Raising the Stakes On Circulation

Folio: The Magazine for Magazine Management, Oct, 2000 by R. J. Lehmann

American Family Publisher's exit from sweeps has circ pros considering radical fixes to subscription marketing.

* Industry executives expressed surprise and dismay at the abrupt announcement from American Family Publishers that the 20-year-old clearinghouse had, as of September, ceased using sweepstakes as a means of soliciting subscriptions.

While divided on the announcement's significance to the magazine industry as a whole, insiders agree the change is a clear signal that it's time to develop new means of driving magazine circulation.

"It's something that was obviously coming for some time," says Monica Winn, consumer-marketing director for Time Inc., which owns half of AFP parent American Family Enterprises. "Anyone who had been following the situation knew that they were facing some serious problems.

"Many probably didn't expect quite so abrupt an announcement," she adds, "but the industry as a whole had shifted away from this sort of marketing, and stampsheets have not been the force they were for some time now. That much has been evident for years."

The announcement followed nearly three years of legal tumult for the troubled AFP, which faced a multistate class action lawsuit accusing the company of using deceptive advertising in its sweepstakes promotions to entice consumers to buy magazine subscriptions. The original suit, filed by 27 states, was settled in March 1998 for close to $1.5 million. However, claims that AFP had further violated its agreement led to an expansion of the suit to include 48 states and the District of Columbia. That action was finally settled in August with AFP agreeing to pay an additional $8.1 million in damages.

American Family chairman Susan Caughmann says the move to cease its sweepstakes offerings in the United States was a part of the company's restructuring under Chapter 11 bankruptcy, which AFP filed in October 1999 at the height of its legal problems. "It is time to move our company in a new direction, and this is the first of several major steps we must make toward that end," she says.

While AFP and major rival Publishers Clearing House once represented a significant portion of the circulation base for major consumer titles, 40 percent of the industry reported stampsheet subscription order volumes in 1999 were off by more than 60 percent from their 1998 figures, according to the "CircTrack 2000" report.

Sally Murphy, consumer-marketing director for Conde Nast, says AFP's withdrawal from the sweepstakes market has left in its wake a good deal of confusion among magazine executives.

"There was a time when the stampsheet houses were something that you could bank on, every year, as a significant portion of your circulation base," says Murphy. "That day is long gone now, and this makes that even more obvious than it was before. The biggest problem is that there isn't an easy and obvious strategy to take its place. Many people have felt the Web would be that, and it still may be, eventually. But for now, we're in a period of significant change--and it's not yet clear where we will go from here."

One possible outcome of the shift, according to San Francisco-based circulation consultant John Klingel, is more experimentation with truly radical subscription price cuts, including at least some consumer magazines moving toward free subscriptions.

"I know that there has been a short-term move away from give-aways and soft sells, but I think long-term, the new environment that we're entering will require more publishers looking at circulation as a kind of advertising expense, Klingel says. "The loss of a major stampsheet player like American Family should light a fire under some people to start thinking more creatively, and to take chances they might not have before."

Randy Charles, senior vice president of circulation, Times Mirror Magazines, echoes the sentiment that the move served as a "symbolic death knell to the era of the pure stampsheet," but adds that enterprising circulation executives should have had the prescience to have other plans in place.

"I'd prefer to look at it as an exciting time to be in consumer marketing, to see the paradigm shift, and to be in a position to use one's skills and creativity to help forge a new one," Charles says. "It is change, and change scares a lot of people--rightfully so. But it's also a challenge that the very best will meet with vigor. Doom and gloom and nostalgia for the past don't sell magazines. Good salespeople do."