Regaining Control Of Circulation

Folio: The Magazine for Magazine Management, July 1, 2000

Circulation took more than its share of knocks last year. First, the stampsheet business collapsed and the magazine industry realized it was going to have to hunt elsewhere for about one-third of all new subscribers. In search of relief, circulators turned to other third-party agents--only to have cash field and PDS business come under fire when a door-to-door subscription company was involved in a deadly van accident.

Meanwhile, Unimag, the industry's fifth largest wholesaler, filed for bankruptcy. The remaining wholesalers, determined not to meet the same fate, devised plans to boost their profitability by demanding more margin and forcing publishers to become more efficient. As a result, many smaller publishers have lost huge chunks of distribution.

The effect of these events can be seen in our FOLIO: 500--only 204 of the industry's largest magazines had circulation gains in 1999. That number is down from 252 in 1998. And when you consider just how strong the advertising environment was last year, that loss becomes all the more significant.

As disastrous as these incidents may have been for circulators who were under intense pressure to keep their ratebases afloat, in the end, they may have been the best thing that could have happened to the industry. The sheer force of these negatives has inspired publishers to regain control of their own businesses. Many have stripped themselves of sweeps-sold subscriptions and are investing heavily in their own direct mail and Internet marketing. Publishers are finally taking proactive steps to control agency fraud. But perhaps most significant is the pressure they are putting on their audit bureaus to revamp reporting practices. At the top of the list of items they want changed is the 50-percent-of-basic definition of paid circulation. Publishers have been restrained by a pricing rule that was made before World War I. Changing that rule so that a paid subscription is a paid subscription will give publishers the flexibility they need to create innovative marketing techniques and to find new subscribers cost effectively.

While the wholesaler-implemented single-copy cuts may sting now, they are creating more rational efficiency levels and will most likely bring stability to a very shaky distribution system. Plus, publishers have become more vigilant in their pursuit of newsstand data, the establishment of smart category management strategies and alternate distribution plans--all of which also aim at puffing control back in the hands of the publisher.

If there was ever a good time to execute sweeping change in circulation economics, it's now, when a booming ad market can help foot the bill.

Teresa Ennis

SENIOR MANAGING EDITOR