Printers move into fulfillment operations

Folio: The Magazine for Magazine Management, Jan 15, 1995 by Lorne Manly

Heralding what is likely to become a rush of printers into the circulation fulfillment business, Quad/Graphics has signed a letter of intent to purchase Newsweek's domestic and international fulfillment operations.

The Pewaukee, Wisconsin-based printing company plans to start its own fulfillment service - called Quad/Data Systems - and to aggressively challenge established industry leaders such as Neodata Services and Communications Data Services.

Meanwhile, another fulfillment house, Palm Coast Data, is on the selling block. Quad, Quebecor and R.R. Donnelley & Sons have all looked at the Florida-based operation, as has Neodata, according to several industry sources. Donnelley is also rumored to be interested in taking a stake in CDS, which is headquartered in Des Moines, Iowa.

A sampling of would-be competitors and magazine circulation executives say they welcome Quad to the fulfillment business, but they also caution that the printer will need to make a hefty investment in order to upgrade the Newsweek system, which will remain in its present location of Mountain Lakes, New Jersey. Although the operation's customer-tracking ability is considered to be excellent, the reporting end of the system is viewed as merely adequate by those familiar with it.

Some observers speculate that the Newsweek fulfillment operation, which currently employs about 200 full-and-part-time workers, will allow Quad to dangle an extra carrot to attract new printing business (although you won't need a printing contract to sign on for subscription fulfillment). Thanks to the acquisition, Quad will be able to offer front-end services such as file maintenance for customer billing and promotions. The printer has been offering back-end fulfillment services since 1988, when it formed its own list processing division. "Quad could, in effect, give away the fulfillment to get the printing," suggests one circulation director at a major consumer publishing company.

Quad's full-service intentions

Quad president Harry Quadracci says that's not the motivation. The acquisition is "not a ploy to get more [printing] business," but rather part of Quad's plan to offer its customers a still array of services. "It helps us get away from being just another commodity."

Still, considering the fairly low profit margins that most fulfillment companies work with - not to mention the recent headaches suffered by Neodata (see "Neodata faces down rumors of cash crunch," Foilo:, October 15, 1994, page 18) - some in the industry wonder if printers like Quad know what they're really getting into. The pressure on fulfillment houses to provide more and speedier services (like rapid delivery of first issues) without passing those costs along to their publisher clients has never been greater. "They must be crazy, or they really don't know what this business is about," says an executive with one fulfillment company.

Or maybe they just want to change the business. With further consolidation of the fulfillment industry a real likelihood, Quad's move makes a lot of sense to some. Quadracci points out that the printer was already planning to start up a fulfillment operation of its own when the Newsweek opportunity came along, and that the acquisition simply sped up rollout by two years.

The deal also strengthens ties with a major client. Last year, Newsweek signed a 10-year, $140 million contract with Quad, which will soon handle 60 percent of the book's domestic run.

The Advocate, Poz square off

Taking another magazine to task for supporting a cause is one thing. Reporting that a publication was paid off to boost a product is quite another. That's the charge against the fledgling monthly AIDS tide Poz - and it's one that has the magazine's founder fuming at what he sees as a personal vendetta.

The accusation is the latest flare-up in the feud between Poz and The Advocate, a biweekly covering gay and lesbian issues. It stems from a December 13 Advocate article about Johnson & Johnson's efforts to promote a home test for HIV. The piece alleges that Poz founder Sean Strub collected pay-offs from the pharmaceutical giant to help speed Food and Drug Administration approval. (Strub encouraged Poz reader to lobby for support of the kits through Poz-provided postcards addressed to government officials.)

Although Strub admits in the Advocate that Poz's parent company, Strubco, Inc., receives 5 percent of its income from Johnson & Johnson (Strubco includes a mail-order order prescription drug service specializing in AIDS-related treatments), he insists Poz's coverage of the controversial home-testing subject remains balanced. The magazine's articles on the topic, including a point/counterpoint piece, have all disclosed closed Poz's relationship with Strubco, Strub adds.

"Johnson & Johnson has sought a high level of community involvement, and we jumped on that," says Strub. "No one was bought off. There is no evidence of that, nor will there be any evidence of FDA violations. The Advocate piece was crass, shoddy journalism of the highest order."