Partnership Flap

Circulation Management, April 1, 2004

Byline: BARBARA LOVE

Circulators say they are having problems getting partnership deals approved by the Audit Bureau of Circulations. But ABC says there are no problems. What's going on?

Partnerships are a relatively new and growing area for subscription acquisition. The rules, which were developed with ABC to give circulators more flexibility, allow publishers to package their products with other consumer goods and to take advantage of synergies. But ABC approval is critical, and some circulators say they are being hamstrung by the approval process.

The problems, say the dealmakers, are inability to get approval before the partnership is set in stone, consistency in decisions on partnerships,

and surety that what has been approved before will be approved again, or that what has been approved won't be unapproved later. "There is no 'common law' to refer to for guidance," says one dealmaker.

The issue came up during a recent meeting of the Fulfillment Management Association.

"Some advertisers and publishers are creating programs that look pretty good - when we can get them through the auditors," said Chip Block, president of USAPubs, at the FMA event. "I think we all agree it's a bit of a problem."

Michael Loeb, president of Synapse, agreed. "It's no secret the rules are complex," he said. "I think ABC and other constituencies tend to underestimate the degree of difficulty working with a partner. It is not that easy to do and the rules are not all that flexible."

But this can be tricky in this time of heavy negotiations between publishers and advertisers.

"ABC requires that a deal be completed," Michael Sheehy, subscription marketing and planning director for Wenner Media, told CM. "But there are lots of ways of stating partnerships."

Mary Beth Meils, a spokesperson for ABC, countered that the whole process is designed to prevent publishers from going into the market with half-baked ideas.

"We want to see something completely thought out," she said. "Nobody wants to see a publisher have a half-way plan underway and not get it approved, but we can't let publishers go into the market without the i's dotted and the t's crossed."

Teresa Perry, vice president of publisher relations for ABC, in an interview with CM, added that she has not heard of any problems.

"Inquiries by circulators about partnerships are at a typical level of other programs," she said. "The questions are the same as well: What are the requirements to make sure partnership circulation qualifies as paid? and What kind of source documentation (paperwork) do I need for the audit trail?"

Perry continued: "We always encourage members to get involved as early in the process as possible. We would be able to look at page one and two of the program in the concept stage. But until the creative piece is finished, we can't give approval."

Perry stressed that the mission of her group is to act as a liaison with publishers to review programs and provide rule interpretation.

But another circulator, who chose to remain anonymous, took issue with the ABC timeline.

"How is it possible to provide ABC with all this information before you have the program set up?" this source asked. "What's more, when you do go to them with the same program that was approved, but with a different partner, they won't approve that program again until they see x, y and z. Is that reasonable?"

Sheehy said that partnership deals have to be concluded quickly.

"From our perspective as a dealmaker, all the power lies in the partner's hands, and we need to do everything possible to make the deal digestible to the partner," he said. "Not being able to commit to a deal that you know qualifies by ABC guidelines could kill a deal because deals live or die by momentum."

He added: "The fact that there is this final approval means we can't sit across the table and make a deal. The truth is, most deals are made just sitting across the table. If we can't do that, it really cuts our legs off."

Still another player, who has negotiated partnerships with ABC, stresses that the problem is "consistency and surety." "If you get ABC approval on Monday, six months from now that approval might be no good - and they've done that on very large programs."

This source does not necessarily blame the board, which he describes as "well meaning."

"The board members are at a level where they don't necessarily understand the granularity of their decisions. They make broad policy decisions and the staff has to do the fine type. The staff's interpretations have made things difficult.

"Now ABC has to evaluate the integrity of a marketing program and these things are not that easy to evaluate," says CM's source. "In the past, all ABC has done is count - Did you collect money or not? Now an organization already stretched is being asked to do more - look under the hood. Marketing judgment is something you gain over years of experience."

If you ask why a deal is turned down, you don't always get a good answer, this person contends. People are "grumbling quietly." "Circulators are on the run, and everyone is petrified of advertisers and ABC," he adds. "They are hiding out and hoping the little wins they have don't get reversed."