Will new RDA program improve magazines' image? Conde Nast and Petersen test program to speed RDA payment to retailers

Folio: The Magazine for Magazine Management, Feb, 1989 by Jean Marie Angelo

Will new RDA program improve magazines' image? * New York City--Conde Nast Publications Inc. and Petersen Publishing Co. have joined forces to improve their Retail Display Allowance (RDA) programs, with the goal of giving magazines a better image with retailers.

Conde Nast, publisher of Self, Vogue and other titles, and Petersen, owner of such special interest titles as Motor Trend and Car Craft, have signed an exclusive agreement with the auditing firm Pinpoint Marketing that will enable them to reduce by two months the time it usually takes retailers to receive RDA payments.

Usually, retailers wait 105 days from the time a magazine is sold on the newsstand for RDA payments, says Peter Armour, vice president and circulation director for Conde Nast. The new system will cut that time to 45 days because of Pinpoint's involvement.

Prior to implementing the system, retailers had to submit RDA claim forms, which passed through the hands of wholesalers and national distributors before reaching publishers. After analyzing the paperwork, the publisher then issued RDA payments to the retailers.

The new system eliminates the national distributor's involvement, says Armour. The wholesalers, who tabulate the retail sales, give their sales reports directly to Pinpoint. In turn, the auditing firm issues RDA payments to the retailers.

Time lapse

Retailers usually receive two discounts from magazines: a 20 percent discount off cover price from wholesalers when titles are sold to a chain and an RDA payment (usually 10 percent of cover price) several months after copies are sold. The time interval between receiving the two discounts hurts the image of magazines as a retail product, says Frank Herrera, president of ICD/Hearst, a national distributor.

Other retail products, such as greeting cards, enter retail outlets with a full reduction already taken off the sale price. And generally this discount is 50 percent, which is higher than what magazines offer, notes Herrera.

The new RDA payment agreement is a first for Pinpoint, a company that monitors co-op advertising programs and issues payments to retailers who have co-op agreements with manufacturers. Executives at both Conde Nast and Petersen believe Pinpoint's experience in the retail industry will add clout to the new RDA program, which began in early 1989.

If this year's program is successful, it will be open to other publishers in 1990, says Armour.

End the RDA?

Although industry sources say the new auditing test is a step in the right direction, many, including Herrera, would like the cumbersome RDA system put to rest. "It only takes one publisher to stop," Herrera told wholesalers and national distributors at Marketplace '88 in Tucson, Arizona, while noting that the magazine industry paid $130 million in RDA payments in 1988.

As an alternative, Herrera and others propose that the magazine industry adopt a discount pass-along system, where the publisher gives a larger discount to the wholesaler, and the wholesaler, in turn, passes along the same discount to the retailer. This way the retailer would get the discount up front.

This alterantive, however, would depend on unity in the wholesaler community, a group of more than 400 independent companies. All wholesalers would have to agree to pass along the discount to retailers, notes Herrera.