Playing by the New Rules

Folio: The Magazine for Magazine Management, Sept 1, 2001

The demise of ABC's 50 percent edict has got managers on both the publishing and fulfillment sides scrambling to decode the revamped handbook. Here's how they're pushing the circulation envelope while straightening out their bookkeeping in time for audit season.

Publishers are ready to unleash subscription combo sales, package deals and pricing structures that were once forbidden by rigid regulations. But, be warned: This newfound marketing freedom brings its own set of complications.

WHITNEY JOINER

DON'T EXPECT to see Golf on sale for a penny anytime soon. Yes, the 50 percent rule has been wiped off the books by the Audit Bureau of Circulations, opening the way for publishers to test new pricing tactics. But stories of one-cent subscriptions have been greatly exaggerated, says Cindy Still, the consumer marketing vice president of Golfs publisher, Time4Media. "We're not in the business of giving magazines away," she says. Economics still demand that "magazines have to get a fair price out of their consumers."

Publishers are looking for ways to stretch the more flexible rules, but creative packaging and partnering--not pricing--are the hot spots of interest in circulation circles. They're looking for ways to form alliances with other magazines, media companies, advertisers and manufacturers to create innovative deals that bundle magazine subs with everything from books to concert tickets.

"We could take Golf and team up with someone who sells golf balls," says Still. From a marketing perspective, there's a great deal of opportunity in these deals because consumers tend to really respond to package offers, she says. "You buy a computer and you get an Internet Service Provider [subscription]. Why wouldn't you want to get your new computer with your ISP, and a subscription to PC Magazine?"

Some theorize that large media companies will wield partnerships much more powerfully than single-title and smaller publishers. But Ken godshall, senior vice president of consumer marketing at Time Inc., says you don't have to be part of the AOL Time Warner empire to make partnerships work.

"This doesn't give any special advantages to large publishers, because it depends on the combination," says Godshall. "It's got to work from the consumer marketing perspective--and who owns the goods or services is less relevant. It's just as easy for Forbes as it is for Fortune."

Adam Cohen, subscription director for the Atlantic Monthly, agrees that size does not always matter. "Sometimes I'm jealous of the things they can do internally," Cohen says of AOL Time Warner, but he agrees that partnering is an equal opportunity for just about all publishers. "Say I march into a bookstore and buy a bunch of books," says Cohen. "At the checkout counter they can say, 'Hey, if I can round this up $2, would you like a subscription to this magazine?"'

Not just for new business

Most of the hoopla over the end of the 50 percent rule has centered on new business acquisition, but the rule changes also ease restrictions on renewal marketing. Here, too, many of the first tests out of the gate involve combination sales. For instance, this summer Time Inc. introduced an offer that gives people who renew their Fortune subscription a trial subscription to Business 2.0.

Publishers also have more room to maneuver when it comes to setting renewal rates. As everyone in the circ business knows, renewals are where the money is--loyal readers will pay more for their favorite magazines than the first-time dabbler. But before the 50 percent-of-basic rule was dropped, marketers couldn't inflate renewal rates without forcing up introductory prices. Time Inc.'s Godshall offers this example: If marketers at Sports Illustrated raised the price of an annual subscription to $120 from $100, then the introductory price would have to jump to $60 from $50. But under the new rules, circulators can keep the introductory price at $50.

With this new pricing flexibility, however, come concerns that conversion rates will plummet. Will the Business 2.0 subscriber who was brought on board when he renewed his Fortune subscription ante up the full cost of the sub once his last issue of Business 2.0 is delivered? Godshall doesn't foresee any problems. "A typical consumer magazine does that successfully. Once magazine subscribers renew, they become so loyal to the magazine that they're willing to pay more.

Others, however, see trouble down the road. "It's unrealistic to think you can bring someone in for $1 and then all of sudden charge him a $20 renewal," says Dan Capell, editor of "Capell's Circulation Report."

The devil is in the details

Questionable renewal rates are just one unknown in the new circ equation. ABC has yet to release the fine print attached to the new regulations--all publishers have to go on is a July 18 letter announcing the passage of the rules, and a few years' worth of theories and discussion.

"I think there are a lot of things missing" from ABC's July 18 letter to publishers, says Jim Borth, Dennis Publishing's group circulation director. "Like, exactly how they are going to treat combination sales and premiums." For example, on multi-publisher combo deals, how do you split the money? "Everybody can speculate based on the letter. No one, to my knowledge, has a set of the rules. And I can't do much without some more clarification."