Circulation's New Game Rules

Folio: The Magazine for Magazine Management, Jan, 2001 by Geoff Van Dyke

PUBLISHERS DEMANDED A MORE FLEXIBLE SET OF REPORTING REGULATIONS, AND AUDIT BUREAUS ARE RESPONDING. BUT THE INDUSTRY IS STILL STRUGGLING TO AGREE ON KEY ISSUES: DROPPING THE 50 PERCENT RULE AND FULL-DISCLOSURE REPORTING. HERE TWO EXECUTIVES WEIGH IN ON HOW THE NEW GAME RULES SHOULD BE WRITTEN.

For a century, one circulation law ruled supreme: No magazine sold for less than half of the basic subscription price counts as a paid subscription. But a shifting media climate and harsh economic changes caused executives to rethink the long-standing definition of paid circulation. The process of overhauling reporting formats is under way, but reaching a consensus on how modifications should be executed remains a challenge.

Still, changes are happening. Last October, BPA International announced it would drop the 50 percent rule at the beginning of 2001 and allow subscriptions to be sold at any price with full-disclosure reporting, indirectly putting pressure on ABC to do the same. One month later, ABC's board of directors gave first passage to the modification of paid circulation in its business division, allowing publications to claim all copies sold for more than one cent as paid. But changes were stalled in the consumer division. Both the Magazine Buyers' Advisory Committee and the Magazine Directors' Advisory Committee have agreed to drop the 50 percent rule, but details with regard to reporting are still being worked out.

The board's decision not to give first passage to the proposed rule changes highlights the complexity of the issue. FOLIO: recently spoke with Holly Klingel, vice president of circulation at Imagine Media, and Ken Godshall, senior vice president of Time Consumer Marketing Inc. and a member of ABC's Magazine Directors' Advisory Committee, to get a sense of the opposing opinions about the proposed rule changes.

FOLIO: Are you concerned about disclosing additional information on publisher's statements?

KLINGEL: The thing I don't like about full disclosure is that it makes it sound like we weren't disclosing things fully before. We haven't been doing anything tricky or deceptive--there's nothing that we're worried about advertisers or anyone else finding out about. So I'm somewhat uncomfortable with that.

It also makes it seem that what a subscriber pays somehow equates to the quality of the subscription--which is not the case at all. The act of paying for a subscription is quality in itself. In that way, being able to charge any price is beneficial. But in another way, I think advertisers are going to look at that and put a value on it by saying, "This person only paid this," or "Wow, look, that person paid this." We don't have any data or statistics or research that shows that the quality of people is different when they pay different prices for a magazine.

The current rules were working just fine in terms of basic rate, because publishers could reduce their basic rate to whatever they wanted and still charge half of that. It's odd for ABC to be focusing on the basic price, because here at Imagine, when we think of creative and new ways to do things, that's not the rule we were bumping up against.

GODSHALL: There's been a lot of anxiety about the quantity and type of disclosure that's been discussed. Many publishers are concerned that the information will be used as a tool for media buyers to negotiate rates. So we're trying to strike a deal that will not unfairly advantage our advertising partners.

FOLIO: Will this affect how media buyers purchase ad space?

KLINGEL: I think it will, because now we're telling advertisers that what somebody pays is important. And so they're going to be using that as part of their criteria to select magazines. Or they're going to say that x percent of your file was at a rate we think is too low, and we don't want to pay full price. There's going to be a lot more negotiating on price because of this.

GODSHALL: I'm not a media-buying professional, so I don't want to say too much about that, but I do believe we've struck a good balance between the circulation flexibility that we need and the additional advertising disclosure that makes that possible.

FOLIO: What information would you like to see disclosed on statements?

KLINGEL: I'm actually fine with how the publisher's statements are today. But in terms of giving marketers more flexibility, the premium rule and the bulk or sponsorship rule [should change]. When we think of creative things, those are the rules that we have trouble with. A lot of times they are programs that we know advertisers are interested in, but on the statement they'll show up as bulk. And there might be a media buyer who will say bulk is no good, and not take the time to understand what our program is and how it is valuable to advertisers.

GODSHALL: We think it would be helpful, if we're going to allow magazines to sell at any price, to report average price paid on a required basis on ABC statements. To ensure that publishers don't go crazy selling lower-priced subscriptions, we think it's appropriate that they provide more information about the price at which they're selling. Right now that isn't available, and that's the most important element of the new disclosures that we're prepared to make.