The McLoughlin legacy: condensing the Digest; thirty-four year Reader's Digest vet trimmed the circulation fat and pushed for profitability

Folio: The Magazine for Magazine Management, Feb 1, 1991 by Warren Berger

Thirty-four year Reader's Digest vet trimmed the circulation fat and pushed for profitability.

VERO BEACH, FLA.-Bigger isn't always better-and that maxim apparently holds true even at one of the world's largest magazines. just ask Richard McLoughlin, the recently retired president and chief operating officer of the Reader's Digest Association (RDA), and the recipient last month of the 1990 Henry Johnson Fisher Award as publisher of the year. For 34 years, he helped Reader's Digest's sales to grow, but looking back now, McLoughlin seems most proud of what he did to help the magazine shrink.

The 58-year-old McLoughlin-who left RDA last June for the easy life in Vero Beach, Florida-was part of the late-eighties, George Grune-led management team that trimmed fat and stressed profitability at Reader's Digest, particularly where circulation was concerned. When McLoughlin announced to advertisers in 1986 that the Digest was scaling back its rate base to make circulation more profitable, the move was seen as somewhat radical-although it turned out to be a harbinger of things to come, as other mass-circulation magazines followed suit in subsequent years.

Today, McLoughlin believes the increasingly widespread lean-and-mean approach to circulation management of magazines is proving very important in helping the industry weather the current economic storm. "Increased profitability of magazine circulation today represents one of the most important changes of recent years-and one that enables magazines to withstand a downturn in advertising revenues much better today than 10 or 20 years ago," he says.

For that reason, and others, the upbeat McLoughlin doesn't buy the current gloom-and-doom scenarios in the industry. "I think this is a time of enormous opportunity for magazines," he says. "They're doing a better job than ever at managing circulation, at ad sales, and at marketing themselves."

And what of the economy? McLoughlin reports that the business has seen tougher days than these over the last four decades, and it has also proven doomsayers wrong before. "Ever since I came into this business, people have been predicting dire things for magazines," he says, and they haven't been right yet."

Certainly, McLoughlin speaks from long years of experience in the trenches. He joined the Digest as an ad sales man in Detroit in 1956, shortly after the magazine, then under the patriarchal leadership of DeWitt and Lila Wallace, had decided to accept advertising. Those were heady days, but difficult ones as well, McLoughlin recalls; advertisers were excited about finally having access to the Digest's 10 million readers and its acknowledged cultural influence, but weren't so sure about those small pages. "At the time, advertisers and agencies loved the big page-size of Life magazine," McLoughlin says. "We had to do a lot of research establishing that a page is a page is a page."

If advertisers needed convincing, McLoughlin was up to the task: In his fourth year at the magazine, he made his mark by selling a 40-page, $1 million ad supplement to Lee Iacocca, then the marketing manager at Ford-it was, at the time, the largest magazine space sale ever, according to McLoughlin. "He is and has always been the consummate ad sales man," says Ron Cole, now vice president of RDA's Magazine Publishing Group, who worked under McLoughlin for much of the last two decades.

But McLoughlin also proved to be more than that as he worked his way up through the ranks along with Grune, who had joined the company in 1960. After stints as advertising sales director, corporate vice president and director of U.S. magazine operations, McLoughlin was named publisher of the Digest in 1980. Then, after the death of Lila Wallace in 1984 (following DeWitt's death three years earlier), a new management team headed by chairman Grune and vice chairman McLoughlin took the reins.

New bosses/`new hardheadedness':

RDA became a different company under its new bosses. "There was a much sharper focus on profits," says McLoughlin, who adds that the company emphasized "strategic planning and tighter controls." To some, the controls were coo tight: According to former Digest staff editor Benjamin Cheever, the "new hardheadedness" at RDA in the late 1980s was characterized by layoffs, lengthened workdays and cutbacks in services for employees, who had long been coddled by the Wallaces. The cost-cutting measures proved effective: In the last five years, while revenues increased 40 percent, to $1.8 billion, the company's net income increased by over 700 percent, to $152 million (which didn't hurt RDA's market value when Grune and McLoughlin took the company public last February).

The most significant cut:

According to McLoughlin, the most significant of all cuts was the one involving the Digest's rate base, which was taken from 17.8 million to 16.2 million. It wasn't done lightly. "There was a great deal of trepidation," McLoughlin says. "Historically, whenever a magazine had reduced its circulation, it was judged to be failing-going back to the Life, Look and Saturday Evening Post days. We knew there was a risk that some would see the move that way. But it was simply a matter of acknowledging that we weren't making money on the last half-million subscribers-they were the toughest to bring into the tent, they renewed the poorest, they were slow payers, and they were less likely to be valuable to the advertiser. Once we made that case, advertisers and agencies gave us credit for stepping up to a tough decision."