The Folio: 30

Folio: The Magazine for Magazine Management, Sept 15, 2001

Ever wonder how much magazines actually discount off the rate card? Or what publishers truly take in from subscriptions and newsstand sales? In our first-ever investigation into the real revenues of the biggest consumer magazines in the country, we go inside the numbers collected by the Publishers Information Bureau and Audit Bureau of Circulations. The findings will surprise you.

There's not much that publishing folks and advertisers can agree on in these days of economic uncertainty and disappearing marketing budgets. So be thankful for the advertising revenue tallies from the Publishers Information Bureau--that the numbers are bogus is a statement no one will quibble with.

Publishers, media buyers and marketers alike realize that determining ad revenue by multiplying the one-time, black-and-white rate by the number of pages sold is ludicrous at a time when discounts-both on the rate card and off-are running amok. But magazine folks and advertisers have done little about the inaccurate state of affairs except to complain.

Which brings us to the first-ever FOLIO: 30. We've decided to get much closer to the economic truth of the top consumer magazines by investigating what their real ad revenues are. And instead of adding PIB numbers to gross circulation revenues, as the FOLIO: 500 used to do, we've sought out the actual circulation figures of the biggest magazines in the country to reach a total revenue number for each title.

To accomplish our mission, we devised a multifaceted plan of attack. On the ad sales front, our first stop was Nielsen Media Research, which took the publisher-supplied data to PIB (via Competitive Media Reporting) and then adjusted for on-the rate-card frequency discounts. (The differences between those totals and those from PIB can be seen on the Top-30 Advertising Revenue chart, page 25.)

But, while Nielsen's very helpful number crunching got us closer to reality, it didn't tell the whole story. So to ascertain the scope of discounts (stated and not) at specific titles, we followed up by interviewing 62 magazine publishers, ad sales people, media buyers and marketing chiefs at the companies that actually spend the money. We took into account special advertising sections, insert ads and trade and retail ads--which all carry lower rates than what PIB assigns to them. We also added in the off-the-rate-card discounts that nearly every publishing company resorts to, with the exception of Conde Nast Publications. (Its magazines, however, don't stint on marketing programs for advertisers, which end up cutting into the bottom line just as discounts do.) We finished up with an effective media buyer discount, which we applied to the PIB numbers. The standard agency commission was then added into the mix, giving us a final ad revenue number.

For circulation, we dug into the publisher's statements and audits filed with the Audit Bureau of Circulations, and talked to experts in the newsstand distribution business. Through this reporting and a mathematical formula devised by Stuart Jordan, Brill Media Holdings' circulation guru, and E. Daniel Capeil, editor of "Capell's Circulation Report," we arrived at our revenue figures. (For a detailed explanation of the methodology used to determine ad and circulation revenues, see page 29.)

So what did we ultimately find? PIB numbers are, in fact, bogus. To see just how divorced from reality they are, take a look at Playboy's real ad revenues and those put out by PIB. The magazine reported $78.1 million in advertising revenue in 2000; according to filings with the Securities and Exchange Commission, that actual number was $38.4 million.

PIB revenues maybe way off, but the clearinghouse does serve one function that mirrors reality--as an ordering device. The four top magazines ranked by PIB revenue are the same as FOLIO:'s--Time Inc.'s People, Sports Illustrated and Time, and the McGraw-Hill Companies' Business Week. The rest of the Top 10 don't match up quite as neatly, but the group is the same. Fortune, another Time Inc. title, finishes in ninth spot on PIB but finishes fifth on ours. Forbes, meanwhile, performs slightly better on PIB (8th) than on the FOLIO: 30(9th) because of greater ad discounts it offers. Meredith Corp.'s Better Homes and Gardens and Gemstar-TV Guide International's TV Guide, fifth and sixth respectively, according to PIB, each drop a spot on the FOLIO: 30. The Washington Post Company's Newsweek finishes one higher on our list, compared to ninth on PIB's. And Meredith's Good Housekeeping landed in 10th spot on both.

We also discovered that discounts are everywhere and are growing as publishers find ever-more creative ways to cut their rates. "You don't have to be a hardball negotiator to get discounts," says Bill Reynolds, senior vice president and director, media and production, at Henderson Advertising, Inc. "Literally, if you ask for it, you get it. If you're paying the full amount, you're crazy." (For a more in-depth take on how publishers are dancing around published rates, check out "Rate Base Madness," page 24, by Joe Mandese, editor of our sister publication Media Buyer's Daily.)