any time is difficult. To ask them to do it in a two-week window is absurd," said Jay Annis, VP of single copy sales at Taunton Press.

The second and likely more onerous part of Anderson's demands outlined the wholesaler's exit from bearing the costs of scan-based trading (SBT). "We are no longer going to participate in investment of scan-based trading," Anderson said, and added that they had already invested $70 million into inventories for four major customers.

Anderson said that the greeting card industry, which also uses SBT, passes the cost on to the manufacturer. "We think it is only fair that the manufacturer bear the cost," he said.
Anderson said the pricing is non-negotiable-"We really belive the seven-cent number is the number."-and then dropped this bomb: Publishers that don't sign the agreement would effectively be dropped from distribution.

The flip side, however, was Anderson's already precarious position. If publishers didn't comply, the company would be forced out of the magazine distribution business. "We're committed to this. Over the last 12 years we've tried to serve the customer in the best way. The last thing we want to do is exit the business. But why should we be in a business that doesn't give us any return? We don't want to get rich, but we want a fair return and that's all we're asking for."

Then, exactly one week after Anderson announced its price hikes, Source Interlink announced their own. Like Anderson, Source asked for a 7-cent, per-copy surcharge, but no SBT demands. Source's demands, however, were delivered in a letter.

Combined, the two wholesalers are said to account for about 50 percent of the market.

In the letter to clients, Source Interlink Distribution president Alan Tuchman said, "As we continue to aggressively pursue and maintain an effective cost structure within our operation, we've come to the realization that more needs to be done if we are going to overcome the daunting financial challenges that exist."

If the 7-cent surcharge were added to all 3.185 billion copies distributed to retail, the industry-wide cost would be $267 million. Divide that in half, and the one-two punch of Anderson and Source Interlink amounts to an industry cost of $133.5 million.

Distribution System: 'A mess for us all.'
It immediately became clear that some national distributors and publishers were not going to play ball. Time Inc. and, by extension, Time/Warner Retail, announced they would not comply with the new pricing structure. Then Curtis, AMI, Bauer, Hachette and others fell into step behind Time Inc.

A powerful backlash was suddenly swelling against Source and Anderson, which were faced with a significant and unsupportable loss of product. "I wouldn't say that Curtis cut [Source] off," said Dennis Porti, Curtis's executive vice president, in support of his company's decision to stop shipping product to Source and Anderson. "Because of their unilateral mandate, they more or less cut themselves off. The publishers simply cannot afford that kind of money."

Meanwhile, Comag, jointly owned by Hearst and Conde Nast, despite a leaked client letter from a mid-level manager at the national distributor that said both Anderson and Source were about to go under, announced it was working with the wholesalers to continue relations under its IMPACT program, which essentially gets the wholesaler to agree to deliver on a bundled set of services for the publisher, which, if completed, qualifies the wholesaler for another layer of compensation. Those compensation levels were being negotiated in order to keep service interrupted.

Unable to sustain viability in the face of the publisher and distributor rebellion, Anderson was forced to shut down its magazine operation only three weeks after it announced the pricing changes. CEO Anderson said he would "continue to hold discussions with publishers and retailers, trying to develop a viable model that allows it to remain in business," adding the situation is "a mess for us all."
Source, on the other hand, had other plans. A recalcitrant Jim Gillis, Source's president, accused Time Warner and the others that they were conspiring to shut Source and Anderson out. "This is about American Media and Curtis and Bauer and Time Warner trying to control retailer pricing by eliminating magazine wholesalers so they don't have so many they've got to do business with."

Gillis said he was prepared to maintain contracts with his existing retailers, which approach 35,000 and include Wal Mart and Barnes and Noble, the two biggest magazine sellers. Consequently, American Media, Bauer and Curtis and Time Warner Retail clients would not have product going into those retailers.

Source's chairman and CEO, Greg Mays, sent a letter to retailers in an effort to win sympathy for Source's cause. "This has been caused by an unprecedented and unprovoked assault on this channel by certain publishers and a national distributor. They are trying to lock out competition (Source) in the magazine distribution chain to the retailer's detriment," said the letter.

Mays closed the letter saying that Source was about to file a "major anti-trust lawsuit and [seek] a restraining order so we can continue to properly service your stores."
That restraining order was quickly granted by the U.S. District Court for the Southern District of New York, prohibiting publishers and national distributors from denying shipments to Source's magazine distribution business.

It was a major victory for Source because it paved the way for a settlement with Time Inc. and Time/Warner Retail, which soon signed a new, multi-year contract with Source. The new contract, however, did not include the 7-cent surcharge.

Where Does This Leave Us Now?

The suit, while a win for Source, ended up throwing a wrench back into the gears. The channel was on the verge of regaining control of distribution routes, according to a client letter sent by Quebecor, a printer. "Just when it appeared the turmoil was clearing up after the magazine national distributors had reassigned almost all of the Anderson News and Source Interlink wholesaler copies to new wholesalers, a NY judge issued a court order prohibiting publishers and national distributors from denying shipments to Source Interlink's wholesale magazine distribution business," said the letter.
Indeed, Taunton's Annis was just about comfortable enough to forecast some normalcy. "Two weeks ago yes, but now no one is daring to forecast because of the Source restraining order and the lawsuit," he says.

In the meantime, publishers are scrambling as the distribution system tries to regain control, putting significant newsstand promotions and allocation plans on hold. It's a whole new ballgame. "Now we are operating outside of our strategy," says Richard Alleger, Rodale's senior vice president, retail sales. "Certain activities are on hold."

Up until the newsstand imploded, Rodale was leveraging a two-brands-is-better-than-one approach to help retailers find extra value. "Rodale is unique in that we have some obvious synergies in our products, like Men's Health and Women's Health. We have worked with a number of retailers in 2008 and 2009 to bring retailer combo promotions depending upon what they are trying to promote."
Temporary price reductions were also gaining traction. In fourth quater 2008, Rodale offered price reductions to consumers via in-store coupons. The actual cover price did not change, but the coupons knocked $0.50 to $1.00 off the cover price.

Both of those programs have temporarily been shelved, as is an allocation reduction plan that was helping the company tighten up its print orders. "Up until the supply chain disruption, we've been working with a number of wholesalers to reduce allocations across a category, not juts across a title. We anticipate that when this disruption calms down, we will get back to this again," says Alleger.
Annis has been talking to his national distributor, Curtis, several times per day. "From my standpoint, I'm just trying to ship the copies to the places that are going to get them to the retailers. And that's proving to be very difficult right now."
So are the printers. In Quebecor's letter, the printer detailed some of the distribution snafus the supply chain breakdown caused. The lawsuit, for one, had caused delivery instructions to the printer to be re-consigned-again-resulting in a deluge of shipping requests and changes that created havoc with Quebecor's already delicate distribution plans. "This caused QW plants and QWL CF locations to start and stop destination re-flagging of pallets, load planning, truck rerouting and stopping of equipment in route on the same day," said the printer.

Meanwhile, Anderson's shutdown exacerbated the confusion over alternative distribution options. Magazine product formerly consigned to Anderson remain on hold at plants, and, in early February, Quebecor delivery trucks were literally turned away from 11 Prologix East locations when they discovered the facilities were closed.

For now, Annis says he's keeping extra-close tabs on his print orders, often making adjustments at the last second. "Many publishers, ourselves included, work with their national distributor to set the allotments by wholesaler based on sellthrough, field work, wholesalers requests, promotions, and so on. Once this is done, the national distributor issues a total print order for the newsstand. This is then combined with our subscription number for a final print order to go to the printer. This ensures no copies are wasted. Lately, I have been giving an overall number for the newsstand, which is combined with subs and sent to the printer. I then go back at the last minute and work the newsstand galley to the number I gave initially to try and get as much time to determine what wholesalers are now servicing what retailers, and making the appropriate allocations for each."

Annis is also taking an opportunity to hit the reset button. "I'm going to use this opportunity to try and improve my sellthroughs. because in a lot of cases you're getting a fresh start and I'm going to try to take advantage of that."

Annis expects wholesalers and distributors will welcome his help in determining new route allocations, not to mention the chance to keep a close eye on existing in-store promotions. "We have checkouts to protect and we have promotions that are going on that we need to ensure get the right amount of copies."

When the dust settle, says Annis, he and his team will physically visit the wholesalers and their national distributor to rework distributions. "I can imagine how flooded they're going to be with trying to set up distributions. We're going to go out there and assist them to make sure they get set up properly.

A Newsstand Fable: The Fox and the Jackal

2009-01-21T06:54:00.001-05:00

A Newsstand Fable: The Fox and the Jackal
The latest Anderson broadside, no matter how crude, has left publishers in a very uneasy defensive position.
By Baird Davis
http://www.audiencedevelopment.com/2009

Thank goodness for the Anderson family. Their Anderson News Company can be counted on for keeping the fascinating newsstand fable alive with their periodic threats of Armageddon. What would the industry do without them?

Well the magazine industry might soon have to face that unpleasant reality. If truth be known, many of Anderson's wounds are self-inflicted. In the 1990's the Anderson family saw the dramatic changes occurring in the magazine distribution landscape as an opportunity to greatly expand their successful regional wholesaling operations. They were banking on synergies of scale and a core belief in the superiority of their operating practices. Instead they discovered that regional success does not necessarily translate on a larger scale and retailers, not wholesalers, dictate the channel rules. The grand Anderson strategy has been a big disappointment. They have since pulled back from their most far flung geographic excursions. Overall it has been a humbling lesson in business hubris.

Anderson's actions have always been defined by a strange naiveté about both the magazine and retail industries which they serve. Their latest initiative is no exception. In it they "mandated" an across the board price increase (with no publisher quid pro quo) and in classic Anderson fashion included an ominous threat about closing their magazine wholesaling doors if a significant number of publishers don't acquiesce.

This latest Anderson broadside, no matter how crude, has left publishers in a very uneasy defensive position with only Hobsonian choices. Yes, there does seem to be some sentiment among national distributors/publishers to call Anderson's bluff. However, an Anderson family departure from the magazine wholesaling business would leave a gaping hole in the distribution pie. Many of the major chain retail stores, currently serviced by Anderson, can probably be accommodated (over time) by other wholesaler organizations. News Group, Source Interlink and Hudson News are undoubtedly waiting anxiously in the wings for the chance. But make no mistake about it, an Anderson departure would be a traumatic blow for publishers.

While Anderson was struggling, the self-absorbed brotherhood of publishers (i.e. national distributors) failed to address the gravity of channel conditions. It's almost as if publishers were in a time warp-trapped by a nostalgic yearning for yesterday. They have been unable to adjust to the unalterable fact that magazine distribution ground rules have changed dramatically in the last decade. The major chain retailers now set most of the industry's operating and financial parameters. Wholesalers, for the most part, have agonizingly adjusted to the new channel order. However, national distributors have chosen to ignore the effect of change, often blaming wholesalers for their own woes. As a pragmatic negotiating ploy, this might be considered good strategy. But the tough-guy stance of national distributors now appears to be a relic of the past-one that's caused publishers to miss a critical opportunity to direct much needed channel reform to their advantage.

The classic struggle between retailers, wholesalers and publishers is nearly as old as time. The Greek Aesop's fable, "The Lion's Share," captures the essence of this conflict. In it the lion (retailer), the fox (wholesaler) and the jackal (publisher) go hunting and successfully kill a deer and divide it into 4 pieces. The lion (retailer) takes three quarters and leaves the fox (wholesaler) and jackal (publisher) to fight over the remaining quarter. The battle for the remaining quarter is a test for survival in the treacherous, yet nourishing, forest.

That's the Aesop question-can wholesalers and publishers, like the fox and the Jackal, find a way to do what's prudent and equably divide the remaining quarter? If they can't they'll soon find that life outside the forest is less appetizing.

Single Copy Sales Are Likely to Come Back

2008-12-01T20:33:00.002-05:00

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
www.nscopy.com

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.

Publishers Claiming Digital Circ on Rise

2008-10-20T09:28:00.001-04:00

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

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Magazines Wrestle with Future Business Model
By Tony Silber
http://www.circman.com/viewmedia.asp?prmMID=4214&prmID=1#
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."

Deciphering a Conundrum: First-Half 2008 Newsstand Sales

2008-10-07T11:48:00.001-04:00

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.

Celebrity Titles

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.

Time Inc.

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.

Bauer

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.

Meredith

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.

Rodale

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.

Pricing

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.

Final Thoughts
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.

To Postal Workers, No Mail Is 'Junk'

2008-09-29T23:19:00.001-04:00

To Postal Workers, No Mail Is 'Junk'
With revenues falling, the post office owes its future to stuff we throw out.
BY Caitlin McDevitt
NEWSWEEK
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.

URL: http://www.newsweek.com/id/161231

More Publishers Raise Prices. But Success Rates Are Less Encouraging

2008-09-23T14:09:00.001-04:00

Cover Prices: First Half 2008
More Publishers Raise Prices. But Success Rates Are Less Encouraging
By John Harrington
http://www.nscopy.com/

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]."

Where Publishers Are Thriving

2008-08-21T10:41:00.002-04:00

Where Publishers Are Thriving
Germany's papers are doing fine despite the ad flight to the Web. What's their secret?
by Jack Ewing
http://www.businessweek.com/magazine/content/08_34/b4097094901129.htm
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.

PRE-WEB MAKEOVER
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."

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

2008-08-03T22:58:00.001-04:00

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
http://www.circman.com/viewmedia.asp?prmMID=4097&prmID=1

[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.

ABC Board Cuts Audit Costs for Newspapers, Freezes Rates for Magazines

2008-07-29T21:22:00.002-04:00

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
http://www.circman.com/viewmedia.asp?prmMID=4090&prmID=1
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.

Digital Editions' Growth Spurt

2008-07-10T14:40:00.002-04:00

Digital Editions' Growth Spurt
E-editions are gaining ground in the mainstream market.
By Gretchen A. Peck
http://www.pubexec.com/story/story.bsp?sid=110154&var=story

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

alQemy
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

BlueToad Inc.
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

DMC Inc.
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

Dirxion
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

NewsStand Corp.
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

Nxtbook Media
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

Olive Software
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
Communications
Contact: (866) 654-8387, OliveSoftware.com

PageSuite Ltd.
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

Qiosk.com
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

Texterity
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

YUDU Media
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

Zendition
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

Zinio LLC
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
Contact: Zinio.com/publishers

Zmags Inc.
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.

Are Free Magazines the Future of Publishing?

2008-07-02T08:04:00.002-04:00

Are Free Magazines the Future of Publishing?
Will consumer go controlled?
By Chandra Johnson-Greene
http://www.foliomag.com/2008/are-free-magazines-future-publishing
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
http://www.dmnews.com/Maghound-offers-magazines-a-la-carte/article/111962/

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.

Striving for Zero Returns on the Newsstand

2008-06-01T21:45:00.001-04:00

Master Manufacturer:
Striving for Zero Returns on the Newsstand

By Steven W. Frye
Publishing Executive Magazine
http://www.pubexec.com/story/story.bsp?sid=107631&var=story

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.

China's Model
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.

Magazines: Ad Pages Slip First 4 Months Of '08

2008-05-16T07:40:00.001-04:00

Magazines: Ad Pages Slip First 4 Months Of '08
by Erik Sass
http://publications.mediapost.com/index.cfm?fuseaction=Articles.san&s=82433&Nid=42743&p=204904

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
http://www.wwd.com/memopad/article/124925?page=0

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.

Why Consumer Magazine Circulation Levels Are Still Too Bloated

2008-05-04T21:13:00.001-04:00

Why Consumer Magazine Circulation Levels Are Still Too Bloated
By Baird Davis
http://www.circman.com/viewmedia.asp?prmMID=3943

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.

2008-04-27T21:07:00.002-04:00

Postal Debate: Time Inc. vs. The NationMagazines on opposite sides of the shape-based postal rate structure.
BY Jill Ambroz http://www.foliomag.com/2008/postal-point-counterpoint-time-inc-vs-nation
FOLIO: asked two magazine executives-each with vastly different publishing backgrounds-about the impact of last July's shape-based postal rate structure. While mega magazine publisher Time Inc. was perhaps the foremost proponent of the new structure, it could be argued that The Nation was among those hit the hardest, having to absorb a half-million dollar increase in postage costs. The political weekly, with a circulation of 181,070, had to turn to subscriber donations to stay afloat.

So, ten months into the new rate structure, here's a look at their different approaches and different experiences.
FOLIO:: Do you feel the new shape-based postal rate structure implemented last July is a better system than previous rate structures?
Jim O'Brien, director of distribution and postal affairs, Time Inc.: The new rate structure is definitely a step in the right direction. When the rates begin to match the costs, mailers will work toward the lowest-cost method of preparing their mail, which is why you're seeing new growth in co-mailing and co-palletization right now. The new rates aren't perfect, but they're necessary if we want to keep Periodicals Class rate increases at or below CPI.

Teresa Stack, president, The Nation: I think it is a bad system. Instead of the preference that periodicals were entitled to since the founding of the postal service, the new rate plan imposes the most burdensome requirements for magazine retailers. What these new rates do is favor the large volume magazines (that by definition can better fill containers and perform other worksharing) and shift the costs onto the small magazines, including those that specialize in political content.

Our rates went up between 18 to 20 percent; some other small political magazines saw even larger increases, while the average rate increase was around 12 percent.

FOLIO:: Are the new periodical rates fair to everyone, small publishers and larger publishers?
O'Brien: If you surveyed the industry today, you would probably find that many small mailers think that the rates are unfair because they incurred higher increases than large mailers, and large mailers think that the rates are unfair because they pass through only 40 percent of the bundle and container costs and therefore perpetuate the cross-subsidy to small mailers. Our industry needs to get to the point where the rates reflect the costs and mailers pay for the resources that they consume within the Postal Service.

Stack: Clearly they are not. The largest publishers spent a lot of money lobbying for this new rate structure because it benefits their interests, unfortunately at the expense of small magazines. And while they can correctly argue that the new rates more accurately reflect costs to the postal system of individual titles, we have to remember that the entire class of periodicals has been subsidized for hundreds of years, with the goal of supporting a thriving multitude of opinions and content.

FOLIO:: What would you change in the postal structure?
O'Brien: I would like to see each rate element cover the Postal Service's cost to process and deliver that product and make a contribution to the overhead of the Postal Service. In other words, each mailer should pay for what they use. Last year, Periodicals mail covered only 83 percent of its postal costs. We need to get to 100 percent cost coverage or we may be at risk of an exigent increase.

Stack: In order for small magazines to survive, they cannot be subject to the radical restructuring imposed by the new rates. If we believe in our postal system, we may have to carve out different treatment for small titles in order to preserve the health of the class.

FOLIO:: The first quarter saw a significant decline in both First Class and Standard Mail, which pay for most fixed costs. If this trend continues, what will the repercussions be for the USPS and potentially, for publishers?

O'Brien: If Periodicals Class mail does not make progress toward 100 percent cost coverage then the Postal Service will file for an exigent rate increase to bring us to 100 percent. The average Periodicals contribution to institutional costs last year was negative 5¢ per piece. A 5¢ increase would be devastating for both large and small publishers, which is why Time Inc is pushing for mailers to change their behavior and prepare mail more efficiently.

As far as the Postal Service is concerned, volume losses put additional pressure on their cost reduction efforts. Postal Service management has done an excellent job of removing costs from the system but at some point they will hit the wall on cost reductions. When that happens, if volume does not rise, the USPS will be faced with either an exigent rate increase above the CPI cap or a bail-out from Congress.

Stack: Two things could happen: prices could go up even more (and if the large magazines have their way, those increases will be much higher for small magazines than for large ones). And then volume will go down. At that point, the USPS could be in real trouble. It may then take a congressional subsidy to preserve the universal service that our leaders believed was essential to our form of self government.

Time to Make the Case for Magazines and Books

2008-04-15T22:38:00.002-04:00

Time to Make the Case for Magazines and Books
By John Harrington
http://www.nscopy.com/

At The Retail Conference, which wrapped up two weeks ago, several of the presentations focused on information that demonstrated the unique values that magazines and books bring to the retail environment. Additionally, another argued that these findings need to be consolidated into an aggressive and coordinated retail marketing approach that will benefit the entire category, and all of the members of the magazine distribution channel. Frankly, such a concept was employed, successfully and cooperatively, nearly two decades ago (see page 2). And for the last 10 years or so, it has been talked about constantly. Now, as the first decade of the 21st century is drawing to a close, and competitive product lines are clearly aiming at publications' space in large chain stores, and the tensions in the channel are reaching a crisis point, all members of the business should be doing whatever they can to see that publishers, national distributors, and wholesalers begin speaking loudly and with "one voice" to retailers.

Some of the good news from The Retail Conference about magazines began with Wendy Liebman's "How America Shops." A few points:

Women who buy magazines are cautious, take charge shoppers, but magazine buyers are also less price sensitive, enjoy browsing more, and are willing to pay to get in and out quickly.

Women who buy magazines shop in more retail channels than those who do not, by 12.5 to 8.6 in a three month period.

Magazines are #1 on the list as an affordable, under $10, treat for women; and,
Magazines are the #1 checkout favorite for women.

In "Improving Store Performance in the Grocery Channel," Tom Griffith of Willard Bishop Consulting, noted that while the so-called "Center Store," essentially general merchandise, is under siege, magazines and books are the most profitable products there. Among the numbers:

Within general merchandise, magazines generate 6.4% of sales, but 16.3% of profits.
Books and news represent 2.6% of sales, but 7.2% of profits.

Magazines profit-per-item sold of $0.58 is higher, by considerable margins, than snacks, gum, candy, and carbonated beverages.

These findings and more were a key part of a third presentation, "A Case for Magazines at Retail: One Voice." Three national distributor executives - Jay Felts, Comag Marketing Group; Drew Wintemberg, Time/Warner Retail Sales and Marketing; and Jay Wysong, Distribution Services, Inc. - laid out the beginnings of a plan to build a true "industry" presentation. The work is being done by a committee of the International Periodical Distributors Association (IPDA). No timetable was announced, but the message was that it has a high priority.

The History: Late in the 1980's, initially under the auspices of the Magazine Publishers of America (MPA), research about magazine and book supermarket profitability was begun, using the direct product profit (DPP) measurement. A major consulting firm substantiated that magazines were the most profitable general merchandise item, and that books were among the leaders as well. The wholesalers' trade organization of that time, the Council for Periodical Distributors Associations (CPDA) soon joined the project. The program's budget, in 1988, was nearly $1 million. Additional hundreds of thousands were budgeted over the next few years to bring the findings to top executives at the largest supermarket chains. Publishers, national distributors, wholesalers, association executives, and the consultant were part of those presentations. Beyond those joint sales calls, DPP materials, monographs and video tapes, developed by MPA and CPDA, were key parts of retailer visits by individual publishers, national distributors, and wholesalers.

The DPP program of the late 1980's and early 1990's was very successful, as supermarket publications' footage increased by double-digit percentages. As a follow-up, MPA and CPDA engaged the consulting firm to study DPP figures for discount stores. The resulting study was presented to a then-emerging discounter located in a remote town in Arkansas named Wal-Mart, which was only beginning to display magazines in its growing chain.

Remember as well, in those years, magazines were strictly a 20%-off cover price item, with display allowances bringing their gross margins up to around 27%. Today, and for the last decade, as a result of increased channel competitiveness, gross margins are estimated, modestly, to be over 30%.

The key to the success of the DPP marketing program of 20 years ago was its cooperative nature. For a new program to succeed, it will also have to be inclusive, and it will have to take place as soon as possible

At the Newsstand: Cloudy Sales Results and Growing Tensions

2008-04-13T22:39:00.001-04:00

At the Newsstand: Cloudy Sales Results and Growing Tensions
By Baird Davis
Circulation Management Magazine
http://www.circman.com/viewmedia.asp?prmMID=3875
Newsstand sales performance of audited publications in the second half of last year appears to be reasonably good in spite of a few extenuating reporting contingencies. Unit sales of 477 million were only down .7 percent and revenue rose to nearly $1.7 billion, a lift of 4 percent.

But things are not exactly as they appear. There were several conditions that clouded the process of interpreting newsstand sales performance in the last half of 2007. First, industry sales were inflated by an "extra" 1.8 percent by a timing situation that made it possible for weekly publications to report 27 issues for the audit period instead of the previous year's 26 issues. Plus, Meredith reportedly boosted its numbers by counting sales sold at deeply discounted prices at Dollar Tree stores. This inflated industry sales another .8 percent. These factors have partially compromised the viability of year-over-year sales comparisons. If these factors were excluded from the sales calculations the industry's unit sales would have been down 3.2 percent and revenue up 1.9 percent-still a fairly good period, but not nearly as good as it first appears.

Celebrity Titles Still Set the Industry Sales Agenda

Once again, the celebrity category kicked butt. The aggregate sales of the six celebrity titles (People, Us Weekly, Star, In Touch, Life & Style, OK!) grew in the second half of 2007. Unit sales were only up .8 percent, but revenue rose $49 million, up 11.4 percent. The average cover price for the group increased from $2.86 to $3.16. However, it should be noted that the sales of these publications (all weekly frequency) were helped by an anomaly in the audit bureau reporting period that allowed an additional issue to be reported for the period. This, in turn, skewed the year- over-year comparison, giving it the false appearance of lifting their unit and revenue 3.8 percent. But even without the frequency factor, the revenue increase would still have been nearly 8 percent.

Sales of the two audited tabloid publications (National Enquirer and Globe), which in essence are also celebrity titles, continued to fall in the face of the strong sales performance of their regular sized competitors. Their unit sales were down a combined 10.6 percent, but their revenue, helped by aggressive price increases, only fell 1.7 percent. The combined sales revenue of the celebrity and tabloid titles totaled nearly $570 million, up over 9 percent. Like it or not, these eight publications continue to set the magazine newsstand agenda, accounting for one-third (34 percent) of the industry's revenue for audited publications.

In the past, the sales success of the celebrity titles precluded strong sales performance from many of the other checkout publications. But in this reporting period, the sales performance of the non-celebrity checkout sold titles (nearly all women-oriented) was generally good. There were a meaningful number of titles with revenue increases of 10 percent or more. This group included Rolling Stone (23.3 percent), Sports Illustrated (20.5 percent), Self (18.0 percent) Redbook (17.8 percent), Everyday with Rachael Ray (17.0 percent), First (16.6 percent), Prevention (14.6 percent), Soap Opera ABC (12.1 percent) and O, the Oprah Magazine (10.0 percent). However, there were some major checkout title sales casualties-Good Housekeeping (-20.7 percent), Marie Claire (-14.3 percent), Glamour (-13.2 percent), Soap Opera Weekly (-13.1 percent), Vanity Fair (-12.8 percent), Woman's Day (-11.0 percent) and Allure (-10.6 percent). But the winners exceeded the losers and revenue for the non-celebrity checkout publications rose a healthy 5.4 percent.

Largest Cover Price Increases in Three Years Confined to Weekly Publications

The average cover price of audited publications sold in the second half of last year increased 4.8 percent-from $3.36 to $3.52. This is the largest percentage price increase in recent years. It represents a major change from the last three years, during which average price remained flat.

The price increases, however, were not broad based. They were primarily confined to weekly frequency publications. Fourteen of the top 17 selling weekly publications increased cover price in the last year. The combined effect of the price increases on weekly publications produced an aggregate average increase of 10.0 percent for this group. The average price increase for all other publications was a miniscule .5 percent.

Most of the weekly publication price increases were not, in the traditional sense, market driven. Publishers of low priced (less than $2.99) weeklies were influenced, to a large extent, in their price increase decisions by wholesalers who "persuaded" them that pricing below $2.99 was not financially healthy for the industry. Even though some publishers of weekly titles have been inching up their cover prices in the last few years, it was Bauer's decision to increase cover prices approximately 35 percent in the fourth quarter of 2007 for all their audited publications, including their three major weeklies (Woman's World, In Touch, Life & Style), that has had the most dramatic industry pricing impact.

It's too early to definitively determine the effect of the price increases for weekly publications. But the initial results appear to show that it's not necessary to employ super-low pricing to maintain volume sales. The apparent success of raising the low prices for weeklies, however, does not necessarily translate to elastic pricing for other publications. The market pricing elasticity restraints that have slowed subscription pricing are likely to remain in play at the newsstand for most other publications.

Deeply Discounted Sales

While the industry appears to be moving away from super-low pricing practices some publishers experimented by selling their titles at Dollar Tree stores, where the publications are presumably sold at a dollar or less. The largest proponent of this practice in the second half of last year was Meredith. The sales of their five leading newsstand titles-Better Homes & Gardens, Fitness, Ladies Home Journal, Family Circle and More reported a combined sales revenue increase of $9 million, nearly 29 percent. It's now estimated that all, or nearly all, of the sales increases for these titles can be attributed to Dollar Tree. However, Meredith, to their credit, has announced that they have discontinued sales of their products at Dollar Tree. Many industry observers believe that it was important for Meredith to rescind their Dollar Tree agreements. There's a sense that it will help preserve the industry's long record for selling publications at full (or nearly full) cover price. There is also a belief that maintaining full cover price integrity helps to demonstrate product vitality and "wantedness" for the newsstand source of circulation, which is very important to advertising buyers.

Checkout and Mainline Sales Heading in Different Directions

The unit sales of checkout titles grew .9 percent and revenue increased 7.2 percent. In contrast, mainline unit sales declined 6.1 percent and revenue fell 2.4 percent. These divergent trends began taking shape in 2004, when the sales of celebrity titles began their growth spurt and the sales of "laddie" titles started to abate. In the intervening three-year period, checkout unit sales have increased about 1 percent and revenue 2 percent per annum. Mainline unit and revenue sales, on the other hand, for the same period have annually fallen 5 percent and 3 percent respectively. The spread between checkout and mainline sales is expanding. This trend probably indicates that a greater proportion of industry sales are being made in the mass merchandiser, supermarket and drugstore channels of trade, where checkout sales predominate. If this trend continues, it doesn't bode well for mainline publications.

Newly Audited Publications

A total of 27 titles with newsstand sales were added to the auditing ranks in the last year. The performance of four of those titles stand out-People Stylewatch and All You (Time, Inc.), Quick & Simple (Hearst) and Taste of Home (Reader's Digest). Together these publications accounted for over $30 million in revenue in the second half of 2007.

People Stylewatch is probably the most noteworthy. It reported average sales of 549,000 per issue. This is the best performance achieved at launch by a monthly title since the debut of O, The Oprah Magazine in 2000. A Taste of Home, although newly audited, is not a recently launched publication, having previously been published by Rieman. It has a massive paid subscription base of nearly 3 million, but it still reported newsstand sales of 162,000 per issue. The other two-All You and Quick & Simple-although newly audited have been sold at the newsstand for two years or more. They both carry cover prices below $2 and are frequently referred to as "Bauer Beaters". Although they posted relatively strong sales, their market position could be compromised in the future if the industry continues to shift away from super low cover pricing practices.

Sales of the Top 10 Companies at Newsstand Time, Inc. and Bauer

Time, Inc. continues as the newsstand revenue leader with sales of $258 million. But Bauer is closing the revenue gap.

Sales revenue grew to nearly $235 million, up 11 percent in the last half of 2007. Bauer's sales were helped by large cover price increases in the fourth quarter of 2007. Their sales in this reporting period, however, only reflect the effect of price increases on several issues. In the first half of 2008, the full effect of Bauer's aggressive price increase strategy (average 35 percent) will be revealed. If the Bauer titles don't suffer significant unit sales fall-off as a result of their price increases it's entirely possible their newsstand sales revenue will exceed Time, Inc.'s in 2008.

American Media, Hearst, Wenner, Condé Nast, Meredith and Hachette

American Media's sales slipped, hurt by the continuing sales slide of their two tabloid publications, but their sales still leave them in third place among all publishing companies. Wenner's revenue, on the other hand, grew a robust 14 percent, helped by the sales growth of Us and Rolling Stone. Hearst's sales revenue was up nearly 8 percent, but if the sales of their newly audited title, Quick & Simple, is excluded the revenue of their previously audited titles was flat. Their performance, however, was better than Condé Nast and Hachette whose sales revenue slid five and six percent respectively. Meredith's revenue was up 18 percent, but as previously discussed, their sales lift was almost solely a result of Dollar Tree sales.

Enthusiasts Media

Enthusiasts Media's newsstand performance is important because their sales, more than any other company, are a proxy for special interest publications. They publish 47 audited publications and all, except two soap opera titles, are male-oriented special interest publications sold on the mainline. In the aggregate, their sales revenue declined about six percent. But if the sales of their two soap opera titles are excluded, the revenue of their 45 special interest titles were down less than 1 percent, good performance in a down market for special interest titles.

Northern & Shell

The biggest surprise among the top ten newsstand sales companies was Northern & Shell, publisher of OK! Weekly. They raised the cover price of OK! from $1.99 to $2.99, yet unit sales rose 11 percent and revenue grew 70 percent to over $44 million. Their sales increase moved them ahead of Hachette on the newsstand sales leader board. After a rocky start OK!, with its British heritage, is demonstrating that it may have real staying power in America.

Shattering Any Illusion of Market Stability

For the last few years, wholesalers, in the absence of industry leadership from publishers and national distributors, have been more assertive in their actions and in voicing their industry concerns. In doing so they are sending shivers through the newsstand industry.

Wholesalers continue to ratchet up the intensity of their rhetoric. They have threatened to hold back payments to national distributors and tried, unilaterally, to raise publisher's discount rates. However, it should also be noted that their actions, some made in desperation, have produced some very constructive results. They have reduced the number of titles handled and significantly restricted distribution allotments. These actions have helped improve the industry's sales efficiency level from 36.2 percent to 39.6 percent (as reported in The New Single Copy). This has apparently been accomplished without any significant reduction in industry sales. The financial implications of improving efficiency by 3.4 percentage points is to annually save more than 100 million copies from being printed and distributed-a truly staggering number. Still it's the stridency in which wholesaler objections are being put forth that is causing legitimate concern across the entire newsstand supply chain.

It's been more than a decade since retailer initiatives irrevocably changed channel operations. During the ensuing period the surviving wholesalers have found efficient ways to accommodate many of the operational and financial mandates imposed by retailers. But most wholesalers have now exhausted their cost saving opportunities. Further exacerbating the situation has been the recent rapid expansion of scan-based trading (SBT) as a newsstand trading option. This has placed an additional financial burden on wholesalers.

It's now evident that wholesalers have been pushed to the financial brink. Financially wounded wholesalers are severely endangering the well-being of the entire newsstand supply chain.

On Eve of Retail Conference, PBAA Survey Details Publisher Concerns

2008-03-27T15:23:00.001-04:00

On Eve of Retail Conference, PBAA Survey Details Publisher Concerns
By John Harrington
The New Single Copy
http://www.nscopy.com/

The 2008 Retail Conference, with the theme, "Unleashing the Power of Print," will begin next Sunday, March 30, in Tampa, Florida. The conference is co-sponsored by the Magazine Publishers of America (MPA) and the International Periodical Distributors Association (IPDA). According to the results of survey by another publishing related trade group, the Periodical & Book Association of America (PBAA), the conference will take place in an atmosphere of uncertainty and concern; at least among the 38% of PBAA's members who participated in the survey, which was conducted in January and February.

The following findings of the PBAA report were excerpted from the association's publicity release of March 18:
"68% of publishers decreased or kept their draws flat in 2007 (in line with wholesaler initiatives).
"More than half of the publishers had decreased or flat sales.
"69% raised their cover prices (32% by a $1.00 or more). Publishers seem to be trying to make up revenue by cover price increases, since sales are flat or down.
"86% expect flat or declining sales in 2008. Note: Publishers are unhappy in general with wholesaler attitudes; copies have been taken out of the systems, efficiency is up, but publisher cost savings (of not printing the wasted copies) are eclipsed by rising paper, printing, binding, and distribution costs . . .
"Publishers are seeing continued resistance by wholesalers in general to the concept of 'returning copies to the system' by re-investing or 'trading up' copies to new outlets . . .
"75% of publishers saw no benefit in their participation in wholesaler incentives.
"65% of publishers perceive the national distributors are trying to 'fight the fight' but are not effective at this time . . .

"Wholesalers are perceived primarily as magazine distributors, not as sales partners (and need to be more aware of this widespread perception), leading to increasing publisher efforts to find additional sales channels."

Confirmation of Increased Tensions: Although the PBAA survey results are strongly attitudinal, and probably not a statistically valid representation of the entire business, they do confirm the increased levels of tension that are clearly present today in the magazine distribution channel. Although sales have improved, albeit only by minuscule levels, in each of the last four years; and efficiencies are up by six percent during that period, the levels of distrust between wholesalers and publishers and their national distributors is at a very dangerous level. More than a decade of financial distress at the wholesale level has driven the surviving companies to institute, particularly in the last few years, policies aimed at reducing costs. Although most wholesalers say they are also engaged in aggressive marketing, suppliers generally feel the policies emphasize cost savings at the expense of expanding sales. At the same time, the already mentioned fragile economic condition of wholesalers has driven some of them to demand higher margins and/or challenge national distributor payment terms. The tensions arising from these types of confrontations have led many in the business to consider the possibility of one or perhaps more major wholesalers leaving the business entirely. For any publisher or national distributor, the challenge of suddenly having to deal with the loss of 15% to 20% or more of its retail distribution is more than a daunting task. That scenario has always been a remote contingency, but only in the last six to nine months, has it matured into an imminent possibility.

Retail Conference Topics:In this somber atmosphere, MPA and IPDA have announced the subjects of a series of panels and workshops for next week's conference. They include:

"Consumers, Retail, and the Environment." Chaired by John Griffin, National Geographic and chairman of MPA. Panelists: Michela O'Connor Abrams, Dwell; Steve French, The Natural Marketing Institute; David Refkin, Time Inc.; and Dave Sherman, Blu Skye Sustainability.

"Inside Insight: Through the Eyes of Former Retailers." Moderated by Richard Lawton, CMG. Panelists: Steve Burbridge, T/WR; Tim Humanik, CMG; and Jerry Lynch, IPDA.

"Puzzled, Perplexed & Pondering.. . . . Why Publishers do the Things They Do." Moderator: Rob Gursha, T/WR. Panelists: Linda Brennan, Business Week; Ken Godshall, Hearst Magazines; Terry Day, National Geographic; and Suzanne Roman, The Taunton Press.

"Future of Magazines at Retail." Moderated by Peter Kreisky, The Kreisky Media Consultancy. Panelists: Jaime Carey, Barnes & Noble; Glen Clark, The News Group; Rich Jacobsen, T/WR; and John Loughlin, Heart Magazines.
"A Case for Magazines at Retail." Panelists: Jay Felts, CMG: Drew Wintemberg, T/WR; and Jay Wysong, DSI.

Other speakers will include Matt Cooper, Portfolio Magazine; Cindi Leive, Glamour; Wendy Liebmann, WSL Strategic Retail; Tom Griffith, Willard Bishop Consulting; Anne Zafian, Simon & Schuster; John Santanella, Nickelodeon; and J. Walker Smith, Yankelovich Partners.

In Circulation: Timeliness, transparency help circ measurement keep pace with other media

2008-03-27T00:12:00.001-04:00

In Circulation: Timeliness, transparency help circ measurement keep pace with other media
By Lauren Bell
Audit rules approved by the Audit Bureau of Circulations board last week seem to mark a trend in circulation measurement: faster, more precise reports that bring print audits closer to the sort of metrics used by other media. The ABC's new rules were intended to simplify current audit rules and make audit reports more useful to advertisers and publishers.

Key to this new push for usefulness was the change ABC made to its Rapid Report guidelines. Publishers using Rapid Report - an online tool for recording audience numbers issue-by-issue - are now being asked to post initial post-issue readership projections within three weeks of a weekly title's on-sale date. Monthly publishers should post within seven weeks.

"It's a much more on-demand world today," said Kammi Altig, manager of communications at ABC. "People in the Internet age do expect information more quickly, and it certainly makes the print industry more competitive and more comparable with other media industries."

By speeding up the process, ABC is making print audience reports more comparable to the more regularly-posted numbers provided by TV, Web sites and other media. Such information is expected to raise print's standing in a marketplace where ad buyers consider and compare multiple media platforms. It is important to note, however, that Rapid Report measures circulation, while other media measure audience - a difference that makes comparisons between the two an apples-to-oranges exercise.

Robin Steinberg, SVP, director, print investment and activation for MediaVest USA, added, "The simple answer is yes, it does make print more competitive, that's why we developed these reporting guidelines. As a medium we need more timely data and we need to understand the data earlier rather than later. It's really about transparency, and I think publishers will benefit by being more transparent on a timely basis."

A new MPA initiative unveiled by president/CEO Nina Link two weeks ago sought similar effects. MPA proposed new audience-based metrics that measure different audience demographics and engagement with ads.

"A key item was to become faster in our measurement and more comparable to the way other media are measured and more accountable," Link said.

A tangential, but no less important, effect of the MPA changes is that better consumer metrics may allow circ marketers to deploy more targeted campaigns. And with numbers coming in on a timelier basis, marketers will be better able to judge how audiences respond to a magazine on an issue-by-issue basis.

Like ABC, the Magazine Publisher's Association is making improved online survey techniques a major focus in its reworking of the audience reporting process.

Scan-Based Trading's Hold-Up

2008-03-21T09:56:00.002-04:00

Scan-Based Trading's Hold-Up
Fully adopting SBT is a complicated, gut-wrenching situation.
By Baird Davis
Circulation Management Managzine

Fully adopting SBT is the most complicated, gut-wrenching situation ever faced by the magazine distribution industry.

One's perception of the value of scan-based-trading (SBT) for magazines varies widely depending on whether you are a retailer, wholesaler, national distributor or publisher. If you're a retailer, you love it, but the other channel participants are far less sanguine about it. But regardless of one's position, there is no mistaking SBT's inevitability or its critical place in determining how business will be conducted in the newsstand channel.

SBT has resided on the periphery of the newsstand industry for nearly a decade. It's been reviewed, tested, discussed and exhaustively analyzed by chain retailers, wholesalers and national distributors. But only in the last year has the process achieved sufficient scale to help demonstrate its inevitability as a trading option for magazines. Today, more than 25 percent of magazines distributed by wholesalers are done under SBT agreements. In the next few years, SBT is realistically expected to exponentially expand.

Conceptually, SBT will significantly reduce expense, improve efficiency, ease the return handling burden and generally help streamline an archaic system. It sounds like it's a pretty good thing, right? Well, not exactly.

What's Holding Back Full Adoption of SBT?

The central problem is finding a way for the newsstand channel partners to equitably share SBT's costs and benefits. This would seem to be a relatively easy task. (On the contrary, fully adopting SBT is the most complicated, gut-wrenching situation ever faced by the magazine distribution industry.)

To understand the severity of the SBT issues facing the industry, a little background information may be useful. The most important thing to know is that SBT is not currently an industry-wide initiative. It is being conducted between only retailers and wholesalers. National distributors and their publisher partners have chosen not to participate in the process. That, of course, raises the question: why haven't national distributors/publishers joined the SBT party?

The answer to that question lies deeply rooted in the history and culture of the newsstand business. The magazine distribution system, unlike most systems bringing product to sale at retailers, has two middlemen-wholesalers and national distributors. The relative complexity of the magazine product line (thousands of different products, return processing, etc) requires the services of both. But having two middlemen has greatly escalated the prospect for disagreements and conflicts of interest.

If truth be known, there has always been an uneasy truce between wholesalers and national distributors. Compounding the inherent difficulties of the wholesaler/national distributor relationship is the lack of unanimity of thought and action within either the wholesaler or national distributor communities. This has led to "intramural competition," which, from time to time, has been detrimental to the best interests of newsstand channel efficiency.

Business life in the newsstand channel has never been without tension or conflicts of interest. Now SBT has been tossed into that messy stew. SBT has heightened areas of contention among all four major channel participants. But it's the issues that divide wholesalers and national distributors that are the most critical. Wholesalers, largely out of competitive necessity, developed SBT agreements with retailers. But in doing so, they've taken on a huge financial burden.

National distributors have held back from participating mainly because they felt that the SBT financial terms are too heavily weighted in favor to the retailer; that the agreements did not meet minimum system and security guidelines (all the major national distributors have published papers outlining their SBT system requirements); and, in general, they felt that wholesalers entered into these agreements without proper due diligence. Wholesalers, for their part, believe national distributors (and by inference, publishers) have not been properly sensitive to the changing market conditions that have made adopting SBT a priority for retailers. Nor do they feel that national distributors have been empathetic to the SBT-related financial burden they have assumed.

The SBT Stalemate: A Lose-Lose Situation

The hope for industry-wide SBT program is now stuck in a stalemated situation. This poses a grave danger for the entire industry. SBT has, in effect, been endorsed by the mass merchandiser retail community and it's going to move forward with or without national distributor/publisher participation. But-and this is the critical consideration -it can never achieve its hoped-for efficiencies without national distributor participation.

The Importance of Breaking the Stalemate

Now let's be frank about SBT's benefits. Even a more equitable division of costs and benefits is still likely to heavily favor the retailer. The retailer derives immediate and substantial benefits from SBT. For wholesalers, national distributors and publishers, it's unlikely there will be any significant benefits in the short run. But it will undoubtedly provide significant long-term cost saving benefits that accrue from an improved and more efficient distribution channel.

In addition, wholesalers, national distributors and publishers must, to some extent, look beyond prospective cost savings and take the long view in considering SBT's merits. They have to carefully consider the importance of what SBT can do in simplifying, for retailers, the often-convoluted process of selling magazines. It is the single most vital action that the channel partners can take to cement relations with retailers and help insure the long-term viability of the mass merchandiser participation in the sale of magazines. SBT requires upfront sacrifice from wholesalers and national distributors, but in the long run, it's likely to be the best alternative for protecting the newsstand business.

Let's Get It Done

It's imperative that SBT become an industry-wide initiative. This means wholesalers and national distributors must settle their differences. I don't want to underestimate the difficulty of reaching agreement. The issues (shrink, inventory control, system security and transparency) dividing wholesalers and national distributors are unbelievably thorny.

But in a SBT study conducted by John Harrington and myself (copies of this report can be obtained by contacting John Harrington at jharrington@nscopy.com), it was revealed that there were no issues dividing the parties that were so intractable as to be considered as "deal breakers." What's required is for wholesalers and national distributors to immediately begin the process of negotiating, in good faith, a SBT accord. It's possible to do this. Stop wasting time -let's get it done. As the Harrington/Davis SBT report indicated, "no less than the future viability of the newsstand trade with mass merchandisers is at stake here."

After Newsstand Spike, Meredith Discontinues Dollar Store Distribution

2008-03-04T22:13:00.002-05:00

After Newsstand Spike, Meredith Discontinues Dollar Store Distribution
Was licensing deal with Wal-Mart threatened?
By Dylan Stableford and Bill Mickey
http://www.foliomag.com/2008/after-newsstand-spike-meredith-discontinues-dollar-store-distribution

With newsstand sales still struggling to make any significant headway, Meredith, like most publishers, has been under pressure in recent years to find alternative sources for retail sales. And it appears one of those sources resulted in a spike in newsstand sales-and got them into trouble with Wal-Mart.

During the second half of 2007, Meredith's Better Homes and Gardens posted a 71.5 percent jump in single copy sales, according to ABC's FAS-FAX. That jump is thought to be largely attributed to selling issues at steep discounts at Dollar Tree stores, which attracted the ire of Wal-Mart and may have threatened a significant licensing deal Meredith recently struck with the big-box retailer.

While there's nothing inherently wrong with selling magazines through alternative and steeply discounted outlets such as the dollar stores, the strategy does have an impact on both the brand perception and the rest of the distribution chain. Indeed, Meredith has since discontinued its distribution into the dollar outlets when, according to sources, Wal-Mart threatened to turn the publisher's titles away from its newsstands.

"We had always planned to phase these programs out," a spokesperson for Meredith told FOLIO:. The spokesperson declined to comment on details of the specific distribution programs, such as the Dollar Tree Store, and the Wal-Mart deal, citing proprietary concerns.

Meredith's Better Homes and Gardens and Ladies Home Journal were both on the notorious Wal-Mart list of magazines scheduled to be cut from its stores. They have since been reinstated.

Other titles distributed into the dollar stores, according to sources, were Family Circle and Ladies Home Journal. All three titles are distributed by Time Warner Retail, which did not return phone calls for this story.

According to ABC's FAS-FAX report for second half 2007, single-copy sales rose 71.5 percent for BH&G, 12.7 percent for Family Circle, and 37.5 percent for Ladies Home Journal.

Controversial Circ Practice
"One, you're devaluing your product, and two, you're damaging your relationships with your major retail customers," says John Harrington, a noted industry consultant and publisher of the New Single Copy newsletter. "Plus, it could have damaged the branding agreement Meredith had [with Wal-Mart]. It's the newsstand version of verified."

The Wal-Mart branding deal, which included a range of home products based on the Better Homes & Gardens brand, was announced last October. The new line will be available this fall.

That licensing deal would look strange without the namesake magazine on the retailer's shelves.

According to a source familiar with the arrangement, the copies sold in the Dollar Tree stores were overrun copies still within their on-sale period. "I don't know if they were returnable or if it was a one-way sale, but they were probably one-way if they were only a dollar a copy," says the source.

Since the copies were still within their on-sale periods, the steep discount was a tough pill to swallow for other major retailers who sell the magazines at cover price.

Pulling the magazines from the dollar stores should, after all, not have a material impact on the publisher's overall newsstand strategy. They were sold for a dollar, after all. For Better Homes & Gardens, single-copy sales represented about 5 percent of total paid and verified circulation; for Family Circle, a more robust 23 percent; and Ladies Home Journal, about 10 percent.

Second-Half 2007 Newsstand Sales Delight and Confound

2008-02-17T12:02:00.002-05:00

CIRCULATOR: Second-Half 2007 Newsstand Sales Delight and Confound
By Baird Davis
http://www.circman.com/viewmedia.asp?prmMID=3759
ABC's twice-annual FAS-FAX report detailing analyzed paid and non-paid circulation for just over 700 U.S. consumer magazines was released earlier this week, and the numbers tell an interesting story.

Newsstand revenues rose in the 2nd half of 2007 by 2.8 percent to nearly $1.7 billion. This, of course, is good news for the industry. However, the bad news is unit sales declined 1.8 percent, to slightly less than 472 million (this data is subject to revision when the final audit bureau data is provided later this month).

The spread between unit sales and revenue performance is one of the largest in recent years. It apparently reflects the beginnings of a strong cover price trend. Besides pricing there were also other factors that contributed to the mixed sales story in the second half of 2007.

Cover Price Effect
The estimated average industry price rose from $3.36 to $3.52 in the second half of last year. This is probably the largest average price increase in industry history. The price increases were led by Bauer, who last fall announced price increases on their nine audited titles of approximately 30 percent. However, their price increases only affected sales the last two months of the period. Even so, Bauer's aggregate revenue increased 11.3 percent on flat unit sales. It's much too early to proclaim their price increases a success, but it is an impressive start.

Bauer wasn't the only publisher pushing prices higher. The average price of titles sold at checkout increased from $2.96 to $3.14 (up 6.1 percent) and mainline titles (primarily male oriented) increased their average price from $4.67 to $4.79 (up 2.6%). But newsstand pricing is far from being fully elastic. The sales performance of Ok! (price $1.96 to $2.99, unit sales down 22 percent), TV Guide (price $2.16 to $2.66, unit sales down 26 percent), Newsweek (price $4.50 to $4.95, unit sales down 12.7 percent), and Time (price $4.22 to $4.95 unit sales down 16.5 percent) helps demonstrate the market resistance to price increases. On the other side of the coin In Touch increased price from $1.99 to $2.29 and unit sales increased 4 percent. The lesson here is that cover price increase decisions should always be approached with caution.

Impact of Wholesaler Distribution Reductions
Much has been written recently about wholesaler mandated distribution reductions. It's difficult to assess its impact from audit bureau data. But there are some indications they might be having a slightly adverse impact on unit sales-estimated to be about a half of one percentage point. If the industry efficiency level has been raised from 33 percent to 38 percent, as some wholesalers have indicated, a half point sales reduction would represent a big win for publishers, as well as wholesalers.

Celebrity Title Performance
In the second half of last year the celebrity titles continued to set the sales standard for the industry. These five titles-People, US, In Touch, Star, Life & Style and Ok! (which represent 27 percent of industry sales revenue)-experienced a unit sales decline of 3.6 percent, but revenue gained 6.4 percent. In Touch was the only one of the five publications to show both unit and revenue gains.

The Dollar Tree Phenomenon
Meredith reported in the second half of 2007 that the sales of their four leading newsstand titles-BH&G, Fitness, Ladies Home Journal and Family Circle-had a staggering combined 31 percent increase in sales revenue. This was a highly unusual sales lift for mature titles. As it turned out it appears that nearly all of the increase ($8.6 million) from these four Meredith publications can be accounted for by sales through Dollar Tree stores. But there was a backlash from major chain retailers about selling product at deeply discounted prices. Meredith in the last few days has indicated they have discontinued their Dollar Tree distributions. It seems as if Meridith's Dollar Tree sales lift will be a non repeating anomaly that can best serve as a cautionary tale concerning the risk of the selling leading titles at deeply discounted rates.

Newly Audited Publications
There were three major titles added to the auditing ranks in the second half of last year. Two published by Time, Inc.-People Stylewatch and All You (both monthly frequency). The other, Quick & Simple, is a weekly title published by Hearst. People Stylewatch and Quick & Simple reported revenue of nearly $11 million and All You a little less than $6 million. Of the three, perhaps, the sales of People Stylewatch is the most impressive. It reported average sales of 549,000 per issue. Its sales revenue exceeded those of Vanity Fair, Vogue and Good Housekeeping. It is believed to be the largest revenue achieved, at launch, by a monthly title since the super sized debut of O, the Oprah Magazine in 2000. Quick & Simple, with an average price of only $1.63, and All You (cover price $1.97) reported good sales, but the sales of these titles might be compromised in the future if the industry continues to shift away from super low cover priced products.

Mixed Messages
The mixed sales performance in the second half of 2007 mirror the complexity of the market conditions. Price, we're reminded, is a double-edged sword. It appears as if price increases will be accepted in certain circumstances, especially when increases involve titles previously priced below $2.99, but meet resistance in others. The wholesaler initiated distribution reductions are still a work in progress, but the initial results appear to be promising. Finally, we learned that the market can be self policing when it comes to selling magazines at deeply discounted prices. As always, the newsstand retains its mysterious aura to both delight and confound.

Weeklies Still Turning in Strong Circ Performance

2008-02-11T13:31:00.000-05:00

Weeklies Still Turning in Strong Circ Performance
Audit Bureau Releases Latest Magazine Sales Figures

By Nat Ives Published: February 11, 2008 NEW YORK (AdAge.com) -- The new magazine circulation figures being released by the Audit Bureau of Circulations have as much complicated action as a three-ring circus. In the center ring, the celebrity tabloids prove that there's a lot of life left in at least certain kinds of weeklies. Everybody has raised their cover price since the last circulation numbers, but some kept newsstand sales rising anyway.

People magazine reported average paid and verified circulation of 3.6 million for the second half of last year, 3.5% under the second half of 2006. Us Weekly, from Wenner Media, reported average paid and verified circulation of 1.9 million, up 10.1% over the half the year before, and newsstand sales up 2.7%. OK also reported average circulation of 935,378, up 23.5% from second-half 2006, and a newsstand gain of 7.1%, partly on the strength of its exclusive cover story about the Jamie Lynn Spears pregnancy.

Others reported fall-offs in single-copy sales but pinned the blame on price hikes and other factors aside from the titles themselves. Newsstand faces more obstacles"Newsstand is still a very hotly contested space overall," said Paul Caine, president of Time Inc. Entertainment Group, which includes People. "Most magazines don't have to worry as much about newsstand as us. For those properties out there that are newsstand reliant, there are many more factors involved than the vitality of the title. There's gas prices, shopping, the economy -- typically not the same factors that apply to the subscription side of the business." "In the weekly category we all continue to compete in right now, there's been no sign of any fatigue by the consumer," Mr. Caine added.

"All signs are pointing to continued growth." People, Time Inc.'s crown jewel, reported average paid and verified circulation of 3.6 million for the second half of last year, 3.5% under the second half of 2006. Mr. Caine said the most recent figure would have been higher but for 4 million in sales from other People products, such as People Style Watch, People Books and People Country. His rivals at Bauer Publishing have just decided to cut its paid guarantees to 1 million from 1.2 million at In Touch Weekly and to 550,000 from 700,000 at Life & Style Weekly. Although the company signaled some embarrassment last week by burying that news in a press release titled "Bauer Publishing Moves to #1 Position in Magazine Retail Sales," it claims to be happy. "Overall we are pleased with our newsstand sales and solid sell-through," said Ian Scott, president of Bauer Advertising Sales, in the release, which also neglected to mention the departure that day of Life & Style's publisher to join Maxim as an associate publisher. "Fall-off in newsstand sales was anticipated and planned for -- any product or service which raises its prices by more than 50% will expect some attrition.

This brings our circulation to its natural level and allows us to cater to our core buyers who are willing to pay more for the product." BusinessWeek, Foreign Affairs American Media's Star, which already cut its rate base 10% to 1.35 million last July, reported average paid and verified circulation of 1.4 million across the second half, down 11.3% from second-half 2006. But celebrity weeklies aren't the only kind; BusinessWeek tacked on a modest 1.3% gain in the second half of last year, while newsstand jumped 9.3% on title's redesign. If you're overdosing on shallow celebrity news just reading this article, let us at least also inform you that Foreign Affairs is reporting average paid and verified circulation up 4.3% from the second half of the year earlier.

And there are other winners in the latest circulation report. Shelter books did well for the most part, either by expanding circulation or reducing their use of verified public-place copies, which advertisers don't always covet as much as the copies people sought out to buy. Conde Nast's Domino continued to grow, for example, adding 22.8% to its paid and verified average for a total of 677,852. And Home, part of Hachette, lost 9% partly because it achieved a 60.7% reduction in verified circulation. Sibling Metropolitan Home gave up 7.8% as it, too, cut its use of verified circulation and actually pulled out a gain on newsstands. Hearst's Good Housekeeping saw its paid and verified average slip 2.3%. We won't get numbers on Martha Stewart's Blueprint magazine, however; that recent launch got killed partly for want of high-end advertisers.

Mixed results for cooking magsThe still-young
Every Day with Rachael Ray, which had slowed its schedule of rate-base increases for a time, posted an impressive 67.4% gain in the half for an average paid and verified total of nearly 1.7 million. Some other cooking titles produced mixed results: Bon Appetit held steady with a 1.1% gain; Gourmet slipped 3.1%. The titles that Bonnier Corp. bought from Time Inc. began to show signs of improving under their new owners. Field & Stream posted a 10.2% increase in paid and verified circulation despite a 40.6% cut in the verified piece.

And Popular Science eked out a 4.1% increase in its paid and verified average while achieving a 71% reduction in verified. At Conde Nast, Vanity Fair turned around its ad sales problems last year, but now circulation is slipping: it fell 6.3% on a 12.8% decline at newsstand and a 2.7% decline in paid subscriptions and verified circulation. Newsstand suffered partly because Vanity Fair couldn't come up with a cover to sell as well as that Suri Cruise cover in October 2006. Disappointment for men's magazinesGQ, Conde's stalwart for men, fell 9.1% despite a 7.3% newsstand increase. Sibling Details was flat by all measures. Hearst's Esquire gained 1.7% while losing 6.4% on the newsstand after a price increase to $3.99 from $3.50. Men's Health, part of Rodale, is reporting average paid and verified circulation of 1,804,949 -- somehow just 28 copies apart from the 1,804,921 it reported a year prior. Best Life, a Rodale title for a slightly older crowd, chalked up a 16.8% gain. Maxim was flat at 1.9% over the second half of 2006. Business magazines kept fighting the good fight -- and a fight it is -- for their share of readers. As noted above, BusinessWeek gained 1.3%.

Fast Company and Inc., both part of Mansueto Ventures, showed flat overall results. Wired, a new member of Conde's business group that considers the business books its main competitors, posted a nice 7.7% increase. (Forbes and Fortune did not respond to requests for their circulation figures.) Flat or slight growth could have been a category of its own, arriving at titles from Elle to New York, Parenting to Real Simple (up 1.3%), and Glamour to Seventeen, both up 2.3%. Flat-to-barely-reduced circulation was an indiscriminate visitor as well, touching Cosmopolitan (down 1.5%), The New Yorker (down 0.5% as newsstand fell 9.3% on a cover-price increase), Skiing (down 1.7%), Architectural Digest (down 0.7%) and Vogue (down 0.7%).

Wholesalers and Retailers Draw the Line, and an Industry Lurches Toward Efficiency

2008-02-08T00:01:00.000-05:00

Wholesalers and Retailers Draw the Line, and an Industry Lurches Toward Efficiency
Circulation expert says big magazines are the problem.
by Tony Silber
www.FolioMag.com
Wholesalers and retailers that attempt to increase efficiency by reducing the numbers of titles they carry, especially the smaller ones, are fighting the wrong battle, a leading newsstand expert said this week.

What's more, says Dennis Porti, executive vice president of the national distribution company Curtis Circulation, any attempt to bring the newsstand sell-through to 50 percent overnight would result in "a catastrophic loss of sales."

Porti was reacting to a flurry of news in recent weeks detailing moves by Wal-Mart [0] and other retailers to delist large numbers of magazines, and by several of the leading wholesalers to reduce by tens of millions of units the numbers of copies they distribute.

According to Mediaweek [1], Source Interlink is cutting distribution by 40 million copies over the next few months, while Anderson News Corp. and the News Group are making cuts of undisclosed numbers. Source is aiming for an overall efficiency-that is, number of copies distributed compared to number of copies sold-of 50 percent by the summer, up from the current efficiency of 38 percent. Last spring, Source cut 57 million copies.
The wholesalers said they thought the reductions could be made without any loss of sales, and some publishers and industry observers have agreed.

But Porti argues that the newsstand isn't inefficient because of the numbers of titles on the racks, he says it's because of the big magazines. "Here's the problem: 50 magazines generate nearly 70 percent of the industry's returns," he says. "The big magazines have the best positions and they have a very, very high draw per outlet. Hypothetically, if they go into a store with 100 copies, they sell 40. That's 60 returns per magazine."

Porti says the magazines themselves are in a tough spot, as are wholesalers, because many retailers may have upwards of 30 checkout racks. "If you go in with too few copies, all in the channel, including retailers, become concerned about empty wire," says Porti. "But when you fill the wire, you become inefficient."

Ultimately, he says, the industry improves efficiency if the larger-circulation magazines manage their draw better. Thankfully, Porti says, the industry has become much more sophisticated about managing draw.

And that's why the industry has picked up four to five points of efficiency in the last few years, he says. "There isn't a publisher in this business that doesn't want to operate more efficiently, and the aforementioned gains are an excellent start."

Women's Fashion Mags: We're 'Confident'

2008-01-29T22:32:00.000-05:00

min Exclusive! Women's Fashion/Beauty March "Spring Preview" Ad Pages: Are Strong Numbers Indicative Of A Downturn Denied...Or Delayed?

In a winter of economic discontent, here is a sector with plenty of advertising content--and you can pronounce it either way. For beauty and fashion magazines, March's "Spring Preview" is second in importance to September's "Fall," and surprisingly, the numbers below look like a rerun of the March 2007 prosperity, when 16 out of the 18 magazines closed up. Here, the ratio is 15 up/5 down, with monthly records set again by Elle and Vogue (and the New York Times' women's-fashion T), and the chart shows March being the catalyst to a decent first quarter. So far, mostly good, as we enter into the heart of 2008--leading to September.

But the executives of the advertising "up" March magazines were, in boy-scout and girl-scout lingo, p-r-e-p-a-r-e-d. Perhaps none more prepared than Vogue publishing director (since January 2002) Tom Florio, whose sales team broke the March 2007 record by 20 pages. "In October, after meeting with top fashion executives in Europe, I had a strong sense that 2008 would be tough," he says. "So, I gathered my staff and we developed new work-with-the-client strategies, and we built on our existing platforms, including SHOPVOGUE.TV. Our message is that we have a powerful brand that drives consu mers to retail, and, with that, I remain confident about 2008."

So, too, does Elle senior vp/group publisher (since March 2002) Carol Smith, following a March that squeezed past 2007's record by three pages. "Being French, we're helped by the strong Euro against the dollar," she says. "And we're also helped by the affluence of our readers. In March, we are carrying the Swiss designer Akris for the first time in many years, along with new-advertisers Jean Paul Gaultier, Aerosoles, and the more mass TJ Maxx. April is also off the charts, but I am worried about the middle class disappearing."

It is a bigger worry for In Style publisher (since September 2001) Lynette Harrison, because, as would reflect a People spinoff, its 1.7 million circulation is more "mass." "The public feels the pinch, and we feel the pinch," she says, in explaining an estimated 36 ad-page drop to 285. "Advertising has started slowly because while we are getting plenty of beauty/fashion/retail, we are not getting the inserts." Gucci/Chanel are among the IS participants.

W publisher (since March 2005) Nina Lawrence got the insert--30 pages of Gucci --inFebruary (see last week's min), which partially explains the 34 ad-page drop from March 2007's record 475. Also, the loss of Gap, which is not yet running in any magazine this year.

At Harper's Bazaar, publisher Valerie Salembier, who celebrates her fifth anniversary in March, tells of new advertisers Akris/Laura Mercier/Guess/Rena Lange, and for high-society car buffs, Bentley/Lamborghini. Like Elle's Smith, Salembier all but guarantees an up April that will follow a +4.5% March, but September and November (HB's 140th-anniversary last year) will be challenging.

Might also be for Town & Country publisher (since October 1999) Jim Taylor, who will face a November issue that last year marked the 25th anniversary of Princess Grace's passing. But the March T&C was enriched by Prada/Piazza Sempione/Fratelli Rossetti/Prada and, in the HB car spirit, Mercedes, while Marie Claire publisher (since September 2004) Susan Plagemann welcomed Dolce & Gabbana/Emporio Armani/Max Mara and Salvatore Ferragamo.

At Glamour, just-promoted publishing director Bill Wackermann has Tiffany & Co. opposite cover #2 in March as symbolic of a "high-end business that continues to boom." At Cosmopolitan, publishing director (since August 1995) Donna Lagani says that fashion/retail and beauty sectors are "fun and fearless" in March with +24%/+22% differentials.

At Allure, vp/publisher (since April 2001) Nancy Berger Cardone boasts 15 new advertisers this quarter to add to the 80 who joined last year--including, in March, Baume & Mercier/Frederic Fekkai and, for liqueur fans, Hypnotiq. Self vp/publisher (since April 2004) Kim Kelleher says March is retail-driven (Dillard's/Macy's etc.), and, for "alligator buffs," carries Lacoste. Ditto Essence (JC Penney/Wal-Mart, etc.), where president (since January 2005) Michelle Ebanks says that retail is strong, but "fashion is still a battle for us."

Going against a big March 2007 was the "battle" for O publisher (since July 2000) Jill Seelig, but Calvin Klein Apparel debuted. March's ad-down "hiccup" for Redbook publisher (since July 2003) Mary Morgan was partially cured by new jewelry advertiser Silpada Designs. New Japanese facial-care advertiser Shiseido put publisher (since 2005) Sabine Feldmann in better Shape, and counterparts Lee Slattery (Fitness) and Mary Murcko (Women's Health) both reported gains in beauty.

For New York magazine publisher (since July 2003) Larry Burstein and New York Times magazine executive director/advertising (since 2001) Rich Colandrea, it remains--to resuscitate the campaign phrase--the economy, stupid!, which, in the upscale Big Apple, looks, for now, smart.

The Wal-Mart Magazine List. A Look at The Impact

2008-01-24T22:45:00.000-05:00

The Wal-Mart Magazine List. A Look at The Impact
By John Harrington
Since mid-December, it was widely known that Wal-Mart Stores had reduced its authorized magazine title list from around 2500 to just over 1100. However, most national distributors and publishers were advised only about their own titles, and a full list did not seem to be available. This past Friday, January 18, Keith Kelly, reporter for The New York Post, wrote about the retailer's action and noted some of the titles no longer available on the chain's racks. There is no question that it is major news when the world's largest retail seller of magazines reduces, by more than 50%, the list of titles it is willing to display. However, the actual impact of the move is not likely to change in any significant degree the overall state of magazine retail sales, or even sales in Wal-Mart itself.

Although Kelly noted Wal-Mart's share of all newsstand sales at over 20%, The New Single Copy estimates the number to be in the 15% to 18% range. It may be even less. At the 2005 American Magazine Conference, Time Inc. CEO, Ann Moore, when introducing Lee Scott, Wal-Mart's CEO, said that his stores accounted for 12% of her company's sales. Not only are Time publications such as People, Real Simple, and In Style, major sellers in Wal-Mart, the company also publishes All You, distributed exclusively in the chain. Time Inc. generates more retail dollars than any other publisher, and while some others may be more dependent on Wal-Mart sales, it is hard to calculate the retailer's share being very much greater than 15%.

While the elimination of more than half the titles grabs everyone's attention, most estimates are that the remaining 1100 plus account for over 95% of Wal-Mart's magazine sales. Some think the figure may be as high as 97% or 98%. Another fact to keep in mind, is that the size of Wal-Mart's revised authorized list is not that different from a number of other supermarket chains, all major competitors of the chain. In some instances, authorized lists of 1000 to 1200 have been developed with considerable direction from major publishers and national distributors, acting in a category manager role. It is no secret that larger publishers generally contend that crowded displays depress overall sales. Of course, that opinion is not universally shared, even by all wholesalers, let alone all publishers and national distributors.

Wal-Mart's list reduction should also be seen in the context of the chain's "Sustainability" initiative, which has identified specific goals for magazines: 1, a sales increase of 5.0%; 2, improving efficiencies to 50%; and 3, achieving waste reductions throughout the channel. (See The New Single Copy 10/29/07 and 11/5/07).

Another factor to keep in mind is that no single Wal-Mart display fixture is carrying much more than 300 different titles, forget 1100, at any one time. The larger figure represents the number of titles eligible for sale throughout the chain of more than 4000 stores, located in every part of North America. Many of the titles are only likely to be available in limited geographies, or at certain times of the year.

Much was also made of what seemed to be anomalies among the titles delisted by the Wal-Mart. Many of them are magazines targeting high-end customers, luxury markets, and smaller circulation (at least on the newsstand) social and literary titles. Given Wal-Mart's solidly middle-America demographics, many such publications would not reasonably be expected to produce viable numbers.

A few of the eliminated titles cited by Kelly deserve some explanation. The Economist was one. Actually, it has not been available at the chain for more than a year. When it raised its cover price by a dollar to $5.99, Wal-Mart refused to handle it as part of its overall policy of urging suppliers to keep their prices as low as possible. The publisher, who was selling only a few copies in the chain, stood by its decision. During the first half of the year, The Economist's single copy sales were up by more than 10%. Two well known Meredith titles, Better Homes & Gardens and Ladie's Home Journal, were also cited. Many people The New Single Copy talked to thought this might be the result of Meredith selling print overrun copies of the two magazines to a bargain store chain, where they were being sold at retail for a dollar. The policy was particularly irritating to Wal-Mart, which promotes itself to customers as the home of the lowest prices.

The New Single Copy is not dismissing the actions of Wal-Mart. Nor is it challenging the work of Keith Kelly, who is widely recognized as the most thorough and professional reporter covering media today (Note: Kelly did try and reach us while preparing his article, but we were not able to connect). The fact is that Wal-Mart is deeply committed to making magazines a key factor in its presentation. The list reduction should be viewed as a single step in the chain's goals for magazines. After the first "Sustainability" conference, Wal-Mart executives David Addison and Christy Jenkins said, "The summit was the first step in a very ambitious and audacious initiative that will increase profitability...and reduce waste. Everybody stands to gain by committing to this redesign of the magazine value chain."

Shelter magazine publishers adjust to changing housing market

2008-01-16T22:15:00.001-05:00

Shelter magazine publishers adjust to changing housing market
By Davis Kho, Special to The Chronicle
The housing market isn't the only sector that was dealt a blow by the mortgage-financing crisis of 2007.
The publishing industry's once white-hot "shelter" segment - those magazines covering home design and living - also felt the reverberations of contractions in the economy, with Condé Nast's venerable House & Garden ceasing publication after 106 years. Martha Stewart's Blueprint magazine, with its "Design Your Life" tagline, ceased production of its print edition and moved to a less-expensively produced online version.

But are the jump in foreclosures and tightening of credit markets solely to blame? A range of factors - from the inevitable shakeout of an overserved market, to the growing preference for do-it-yourself design, to rising interest in sustainable living - is affecting the market for so-called house porn, at least as much as the economic slowdown.

Michela O'Connor Abrams, president and publisher of San Francisco-based Dwell magazine, says the demise of House & Garden was a calculated move on Condé Nast's part. "Condé Nast is one of the most successful magazine publishers and magazine marketers around," she said. "This wasn't a case of financial distress."

Steve Cohn, editor in chief of the Media Industry Newsletter, which tracks the magazine business, concurs. "I'm not sure House & Garden was hurting that badly. It seemed more of a strategic than an economic decision, done to help Condé Nast's other two shelter titles, Domino and Vogue Living."

Maurie Perl, a spokeswoman for Condé Nast, says that "while House & Garden had a strong connection with its readers, it just didn't have the currency with the advertising community" for it to continue after the sudden departure in October of Publisher Joe Lagani, who left to join online media company Glam Media. Perl confirmed that House & Garden print subscribers are now receiving either Architectural Digest or Domino for the months remaining in their subscriptions, and visitors to the House & Garden Web site are being redirected to Domino.com, giving credence to the theory that this was a move intended to shore up other Condé Nast titles.

Shelter magazines really came into their own in the post-9/11 environment. Gayle Goodson Butler, editor in chief of Meredith Corp.'s Better Homes and Gardens magazine, summarizes the lure of glossy home-design magazines at a time of national insecurity: "People wanted to create comfort and order in their lives. They might not have been able to control the world outside, but they could control their own home environment."

The availability of low-cost mortgage loans over the past five or six years, which made home ownership attainable for many for the first time, also broadened the potential readership. And with housing prices on the rise, it made sense for existing homeowners to seek ideas for keeping properties in tip-top condition.

According to the National Directory of Magazines, published by Oxbridge Communications, the number of shelter magazines increased by 57 percent between 2002 and 2007, from 148 to 233 titles. Nearly half of those - 110 titles - were added from 2005 to 2006. It seemed that you could tack the word "Living" to the end of any magazine and have a viable publication, and there was no segment too small. Thus, Men's Health Living, O at Home and Lofts joined home-design stalwarts like Architectural Digest and House Beautiful (owned by the Hearst Corp., which owns The Chronicle) on the magazine rack.

But in the past year, the directory found, only 16 new shelter magazines were launched. A number of those that had been spun off from established titles, like House Beautiful Kitchens & Baths, have failed to gain traction. In this changing market, even the magazines that have stuck around are reassessing what it takes to be successful in a post-housing-bubble world.

Dwell magazine has undergone a major overhaul that will be visible in the February issue. Abrams says the redesign began well before the mortgage problems. "Sam Grawe became editor in chief a year ago, and he brought in a new creative designer, Kyle Blue. We began at that time to reimagine what Dwell could be, seven years after it was founded. We felt that in order to continue to lead the discussion about modern architecture and design, the magazine needed to be brought up to date."

One of the most obvious changes readers will notice is a slimmed-down size; starting with the February issue, Dwell has kept its height the same but changed the trim width from 9 inches to 8.375 inches. The narrower size, along with a switch to soy-based inks and recycled-content paper, saves the equivalent of 935 trees' worth of paper per issue, according to Abrams.

"These changes are completely in step with our driving philosophy that great design is sustainable design," she says; the magazine had been looking for high-quality recycled paper stock for some time, she says. Abrams confirms that the recycled paper costs more but "because we need less of it thanks to the new size, we just reinvest those savings to cover the higher cost."

A change in dimension is only the start of the story. The design team overhauled Dwell to improve its navigability and freshen the design, changing the cover design and some type fonts. Changes to the editorial content include new departments, such as Theme Attic, in which Dwell asks artists, designers and architects to interpret the issue theme, and Process, which shows readers how the things in our homes are made. Off the Grid has been updated to provide a deeper view into the systems that drive sustainable homes.

In the Modern World also has gone through a radical update. "When the magazine started in 2000, this section was supposed to be four to five pages long; over time it had expanded to 20 pages," explains Abrams. "Now it's back to its original purpose, like a newspaper of current design news tucked inside the magazine."

My House now offers the first-person perspective of the homeowner engaged in a home building project; the February issue chronicles a homeowner who overhauled an 1,100-square-foot home for $55,000 and sweat equity. The inclusion of this section speaks to another major trend affecting the industry: the democratization of design, as more homeowners feel emboldened to tackle their own projects when hiring an interior designer isn't an option.

"The idea of design in the home has been changing over the past five or six years," Abrams observed. "With stores like Ikea and Design Within Reach and Target, people are realizing that they don't have to be professionals to have an appetite for good design."

Better Homes and Gardens' Butler has also noted the shift away from professionally decorated homes to those that are in a constant state of renewal by homeowners. She joined the magazine in July 2006, and, through extensive discussions with readers and subscribers, found that their 7.6 million readers thirsted for the creative outlet that home design represented.

"The home television shows gave our readers a sense of permission for trying new ideas, and not worrying if they didn't work out perfectly," Butler says. "It gives them an expression of creativity and accomplishment" to update their homes without having to call an interior designer.

Butler and her creative team launched what she terms "a fairly significant redesign" in February 2007, in an effort to keep the traditions of the 80-plus-year-old magazine intact while making the content and design more contemporary and compelling.

"We have more balance now between wonderful homes created by homeowners across the country and do-it-yourself projects - how to pull off what you see," Butler said. The editorial content includes more step-by-step instruction, as well as a balance of project durations from short to long term.

Better Homes and Gardens readers are also looking for their "green."

In June 2007, the magazine launched a green column and introduced its Living Green Editorial Board.

For now, coverage focuses more on everyday practices that reduce environmental footprints (like performing an energy audit and comparing energy-efficient appliances) than it does on green design, but the response has been very favorable. "It taps into our reader's interest in 'how do I build on what I have, reuse what I have?' " she said.

While shelter magazines are reassessing their print publications to respond to a changing marketplace, their online versions have also come into their own in the past few years. Part of it is a chance to reach a different readership; Butler estimates that there is only a 13 to 15 percent overlap between readers of the print magazine and users of the Better Homes and Gardens Web site.

It's also true that evolving technologies allow magazine Web sites to provide content and draw in reader participation in ways that improve upon print versions.

"The BHG.com site is loaded with video," said Butler, with topics like how to organize your pantry or fold holiday napkins. Dwell's Web site includes editorial blogs, podcasts narrating walking tours of Berlin and Brooklyn, and video interviews with design mavens like Quik house architect Adam Kalkin and co-housing architect Kathryn McCamant. Both sites invite reader participation in the form of comments and ratings.
But there are certain aspects of browsing through a print publication that simply can't be replicated online.

"The photography in shelter magazines just can't be matched with what's on the Web, at least for now," Cohn said. And tearing out expensively printed pages to take with you to a paint store or show a roommate still beats showing them off on your laptop screen or computer printout.

Despite House & Garden's demise, there continues to be a market for shelter magazines aimed at professional interior designers and the clients they serve. According to real estate market intelligence firm Altos Research, the median home price in San Francisco as of December was $820,361, hardly a sign of a collapsing market.

Cohn said that "though there is a lot of worry about the economy, higher-end publications like Robb Report Luxury Homes and Architectural Digest won't be affected."

But for those publications who aim to make design more accessible and affordable for the rest of us, evolution is the name of the game.

Of Dwell's recent update, Abrams said, "We'll live with it for a couple of issues, and gather user feedback. And then we'll continue to refine and fine-tune the magazine."

Circulation Outlook for 2008

2008-01-10T23:03:00.000-05:00

Circulation Outlook for 2008
By Kristina Joukhadar
In speaking with circulation marketers and audience developers about what they see as the major obstacles facing them in 2008, we got a wide range of answers. But there are a few common denominators-the effect of current economic conditions, integration of new technologies, shortage of experienced staff and the increasingly important interface with the reader were consistently cited. Here, in no particular order, are their concerns.

CHALLENGE NO. 1: INTEGRATING NEW TECHNOLOGY

For Terri Smith, director of circulation, Branch-Smith Publishing, the end of 2007 brought a new online lead generation system, which is increasing leads for the advertisers. One of the projects for 2008 will be integrating the new technology with the existing database and marketing expertise to make the most of this new capability.

"The sales people are loving the names, but it requires lots of double checking. We're diving into the data in our marketing department, tracking emails from readers and advertisers to see what they're saying [about the system and how it serves their needs].

"We've only had one or two months of it and we're working on what the advertisers are going to expect-are these quality leads? We're separating them into types-soft sell or hard sell or more serious.

On the consumer side, says Thomas Masterson, VP consumer marketing, Hachette Filipacchi, "the cost of technology has come down so much that it's easier to apply the technology and advance modern direct mail response models, like with your marketing database. Now we can afford to do it. Using the technology and analysis at an acceptable cost makes me a lot more optimistic than the magazine industry of two or three years ago.

In b-to-b media, "Continued technology advances will allow us to communicate with our customers in a more personalized manner and provide custom products for them," says Shannon Aronson, director of circulation, CMP Media. At the same time, "continued saturation of marketing through email and traditional marketing methods will continue to push marketers to find more effective and creative ways to communicate with their customers."

This will lead, Aronson says, to the need for circulators to work harder to build trust and a sense of community with their customers.

CHALLENGE NO. 2: NEW SUBSCRIBER SOURCES

Smith says the readers of Branch-Smith's greenhouse, nursery and retail garden center titles are basically small businesses, whose main competition is the Wal-Marts of the world. "The independent retailers, the little stores, are being lost," she says.

If a potential reader is looking for a magazine on these topics, says Smith, they will not know to go to one of the magazine Web sites. And if they do a search, they will end up on one of the large online magazine sales sites.

"We were riding on a pink cloud of readers coming to us," she says. Now, on the Internet side, "we've been using magazines.com and tradepub.com with great results," she says. "We do need to evaluate the quality of the readers. I peruse every order myself when we bring in subs that have been outsourced.

"They may not be qualified, and we're paying for every sub. But these companies are very reputable and they've been great. They grant credit if the people don't qualify.

"It's taken a long time to get there, but it's great: the boss is happy," says Smith.

CHALLENGE NO. 3: EMAIL DELIVERABILITY

For Christine Oldenbrook, director of marketing and emedia, Bobit Business Media, the biggest challenge for 2008 will be email deliverability and email address collection-for example by getting people to register for things on the Web. "We need to improve on the number of names," she says. "Deliverability continues to be a big issue.

"The more sophisticated the software gets, the more default filters there are-for example, in Outlook 2007. And enterprise firewalls bump everything into junk mail, so the delivery level is dropping. We're now doing it internally, but if the situation continues, we could be forced to send it out and go looking for a delivery solution."

"We're spending money on the software, but have to hire someone and make it their job," says Oldenbrook. "Building a unified database will help. When you're asking how many email addresses you really have, it becomes [crucial]. This year we'll figure it out, even if having a system means doing it internally."

CHALLENGE NO. 4: THE ECONOMY

Another force to be reckoned with is the economy, both in general, and in terms of the state of the print vs. online revenue equation in the media industry.

"The 80's are not coming back," says Masterson, "but the industry has come back quite a bit. Some of the most profitable magazines are life style and special interest. The consumers need them.

"We're not seeing the rapid growth of the past, which is bad. The good news is the business is profitable," he says, "even though individual titles are having a hard time.

"For example with the car books, the research shows that trips to the dealership have declined. But people still use the books," he says. "They research online but read in print, particularly as part of their leisure time. It's easier to digest.

"News magazines have been dramatically impacted by the Internet," Masterson adds. News and business have a different shape on the Internet and there is an endemic advertising base that has gone away since the tech bubble burst, and it's never coming back. There's been consolidation with the national advertisers online. And news and business magazines are closer to being affected by the online cannabilizing the print.

"It's interesting," Masterson says, "that according to research, women go online for recipes and health information, but there are some things, like fashion, that they want to read in print. So although everyone is feeling the financial pressures [of online content viewing], in some genres, it's not as bad.

"There's still a place for magazines. The way people read magazines is changing, but it's not all gloom and doom," he says.

CHALLENGE NO. 5: SPECIFIC INDUSTRY DOWNTURNS

"It's always true that when you serve a particular market and the market you serve goes through a major downturn, it's going to have an impact on your business," says Nick Cavnar, VP circulation, Hanley-Wood Business Media. Their primary market is residential construction, an area especially hard hit.

"There's not a lot you can do. You can have the biggest market share and the best sales force in the world. Subscribers can actually pay more attention to your product in a downturn. They may be reading for more ideas on what they can do to counteract the business climate, or they may have more time to read. But the advertising market gets tough," he says.

"People need good information more, especially if you have free subs (it's a challenge if people have to pay). It's not harder to maintain controlled circulation, but circulation people are under more pressure to pull the costs down and keeping the costs down means you need to spend more time on analysis, both for the sake of the company and the owners who need more information and analysis. You need to control costs and show how you are going to do it-under a microscope," Cavnar says.

"When times are good, you submit the budget-and you're always going to have reductions. But in a downturn, it's scrutinized a lot more, even if the budget is good news," he says. "You have to be careful to analyze in detail-everything has to be calculated more. There's more pressure to control costs and do analysis and documentation."

Cavnar's advice: "Be realistic and step up and provide as much information as you can. Do an analysis for the company on further cost savings. Look at your comp list for possible cuts; look at the circ on the file that may not be efficient.
"Maybe advertisers don't want certain circ, or they don't serve specific segments of the file. It may not be a segment the advertisers want to buy."

CHALLENGE NO. 6: INCREASED REGULATION

Consumer marketing is facing regulation from all sides now and it makes things more difficult, but it's all part of our modern world, says Masterson. "It's challenging, but the increased privacy that people are focusing on now as a bad thing also has a positive side. Consumers all want more control over how they are marketed to-for example with the opt-outs.

"You don't want to send marketing to them if it makes them feel bad about you," he says. "It's the concept that doing it [marketing] the wrong way damages direct mail and risks the channel. But you can do it the right way and meet their needs-as we all try to do."

CHALLENGE NO. 7: NEWSSTAND-MERCHANDISING

"We need to find a way to grow sales in the industry," says William Michalopoulos, senior director, retail newsstand marketing, Hachette Filipacchi. "We've made an impressive effort to cut copies out of the system, and now we need to see how we can grow sales using the smartest marketing successes and coming out of the box with a strong product.

"I'd like to see the industry have a unified marketing message. We're currently seeing the attack of candy and gum at the check out-they have a unified message.

"Publishers also overpay for stuff [at checkout] and in the end it drives up costs for everyone. The wholesalers put extra points over the prices for the checkout rack. It's ugly. I've always been an optimist, but it's getting harder," Michalopoulos says.

"We had a pretty good year-we rolled up our sleeves and cut out a million copies from distribution and still maintained sales across the line. It's been a successful program, finding the right products and the right place and executing it.

"We're still selling magazines, executing at the store level and having the right products are key," he says. "For the budget in 2008, across the line, we hope it will be flat. We're planning a couple of new things. Next year, we'll dig deeper. We've picked the low-lying fruit now so we'll have to work harder. And of course staffing is leaner all through the channel."

CHALLENGE NO. 8: NEWSSTAND-COST OF THE WIRE
"Looking ahead, one of our big concerns is the evolving dynamics at checkout," says Doug Serafin, director of newsstand planning, Hearst Magazines. "As the overall number of checkout pockets continues to shrink, the competition for front end positions only becomes greater. On top of that, there's also a new push to increase wire costs. And rising IPO costs are another concern.

"In addition, newsstand promotion costs generally tick up year after year. It makes good promotion even more important," Serafin says.

"So whether we're looking at investment in checkout or promotions or retailer incentives or the print order, we have to be careful as publishers to do it in a responsible way. Mistakes hurt the industry's bottom line, not just the magazine that makes the bad investment."

"Wire costs are projected to increase and installation fees are being assessed at the front end. For a magazine with a lot of pockets, that can be a big expense. Front end costs will increase for most titles, but many titles will not see any sales increase." he says.

"There are many layers of merchandising, carried out by both the wholesalers and the national distributors. But retailers may actually be in the position to help as much as anyone-they're in their stores every day. By encouraging retailers to assist in merchandising their own stores, it can only make things better."

CHALLENGE NO. 9: FALLING RESPONSE RATES

"Everyone's struggling with response rates," says Barry Green, VP circulation, Hearst Business Media, "especially controlled circulation-and direct mail in many markets is almost useless. The return on investment [for direct mail] is extremely costly.

"There once was a formula followed by most circulators to achieve audience goals, but now it's extra difficult to meet them. You used to get a 33 to 35 percent response rate on cover wraps-maybe more. That was 10 years ago; now you get maybe 15 percent on a qual wrap-that's a fairly general rate.

"So what's my choice?" Green asks. "Either tell management the budget must go up, or lower the audience goals (like maybe you can't have 100 percent in the one year column).
"We are spending more to get new people who are served subscriptions but never respond. People are just busy. It doesn't mean they don't want the magazine. But what do you tell them [to get them to renew], and how do you force them?

"It's hard to get people on the phone and talk to them these days," he says. "It used to be easier when there was no voicemail. You had to either answer the phone, or it went to the switchboard, where they would put it through to your line.

"That's not true anymore. You look at the number and if you don't know who it is, you let it go to voicemail. It's an enormous problem and it's basically confined to the controlled b-to-b arena. More overall calls and more repeat calls equals higher costs just to stand in place."

CHALLENGE NO. 10: STRETCHED TOO THIN

"In general," says Green, "there's also a challenge with circulation being stretched into many other areas of the business-like the Web, audience development, email marketing, list rental, online advertising, bonus distribution (anything and everything we can do as participants in creating the overall advertising environment and adding to revenue generation).

"On any given day, you can get hit from left field, with new requests and figuring out ways to meet them. I'm glad we have such a good fulfillment house that can maneuver anything into the existing framework. The funny thing is that 'technology' creates the difficult problems that need unique solutions but it also helps solve them."

CHALLENGE NO. 11: FINDING EXPERIENCED STAFF

It appears that many b-to-b's are very attuned to the Web, especially in markets where readers are searching for online business information. "In b-to-b, there's lots of product online and there has to be support for it," says Oldenbrook, who has just hired a Web analyst. "You can adjust the Web design to drive traffic and Web services, do search engine optimization-the publishing disciplines are more interdependent on the Web. And they need to know how to work together."

"The biggest challenge we are facing is finding junior people," says Masterson. "It's been very surprising over the last two years. We generally don't use recruiters for upper management or mid level positions. We use the online resume sites [and that's working].

"But it's hard to find people with one to two years experience," he says. "You have to bring them in from outside of the industry. And we've found one or two from the Web side. Mid and senior levels we can find-they're applying for jobs.

"Magazine titles have been cut in the industry," he says. "There used to be big departments, but now there aren't the same number of young people. In the last six months, people have been stolen away. The head counts are so tight-there's no more big staff at Ziff Davis or Times Mirror, or even at Primedia."

CHALLENGE NO. 12: CUSTOMER SERVICE

"It's the old 'plus/minus'," says Green, speaking of today's circulation climate. "All that's happened has made circ become audience development and it's become a greater mix of the 'publishing/ media' operation (plus), but there are so many more intricate and confusing bits of minutiae to deal with (minus).

"The difficulty is how do you handle all the customer service, privacy, unsubscribes, complaints, etc.?," he says. "These are minor problems, but they add up. Think of all the time consumered dealing with correspondence/email due to just a few questions.
"And then there's the people [staffing] problem," he says. "Do you have the time and the people to answer this stuff?

You'd like to keep it inhouse, because it's tricky, and if you have multiple products, it's not just a simple case they can handle at the supplier. What do you offer them when they complain? Do you say 'tell us what you want?' Or 'tell us what you don't want?' and watch out for 'Big Brother' if we're not careful."

PARTING THOUGHTS

On Controlled Circulation..."It's easy to look smart when the market is booming," says Hanley-Woood's Cavnar. "The proof of [your value] is how you will manage the business and how you will weather the downturns. For circulation people in the market, some parts of the economy are in recession and others are doing well.

"The big challenge is keeping [your programs] going. You can't stop doing things, like working on your expires and developing online as well as the print channels. You need to grow and invest-do more with less money," he says. "Is it a challenge or an opportunity? Can you build and develop things with your audience through electronic communications for less cost? Do your audience development electronically and save money?

"One of the things that's surprising is that list revenue is increasing and branded custom emails are getting more interest. By building the email database and email capabilities, you can make more contribution from circulation. It enhances what you can bring to the table for new revenue opportunities, which is great. A small contribution from circulation doesn't mean it isn't attractive: in a downturn, even small savings look good."

On Newsstand Sales... "The distribution channel needs to be streamlined," says Michalopoulos, "and now Wal-Mart is trying to eliminate titles from distribution and some wholesalers are talking about it. As an industry, we have to do a better job of cutting costs.

"It's a long term role," he says, "and the responsibilities of some of the players in the chain have to change, so that there's still enough pie to cut up for everyone. The distribution models have to change to enable a focus on merchandising and execution.

"I'm cautiously optimistic, but there's going to have to be some pain before things start to turn around. Magazines still have a part and can be very successful. We just need to get the right product in the right place where it can sell. I'm hopeful we will figure it out."

Seeing the Larger Picture..."It's hard to talk in a smaller context about audience development, when everything that we do is impacted by the larger context of the world," says Eric Rutter, VP audience development, Reed Business Information.

"The fact that it's changing all the time is part of the challenge, but the primary purpose remains the same: to deliver to our advertisers the targeted and relevant audience with penetration into the right companies and to the right people who will be engaged with the product."

Optimism Declines Among Ad Execs, All Media Impacted, Even Online

2008-01-08T21:14:00.000-05:00

Optimism Declines Among Ad Execs, All Media Impacted, Even Online
by Joe Mandese
ADVERTISING EXECUTIVES HAVE GROWN SOMEWHAT more pessimistic about their plans for increasing the shares of their advertising budget for all media, but some media - especially online - seem to be holding up better than others. The finding, which comes from the latest wave of Advertiser Perceptions twice annual survey of advertisers and agency media buying executives, indicates a marked drop in the percentage of ad executives who expect their share of ad budgets to increase over the next six months for all the media measured. The worst hit of all the media, not surprisingly, were broadcast media outlets. Only 16% of ad executives expect radio's share of spending to increase over the next six months, down from 26% when Advertiser Perceptions conducted a similar study last spring, and down from 19% when it conducted it last year. Optimism for broadcast TV, meanwhile, dropped to dropped 22% in this survey from 29% in each of the last two surveys.

The most recent study is based on the results of 2,047 ad executives who completed an online survey in October and November 2007. The last study was conducted in April and May of 2007, and the previous wave was conducted in October and November of 2006.

While the optimism for online media fell slightly from the spring 2007 results, it has actually improved from the year ago sentiment (see table below).

Other notable declines in optimism appear to be impacting newspapers and mobile media.
Joe Mandese is Editor of MediaPost.

F+W Shutters Multiple Hobbyist Magazines

2007-12-20T08:50:00.000-05:00

F+W Shutters Multiple Hobbyist Magazines
Publisher shuts down five titles, lays off as many as 40 employees.
by Jason Fell

F+W Publications has shuttered five magazines under its Wisconsin-based Krause Publications division, FOLIO: has learned. The titles to be closed include Antiques and Collectibles Journal, Comics & Games Retailer, Toy Cars & Models, Toy Shop and Vintage Motorcycles, the publisher confirmed.

The publisher made the announcement to employees earlier this month in an internal memo. As many as 40 employees have been laid off, the source tells FOLIO:, although another source put the number closer to 15. F+W declined to confirm the number of layoffs.

"We take into consideration the marketplace we serve and the opportunities available for each of our magazine titles. After much analysis and deliberation, we have determined to cease publication of these underperforming tittles," chairman and CEO David Steward stated in an e-mail to FOLIO:.

"We are working to realign our business model and structure to meet the changing demands of the marketplace," F+W magazine division president David Blansfield said in the e-mail. Krause will continue to publish its other hobbyist titles, including Antique Trader and Old Cars Weekly.

F+W purchased Krause Publications in June 2002 for $120 million.
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CIRCULATOR: Newsday, Hoy Circ Case Settled
By Kristina Joukhadar
http://www.circman.com/viewmedia.asp?prmMID=3650

The federal fraud investigation of two of the Chicago Tribune Co.'s newspapers has finally (almost) come to an end. It was announced yesterday that the Chicago Tribune Co. will pay $15 million to settle the federal investigation into fraudulent circulation practices at Newsday and the New York edition of Spanish-language daily Hoy that occurred between 2001 and 2004.

The newspapers have accepted responsibility for the fraudulent conduct of their employees, have cooperated with the government in the investigation and have already paid about $83 million in restitution to their advertisers. In addition, they have implemented "remedial management and internal auditing reforms."

Newsday publisher, president and CEO Timothy Knight said, "Over the past few years, we have made comprehensive changes in controls, systems, customer relations, policies and our management team to prevent this from occurring again."

Nine people have pleaded guilty to participating in the scheme, according to the Associated Press, including employees ranging from vice presidents to home delivery and circulation managers. All are awaiting sentencing.

CIRCULATOR: Capell Celebrates 25 Years of CCR

2007-12-18T07:15:00.000-05:00

CIRCULATOR: Capell Celebrates 25 Years of CCR
By Kristina Joukhadar
http://www.circman.com/viewmedia.asp?prmMID=3637&prmID=1

The December 2007 issue of Capell's Circulation Report is Vol. 26, No. 20, representing 500 issues and more than 6,000 pages published. Way to go, Dan!

As part of the 25th Anniversary Issue, Capell shares some highlights from the past:

"In 1982," writes Capell, Good Housekeeping (with an 80.8 percent newsstand sell-through rate), Family Circle (with 79.3 percent) and Woman's Day (at 75.7 percent) "were among the leaders in newsstand percent sale efficiency. Their efficiencies now hover in the 30 to 35 percent range."

"25 years ago, for magazines making a rate base claim, almost 60 percent missed their rate base. . . Now only about 20 percent miss their rate base, but more titles are not making a specific rate base claim (well over 50 percent of ABC membership)."

"Back in 1986," Capell writes, "Publishers Clearing House and American Family Publishers delivered over 25 percent of all industry new subscription sales." By 1995, their volumes were off 70 percent. Now, AFP is gone, along with other direct mail agents like Magazine Buyers Service, United Subscription Service, Magazine Marketplace, Great American Magazines. Worldwide and Perfect School Plan are also defunct.

And then the kicker: "In the very first issue of CCR, after analyzing the Seven Sister magazine category, we reached the following conclusion: 'The Seven Sisters represent a classic case history of the proverbial publishing treadmill. As ad pages increase, management pushes circulation well beyond its natural level.

'Then as ad page growth inevitably levels off, publishers are left with high circulation acquisition and maintenance costs no longer justified by ad revenues that are static at best. Magazine profits begin to slip. Circ directors are put in a no-win situation, as they are pressed to deliver inflated circ levels at ever increasing subscription and newsstand prices.'"
Adds Capell, "Twenty-five years later, the problem is still the same!"

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CIRCULATOR: Postal Rates Affecting Volume
By Kristina Joukhadar
http://www.circman.com/viewmedia.asp?prmMID=3642&prmID=1

The Postal Service released volume data for the fourth fiscal quarter of 2007 (July through September), and the numbers represent the first quarter to reflect the rate increase. According to David Straus of Thompson Coburn, legal counsel to the ABM, "It is not a pretty picture."

Here are some of the main data points:

* Regular rate periodicals volume is down 2.5 percent from the same period last year, and within that category, classroom publications volume dropped 11.8 percent vs. the fourth quarter of last year;

* Standard mail flat volume is down 9.1 percent, with non-profit enhanced carrier route flat volume down by a staggering 21.5 percent.

* First-class flats are down 12.1 percent.

Straus reports that because the new Flats Sequencing System will soon be deployed, if flat volumes continue to decrease, the cost per piece for the Postal Service will go up. He adds, "I think that we will see such continuing declines, especially in Standard mail, as direct marketers modify their mail shape and programs in response to the significant change in rate design that adversely affects flats."

As 2007 Draws to a Close: Where is the Business Heading?

2007-12-16T20:43:00.000-05:00

As 2007 Draws to a Close: Where is the Business Heading?
By John Harrington
http://www.nscopy.com/

Editor's Note: Last week, I participated in a Newsstand Forum sponsored by the Magazine Publishers of America (MPA). The following is an overview of my remarks and some of the discussions that followed. The panel moderator was Jerry Lynch (IPDA), and the other members were Tom Masterson (Hachette Filipacchi Media U.S.), Lindsay Valk (Hearst Magazines), and Jeremy Koch (MPA).

2007 began with a continuation of trends that have characterized newsstand for several years; low levels of unit and dollar growth, and a small, but encouraging improvement in retail sell-through figures. A very preliminary look at results for the third quarter finds a continuation of both trends. Retail dollar sales appear to have improved 1.6%, compared to the same period in 2006, while units were up 1.3%. If this continues for the remainder of the year, it will mark three straight years of moderate unit and dollar growth for magazine newsstand sales. Following nearly a decade of declining unit sales, this level of performance is encouraging.

More notable is that the 1.3% unit sales increase in the third quarter was accompanied by a reduction in retail draw of 5.1%, which translates into a sales efficiency of nearly 42%. Although that figure needs to be viewed very cautiously (the first-half figure was 38.4%), it would appear to indicate that the efficiency initiatives of most wholesalers and several national distributors are beginning to pay off. According Harrington Associates' annual study, The Magazine Retail Sales Experience, the industry efficiency figure has not been above 40% since 1996. In any event, the magazine distribution channel's conventional wisdom of "Cut the draw, cut the sale," seems ready to become history.

Positives: So, entering 2008, newsstand sales are coming off three years of unit growth, accompanied by improving efficiencies, both trends that contrast sharply with the preceding decade. Added to that is a retail atmosphere that has been generally friendly to cover price increases (Harrington Associate's regular review finds nearly a third of price increases are accompanied by unit growth; and last week The New Single Copy reported that Bauer Publishing appeared to be doing well with its 50% price hikes on some of its high-volume celebrity titles). A recent history of unit growth, improving efficiencies, and an ability to raise prices! It's not the worst way to begin a new year.

Challenges: On the challenge side, the economics of the channel remain fragile. Three of the four large wholesaler groups that represent 90%-plus of the market claim to be losing money, and the fourth says its profit margins are slim. Publishers are competing in a soft advertising market, and the subscription side of circulation has been struggling since late in the 1990's.

Scan-based-trading (SBT), which has been on retailers' agendas for nearly a decade, is an issue that the magazine distribution channel will hear a lot about in 2008. For a variety of reasons, wholesalers are now involved SBT relationships with retail chains, who are estimated to represent more than 25% of magazine sales. Several other chains want to do the same; the number could expand significantly. To date, these programs have been developed strictly between wholesalers and retailers. Yet, the long-term impact will be felt, substantially if not equally, by publishers and national distributors. Most participants agree that for SBT to progress in a way that is beneficial to the channel, it must be an industry-wide initiative. The issues inherent in SBT - among them shrink and the responsibility for it, the impact of inventory costs shifts, and auditing - are profound. Negotiating them, and a host of peripheral matters, will strain a channel already characterized by tensions at every level. Moving forward will require accommodations by all of the trading partners: publishers, national distributors, wholesalers, and retailers.

Moving Forward: The recent positive history of unit growth, improving efficiencies, and a price-friendly market may help ease the resolution of the above challenges.

Publishers and national distributors acknowledge that the recent wholesaler efficiency drives are more productive and effective than previous efforts, and the suppliers are working more closely with them as a result. Still, they caution against moves that may not take into consideration unique publisher needs, particularly advertising rate base issues. As one publisher pointed out, the economic models of publishers, national distributors, wholesalers, and retailers do not always match. Granted, there will never be a full match of economic incentives, but it was also noted that the distribution channel's financial structure has only been marginally modified over the past dozen years. In 1995, there were around 300 wholesalers and they operated in limited markets, characterized by retail density. There were many fewer titles, some of which sold over two million copies per-issue, and their efficiencies were in the 60% range. No single title sell that many copies today and only one or two have that kind of sell-through. Discussion seemed to indicate there is more awareness of these disparities, and sympathy to the problems they create.

During the forum discussions, there was considerable reference to the "Sustainability" initiative of Wal-Mart, the largest retail chain. At its direction, publisher, national distributor, and wholesaler executives have met twice in the last month in the retailer's Arkansas headquarters to address a list of issues, selected by the chain. Overall, Wal-Mart said the main goals of "Sustainability" are 1) a sales increase of 5%; 2) improving efficiencies to 50%; and 3) achieving waste reductions throughout the channel. A national distributor executive said that other retailers can be expected to follow Wal-Mart's lead. The fact is, the "demands" of major retailers to focus attention on these issues may be the push that renders them achievable.

There seems to a broad sense that 2008 will be a year of significant change. If the entire channel, including retailers, operates as partners, the change has the potential to be positive and long lasting.

One possible impediment to that process was raised at the forum by Mike Sullivan, president and CEO of Comag Marketing Group (CMG). Responding to the topic of a lack of significant progress, despite much debate, Sullivan said, "'Ego-nomic' business decisions continue to prevail over 'eco-nomic' business decisions."

MRI Uses RFID Chips for Mag Measurement

2007-12-05T22:03:00.000-05:00

MRI Uses RFID Chips for Mag Measurement
by Erik Sass

BIG BROTHER IS WATCHING--WELL, JUST Mediamark Research and Intelligence, actually. The magazine audience measurement firm is partnering with DJG Marketing's Waiting Room Subscription Services to put radio frequency identification (RFID) chips in magazines in waiting rooms to determine just how many customers actually read them.

MRI has been testing RFID technology in-house for over a year, but the DJG-WRSS partnership marks the first external study using MRI's Passive Print Monitoring System. RFID microchips are small, passive transponders remotely powered by radio frequencies, allowing detection and measurement of movement.

The study seeks to determine whether RFID tech can accurately measure time spent with a specific magazine issue and the number of individual readings. It may even allow MRI to measure exposure to a specific ad page in the magazine. DJG wants to recruit publisher support for the test.

The new measurement initiative may help resolve a controversial issue in magazine ad sales: Should free or discounted copies distributed in public places count as quality circulation? Often dismissed as "junk circ" used to inflate publishers' figures, proponents argue that these magazines have value that can be measured in terms of reach and frequency, akin to booming place-based video media.

In this vein, Marc Passarelli, president of WRSS and chief operating officer of DJG Marketing, remarked: "Public place distribution is an important source of targeted readership generation for magazines and provides a defined competitive environment for sampling multiple titles."

In August 2006, Time Inc. and Mediaedge:cia released a study which found that over 80% of waiting-room readers act on ad or editorial content they see in magazines there. The Internet study tracked readership of six different magazines in a sample population of about 5,000 people, focusing on Entertainment Weekly, In Style, Sports Illustrated, Fortune, Parenting and People. The study also found 85% said they "didn't mind waiting if magazines were available," while 97% thought "waiting rooms should provide things to read while you wait."

Other big players have also experimented with new electronic measurement techniques for magazine readership. In June 2006, Time Inc. Jane Bailey, vice president of corporate marketing information for Time, Inc., and Roberta McConochie, director of PPM client relations for Arbitron, reported the results of a joint study using PPM technology to measure magazine readership. Based on the physical dynamics of magazine reading, the studies revealed large increases in both the number of interactions and overall time spent reading magazines, compared to self-recorded diaries.

Who's Reading Magazines?

2007-12-03T22:26:00.000-05:00

Who's Reading Magazines?
Inside MRI's Fall 2007 Report.
People magazine gets around.

According to the latest report from Mediamark Research Intelligence (MRI), each copy of People is read by a median of 11.34 readers. With an audience size of 42.4 million and a circulation of 3.7 million, People dominates in readership against its top four competitors: Star ranks second in terms of readers per copy (6.95); Us Weekly is close by with 6.74 readers per copy; Entertainment Weekly (5.79) and In Touch (5.65) round out the category.

Surprisingly, readers of Esquire-which distinguishes itself in its online media kit by touting "while other men's magazines are written for highly aspirational readers, Esquire is geared towards men who have arrived"-have the lowest median household income for adults ($53,783) among five of its top competitors. (To be fair, Esquire's readership has seen a marked increase in affluence since 2002, when it had a median income of $42,602). Men's Journal leads the pack with a median of $77,063, followed by Men's Health ($76,865), GQ ($68,746), Men's Fitness ($68,486) and Maxim ($65,614). Esquire's readers are also the oldest of the group, with a median age of 43.9 years. Maxim is on the low end, with a median age of 28.4 for adults.

Male vs. Female

In terms of sex, Esquire appeals to the highest percentage of women (33.8 percent) while Maxim-top in both circ and audience size-has a female readership of 23 percent.

As another example, 30 percent of Scientific American's readers are female versus Popular Science's 14.9 percent, while PopSci has 3 million more readers than SciAm, with a circ of 1.3 million versus SciAm's 574,000.

Women's magazines tend to have less crossover. Just 6.5 percent of Glamour magazine readers are male, versus Vogue's 13 percent, while Glamour's circ and audience size remains higher by one and two million, respectively. In terms of readership, Glamour (12.5 million) and Vogue (10.8 million) are both higher than Redbook (9.8 million) and Seventeen (8.7 million). Allure (5.9 million) has a leg up on Marie Claire (3.5 million) in the readership category.

In the battle over the sports reader, Sports Illustrated's audience of nearly 21 million tops ESPN the Magazine's 13.7 million. The age gap between readers has grown larger since last year, as the median age of ESPN readers has dropped from 33.1 to 31.8 while the median age of SI readers has climbed slightly from 38.4 to 39.1.

This year's MRI results also support the point made by airline magazine marketers that in-flights have a notably affluent readership. Comparing the six top in-flight magazines, the median yearly household income for adult readers ranges from United's Hemispheres ($123,234) to Continental ($88,831).

Martha vs. Oprah

The affluence of Oprah and Martha Stewart's readers is nearly identical, with median income separated by less than $1,000 (Martha's $68,914 versus Oprah's $68,294), but Oprah continues to prevail in audience size. O, The Oprah Magazine's audience is at more than 16 million-a four percent increase from last year's results-versus Martha's almost 12 million-a one percent increase.

Magazine Readers Per Copy (Adults)
National Geographic 19.60
AARP The Magazine 18.13
Reader's Digest 17.19
Better Homes & Gardens 15.80
People 15.71

Magazine Median Household Income
Atlantic Monthly $123,234.00
Barron's $121,832.00
Inc. $115,595.00
Veranda $111,126.00
Golfweek $109,304.00

SOURCE: MRI

MAGAZINE FULFILLMENT: WHERE IT IS AND WHERE IT'S GOING

2007-11-27T08:46:00.000-05:00

CONSUMER MAGAZINE FULFILLMENT:
WHERE IT IS AND WHERE IT'S GOING
By Steve Strickman

The past few years have seen major changes in the consumer magazine fulfillment industry. These changes, especially industry consolidation, have reduced the number of major vendors and the number of alternatives available to publishers. One additional consequence may be a reduction in the competitive intensity among the remaining vendors. Since the start of 2007 there have also been changes in the leadership of two of the larger fulfillment vendors and one of the smaller ones.

Much has been written about the challenges faced by traditional print magazines and newspapers. Fueled by internet growth and new giants such as Google and Yahoo, digital and on-line products are becoming more and more important. Fulfillment vendors are now facing the need to diversify their mix of services to meet the changing demands of their clients and prospects. The future health and growth of these companies may be determined by how successful they are in meeting this diversification challenge.

Mergers and acquisitions, both in the fulfillment industry and in publishing, have reduced historical stability and have created more uncertainty. There are now only three remaining major surviving vendors, down from five only four years ago. Two of the three survivors are owned by media companies. Also, one of the smaller vendors in California closed down a few years ago.

Not all of the news is discouraging. At least one new small vendor has entered the market and others are surviving and may even be prospering.

Two of the remaining large "in-house" fulfillment operations are also joining other major publishers in outsourcing. TV Guide recently converted their fulfillment to CDS and Guideposts is scheduled to do the same in early in 2008. As recently as ten or twelve years ago, major publishers such as Newsweek, Business Week, Meredith, National Geographic and Southern Living maintained in house operations. They are now all gone with only one or two others still surviving. There are, of course, a number of small to medium size publishers who maintain in-house operations using licensed fulfillment systems supplied by companies such as Advantage Computing Systems (ACS).

These recent industry changes, and their impact on alternatives available to publishers, are probably the most the most significant in last 35 years. This article attempts to describe the current situation and to look ahead to what may happen in the future.
Recent Events

Kable

The most recent significant industry event, prior to this year, occurred in 2003 when Kable Fulfillment Services acquired the EDS subscription fulfillment business in Louisville, Colorado (formerly Neodata). Early in 2007 Kable completed the acquisition of Palm Coast Data (PCD), creating the second largest fulfillment services company.

Kable Fulfillment Services operates in four separate facilities: Louisville, Colorado; Palm Coast, Florida; Mount Morris, Illinois; and Marion, Ohio. They also operate a number of different fulfillment systems. The new management, mostly comprised of senior managers from Palm Coast Data led by John Meneough, the former CEO of PCD, is faced with major integration challenges. They must deal with integrating people, operations and systems, while keeping hundreds of clients happy, and at the same time achieving the benefits of cost reduction through consolidation and elimination of duplicate or overlapping functions. This is a daunting task.

During the summer of 2007 they announced cutbacks affecting 75 employees in three of the four facilities (excluding Florida). More recently they announced that the Marion, Ohio facility will shut down by September, 2008 with the work transferred to their other facilities. They are also in the process planning the conversion of clients who are on NPS, the old Neodata system, to the Palm Coast fulfillment system while also converting a major addition, the Time for Media publications recently acquired by Bonnier.

The magnitude of these activities could either enhance their relationship with existing clients, if the service levels are maintained or improved, or could damage these relationships if service levels deteriorate in any significant way. It is clear that many Kable clients are watching closely.

CDS

CDS, a unit of the Hearst Corporation, is also undergoing major changes. Malcolm Netburn was hired as the new Chairman and CEO of CDS in February. The former CDS President left the company a few months later and CDS recently announce a major reorganization. They seem to be taking the lead in implementing a new long term direction that depends on a more diversified mix of services oriented to the changing business models of media companies with a stated focus on the expanded use of technology to meet these new requirements. CDS has exhibited a high energy level during this period of change and is investing in a number of enhanced services.

As part of its change in direction, CDS has changed its name to CDS Global. This name change is more reflective of the international scope of CDS activities. CDS acquired Tower Publishing Services in the United Kingdom a number of years ago followed by the acquisition of Indas, a Canadian company. A new Australian business unit was created within the past two years.

In addition to the recent conversion of TV Guide and the pending conversion of Guideposts, CDS has shown new aggressiveness in pursuing other potential new business. This has helped to sustain a competitive environment, at least temporarily, despite the reduction in the number of competitors.

One new aspect of the CDS reorganization is a temporary modification of the independence of CDS from the Hearst Magazine Division. CDS' IT organization is temporarily reporting directly to an executive at the parent company, which raises the possibility of a conflict of priorities. Ever since being acquired by Hearst 25 years ago, CDS has made an extra effort to avoid the perception of being tied too closely to Hearst Magazines, and this latest step has changed that practice. This closer affiliation could, however, provide CDS with additional resources that enable them to add value for their clients.

Time Customer Service

Time Customer Service (TCS), a Time business unit in Tampa, Florida, has made few major changes in its senior management. Tim Adams has been the President of TCS for many years, and seems committed to programs of growth and diversification. TCS has recently demonstrated a new willingness to compete with the other major fulfillment service providers. Given their size and resources, they could have a major impact on the competitive landscape if they should decide to seek new clients.

TCS now offers two reporting products: Circulation Manager (for report generation) and TPOT (for web based report distribution) that some consider to be the best in the industry. These packages were developed by Time, Inc in New York and demonstrate the advantage of a close relationship with the parent company with access to larger resources made available by the parent.

Others

Among the smaller fulfillment service companies, the Strategic Fulfillment Group of Big Sandy, Texas, (SFG) also made a change at the top management level. Tony Pytlak was brought in within the past year as the new President and COO. Shirrel Rhoades, a respected veteran in the publishing and consumer marketing industries, and a long time consultant to the parent company, DRG, has also been active in supporting SFG's development. They could offer a serious alternative for publishers in the future.

ARGI, another smaller services company, has also had recent changes in senior management. They are positioned as a company that provides database marketing and web services in addition to subscription fulfillment.

There are several other smaller companies in California, including ESP Computer Services and Publisher's Creative Systems (PCS), each of whom has their own niche base of clients. Smaller east coast companies include Fulco and Cambey & West. Changes at these companies, if any, have not been publicized.

Finally, a new player has come upon the fulfillment scene. National Community Services (NCS), an active school plan and field agency for many years, based in Memphis, Tennessee, is offering subscription fulfillment services for smaller circulation publishers. They now have a small, but visible client base, and are seeking growth. They have demonstrated their commitment to the business by recently hiring Glyn Standen, formerly of Kable Fulfillment Services, to lead their fulfillment sales and marketing effort. They are being guided by Jeff Capwell and his associates, a group that has a track record of success in circulation and subscription marketing. NCS could also provide another fulfillment alternative for their niche segment of the consumer magazine market.

Recent Service Enhancements
The major service companies have been making an effort to add new services and offer enhancements to existing services. This was especially true of Palm Coast Data in the period preceding their acquisition by Kable. These service improvements are now being offered by the merged companies.

With its new energy and direction, CDS also is enhancing its services, but some of these enhancements must yet be implemented.

TCS has also been investing in such enhancements, which have been available to their clients for some time. They have been relatively quiet about these improvements - presumably because they have chosen to avoid the head to head competition that occurs elsewhere in the industry.

Palm Coast Data (now Kable) has implemented two major initiatives: a new reporting platform called PCD Inform, and a new database facility called PCD Insight, which is based on the use of advanced database software used by the major database marketing companies.

PCD Inform provides the user with flexibility in defining the content and format of reports and export files. It has many features that make it easy to use. The most unique characteristic of the system is the ability to add and maintain cost data so that full P&L reporting can be utilized.

PCD Insight offers complete count and selection facilities with very fast response times. Kable provides the capability needed to update the database from the fulfillment database. The tool is used for list selections for clients that have their list rental processing done by Kable. It also provides marketing database capabilities, including data overlays, for analysis and target marketing.

Kable clients using the Palm Coast Data system can take advantage of PCD Inform and PCD Insight. Those clients using the NPS system and the K-Data system (the "old" Kable systems) may be required to use other tools.

CDS is also developing a new reporting platform based developments at their UK company. They are revamping the UK system so as to meet U.S. requirements, but the date this new system will be available is uncertain.

CDS' major initiative appears to be in the expansion of its on-line and internet capabilities. This component of their business is growing rapidly and they have joined forces with the new media group at Hearst to accelerate their development efforts. They are currently implementing a new on-line marketing tool called Circules, which was developed at Hearst, for their clients. It seems that CDS intends to use these enhanced internet facilities as a competitive weapon that will also support their efforts to support new media business models.

They are also expanding their use of analytical software that "learns" based on transaction history to help target specific offers to customers on the telephone and on-line. CDS calls this the "SMART" system.

CDS has also upgraded their product fulfillment services over the past year or two. For those clients who have the need, CDS now offers high level services covering order processing, customer service, shopping carts, warehousing and pick and pack. Their product fulfillment system, SERV pf, is interactive, utilizes a relational database, and interfaces with strong internet services. The only major task they have not yet accomplished is to integrate the product customer database with the subscriber database to provide a truly integrated capability.

TCS offers a higher level of postal and distribution support than is available from the two major competitors. They also offer the advanced reporting tools mentioned earlier in this article. As with many industry reporting tools, power usage of the Circulation Management reporting system probably requires extra client training.

One of TCS' most unique services is an itegrated print management system called "OMS". OMS is geared toward larger circulation magazines with multiple editions. Among other functions, the system provides for the "qualification" of geographic and demographic editions, with the ability to prioritize characteristics and to generate edition counts prior to actual selection of main file labels. For publications with this need, OMS offers a unique ability to plan and control edition print orders and counts.

TCS also has a very pro-active Marketing Services group that takes responsibility for much of the workload that, with other fulfillment vendors, must normally be performed by client Circulation staffs.

Other Alternatives

Larger circulation consumer magazine publishers who are seeking more than basic fulfillment services will generally limit their focus to the three large vendors. This could change in the future if one or more of the smaller companies makes the investment necessary to create the depth and breadth of services sought by this major segment of the market.

Smaller publishers who are concerned about fundamentals - i.e., fast and accurate cashiering and transaction processing, telephone and on-line customer service, audit support, adequate reporting, and reliable lettershop services, have a much wider choice.
SFG would be a leading candidate for these publishers. They manage full service operations in one location in Big Sandy, Texas, including all fulfillment operational activities, telephone customer service, lettershop and full product fulfillment. Under their new President, they have exhibited a strong desire for growth and are in the process of expanding their capabilities.

Other good choices could be NCS (the new entry to the business), ESP, PCS, and, perhaps, some of the other smaller companies.

The biggest advantage a publisher has in doing business with one of the smaller companies could be to achieve a higher level of attention and support. Smaller clients sometimes suffer from what they perceive as a lack of attention from the large vendors, especially in account management and from senior management.

In assessing these alternative vendors, publishers should consider cost factors other than fulfillment service prices. For example, the larger service companies have higher levels of automation and can perform image processing and, ultimately archiving of the transaction images. This is harder for the smaller companies to justify. More important may be the ability to obtain larger postal discounts for clients. For standard class these discounts are dependent on the volumes of co-mingled mailings, and the larger companies can normally achieve high discount levels without using a pre-sort house.

The Future?

Where is the consumer magazine fulfillment industry going from here? The likelihood is that there will be many more changes coming. It is almost certain that all of the fulfillment companies will add capabilities to increase their support of multi-media businesses. This will be essential if these companies are to survive over the long term.

Most immediately, we should expect systems to be modified as necessary to support fulfillment of electronic publications, including content delivery. This will also include delivery of on-demand content, with or without gatekeeping and with or without additional collection of payments. These facilities should be relatively easy to implement, depending on the age and architecture of the underlying fulfillment system.

Batch update systems are already obsolete and may, in the near future, be unacceptable. As the world evolves to more of an on-line mode, it will be very important to process in a real-time environment. Those fulfillment companies that seize on this as an opportunity are likely to prosper. Those that resist are setting themselves up for failure.

None of these changes will reduce the need for effective fundamental fulfillment processing. We may see a continued decline in mail transaction volumes offset by an increase in internet based transactions. Similarly, telephone customer service call volumes could decline with a corresponding increase in on-line customer service volumes. In at least one case, more than 50% of customer service transactions are now on-line. As electronic products increase in volume, with almost all of their orders coming in electronically, the trend toward electronic transactions will accelerate.

Real-time credit card processing will become more common while direct billing could decline. The percentage of credit card purchases will increase.

With respect to industry stability, this is much harder to forecast. The three large vendors all appear to be financially healthy, although Kable Fulfillment Services reported a loss in their most recent fiscal quarter.

As part of the privately owned Hearst Corporation, CDS would appear to be completely secure and stable. Hearst rarely sells companies, so an ownership change is highly unlikely, especially a company that is tightly tied to their core business. Through Hearst, CDS has large financial resources to draw on. They have been and should continue to be solid over any foreseeable future timeframe.

CDS may not be likely to expand their business via acquisitions. With a dominant market share, they could be at risk of anti-trust questions if they acquire within the fulfillment industry. Non-fulfillment and foreign companies, however, could certainly be candidates.

Kable is the largest business unit of its parent company, Amrep Corporation. As a public company, Amrep, and because of its dominance within Amrep, Kable could be subject to the pressures faced by many public companies for short term earnings. Amrep has completed the acquisition of four fulfillment companies over the past years starting with Publishers Aide and FCA in the 1990's followed by EDS in 2003 and Palm Coast Data in 2007. The integration issues they face, including the carryovers from prior acquisitions, could have an impact on near term performance. Once they get past this transitional period, however, they are likely to resume their programs of innovation and diversification that characterized their past, especially at Palm Coast Data.

TCS, as part of Time, could be affected by the future of the parent company, which has been the subject of much speculation and rumors recently. The TCS history as an in-house supplier for the largest magazine publishing company in the U.S. certainly gives it the credentials to continue to be a major long term player in the industry. They are working on growth and diversification plans that involve: market penetration in the core subscription fulfillment business; diversification through extension of core skills to expanded markets; and the "spin off" or "bundling" of services to create new products. They seem intent on these efforts and could soon be a force to be reckoned with in the industry.

It's very difficult to speculate about the future of the smaller companies. If the trend toward industry consolidation continues, one or more of them could be candidates for merger or acquisition. It seems likely, however, that they will face the need to modify their businesses to meet the changing requirements of the media industry. Pooling the needed investments over a larger base could provide some incentive for further consolidation.

Steve Strickman is president of SES & Company, a consulting company with many major publishing clients. He was the founder of CDS where he was president and chairman for 16 years. He has also been president of Palm Coast Data and Chairman of the Executive Committee of Kable Fulfillment Services. He has a masters degree from New York University and served on the visiting faculty of Stevens Institute of Technology.

Perspective on Consumer Magazine Circ Levels-First-Half 2007

2007-11-08T08:26:00.000-05:00

Perspective on Consumer Magazine Circ Levels-First-Half 2007
By Baird Davis

The industry is once again sending mixed signals with its circ level data. Insight is needed to see beyond the obvious numbers to the underlying trends.

In the first half of 2007 the audited paid circulation of consumer magazines continued its slow, but steady decline. The industry's paid and verified circulation fell 1.2 percent-from 279.5 to 276.2 million. This was not a large decrease, but it was welcome news for an industry that remains in a bloated state of over-circulation.

What's Causing Circ Level Reductions?

As always, the industry transmitted a set of mixed signals. We'll go below the surface to provide a data based analysis that will, hopefully, clear up some of those circ related ambiguities. Our research will show a declining universe of audited consumer magazines, reveal the breadth of both the circ level increase/decrease trends, put in perspective the circ level management impact of large publishing companies and finally take a closer look at the circ effect precipitated by changing verified and sponsored circ usage trends.

Newsstand Contribution to Circ Level

Newsstand to subscription circ ratio is a good, if somewhat crude, guide for measuring the extent of the industry's over-circulated condition.

In the second half of 2006 the industry was treated to a rare occurrence-an unexpectedly higher newsstand contribution to total circulation ratio. But the results from the first half of the year represent a return to reality. In this period, the declining newsstand circ contribution trend resumed its inexorably downward path.

The newsstand circ level declined to 47.4 million and the newsstand to subscription ratio fell to 17.2 percent-another historic low. In the year 2000, the newsstand circulation ratio stood at 20.8 percent. The persistent downward spiral of the newsstand to subscription circ ratio is a fairly good indicator that the paid consumer magazine business remains in an over-circulated condition.

Number of Audited Titles Continues to Fall

The number of audited paid consumer magazines in the first half of 2007 declined to 562-down from 579 a year ago, 592 two years ago and 645 in the first half of 2000. In the last seven years, the number of audited paid consumer titles has fallen nearly 13 percent.

It should be noted, however, that 90 audited publications (reporting 122 million paid/verified circ) with primarily "association" and/or sponsored circ have not been included in this analysis. 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 first half of 2007, a record total of 44 titles discontinued publication or ceased being audited. There were seven principle casualties (more than 400,000 circ) in this group. Those titles and the paid circ they reported the year previous include: Teen People (1,456,000), FHM (1,251,000), Disney Adventures (1,181,000), Jane (706,000), Nick, Jr. (642,000), Elle Girl (513,000) and Kids: Fun Stuff to Do Together (435,000).

The combined circ of these seven titles was 6.2 million, which accounts for a significant portion of the 8.8 million circ decline attributed to all 44 discontinued publications.

On the plus side, there were 27 publications added to the auditing ranks in the last year. The largest circ contributors were: Ok! Weekly (809,000), Cooking with Paula Deen (766,000), Figure (533,000), Cookie (385,000), Siempre Mujer (381,000) and Diabetic Living (370,000). The combined circulation of the new titles was 5.7 million.

The circulation contribution from the new titles was substantial, but they fell 3.1 million short of balancing the circulation loses attributed to departing publications.

Circ Level Adjustments Less Severe

The pace of circ level reductions decelerated in the first half of 2007. There were 97 publications whose circ was decreased by 5 percent or more, compared to 126 a year ago and 146 two years prior. The frequency of circ level increases also slowed-only 74 publications, down from 89 a year ago, had circ level increases of 5 percent or more.

There were 22 titles that reported circ level decreases of 50,000 or more. These included six titles reporting circ level reductions of 150,000 or more. This group was headed by Time's massive 700,000 decrease and TV Guide's 453,000 reduction. Also included were Sunset (-243,000), Mary Engelbreit's Home Companion (-172,000), Home (-155,000) and Playboy (-151,000). In total these 22 publications reported circ level reductions of 3.1 million.

Counter balancing the level reductions were 28 titles that reported paid/verified circ levels that were higher by more than 50,000. This group included extraordinarily large increases from Everyday with Rachael Ray (+476,000), Cooking with Paula Deen (+372,000) and Women's Health (+268,000). This group of publications accounted for an aggregate circ level increase of 3.3 million.

The increases/decreases from publications with more than a 50,000 circ change nearly balanced one another.

Major Companies' Effect on Industry Circ Levels

The four leading circulation companies-Time, Inc, Meredith, Hearst and Conde Nast-accounted for 39 percent of the audited circulation of consumer magazines in the first half of 2007. Over the past decade, these four companies have aggressively pursued circulation level advances, carefully protecting their market positions.

From the year 2000 through first half of 2006, the combined circ level of these companies grew by 19 million (18 percent) and their share of a shrinking circ level market grew from 31 to 41 percent. Then in the second half of last year, Time, Inc reversed course. It sold 13 audited publications (titles with more than 7 million combined circ) to Bonnier and modified its aggressive circ level practices.

Time, Inc remains the industry's circulation leader, with slightly more than 34 million circ. But its aggregate level is now much closer to the three other major circulation leaders-Meredith (26.7 million), Hearst (24.1 million) and Conde Nast (22.0 million).

A closer inspection of the circ level practices of the industry's circ leaders (below) reveals the extent of those differences. But, surprisingly, it doesn't appear to be having a significant aggregate affect on the industry's circ level.

1. Time, Inc - It divested publications with more than 7 million circ, discontinued publication of Teen People (1.4 million circ) and announced the closing of Business 2.0 (550,000 circ). It has also displayed new circ level caution with its mature titles. It made deep (greater than 15 percent) circ level cuts on both Time and Sunset. Circulation reduction is a strange occurrence for a company previously known for its relentless pursuit of circ level growth and its huge appetite for protecting market position.

2. Meredith - It quietly brought three new publications to the auditing ranks in the last year-Figure (533,000), Siempre Mujer (381,000) and Diabetic Living (370,000). It boosted the circ of More (up 99,000) and venerable BH&G (up 61,000). But it also displayed circ caution-it ceased auditing Renovation Style, reduced the number of audited BH&G specials, discontinued Child and lowered Family Circle's circ level. Its approach to circ level management might be described as cautiously aggressive.

3. Hearst - It demonstrated very little interest in circ level reductions. In the aggregate, it increased its circ level 2.6 percent. This included increasing the level of O, The Oprah Magazine (up 100,000) and Good Housekeeping (+131,000), publications whose levels had been reduced in recent years. It is still clearly pressing the circulation pedal to the medal.

4. Conde Nast- In the first half of 2007 it continued to be aggressive in its circ practices, growing its circ level by 2.9 percent, even though it discontinued Jane, a publication that reported 706,000 circ the year previous. It increased the circ of Domino, GQ, H&G and Wired by 50,000 or more and launched Cookie-a publication that reported 385,000 circ. In the last seven years, it has exhibited the largest circ level growth (21 percent) of any major publishing company.

5. Reader's Digest- Its circ level increased 2.9 percent on the strength of the phenomenal growth of Every Day with Rachael Ray. However, its announced intention to lower the circ of Reader's Digest by 2 million will reduce its overall circ in 2008 to a level that will be less than half that of the four market leaders.

6. Hachette and No. 8. Enthusiast Media- Of the market leaders, these two companies have demonstrated the greatest propensity for reducing circ levels. The most vigorous circ level reduction company has been Enthusiast Media. After several years of divestitures, it still publishes an extraordinarily large number of audited special interest publications, plus two Soap Opera titles.

In the first half of 2007 it reduced the circ level on 38 of its 45 special interest titles, resulting in an aggregate circ level reduction of 4.9 percent. Hachette has trimmed its portfolio of audited publications, selling Showboats International and ceasing publication of Elle Girl and Premiere. It also made significant circ level reductions in the first half of this year on Home, Sound & Vision, Metropolitan Home, Flying and Woman's Day. Overall, it reduced its paid/verified circ level 8.3 percent in the last year.

7. Bonnier (previously World Publications)- Late last year it made a dramatic entrance on to the precarious "large circulation" stage with its aforementioned acquisition of Time, Inc titles. Welcome to the big leagues! Its combined circ level of 9.1 million now places it in elite company. We don't yet know much about its circ level strategy, but we know the industry will be closely watching its circulation actions in the year ahead.

9. National Geographic- It is the odd ball among major consumer magazine publishers. It is a company with a large commitment to "association" circulation (92 percent of the circ for its name sake publication), yet it publishes four other audited consumer titles (combined paid/verified circ of 2.7 million) that don't rely on "association" circulation sources.

It is kind of a hybrid consumer magazine publishing company. But the large scale of its circulation operation insures its significant industry influence. In recent years it has trimmed the circ of its flagship publication, National Geographic. But it has maintained or grown the circ of its other four audited publications.

10. Rodale- In a stealth manner, this company has consistently grown its circulation over the last seven years. Even though it sold Backpacker (circ 354,000), its overall circ level still grew 4.1 percent during the period-led by the dynamic growth of Women's Health (up 268,000) and Prevention (up 94,000). Additionally it resurrected Organic Gardening, a publication that had dropped from the auditing ranks in 2004.

Among the industry's circ leaders, an interesting circ strategy dynamic has evolved. The group appears to be equally divided among growth and reduction proponents. On the growth side are Meredith, Hearst, Conde Nast and Rodale. Balancing that circ level assertiveness are the reduction practitioners-Time, Inc, Reader's Digest, Hachette and Enthusiast Media. In neutral positions are National Geographic and unknown Bonnier.

The Impact of Verified Circ and ABC Par. 6 Sources
It doesn't appear as if the advent of verified circ and the accompanying increase in circ source transparency (ABC Statement paragraph 6) have had any appreciable impact on total paid/verified circ levels. But there have been some significant changes in paragraph 6 source distribution.

The amount of verified circ employed by audited consumer magazines in the first half of this year was 10.8 million-3.9 percent of total paid/verified circ. This is almost exactly the amount of verified circ used (10.7 million) in the previous year. But here's the change: it's down substantially from the amount of verified circ employed (12.4 million) in the second half of last year.

What's caused this fluctuation in verified circ usage?
It can only be explained by reviewing verified circ usage in context with all other reported ABC paragraph 6 sources. In order to facilitate this comparison, I've compiled paragraph 6 data for the 22 circulation companies with more than 2 million paid/verified consumer magazine circ (see the attached chart). This data is a representative industry sample, accounting for 74 percent of the industry's total paid/verified circ.

The data reveals an interesting phenomenon. It confirms the verified circ slide (down 16 percent), but curiously it shows that the rise in other paragraph 6 sources-paid sponsored, partnership, loyalty and combination circ -balanced the verified circ decline. The net effect is that the total use of paragraph 6 circ sources in the last two six month periods is nearly equal, with 13.0 percent of total paid/verified circ in the first half of 2007 and 12.8 percent during the second half of 2006.

The sharp increase in verified circ in the second half of last year appears to be largely a result of a change in ABC regulations regarding partnership non-deductible circ. What happened is that partnership non-deductible circ, previously reported as partnership circ in paragraph 6, was re-designated (and reported) as verified circ in the second half of 2006.

However, this change alone does not reveal the entire paragraph 6 source distribution story. In the first half of this year, partnership circ usage sharply rebounded, reporting a 28 percent (1.1 million circ) increase over the previous six month period. It should be noted that "paid sponsored" circ usage also increased, although not as dramatically as partnership circ.

Some of the increases in partnership and paid sponsored circ in the first half of the year can be attributed to publishers anticipating the effect of yet another ABC rule change. This one will take effect with the first half 2008 ABC statements and involves the paid sponsored source.

In short, the consequences of this audit bureau change are that all paid sponsored circ, designated as "public place," will be reported as verified circ. The relatively small portion of paid sponsored circ that is "individually addressed" will remain (for the time being) classified as paid sponsored circ.

The sponsored circ redefinition change could cause another temporary spike in verified circ, similar to the one precipitated by the partnership regulation change. However, the significant increase in other paragraph 6 circ source use in the first half of this year is an indicator that publishers will try to avoid major verified circ increases by replacing a majority of any paid sponsored (public place) circ losses with circ from other paid paragraph 6 sources.

CONCLUSION: What's Really Precipitating the Modest Industry Circ Level Declines?
The industry's aggregate circ level may be bloated, but publishers don't seem overly concerned. They have, more or less, disregarded the warnings of a drooping newsstand to subscription circ ratio. They appear to be balanced in terms of increasing or decreasing circulation.

The differing circ strategies of the major publishers are helping sustain relatively stable industry circ levels. Even the prospect of explaining verified circ to advertisers hasn't diverted publishers from their circ level increase persistence. We'll have to see if the recent redefinition of the paid sponsored circ will have an adverse effect on circ levels.

The only thing that seems to be having a slimming impact on industry circ levels is anthropological in nature. The consumer magazine environment is over-populated-it can no longer adequately support as many titles as it did ten years ago. Of course the industry has always been governed by Darwinian survival rules-the weak succumb, the strong continue.

The difference today is that the weak are being replaced on less than a one for one basis. The decline in audited publications (down 13 percent in the last seven years) accounts for the majority of the industry's circ level decline.

But, interestingly, the average circ of the surviving titles has grown from 467,000 seven years ago to 491,000 in the first half of 2007. This five percent increase in average circ per audited publication partially offsets the level reduction effect of having fewer audited publications.

The Darwinian effect is partially helping relieve an over-circulated industry. However, it's going to require more proactive individual publication circ level reduction efforts if the industry is to expeditiously reach circulation level equilibrium.