List rental negotiation is here to stay; if you are going to buy or sell lists today, you must be aware of these key negotiating tactics that affect quality and price

Folio: The Magazine for Magazine Management, March, 1990 by Liza Frenette

List rental negotiation is here to stay Money from magazine list rentals was an exciting new revenue stream for publishers who quickly became dependent on those dollars. When the twin pressures of postal rate hikes and increases in paper costs began to decrease that flow, publishing management had to retrench. The gold rush fever for list income may be over, but the gold is still there -- publishers simply have to work harder to get it. List rental has become a business requiring negotiation and strategy skills.

Negotiating is more than a means to regain revenue: It is a way to lure new customers, to keep existing ones from leaving, to stay in tune with an industry that is making more demands as it becomes more sophisticated. And negotiating is not just dollars, but sense.

Top leaders in the magazine list rental industry recently shared with FOLIO: some of their developing ideas on how publishers can make sure they are getting the best deal when renting their subscriber lists, and how to deal effectively when they are hunting for lists themselves.

More prevalent than ever

"There's never been a time like this when there's been so much negotiation," says Don Rappaport, chairman of American List Counsel, Inc., which manages and brokers lists for magazines such as The Atlantic, Ms., Spy and U.S. News and World Report. "At first, list revenue was 'found' money," Rappapport explains. "Then publishers became dependent on list rental income -- and then they saw that income deteriorate and got nervous. Now, every list order today involves negotiation," he says.

Mike Manzari, presicdent of The Kleid Company, Inc., says simply, "In some cases, negotiations mean the difference between renting or not renting. Today's list broker has to be a skilled negotiator." The Kleid Company is a list company that manages subscriber lists for magazines including Bride's, Glamour, Self, Vanity Fair and House & Garden.

There is "no doubt" that list negotiations are more prevalent than every before, adds John McQuaid, vice president of sales for CompuName, part of The Lake Group, which handles lists for L.A., Style, Esquire, New England Monthly, Art in America and numerous other consumer and business magazines. Negotiating is a response not only to the increased costs of mailing and paper, says McQuaid but to the increased sophistication of the industry.

Although leaders in the magazine list industry sometimes differ in their choice of negotiating strategies (and a few maintain that they rarely negotiate), some new and some improved practices have evolved. The tactic that seems to be maintaining the strongest lead when magazine list rentals are negotiated is volume discounting. Pumping up the volume of list rentals is done more frequently now, say most industry experts, and there are two techniques: a discount for a one-time, large list rental, or a discount for a large number of names rented during the course of a year.

Richard Steeg, chairman of The Coolidge Company, Inc., which represents the subscriber lists of Working Woman, American Health, Mother Earth News, Psychology Today and many others, sees volume discounting, as a way to move away from the emphasis on net-name deals.

"There's a trend to get away from net-name and to talk volume, regardless of the output," says Steeg, who favors discounts on the base price of the list. "It makes sense. It gets away from the monitoring and makes the whole process a lot cleaner."

A net-name discount is a break given based on the number of names that are duplicated on lists already in the hands of the list renter. Eighty-five percent net-name is generally assumed to be the industry standard, and negotiating often begins at that point. However, Steeg points out, after the rented list is merged with the renter's subscriber list, "the manager has to paw over merge-purge reports" to verify duplications.

Volume discounting not only saves time, but also makes sense. The reason is that the greater selectivity available from lists, combined with the appearance of more vertical magazines, means "the average size of the order is smaller than it used to be," says Steeg.

Rappaport says American List Counsel combines the two discounting possibilities: net-name and volume. "We tie net-name to order size," he says. "We say, 'If you give us better volume, we'l give you better nets.h It's a very strong tactic that we've used for a year now."

Manzari says Kleid is thinking of offering volume discounts for either one large order or a guaranteed number of orders in a year. "I think it's going to spread," he says of the practice.

Not all magazine list owners have embraced negotiating, especially for price. Alan Zamchick, list director for the Diamandis Communications publictions, says flatly, "We never negotiate a base price."

Rodale Press also objects to base price discounting, according to Denise Greiner, list services supervisor: "If we ask them to drop their price, they may ask us to drop ours. We don't give discounted rates on the base."