AFE: Shift in Top Execs

Circulation Management, Dec, 1999

On the heels of voluntarily filing Chapter 11 to resolve pending litigation and protect itself against further suits, AFP parent AFE announced that it has named Brian Wolfe president and promoted Susan Caughman to chairman. Wolfe, a Time Inc. veteran who was most recently VP, consumer marketing for Sports illustrated, is known as an aggressive, innovative marketer. "This says to me that they're serious about restructuring for the future," says one industry source. Caughman, who has been president since the start of the stampsheet troubles, is being "removed from the fray, and rewarded for her hard work and pain with the promotion," he asserts.

In the past year, APP has reached voluntary agreements with the attorneys general of 40 states and the District of Columbia, resulting in settlement payments totaling $6.9 million. At press time, an agreement in principle for settlement of a class-action lawsuit filed in Newark, NJ, had been reached, but its terms were still confidential, by court order. "The Chapter 11 filing has no impact on consumers, sweepstakes winners or publishers," said APP spokesperson Rich Tauberman. "It was filed to settle class-action litigation." Tauberman dismissed speculation that the filing may facilitate a buy-out of APE by Time by Time Inc., which is now half-owner. The Pritzker family owns the other 50 percent.

Clients agreed that the filing has no practical impact for the present "We've reduced our dependency on sweepstakes for subscription volume. We don't anticipate that actions taken by AFP will have any further affect on our sales," says David Gilbey, VP, consumer marketing for Time Inc.'s personal finance group.

Some clients expressed concern that the agent would eventually close its doors, but AFP continues to deny this possibility. "If we'd wanted to do that, we could have filed for Chapter 7 in the first place," says one AFP executive, who confirms that the filing is designed to allow the company to stay fluid while resolving pending litigation and restructuring finances and operations. Time Inc. officials have stated their commitment to supporting AFP through a restructuring.

AFP also announced that it has obtained funding to assist it with restructuring and diversifying into new magazine and merchandise distribution. The company's Web site, which presently does not solicit magazines online, is one element being considered, according to Tauberman. Continuous service programs are also a focus. In addition, the agent has launched a new monthly contest featuring a $1,000 daily giveaway throughout the month of December, and will be increasing the number of $1-million winners from one to three per year, according to Tauberman. A livecheck promotion and other special contests are in the works, he says. However, AFP will not be supporting its winter mailing with TV spots this year, but has been promoting sweepstakes winners on the Richard Simmons' DreamMaker Show since September.

At Publishers Clearing House, spokesperson Chris Irving said that the AFP bankruptcy filing has no impact on PCH, and that PCH has no intention of following suit.

One source said that there is some concern among stamp-sheet agents and clients that consumers who read or hear about AFP's filing might erroneously assume that AFP is out of business, and that they need not make their subscription or merchandise payments--a scenario that could potentially affect both agents, since consumers tend to confuse the two. Another noted that consumers who hear about the filing or misconstrue the switch from the multi-million-dollar prizes of years past to multiple, $1,000 prizes might doubt the company's ability to pay out prizes. Others, however, point out that there had been relatively little mass-media coverage of the AFP filing.