Publishers Crack Down on Online Agents

Folio: The Magazine for Magazine Management, Dec 1, 1999 by Mary Harvey

Fed up with the unauthorized sales of their magazines online, publishers are taking action against renegade agents.

Type the words "magazine subscription" into almost any Net search engine and you'll find an extensive list of sites offering "below wholesale prices" on your favorite magazines. That may be good news for bargain hunters, but the proliferation of these fly-by-night Web sites selling subs at unauthorized, often deeply discounted prices is fast becoming a major problem for publishers. And as e-commerce takes hold in America, publishers say the number of unauthorized online agents is multiplying at an incalculable rate. "It's a very disturbing trend," says Bridget Wells, director of agency and modeling services at Hearst.

The problem has escalated to the point where Wells has been forced to continually monitor unauthorized sites, sending cease-and-desist letters, and getting Hearst titles removed. "No publisher wants to see their magazine prostituted on the Internet or any-where else," says Wells. "We already hurt ourselves dramatically by our low prices to consumers, and somebody just blatantly taking further advantage is only damaging the industry as a whole."

At least one major publisher has taken a more drastic measure than simply policing these sales sites: This summer, Time Inc. pulled all its titles from all online subscription agents. "It wasn't a hostile decision in any way, and doesn't mean that in the future we won't consider using them again," says Gene Foca, vice president, e-commerce, at Time Warner Digital Media. "The reality is, in the first half of 1999, most of these online sub agents didn't produce any subscription volume for our magazines," he says. "The whole effort is so new, and we felt this was a unique opportunity to not give this business to a middleman before we proved that we couldn't get a lot of it ourselves."

Still, most publishers are looking for a middle ground, unwilling to cut off the volume they are receiving from legitimate, potentially productive sources. "It's a subversion of what we're trying to do with our own site and with those agents we feel may, in the long run, be a good producer of orders for us," says Jim Borth, circulation director of Dennis Publishing's Maxim.

But like Wells, Borth is taking steps to remove his titles from the growing number of unauthorized Web sites. "There is nothing to keep an online agent from selling below half-basic. It makes you look ridiculous as a publisher," he says.

But the process of hunting down these online agent sites is time-consuming and tricky, says Phyllis Rotunno, vice president of subscription circulation at Playboy. "Like other agents that are unauthorized, it's hard to find them," she says. Having discovered unauthorized sites promoting Playboy and Penthouse in combination sub deals, Playboy has recently started sending warning letters to various sites. "But they'll pop up in different states and change their names," she says. "It's very difficult to control."

Same problem, different medium

Publishers note that the online agent problem is no different from the ongoing dilemmas they have faced with some cash-field and PDS agents. The difficulties have simply migrated online. "It's like the old cash-field days where you'd have a subagent clearing through a legitimate agent that you've authorized," says Borth. "The same thing's happening now. There are a number of agents that nobody claims to have clearance for."

Lisa Coffey, vice president of operations at Magazines.com, an authorized site relaunched this January, concurs. "[Cash-field and PDS agents] will take their Internet orders, take the files and load them, and manipulate the prices and remits to look like they were legitimate orders coming from their outbound phone calls, when in fact they were from someone like 'Jake the Magazine Guy.'"

One way to curb the problem is to determine who's clearing those types of orders and deauthorize or otherwise punish those agents, says Coffey. "That would cut it off in short supply. If a large cashfield agent were deauthorized, that would send the message home."

Others say dealing exclusively with one or two trustworthy agents would do the trick "The easiest way to control this is to go to a single clearing agent," says Magazine Publishers of America executive vice president, consumer marketing, Michael Pashby.

"You could hurt your flow of orders, but you will be able to control how your magazines are being marketed," says Maxim's Borth. "For the long-term, that's in the best interest of all publishers."

Legitimate agents fight back

Brian Hecht, president of enews.com, which pioneered the online newsstand concept in 1993 and now has 25,000 approved affiliate Web sites, says he has been working with publishers to curtail unauthorized sales.

"The potential of sophisticated selling online is so great that it would be very foolish for publishers to ignore the rise of specialists in Internet magazine marketing," says Hecht, who also acknowledges that there are only a handful of magazine sellers who are "playing fair" on the Net. "We have conversations daily with publishers about the mutual aggravation we feel," he says.